Originally Posted by
bryris
Real estate is actually one of the best investments in an inflationary economy. There is only so much of it on the planet, as such it is a great commodity that will have instrinsic value outside of any fiat money quantities attached to it. Disregarding natural cycles in real estate value (this current drop in real estate value has little to do with inflation), the instrinsic value will merely demand more of the weakened dollars.
The recent real estate devaluation has nothing to do with inflation, but it has everything to do with the availability and cost of mortgages. In an inflationary environment, interest rates will skyrocket, sharply increasing the cost of mortgage financing. In the late 1970s, morgage interest rates were 18%! I believe that would clobber residential housing prices, especially since people make much smaller downpayments now, and the mortgage is a much more significant part of the purchase price.
I'm still trying to get my head around the impact on rents in an inflationary environment led my currency valuation (not rising incomes, as in the 1970s). It's so hard to be convinced that a landlord could raise rents when income is not increasing.