Over the past decade, changes in the US dollar have been one of the central storylines of the evolving global economy. The same is true for the New York Real Estate market. As the US government unofficially abandoned its increasingly untenable strong dollar policy at the beginning of the decade, foreign demand for US real estate began to increase. This has been especially important for the New York City market, which offers apartments that were both important status symbols for wealthy foreign buyers and convenient second homes for international businessmen and political elites.

By far, the most important currency pair is the US dollar/Euro. Similarly, citizens of EU countries have purchased more New York City property than holders of any other currency. As the euro climbed and the dollar fell, the latter became so weak that one euro could purchase more than 1.6 US dollars.

In the past several weeks, however, what was viewed as a temporary uptick in the value of the dollar has become a sustained rally. Once again, the euro is back below $1.50 in value.

While many analysts still predict the dollar will remain weak for the foreseeable future, analysts at Goldman Sachs put out a new report on August 14th predicting the opposite. The company is particularly well respected in currency markets – their last CEO, for instance, is now the US Secretary of the Treasury.

It is safe to say that this new report by their analysts marks a major turning point in Wall Street’s attitudes towards the dollar. The rest of the international financial industry might not follow suit just yet, but at any rate, it is clear that the dollar’s slide has bottomed out and reversed itself at least somewhat.

Many potential foreign buyers were waiting to see how far the dollar would fall before they scooped up New York City real estate for prices that – for them – are incredible bargains. The combination of the dollar’s recent rebound and Wall Street’s developing attitude on the currency suggests that it is doubtful the euro will climb much further than $1.65 for some time.

As this reality becomes generally accepted in and out of the financial and real estate industries, expect foreign buyers to pick up their purchasing pace. Indeed, as the dollar’s recent rally fades during the next month or two and it returns to something closer to the middle of its recent range of $1.47-$1.63, it will become clear not just to international investment firms but also to individual foreign buyers that the current market is about as good as it is going to get for them.

As prices in the New York City market are expected to show undramatic changes during 2009 – in comparison to recent years – it is likely that the rest of 2008 and much of 2009 will be seen by foreign buyers looking at the NYC real estate market as something of a golden age of investment. Accordingly, the stimulative effect of the low – but not too low – the dollar will be a powerful force supporting the market for at least the next 18 months.

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