TJP

Hyper-inflated Housing Market

Byron A. Ellis

The housing market consumed by hyperinflation is out of reach for a large number of potential buyers; their salaries cannot afford the steep mortgage payments.

The shortage of homebuyers, however, is unlikely to significantly change the fundamentals, since government spending on the war fuels the economy. And, even if the war spending dries up reducing national income and employment. The Federal Reserve will increase the money supply to compensate for the reduction in income, deflationary pressures, and unemployment.

Thus, it is unlikely that housing prices will fall significantly in the coming months. What is more likely is that the supply of new housing will diminish. Therefore, housing prices will remain relatively sticky, particularly in densely populated areas.

Escalation of the Middle East conflict, however, could cause the price of oil to top $100.00 per barrel, which would adversely affect disposable income, prices, employment, and hence housing demand.