Gold Up...Oil Down...Housing Flat?
A: TO KEEP HOUSING HOT, WE NEED GOLD & OIL PRICES TO FALL SO THAT THE FED WILL KEEP RATES LOW!
Its a tough world to try to time the housing market right now, leading me to look at what the Fed looks at when deciding whether or not to raise interest rates or not. Its a strategy not employed by most people, probably because if you need housing, then you need housing!
But for those of you that are not pressured by a moving timeline, or any other outside circumstance, than you should be vigilant to what the fed is thinking, and where they are likely to go with interest rates. After all, if rates rise another 1/2 - 3/4 points, that should result in a meaningful rise in mortgage rates and make it more expensive to borrow money.
When its more expensive to borrow money, housing prices will come down to make it more attractive to would be buyers.
The price of gold is an indicator toward future inflation as well as the value of the currency market. As Gold prices rise, inflation remains a threat (causing the fed to want to keep raising rates to combat the threat), and worldwide currencies become less valuable of an asset. As currency supply continues to increase (especially the Dollar, Euro, and Yen), the supply of Gold continues to be constrained.
Right now, Gold is trading at multi-year highs and is starting to get the attention of the masses. That is a good and bad sign. Speculators will probably start to buy gold, pushing the price higher, but resulting in a lot weaker players in this market. I will not speculate here where I think Gold is going due to my lack of knowledge of this market.
But I will keep an eye on Gold prices. For the housing market to stay HOT, we need the fed to keep rates low. PLAIN AND SIMPLE!
So, Im hoping that Gold prices correct, and that the price of energy continues its slide. Crude Oil already has gotten hit, and looks likely to keep on moving lower. That is good for everyone, as the Fed will most likely PAUSE raising interest rates if the prices of Gold and Crude continue to fall.
If you are ever going to predict the future of housing, these are the things you MUST think about. It is all tied together, and knowledge is power. As we move closer to 2006, I should have a better idea of what the Fed will be doing with rates! Keep checking UrbanDigs if you plan on profiting from NYC real estate!
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