How will the weak dollar effect real estate prices?
The weak dollar has made importing things more expensive in the
US. Almost everything is imported in the US including basic building
materials such as steel and cement. These things will put upward
pressure on homes.
However, the upward pressure on houses will mostly effect
new homes that are under construction. Existing homes are less likely
to feel this price pressure.
With existing homes, a major factor that will offset any
particular increases in price is the fact that the housing market is
very weak right now.
Credit tightening has made it more difficult to get home loans to
buy homes. Speculation has led to a very large number of houses on
the market which has a downward effect on prices. Speculation has
also eliminated many participants in the home market by either
bankruptcy or over leveraged owners. These people will not be in the
housing market for probably another 7 years or more. They have also
stopped the misconception that houses will always go up in prices.
Trend following behavior has also stopped. People have little
interest in buying homes when the prices are going down. The trend
following behavior was to buy when prices were going up.
These factors will all put downward pressure on both new and
existing homes. The profit margins of new homebuilders will get
squeezed as material prices increase and the number of existing homes
on the market remains high.
The weak dollar will attract foreigners such as Europeans to the
US real estate market. Europeans have seen what has happened in the
US real estate market, so the buying of US real estate will
probably not be significant. And for those that want to buy
real estate, they will face hurdles. It isn't quick and easy as with
stocks and bonds. Most likely some of the larger cities like NYC will
be effected by foreign real estate buyers and LA but most of the
smaller cities will be less effected.
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