There are a lot of really attractive options out there for patient money right now. Everything has seen its price depressed recently, such that you have situation where things are sure to go up in value eventually, and if they don’t, well, we have bigger things to worry about than soured investments. One area that’s going to begin looking attractive to investors is housing. I’m serious. Brad DeLong excerpts MarketWatch:

The national average interest rate on the benchmark 30-year, fixed-rate loan averaged 4.85% in the week ending Thursday, setting a new record low dating back to 1971, according to Freddie Mac’s weekly survey. That rate is down from last week’s 4.98% and the year-ago 5.85%. The 15-year fixed-rate loan averaged 4.58%, a record low dating back to 1991, down from the week-ago 4.61% and the year-ago 5.34%. The five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 4.96%, compared with 4.98% a week ago and 5.67% a year ago. One-year Treasury-indexed ARMs averaged 4.85% this week, down from last week’s 4.91% and the year-ago 5.24%.

And he muses:

I feel like I should refinance my house, up the mortgage to 80%, and go out and buy two more houses. What’s property selling for in Carmel these days, anyway?

Now on the one hand, this kind of outlook is going to make a lot of economists sick to their stomachs (possibly including Brad). Borrowing heavily to invest in too much home is just the kind of behavior that got us into this mess in the first place. And certainly, we wouldn’t want anyone struggling to make ends meet, or with a vulnerable job, or who would need to see significant appreciation in under five years engaged in this kind of activity.

But for those who can afford to make these kinds of investments, this seems like a win-win. More buyers will help markets clear faster, and there are certainly a lot of people out there who could use affordable rental housing. Investors buying owner-occupied homes (present or formerly) for rental income reduce inventory while increasing rental supply. And if they are happy collecting rent for a decade or so, then they’re very likely to make a profit on the sale of the home.

It would require a strong stomach — prices are going to keep going down in a lot of places before they come back up — but it’s not a bad bet. And I’m sure the Fed was counting on some of this behavior when it decided to target mortgage rates.