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Most folks are very pessimistic about real estate right now and therefore it is a strong Buyers Market without a lot of competition. Therefore properties can be purchased for significantly less than replacement cost!
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Interest rates are still near their lowest level in the last 50 years! Often
a small change in interest rates can increase the cost of ownership much more than a change in price. For more on this see Price/Interest Dilemma. -
In spite of the attempt of the government to downplay the facts—we are beginning to experience significant inflation and real estate has traditionally been a great hedge against inflation. And if the U.S. Dollar loses its status as the world reserve currency, inflation will be extreme! Rather than attempt to explain the impact of reserve currency in my own words, I have received permission from my friend, David Campbell of Hassle Free Cash Flow Investing, to quote from his recent blog on this topic. David’s clear explanation follows:
A world reserve currency is selected by the banking community for the strength and stability of the economy in which the currency is used. Prior to WWI, the British pound sterling, the French franc and the German mark were used interchangeably in the world's reserve currency market. A currency becomes less stable when the economy of the country issuing the currency becomes less dominant and bankers begin to abandon it for a currency issued by a more stable economy. After WWI, the German economy was weak and the American economy was strong so the German mark was replaced by the US dollar. After WWII, the British and French economies were weak and therefore the pound and franc were abandoned in favor of the US dollar. The victors of WWII formally discouraged the world from using the currency of Germany and Japan in international trade as an additional means of suppressing their formal rivals. After two consecutive world wars had ravaged the economies of Europe and Asia the United States dollar was in the right place at the right time to be adopted as the world's reserve currency. Fortunately for America, it has been used as the primary unit of currency in international trade ever since. Having the ability to print the world's currency is one of the major reasons why the United States enjoyed such unbridled prosperity since WWII.
On August 15, 1971, the United States unilaterally terminated the convertibility of the US dollar to gold when its president, Richard Nixon, gave an executive order without the approval of Congress or the American people. This August will celebrate the fortieth anniversary of the most elaborate Ponzi scheme ever perpetuated. This means for the last forty years, America has been printing "counterfeit money" because our money is not backed by anything. Foreign countries have been sending things of tangible value such as food, energy, and labor to America where they receive a limitless supply of a counterfeit currency that is manufactured with the click of a mouse. America imports consumer goods and exports dollars and the world is tired of this unfair imbalance.
If the world stopped accepting the US dollar as the world reserve currency, the Ponzi scheme would come to screeching halt and the last forty years of American prosperity would be exposed for what it is: worldwide theft. The Ponzi scheme has lasted this long because the whole world is in on the game. If you are a very large, old world nation, you are encouraged to print your own worthless currency and trade it for our worthless currency. If you are a small nation, America will send you a river of American dollars to buy your loyalty. If your country is neither big nor small and you are an emerging market with natural resources America wants, America will flex the muscle of its military to convince you to keep your mouth shut.
Brazil, Russia, India, and China (called BRIC) is the largest entity on the global stage. They are tired of the United States stealing from them by trading with a counterfeit currency and they have formed an economic coalition to find a solution. China is America's largest lender and trading partner and they are worried America is about to default on its bar tab. China manufactures all of the iPads in the world and then trades them for counterfeit American dollars. If you were China, wouldn't you be worried?
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