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Author: jiml8 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 10556  
Subject: Re: personal investment question Date: 6/1/2003 9:42 PM
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Yes, everyone says deflation is very unlikely, but the Fed has actually mentioned the word several times recently.

I'd welcome people's thoughts on this scenario.


Everyone is trying to talk themselves out of it.

We are deflating, except for real estate. The question is whether real estate will continue to buck the trend. Maybe it will.

All RE markets are local; what happens to your local RE market depends totally on the state of your local economy, as well as interest rates, etc.

The current RE boom is getting very long in the tooth; some sectors of RE are in serious trouble right now even as others continue to show appreciation. Multifamilies are in the toilet in many regions of the country, and that appears to be spreading. Deflation in the multifamily sector in my region is a fact at this time. Too bad for me that I have several million wrapped up in that sector in this region.

The single family boom is, IMHO, unsustainable for much longer. It has been fueled as much as anything by dropping rates and by gov't "go buy a house" programs. Well, rates can't go a lot lower (I'm just completing a refi of my house for 4 7/8, 15 yr) and foreclosures are at record levels. Personal debt is also at record levels, and many people are doing refis to fund lifestyle. This will end, and probably before much longer.

If you need a place to live, go buy your house. If you plan to tap it for capital based on appreciation in the next few years, then IMO you should keep your cash in your pocket.
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