Insight on Real Estate and Inflation from Hedge Fund Manager Kyle Bass

posted on October 8th, 2010 filed under: Real Estate News

Kyle Bass was one of the hedge fund managers who correctly predicted — and mightily profited from — the housing bust.  He’s now predicting hyperinflation as a result of the Federal Reserve’s wild creation of new money (that “quantitative easing” stuff you heard about on the news lately).

  • The challenge for investors is where to put your money if we as a nation are losing control of our monetary base and monetary policy, which he believes is starting to happen.
  • We have a monetary base of $2 trillion and the Fed is talking about printing another $1 trillion.
  • The Fed is experimenting and they admit they do not know what they’re doing.

On the subject of real estate, Bass cites data from 28 housing busts in developed countries since 1970, and estimates that we’re about three years away from a housing recovery.  Peak to trough, the decline in median prices has taken about six years on average, with the bulk of the decline occurring in the first four years.  If the housing bust started in late 2006, we’re mostly done with the price declines in the moderate price range.

But there’s so much inventory that, even if prices don’t go down much more, they’re not going to go up for about three years, because there will be continual supply as yesteryear’s failed buyers get washed out.  In real estate markets like Miami and Coral Gables, where it still costs much more to own than to rent, Bass’s timeline would suggest there’s no urgency to hop from renting back to owning.

Bass sees a more troubled picture for the high end, where he thinks prices are still coming down.  Prices could thus continue falling for luxury real estate in Miami and Coral Gables.

That’s pretty much the opinion that’s been offered here time and again (and again and again and again and again and again and again).  Glad to be in such good company.

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posted by // This entry was posted on Friday, October 8th, 2010 at 11:50 pm and is filed under Real Estate News. You can follow any responses to this entry through the RSS 2.0 feed.

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