Mr. Rawles,
Again, for your very useful posts, thank you. I have a question if you have the time. It was in regards to your real estate post: “My advice to home owners is pay it off and my advice to prospective home buyers is wait for the crash and pay for it with cash.”
This is my current plan: I’ve sold my home and am renting now. But do you believe (in the hyper-inflation scenario) that there will be a lull to allow for your statement above? Will there be a time in between when recession/depression and when hyper-inflation takes hold and the money we have in savings will be about worthless? – C.K.
JWR Replies: Unless there is a full scale dollar crisis that is coincident with a real estate slump, then you are probably fairly safe from U.S. dollar inflation in the short term. You will have your lull. In fact, there is still the outside chance of a deflationary recession. But I’m fairly confident that America’s next deep recession or depression will be inflationary. House prices may eventually again start to increase as inflation kick into high gear, but if the dollar itself is wiped out in hyperinflation, owning a million dollar house won’t mean much–at least it won’t when an SUV costs six figures! The crucial thing is NOT the dollar value of a piece of real property. As with any other tangible investment, the true value of land or a house is intrinsic. The currency unit de jure is just a way of expressing that intrinsic value.
One key proviso: Timing markets can be tricky. The key is to not get greedy. Once you think that a market is nearing a top or bottom, then make your trade. If try to catch the very tip of a peak or the very bottom of a trough, then you are likely to wait a bit too long, and hence lose out. It is better to be a bit early and safe, than it is to be a little too late, and sorry.