Are you ready for INFLATION?!

Investor · Worcester, MA · Member since 2020 · 1k+ posts · 1k+ votes

@George Mastrosavas - I disagree with your sentiment. Given China's economy heading towards a recession due to their developers overleveraging and ruining the real estate market, e.g. Evergrande, what other country would you rather have your funds in? US seems a lot more attractive than most other countries out there.

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Eric Bilderback

Real Estate Agent · Sisters, OR · Member since 2014 · 1k+ posts · 1k+ votes

4y

@George Mastrosavas

I think we are in fourth turning both financially and culturally. One of the frustrations I have is real estate investors (and everyone else) is folks turning themselves in pretzels trying to stay above the fray. In order to get out of this financial mess working class people would need to patient while politicians, bureaucrats, and the financial engineers untangle and deconstunct easy money and all the inequity it has brought. That is asking a lot from people having been screwed once. Average people will need to be agreeable and trust the Central Planners, or the Central Planners need to get tough?

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J Zev J.

CPA · Colorado Springs, CO · Member since 2016 · 413 posts · 258 votes

4y

I don't think a revolution (or pandemonium) will happen. However, I believe inflation will cause a market correction in the next 12 - 36 months, which might help normalize things a little.

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Mike Dymski

Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes

4y

With a PC and the internet, knowledge is virtually free. So is housing, college, and food for certain income brackets. We live in the country with the most opportunity on the planet. The job market is on fire and good (and many bad) workers can name their price. There's never been a better time in history to get ahead...we just have to go to work!

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Daniel Sanchez

Real Estate Agent · Houston & College Station, TX · Member since 2020 · 47 posts · 27 votes

4y

Quote from @Andrew Freed:

@George Mastrosavas - I disagree with your sentiment. Given China's economy heading towards a recession due to their developers overleveraging and ruining the real estate market, e.g. Evergrande, what other country would you rather have your funds in? US seems a lot more attractive than most other countries out there.

I always contemplate this but always revert to the US having the best 5% of entrepreneurs which will propel the other 95%. The best tech is still coming from America and that is driving the world economy. Think Apple, Amazon, Google, Microsoft, and Meta alone outperform entire continents.

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Daniel Sanchez

Real Estate Agent · Houston & College Station, TX · Member since 2020 · 47 posts · 27 votes

4y

Quote from @Mike Dymski:

With a PC and the internet, knowledge is virtually free. So is housing, college, and food for certain income brackets. We live in the country with the most opportunity on the planet. The job market is on fire and good (and many bad) workers can name their price. There's never been a better time in history to get ahead...we just have to go to work!

Couldn't agree, more. We are in the era of destination mobilization. Esepcially down the road with the adoption of the metaverse.

1 Reply

Daniel Sanchez

Real Estate Agent · Houston & College Station, TX · Member since 2020 · 47 posts · 27 votes

4y

Quote from @George Mastrosavas:

On the subject of #exonomic crashes:

- Median family household #income (US census) -

1999: $42,000

2020: $67,521

(61% increase)

- Median #home Price in the US -

1999: $152,000

2021: $411,000

(170% increase)

- Average #student loan debt at graduation -

1999: $16,030

2021: $37,172

(132% increase)

- Average cost of a new #cars -

1999: $20,686

2021: $45,031

(118% increase)

- 1999 #family net worth statistics (federal reserve) -

Median: $53,100

Average: $219,000

($165,900 gap)

- 2020 family #Networth statistics (federal reserve) -

Median: $121,411

Average: $746,821

($625,410 gap)

- Federal #debt -

1999: $5.606 trillion

2021: $28.9 trillion

(416% increase)

- #Suicide rates per 100k (Americashealthranking) -

1999: 10.5/100,000

2020: 14.2/100,000

(35% increase)

The powers at be have allowed these numbers increase for 22 years and have done nothing but make it worse at a faster rate. Everything costs significantly more compared to our collective wage increases, and our federal debt is clearly out of control (currently INTEREST payments alone account for 8% of our federal taxes). Our social security system is woefully underfunded - Robert Kiyosaki predicted a 2025 crash in his 1998 book “cash flow quadrant” for that reason alone due to baby boomers retiring. And now we decide to solve all of our problems we should just print money, a solution a 10 year old could come up with. This caused our 7% inflation last year and the soon to come mortgage rate increases, which will prevent even more people from becoming home owners and begin to improve their financial lives.

