Inflation? Not In My Neighborhood.

Olympia Field Country Club in Olympia Fields,  Illinois.

I have an unusual vantage point to observe the housing market as the pundits fret about the housing “bubble” they imagine is bulging.

I live in a housing refrigerator, Olympia Fields, Illinois. I bought my 3,000 square foot home 34 years ago on a half acre lot within walking distance of the Olympia Fields Country Club, where they played the 2003 U.S. Open golf tournament. There are five beautiful country club courses within a seven minute drive. The suburb is on the Metra train line so I can get downtown in 35 minutes, and I’m five minutes from the interstate.

My wife and I bought our lovely home for $130,000 in 1979 and have put at least $150,000 of improvements into it.

We could sell it this spring for $175,000 to a two earner couple, putting up a 3.5% down payment which we would probably have to subsidize.

On the other hand, my daughter and her husband in Palo Alto, California, just bought a home on a lot half the size of ours, about 2,000 square feet, for 10 times that price. Before they purchased it they needed to write a letter to the seller explaining why they were a deserving buyer for their home.

Like politics, the housing market is local. Is there a bubble in the Bay Area? Actually, not. The house my daughter bought might have been 5% less last year, but the price has little to do with the interest rate and everything to do with Silicon Valley, where Google and Apple are willing to pay well for talented people who want to live close to the office.

Then, there is my gracious, spacious, well-maintained home, next to the best rated grade school in the area. It’s so un-inflated, “flat” would not do it justice. Is there a housing bubble in Olympia Fields, Illinois? I rather doubt it. The five bedroom house across the street was recently sold to a speculator who just put it up for rent.

Houses sell when people want to buy them. With 3% money and 3% down payments you still can’t move the needle in my neighborhood, while in Palo Alto many houses sell for all cash.

The head of the Fed grew up in a small home in Dillon, South Carolina, but he made his name in academia by studying the Great Depression. He has helped the underwater big banks with his low interest policy, but the cheap money has enabled the American economy to rebound while Europe has floundered. There is absolutely no sign of widespread inflation in wages, real estate, or chewing gum.

But I keep rooting for some, which would indicate that the economy has some footing and real people have found their mojo.

Housing bubble? Please. Come to my house for pancakes.

Question: Would a little inflation help you?

SHARE THIS

Share this post

11 thoughts on “Inflation? Not In My Neighborhood.

  1. Val Zanchuk

    A little inflation would be an indicator of a growing economy. I would also welcome this situation. Selling to more customers plus having our existing customers buying more would give us a more reasonable growth rate. Now, we’re only getting about half of that equation, so things are stagnant – mildly profitable – but stagnant.

     
  2. Justanothercanuck

    Bought for 130K (1979 $s), added 150K and it is now worth 175K (2013 $s)? Sounds like serious de-flation, Lloyd! I can’t buy the dirt for $175K.

     
  3. ms

    A little “wage inflation” for the lower working class would be good. This economy is stagnant because 100 million people in this country make less than $40K and 73 million make less than $25K. And this is out of 151 million wage earners.

    You’re not going to sell too many widgets when 2/3 of the country is just scraping by.

    The only way to get the economy really moving is to get more money into the hands of people that will spend it right away.

    More inflation will make it much tougher on the lower class and as a result, hurt all of us.

