I have a theory: High Oil Prices will probably ultimately lead to improvement in the real estate markets.
Here’s why:
High oil prices have led to price inflation, particularly in foods and basic goods. And it appears that the Federal Reserve will soon raise interest rates to combat the growing threat of inflation.
You might think this is a negative thing, but you’d be wrong. In our current economic state, interest rate increases will be valuable because higher interest rates here will lead to more foreign investment in U.S. Dollars, as well as in dollar-denominated goods and services. In turn, this strengthens the value of the U.S. dollar.
As the value of the U.S. dollar bottoms out and begins to rise, the real cost of acquiring U.S. real estate begins to increase for foreign companies. And say what you want about America, but people in other countries know it: America is a prime location to own real estate.
Since the real cost of foreign investment in American real estate will begin to increase, it seems quite probable that the U.S. real estate market could continue its recovery in large part due to foreign investments that are sped along by the pressure of the increasing value of the U.S. dollar.
To be clear, none of this has happened yet. But it could - and I’m confident that most (if not all) of it will. It’s just a matter of time.
SECURE & CONFIDENTIAL
2 Comments So Far»
Well sad but true the Feds think that the way to stope inflation is to raise interest rates, I personally think that they are WRONG. What is causing the increase of prices across the board is the HIGH cost of fuel and nothing more. Everything gets made with or moved using fuel in some format and if those costs go up then everything else goes up also. Why can’t they see that?
Thanks for the insights, Bryan. You point out things I hadn’t thought about and should be considering.
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