INVESTOR RESOURCES
INFLATION
How InflationWill Affect the Real Estate Market
WHAT INVESTORS NEED TO KNOW IN THIS TIME OF PRINTED MONEY
by Andrew Syrios, Stewardship Properties
nless you have been living under a rock, you know that
still sluggish, but unemployment has improved from 14.7 percent in April 2020 to 6.1 percent in April 2021. So, let’s put this all together. If you’re familiar with the Quantity The- ory of Money, you know that Money X Velocity = Price X Productivity. Velocity is how fast money is spent, which increases in a healthy econ- omy (and is thus increasing now). Money is how much money is in circulation (which is up a lot). And productivity, while improved, is still below where it was at for the begin- ning of 2020.
In other words, every sign points toward prices increasing … a lot. In fact, we’ve already seen this starting to happen; in stock prices, cryptocurrencies, real estate (we’ll get back to this one), gas prices, lumber (yikes!) and we’re finally starting to see it in commodities as well. Even the CPI or Consumer Price Index (which does not count assets in its calculations) is show- ing inflation is up to a 4.2 percent annualized rate in April (it was just 1.4 percent in January). And again, because the CPI doesn’t count
U
the Federal Reserve has printed an extraordinary amount of money over the last year. Something like 30 per- cent of all of the dollars in circula- tion were put there over the past 12 months. The authorities have clearly lost any inhibitions about quantitative easing and throwing money around. So, there are a lot more dollars around than there used to be. In addition, the economy is starting to pick up a bit now that the lock- downs are (mostly) ending. Yes, it’s
50 | think realty magazine :: august 2021
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