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San Clemente Home Price Prediction: Inflation

A gaze into my cracked crystal ball.

It’s crystal ball gazing time.

But before I make any predictions about San Clemente real estate, I have a few caveats:

First, most popular forecasts about financial matters turn out to be wrong. Given the laws of probability, it would seem the prevailing wisdom would be right at least half the time, but that doesn’t seem to be the case.

For instance, 80 percent of well-educated, experienced and highly paid Wall Street portfolio managers routinely underperform simple market indexes. How they keep their jobs is beyond me.

Try this for yourself:  Spread out a chart of the daily Dow Jones Industrial Average for May and cover up everything but May 2. Try to predict whether the market will go up or down on May 3. Then move over one day and try to predict whether the market will go up or down on May 4.

Repeat for the entire month and you will discover you are wrong about 80 percent of the time. Go figure.

I have also noticed that the most visible and outspoken financial soothsayers seem to have the worst track records. Far from discouraging them from continuing to predict the future, they ignore or explain away their errors–citing “unforeseen” developments.

And I thought the job of seers was to see the unforeseen.

Many market forecasters couch their predictions in worthless “if, then” language such as, “if the recession worsens, then housing prices will suffer.”

Well, duh!

Finally, with mountains of fascinating real estate statistics available every day to San Clemente homeowners and home seekers alike, there is really only one question they want answered: What’s going to happen sooner or later to the market value of the home I own or want to own?”

My crystal ball is a bit cracked, but here is what I see:

Sooner:  The San Clemente home real estate market overall has been flat for the better part of two years and will remain flat for at least another year. Certain neighborhoods will fare better than others, and the closer to the ocean, the better the lackluster market performance.

Later:  San Clemente home prices will rise along with inflation over the next ten years. The rise will be substantial, as it was in the 1970s.

I base this prediction not on what I think may happen in the future to spur inflation, but on what has already happened. In my view, there is simply no way the country can incur this many trillions of dollars of debt this quickly without experiencing inevitable inflationary consequences.

(By the way, that is exactly how countries get away with incurring large debts–they pay back over time with inflated, less valuable money.  Over time, the US government WANTS inflation.)

Inflation has been tame for the last few years, but only because of Washington’s herculean efforts to keep interest rates low to spur investment and badly needed job growth. Eventually this effort to keep a lid on inflation must fail.

Owning real estate in the future--especially in San Clemente--may be less a growth strategy than a defensive move. Inflation will hurt those on fixed incomes, but those with inflationary assets and income will feel much less pain, or none at all.

For more of the latest market news and statistics on San Clemente real estate, visit my blog at MCotter.com.

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