A reader comment asks:
The dollar still seems low enough that Russians and other non-US buyers may help with your predicted real-estate collapse … thoughts?

Photo: p0psharlow, Creative Commons, Flickr

My response:
I think the dollar will start to rally vs. Euro when the financial crisis is over and Europe starts to go into a recession.

Why? European interest rates will start to fall just as the U.S. financial system finishes digesting the current banking, insurance, mortgage company liquidity and stupidity crisis. That interest rate differential will start to drive the dollar higher versus the Euro. That increase in the dollar will start to drive away the European buyers of New York City apartments who have been holding up the apartment market. In a situation where mortgages are more expensive and Europeans aren’t buying, there is nowhere for prices to go but down.

Disclosure: I own a condo in New York City. I’m not excited about prices falling but I won’t move either. After all, you have to live somewhere and I’m not going to play arbitrage with my abode.