Ben Bernanke Really Wants You To Buy A House

The local real estate market has finally lifted from the bottom. The average price for a single family home in Pleasant Hill has risen 4.9% from this time last year while sales volume has gone up by 21%. The number of successful short sales has risen a whopping 42% while the number of foreclosures has dropped by one third. While this news is encouraging it’s important to understand that having a rising market doesn’t mean we have a healthy market. The underlying problems created by the housing boom/bust are still quietly simmering behind the positive headlines.

The real estate market is now largely controlled by political influences and less so on free market principles. The politicians and bankers are going to extreme lengths to prop up the housing market. The Federal Reserve’s chairman Ben Bernanke just announced they would be buying 40 billion in mortgage backed securities each month with no end in sight. This will force mortgage interest rates even lower than the historic low rates we already enjoy. This will continue to stimulate buyer demand for housing. At the same time the politicians have slowed the wave of foreclosures to limit the supply of homes on the market.  Low interest rates with a sharply reduced supply always drives prices up.

What does this mean for you? I always advise people that trying to time the real estate market is a fool’s errand. You should buy or sell when the time is right for you. That said I think that the coming years will be the best time to OWN properly leveraged real estate. Here’s why: most economists agree that the Fed’s recent actions will result in high inflation. When you have a mortgage with a fixed interest rate that is lower than the inflation rate you have effectively created your very own wealth transfer device. This combination literally takes wealth from the bank and slowly transfers it to you.

This concept is little understood but it was the single most important reason for the wealth of the “Greatest Generation”, the wealthiest generation in the history of mankind. This generation received most of their wealth during the “stagflation” period in the 1970’s and 1980’s simply by having bought low priced homes with fixed rate mortgages in the 1950’s and 1960’s that appreciated due to inflation. They got wealthy BECAUSE of the reckless monetary policies of the Federal Reserve. Understanding this history means opportunity because history is getting ready to repeat itself.

If you are a home owner with an adjustable rate mortgage you should refinance into a fixed rate one. If your home is paid off you may want to consider getting a mortgage and investing the money in more real estate. If you don’t own a home you should consider buying one in the next few years. If you would like more information on creating wealth with real estate and inflation send an email to info@homesmax.com and I’ll send you a free PDF copy of “Creating Wealth Through Inflation”, a highly detailed mini course that fully explains the concepts I’ve touched on in an easy to understand format.