Real Estate

Question for you guys which doesn’t seem to get touched on in the media… If huge government deficits and monetization eventually lead to inflation down the road what do you think the effect will be on real estate prices? Keeping in mind that mortgage debt relative to household income has never been this high in any previous inflationary environments. Here in Canada, I believe the figures are that average household income is ~$65,000 per annum and average household mortgage debt is $180,000. If inflation and/or expected future inflation causes nominal mortgage rates to increase from say 4% to 8% then mortgage interest costs should rise disproportionately to wage inflation (Ie. wages increase by $2,600 per annum and mortgage servicing costs increase by $7,200 per annum.). This to me seems like a recipe for major sell-offs/ foreclosures, and lower prices. Maybe the better question is whether you think central banks will find it politically acceptable to raise rates as high and early as they need to before it gets to this point…

$180K might be mortgage debt but it’s not an annual mortgage payment. I don’t see how you went from that to $7.2k/annum increase in servicing cost.

I would think new construction prices would go up as construction/materials costs go up. Also, rents would go up…