Read on Twitter
What happens to real estate from here if we get inflation or deflation?
If inflation raises, the Fed will stay really lose making real rates negative.
Meanwhile rents, cost of construction, labour, materials will all rise so cost of replacing real estate will go higher.
If inflation raises, the Fed will stay really lose making real rates negative.
Meanwhile rents, cost of construction, labour, materials will all rise so cost of replacing real estate will go higher.
All of these things are good for real estate in general, since it’s an inflation hedge and high inflation will eat away at current debt.*
(*assuming you fixed your rate for a long run and didn’t get a floating rate)
Very high inflation could see interest rates spike though...
(*assuming you fixed your rate for a long run and didn’t get a floating rate)
Very high inflation could see interest rates spike though...
...which usually puts temporary pressure on demand and could cause a price correction.
But eventually the market adjusts and high inflation recovers prices rather quickly (look at the bust & recovery of 1974).
What about if we see further deflationary trends from here?
But eventually the market adjusts and high inflation recovers prices rather quickly (look at the bust & recovery of 1974).
What about if we see further deflationary trends from here?
So far, deflation has actually been great for real estate, too.
Yes, we saw two major crashes during disinflation period of 1981-present.
The first was in 1990 & second in 2008. But real estate has had crashes during inflation too (1974).
Yes, we saw two major crashes during disinflation period of 1981-present.
The first was in 1990 & second in 2008. But real estate has had crashes during inflation too (1974).
What deflation has done is push bond yields lower (together with QE programs) and therefore made real estate cost of capital more & more attractive.
It seems that one cannot lose investing in real estate — especially if you focus on solid locations, don’t overlever & add value.
It seems that one cannot lose investing in real estate — especially if you focus on solid locations, don’t overlever & add value.
A win-win, or is it?
Surely it cannot be that easy, even though real estate bulls would argue it’s always a win-win (but half of them go bust every time a recession comes
).
What am I missing?
Comments?
Disagreements?
What risks do you see?
Surely it cannot be that easy, even though real estate bulls would argue it’s always a win-win (but half of them go bust every time a recession comes
).What am I missing?
Comments?
Disagreements?
What risks do you see?