     
  4. Jim Goerges

    Well, there you go again! I throw the BS flag on that one! Couple different ways to explain that, pricing SHOULD GO DOWN, and it is not! The reason is the largest consumer of GDP doesn’t change there buying habits, it is keeping pricing TOO HIGH. That consumer is government by the way!! Many areas of the country, ours included housing is 20-30% down from 2006, yet up double or triple from 1979, so not sure why your situation is so poor, especially next to that golf course. If you look at the unemployment and believe what is posted that is your first mistake. The 7.6% unemployment touted by the Obamians and economic savants does not include the increase of people not in the labor force of 663,000 people! What is horrible is that number is now 90,000,000! Imagine 90,000,000 people not looking for work! STAGGERING! For no bias numbers on stats look at http://www.zerohedge.com. Our labor force participation rate is now 63.3%, down .2% in one month, worst increase in 34 years.
    I personally like low interest rates, most dems by the way want large interest rates so there money markets and savings work. I like to see money work by being put to use, not stagnant in some bank account. However, how in our consumption society how will this 90 million pay for anything? They DON’T!! Newsflash, the poor have NO MONEY!!! Our government is subsidizing the poor! Why? VOTES! Obama bought the election! Back on track, so how are the poor supposed to pay for health care like Obama, Reid, and Polosi have told us, THERE NOT–THEY HAVE NO MONEY! So when all the money flows out of the system, because it is spent mostly on worthless stuff at inflated prices, and for food and shelter at inflated prices, what’s going to happen?
    Who is gonna pay the bill for the new machine when our taxes and costs go up and nobody can pay the bill? We are less than 3 years from this blowing up! Wanna bet? Interest rates and inflation will go into overdrive for the years they were artificially low. Bernanke is guiding the ship to into a new intellectual bankrupcy, soon it will be a reality, what he tells about structural or systemic economic issues and the cure for each, he is either lying or stupid or evil. Unemployment is structural. The fed is powerless to fix that attribute of the economy. His policy’s are basically draining money out of the market that is subsidizing people to not produce and be valuable to society. What always happens when there is no value to money? What happens when you just keep rolling the printing presses, ECONOMIC DISASTER! Inflation happens and your home becomes worthless and people start stealing from you, because the government can’t support them. Isn’t unbridled entitlement wonderful! Whose fault is that, oh, I know, Bush’s and the rich.

     
  5. JB

    MS makes a point that I have tried to make for a while. To improve the economy we need to help those at the lower end of the economic scale. They are customers and thereby “job creators”. Any economic help they get will be spent back in the economy. You get much more “bang for your buck” by helping the low end of the economy as opposed to helping the upeer end ot the economy.

     
  6. BILL

    LET’S JUST LICK OUR WOUNDS, I BOUGHT THIS NEW HOME IN 1988 4300 SQ. FT. $225.000.00 WITHOUT THE FINISHING TOUCHES, ANOTHER $100.000 MADE IT LIVABLE. NOT WORTH MUCH MORE THAN A PLUG NICHOL. SAME DEAL IF I HAD BOUGHT SOME #4 WARNER & SWASEY TURRET LATHES!!!!

     
  7. BILL

    ONE MORE QUESTION, WHY WAS I PAYING 2% OVER PRIME IN 1983 FOR MONEY FROM THE BANK. PRIME RATE WAS 21 1/2% ANYBODY KNOW WHY???
    I CALL IT THE SCREWING OF THE PEOPLE OF THE CENTRY

     
  8. jax thomas

    Lloyd, you live in the most corrupt state in the united states, so do I. When my kids graduate from college, you can bet i am going to pack up my shop and get out of illinois. who would ever want to start a business in this state. if your last governor is in jail and your current governor is going to jail, you might be from illinois

     
  9. Eric Shear

    The Peoples’ Republic of Illinois is near the bottom in every category compared with the rest of the country. I have a sizable amount of rental property in Illinois. I regret investing in Iliinois now. Property values and appreciation have been dismal since 2006. I see first hand how much my tenants are struggling to make ends meet. There is no housing recovery, it is an artificial stimulus caused by record low values and interest rates. Anyone who tells you the economy is improving is uninformed, lying or both.

     
  10. Emily Halgrimson

    I got lucky, I guess. I bought my house in 2009 for $150k and it appraised in 2012 for $190k, and I bet I could actually get $210k for it today. I chose a house that needed work in a fantastic community with excellent schools (Munster, IN). I love the house, but the value I have gained from it makes me smile every time I step over the threshold.

     

Comments are closed.