All things real estate: How future inflation can affect home prices – Business


First off, I want to let everyone know that no matter what you read about doom-and-gloom scenarios, currently there is no bubble in the real estate market. I have conveyed this many times: Our inventory is at an a historically low level. However, the No. 1 reason that prices went up to high single and double-digit percentages in 2020 was the Covid-19 pandemic as well as the lowest mortgage rates in 50-plus years adding to the feeding frenzy of purchasers.

Also contributing was the temporary shutdown of our markets and then the insane pent-up demand that exploded in buying homes during the second and third quarters and beyond from those leaving and escaping New York City due to Covid.

Our government is in a vicious cycle of printing trillions of dollars to invigorate our economy through the first stimulus checks in 2020 as well as PPP loans and grants through the Small Business Administration. Now the second stimulus package of $1.9 trillion called The American Rescue Plan Act of 2021, also called the COVID-19 Stimulus Package, was passed by the Senate last month and President Biden signed it into law. It appears for the short term this will obviously assist many who are either unemployed or whose businesses were greatly affected by the turndown in our economy in 2020 and even in 2021. The millions who were laid off and who are still unemployed (although employment is improving greatly) are getting a second shot in the arm, but will it be enough? Who will be paying it all back, us and our grandchildren and those yet not born?

I am torn between agreeing with the stimulus and not agreeing with it for several reasons. The sheer immensity of the additional trillions added to our national debt has escalated more in the last four years of the Trump presidency compared to the eight years of the Obama presidency. But this new increase is pushing us into a new territory of debt, but what other choices do we have? There is the need to create jobs through the infrastructure bill as well as cover other much-needed expenses. I am not pointing fingers but just stating facts. It is what it is and now we will be adding that much more to what we already owe.

What if interest rates were to continue to rise, while our currency becomes diluted, so one would need more dollars to pay for things, thereby decreasing purchasing power, which is called inflation? Do you know what it will do to our national as well as our international debt? It will add trillions upon trillions in higher interest payments, which will create what I would call an unsustainable debt crisis, which I believe we already have. However, landlords will benefit because if and when mortgage rates increase, causing more not to qualify, then more buyers will look to renting as the only option for a longer term, increasing demand and raising prices. Unfortunately, history does repeat itself as we don’t always learn from our past economic misfortunes and…



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