Inflation? Buy Honolulu Real Estate As A Hedge!
May 23rd, 2008 categories: Reasons To Sell
Wednesday’s news reports regarding the Federal Reserve’s concerns over possible increases in inflation may be another sign that it is a very good time to buy real estate in Honolulu. Vice-chairman of the Federal Reserve, Donald Kohn tries to articulate the Fed’s concern. Let me know if you can make sense of this quote.
“My expectations for moderating inflation and limited spillover effects from commodity price increases depend critically on the continued stability of inflation expectations,” Mr. Kohn said, in a speech to a pensions conference in New Orleans. “If longer-term inflation expectations were to become unmoored - whether because of a protracted period of elevated headline inflation or because the public misinterpreted the recent substantial policy easing as suggesting that monetary policy makers had a greater tolerance for inflation than previously thought - then I believe that we would be facing a more serious situation.”
To read the entire article click here.
In previous posts, I have discussed the reasons why I am bullish on mid to long term core Honolulu real estate values. Add inflation to this bullishness and you might want to get into Honolulu real estate and here is why.
I began my career in real estate in 1983. Our Nation was dealing with significant inflation that began in the late 1970’s and because the value of everything was shooting through the roof, real estate values were going up too. Because the bank will lend you most of the purchase price of a property, buyers were able to leverage their dollars against inflation through the purchase of real estate. If inflation does take off, today’s low interest rates allow you to lock in a very reasonable cost of money. In 1983, fixed rate loans were in the range of 18%. Imagine how happy you would have been if you had a 6% interest rate locked in before interest rates shot up.
Sincerely, for our Nation’s sake, I hope inflation is held at bay. If it does kick in, then having purchased now my make you look like a genius.
By the way, today’s picture is overlooking Lanikai from the middle part of the Lanikai Pillbox hiking trail. Double click on it to see a larger version.
The quote was a little over my head, but I loved the article on hiking and family safety!