US Dollar Makes Some Gains

There appears to be a subtle but positive shift for the US Dollar vis-a-vis the Euro and other benchmark currencies recently.  After toying with a new record low in the $1.60-1.61 range against the euro, the dollar rebounded impressively in the last week.  As of this moment, the mid-market rate sits at $1.558.

Contributing to the dollar’s renewed strength is the remarkable decline in oil prices in the last two weeks, due to rapidly increasing inventories and a short term diminishing of global demand because of weak economies around the world.  Couple that with some better than expected economic news on the home front, and signs of continued inflationary problems abroad, and the US dollar signaled that it wasn’t Charmin’s equivalent of currency just yet.

For currency traders, the dollar/euro ratio has been “range bound” for the last month or two, trading narrowly in the 1.56-1.63 range.  But an important charting threshhold was passed late last week, when the euro dipped below it’s 100 day average.  This can often be a precursor of a long term trend, namely a weaker euro.  Traders are now talking of a new floor for the exchange rate of 1.53, should the dollar strengthen to 1.555 or more.

All of this is good news for US buyers and travelers heading to Europe.  While the situation remains highly volatile, and the dollar could weaken again with only the slightest of bad news, at least there is now hope that the movement is not a one way street into oblivion.

Chez La Tour – Work Finishes!

After a little over 3 months of renovation, Chez La Tour opened its doors to it first Owner for the month of July.  In a race against the clock, the construction dust was swept up, tools hauled out, pictures hung, furniture placed, and a myriad of small details tackled.  There are still some details to finish, but the apartment was fully functional and ready to go when our first Owner arrived on the 4th of July.  Here are a couple photos.  To see all of the photos, go to our website at www.parishomeshares.net/cltphotos.html.

The US Dollar Continues to Struggle

Us poor Americans.  Our US dollar continues to be the whipping boy of the currency market. As I have discussed earlier in this blog, I think that there are several reasons underpinning the weakness of the dollar.

1.  Oil prices. While I feel that there is a certain amount of speculative fluff in the current dramatic rise of oil prices, the reality is that oil is purchased in US dollars, and as long as oil prices trend upward, this puts pressure on the US dollar. We have seen prices cross the $100/barrel threshold and head close to $150/barrel, all in the last 6 months.  There is no current shortage of oil, but continued unrest in the Mideast region, including the Iran/Israel threats, and the war in Iraq continue to make an assured supply of crude an uncertain prospect at best.  Couple this with unprecedented demand from emerging countries like China and India, and the picture gets even more fuzzy.

2.  Our economy. The current credit market crisis continues to weaken the chances for an economic rebound at home in the near future.  No one will say we are in a recession, but the reality is that the economy is in dire straits, with the housing market decimated, the banking industry in shambles (today the US announced that it may have to rescue Fannie Mae and/or Freddie Mac from insolvency), the airline industry is planning huge employment cutbacks this fall, and we haven’t yet hit bottom. This does not inspire confidence in the international investment community.

This weekend, IndyMac was shut down by Federal regulators.  This represents one of the largest bank failures in US history.  Teetering on the edge are Washington Mutual and National City.  Both banks have a significant amount of their assets in sub-prime mortgages. I suspect the situation will worsen before it gets better.

3.  Interest Rates. Money flows to the area of highest return.  The US is caught between a rock and a hard place.  It has finally signaled an end to the lowering of interest rates, but a return to increasing rates, which would make the dollar more attractive, would further hamper any near term prospects for a housing recovery.  Further, inflation poses a serious concern, both here and abroad, with the dramatic increase in costs of basic food supplies and raw materials such as steel and copper.

The good news is that the Fed has indicated that they are now watching the dollar more closely, and are prepared to shore up its value should it continue its precipitous decline.  I think their benchline is somewhere in the $1.60/euro range, but I could be completely wrong.

Future Prognosis: In the short term, the currency experts are bearish on the dollar, which signals further weakness.  Longer term, the prospects may be brighter, but only if positive action is taken to get our own economic house in order.

Le Petit Trésor – Our Newest Project

Last month, we rolled out our newest fractional offering, Le Petit Trésor.  Situated on the 5th floor of a gorgeous Haussmann building in the heart of the Marais, this 1 BR is our lowest priced fractional project, yet offers extraordinary value.  Already, this apartment is 50% reserved.  Check out all of the details on our website, at http://www.parishomeshares.net/tresor.html.

View from LR balcony

Paris Real Estate Prices

As though totally nonplussed by the financial turmoil swirling around the real estate markets around the rest of the world, Paris real estate prices continue their slow, steady march upward.  According to the latest figures published by the Notaires association, the average price for Parisian real estate increased 9.4% from April 2007 to April 2008.  To view the report, click here.  However, according to the same report, the total volume of sales decreased by over 13%, perhaps indicating an increasing resistance to the higher prices.

From a practical standpoint, based on my personal experience of searching the real estate market, this price figure appears to be low.  Local agents are aggressively pushing prices upward every day, and now most core area apartments seemed to be priced at or above 10,000€ / m2, irrespective of the apartment’s condition or location.  Good quality apartments are hard to find, and those that do appear are priced in the 12-15,000€ range.  To me, prices are starting to get absurd, yet they continue to sell.  Is the Paris market heading for a bubble?  I do not know, but my feeling is that true prices have skyrocketed over 20% in the last 6-9 months alone, and this rate is unsustainable in the long term.

Happy Bastille Day!

Today is one of the biggest French holidays, Bastille Day.  Like lemmings, most of France will be enjoying the remainder of their long holiday weekend in the countryside or at the beach.  Traffic of course will be at a nightmare level, and for those remaining in Paris, there will be parades along the Champs Elysées, festivals and the annual fireworks show at the Eiffel Tower.