Inflation is being watch and it affects housing both positively and negatively. Negatively, since inflation will increase the cost of borrowing and put pressure on home prices. Positively, since as inflation happens and de-value the dollar assets such as Real Estate tends to hold it's value.
"It's not good news from a whole variety of perspectives," says Nicholas Colas, chief investment strategist at BNY ConvergEx in New York. "Food inflation is getting very bad and that's just bad news for the majority of consumers who are still stretched. It's bad news for the 42 million people who are on food stamps."
Price inflation is coming primarily from upward global pressure on commodities like the multiple grains that go into food production as well as heating oil and gasoline that power the world's growing economies.
It's also being driven by a weak dollar, which has continued to fall in value as the Federal Reserve has printed more and more money to pay for programs it hopes will stimulate growth
And
Does QE2 help middle America? No, it just makes everything more expensive for middle America," banking analyst Meredith Whitney said in a CNBC interview Thursday. "I think that is a complicated policy and a dangerous policy to take things that much further."
The good news? Analysts have upgraded revenue expectations for companies that benefit from higher commodity costs, such as farm equipment manufacturers, miners and large multinationals, despite the expected slow growth of the US economy.
"[I]t does seem clear that weak/dollar commodity inflation is beginning to seep into analysts' expectations," Colas, of ConvergEx, wrote in a note to clients. "It took some time-the dollar has been weakening much of the year-but analysts have clearly caught on and begun to model the current state of affairs into loftier revenue targets for the next few quarters."
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