The Wizard of Oz and the Perfect Storm

Real estate values are about to free fall

Close your eyes for a moment. Picture the scene from the beginning of The Wizard of Oz when Dorothy and Todo get locked out of the storm shelter. They run back to the house to Dorothy’s bedroom. The next thing you know the house is free falling in a tornado.

Real estate values are about to free fall as if they are affected by a tornado and no one knows where the landing will be or how hard they will hit the ground. For real estate values the tornado is coming, and the storm shelter door has been locked months.

Until recently the only asset class not affected by inflation has been the value of real estate. The wealth you have built in your home since 2008 but especially over the last two years has now caught the inflation bug.

Raising oil prices and interest rates, which by themselves would increase inflation, have an inverse relationship to the value of your home. Higher oil prices, interest rates and more inflation will drive down the value of your home.

There are two ways to reduce inflation and preserve the value of your real estate investments as well as other assets. Government can reduce the restrictions on the production and exploration of United States oil and flood the domestic and European markets with an abundance of oil. This will drive down oil prices, interest rates, the cost of all goods and services and inflation within a few months. Or we can sit back and witness what the government seems hell bent on doing. Curb inflation by limiting oil production, driving prices on everything up, increasing the interest rate and destroying your wealth by crashing real estate values. If your wealth is reduced, you have less money to buy things with.

Anyone who is close to or is retired, especially if your mortgage is paid off, still has an opportunity to preserve their wealth. Sell your home now and ride out the perfect storm to survive the crash landing. You will have great opportunities. There is always a rainbow at the end of the storm.

There is always a rainbow at the end of the storm