Housing prices


I am in the market for a house. These days it seems that everyone is either in the Realty business or is closely related to someone who is. Its a good market, lots of money, housing prices are high and there is pleanty of money to go around. Where is all the money coming from tho?

Have you been watching the news? Ever notice how much money China has been pumping into the US economy? Mainly in US Treasury Bonds, but they have had to consume enormous amounts to keep their currency fixed against the dollar. Which in turn has enabled the US to keep interest rates very low.

Hmm, whats the connection you might ask? China is under pressure from the US to raise the value of the Yuan against the American dollar, this makes for cheap Chinese good that they can then flood into the US market. (Don’t we all just love cheap stuff from China) Except if they raise the value of the yuan against the dollar it will have a profound impact on the interest rates. It already has in fact. Recently China bumped the exchange rate from 8.11 to 8.1097 and it had the immediate effect of moving the yield from a 10 year Treasure note from 4.16 percent to 4.28 percent.

This is not a good time to be buying a house in a bubble area, or own one in a bubble area for that matter.

Comments are closed.