Understanding the dollar
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An interesting conversation about the economy, value of the dollar, as well as housing prices happened recently when several questions left all parties involved somewhat perplexed. Trying to understand the nature of how everything comes together to structure our nation’s and the world’s economic landscape can be quite daunting if one has no understanding of the platform.
Firstly, the value of a nation’s currency and the appraisal of a home are two distinct economic concepts that often run on different tracks, yet they eventually collide in the wallet of the average homeowner. At the most fundamental level, the value of the United States dollar is no longer tied to a physical commodity like gold. Instead, it is a fiat currency, meaning its value is derived from the strength of the economy, the stability of the government, and the global laws of supply and demand. On the world stage, the dollar’s value is measured by its purchasing power compared to other currencies. When international investors have high confidence in the American economy, they buy dollars to invest in U.S. assets, driving the value up. Conversely, if the government prints more money or if inflation rises significantly, the “supply” of dollars increases while the “utility” of each individual dollar decreases, making everything from a loaf of bread to a gallon of gas more expensive.
When we shift our gaze from global currency markets to the 2,000 square foot home on your street corner, the valuation process becomes more localized but no less complex. An appraisal is essentially a professional estimate of a property’s market value at a specific moment in time. This estimate is based on the “highest and best use” of the land and a comparison of recent sales of similar homes in the immediate area. However, the reason that same 2,000 square foot house is worth significantly more in 2026 than it was in 2020 is rarely because the physical structure has improved. In fact, buildings technically depreciate as they age. The surge in value is primarily driven by three external forces: scarcity, inflation, and the cost of money.
Between 2020 and 2026, the housing market experienced a perfect storm. First, the supply of homes failed to keep pace with the growing population, creating a scarcity that naturally bids prices upward. Second, the cost of materials and labor; the “replacement cost” of a home; skyrocketed due to global inflation. If it costs a builder 40% more to build a new 2,000 square foot house today than it did six years ago, the value of existing homes rises to meet that new baseline. Finally, we must consider the “lock-in effect.” Many homeowners who secured low mortgage rates before 2022 are unwilling to sell and trade for a much higher interest rate today. This keeps inventory low, ensuring that when a house does hit the market, the competition is fierce.
Ultimately, your home has become more valuable; not because the wood and drywall have changed, but because the dollar used to measure them has lost some of its individual power while the desire for a place to live has remained constant. In the eyes of an appraiser, you aren’t just living in a 2,000 square foot box; you are sitting on a scarce asset in a world where the currency is more plentiful and the land is not. This equates a grass-roots assessment of the basic construct of our economic system, lending credence to the old adage that it’s money that, literally, makes the world go ‘round. I could be wrong but it’s just something to consider.
To pose a question, comment, or share your opinion about this opinion, you can reach Howard at bg@authorbghoward.com or P. O. Box 8103, Jacksonville, FL 32239.
