Inflation SURGING in 2021. Buy Real Estate?
The price of goods (especially used cars, gas, and meat) across America has spiked over the last three months as a combination of economic re-opening, supply shortages, and low interest rates has pushed up inflation. The Bureau of Labor Statistics-tracked CPI is now measuring the highest YoY % increases in decades.
The Federal Reserve Quantitative Easing program gets a lot of blame for this inflation. QE is essentially a “Money Printing” strategy where the Fed gives banks cash in exchange for treasuries and mortgage backed securities. Analysis of bank balance sheets shows that their cash reserves have spiked as result. But interestingly banks aren’t making as many new loans as they used to. The growth rate in loan credit from US commercial banks has slowed to only 4% per year in the last decade compared to well over 8% from 1970s-2000s. If banks aren’t making loans at the same rate, and the Fed printed money is just staying in bank vaults, that’s not inflationary.
Is Inflation here to stay? And if so, what does that mean for your Real Estate Investment Strategy?