Our trajectory as a society is only getting worse for the average American. I believe everyone should have fair chances, but unfortunately it gets harder and harder for people of lower income brackets to move up in the world. I’ve seen some struggles since I was a child. I was able to build a solid net worth by 26, but only because I was fortunate enough to get into real estate. We know not everyone can, or we’d have too much competition to collectively succeed.

I believe people will only live so poorly for so long. Does anyone else project possible pandemonium on the horizon (similar to a French Revolution)? Wish someone would get into power and right the ship to provide economic stability to our nation, without thrashing our lives and businesses.

Curious about your opinions on this.

Real estate is not the only wealth builder. As a young person, I know there have been many millionaires made from marketing, crypto, and development. The opportunities are greater now than ever, not just for real estate.

1 Reply

Chris Webb

Investor · Central Virginia · Member since 2020 · 394 posts · 253 votes

4y

The aggregate amounts look outstanding. However, we are now a payment society. Average length of payments would be a better gauge. Buying a $400K home on a payment of BLANK over 5-8 years and then trading up does is not really accounted for in the metrics listed here. Same goes for car, student loan, and other payments.

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Jake Soper

Real Estate Consultant · Lawrence, MA · Member since 2020 · 216 posts · 157 votes

4y

Putting the worlds economy on pause while we all sat inside for months is turning out to have some serious repercussions, despite the incessant claims of 'transitory' inflation. We all knew that was BS. Someone has to pay the piper, and we're all paying it everyday, 7.6% at a time.

A Longer term debt cycle crash is starting to play out. Every 70-80 years there's typically a drastic reset.

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Sam YinPro Member

Los Angeles, CA · Member since 2021 · 584 posts · 738 votes

4y

Having come from a country where there was inflation, revolution, genocide where millions were killed in just a few years to reset society and wipe out all currencies... the US economy and society is far from any revolution. I would guess not in our lifetime.

As for our current state of inflation, I welcome it. In my view, with everything going up all around, it makes it more easy to swallow when you raise rents. Tenants know there is inflation and will expect rents to go up. Your debt is locked in. Your operating costs increase at a slower pace than the rent. You will come out of this very well if you use it to your advantage.

I recently raised rents on a tenant and she commented that she expected another $250 higher and was ready to pay. I missed the boat on that one. But it reaffirmed my thoughts on how tenants feel about the value of money.

2 Reply

Jamin Littell

New to Real Estate · Brighton, MI · Member since 2018 · 10 posts · 1 vote

4y

@Sam Yin good points

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Troy Halsey

Contractor · spring lake North Carolina · Member since 2020 · 27 posts · 10 votes

4y

@George Mastrosavas this is very good information, this the type of learning that should help pin point the trouble and to start finding solutions!!

0 Reply

Troy Halsey

Contractor · spring lake North Carolina · Member since 2020 · 27 posts · 10 votes

4y

@Zev Jankovicdo do you think that a correction would prove the inflation, because I don’t think the price would be corrected to normal everything would be still very high

1 Reply

J Zev J.

CPA · Colorado Springs, CO · Member since 2016 · 413 posts · 258 votes

4y

@Troy Halsey - It depends what you think 'normal' is. I've been reading estimates from a 20% - 40% correction. I have also seen some experts say an even smaller correction. Either way, most of them don't see a correction coming any time soon in the housing market.

1 Reply

Nate Sanow

Investor & Agent · Tulsa, OK · Member since 2016 · 1k+ posts · 1k+ votes

4y

We can all still live below our means. If housing in our area is expensive we move to cheaper markets. If cars are expensive we drive old used ones. If eating out is expensive we stay in. If groceries are expensive buy in bulk and avoid name brand stuff… I think things like this both could curb inflation if done en masse and allow the average joe to get ahead, or at least save up a little and be OK. While I’m a little more into debt than him it’s the Dave Ramsey approach that can keep you grounded in these weird times.

As for housing I don’t see a crash or correction imminent but perhaps being slightly more of a buyers market if there was to be a higher DOM for properties on the market.

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Are you ready for INFLATION?!

Are you ready for INFLATION?!

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