Holiday festivities are over and mundane routine slowly settles in. In a few weeks a new President will be sworn in. It is a good time to think and plan for 2009. We read reports about Real Estate decline and difficult times ahead of us. I am not an oracle to predict the future. All I want to do is share some known facts. Without going into dull details, below are some thoughts and observations which some of you may find useful when working with your clients.
It is a known fact that the government will face an astronomical deficit and will try to stimulate the economy. This will force the government to borrow heavily. Current interest rates are low and it is unlikely that they will rise in the next few quarters. Soon we will all compete for chip money, including the federal and local government. The simple rule of supply and demand will push interest rates up. The time to purchase a house is now, when the interest rates are low.
Massive borrowing and high interest rates are essential ingredients for high inflation. High inflation will devalue your savings. During inflationary periods, owning property is considerd a wise way to park money. Thetime to purchase a house is now, before inflationary pressure checks in.
Trillions of dollars in the U.S. budget deficit will be one of many reasons why investors will begin to question the U.S. government’s ability to repay it’s obligations. Investors may lose confidence in U.S. dollars. Erosion of confidence will be the main driver for devaluation of the U.S. currency. Thetime to purchase a house is now, while the dollar is still strong against major foreign currencies.
According to many “experts”, prices of property are at a historic low. The time to purchase a house is now, because we may not see such low prices again for some time and because sellers are motivated.
Boris Gruzman, CEO