Hyperinflation or Recession

[Dillon Cook]

I have my thoughts on which the fed will choose, but who knows!?  I have a feeling if push came to shove, they would fight a recession instead of inflation and reduce interest rates again.  Inflation is extremely high already.  Interest rates are high, but haven't affected pricing as much as you'd think in the Tampa area.  Is past inflation keeping the prices high amidst high rates?

Kiyosaki recently said our economy is going into an "aerodynamic stall".  Curious to hear opinions bounce around because IF rates were to drop again in ~ a year, that would affect the way investors viewed deals right now.  

[Josh Green]

Quote from @Dillon Cook:

I have my thoughts on which the fed will choose, but who knows!?  I have a feeling if push came to shove, they would fight a recession instead of inflation and reduce interest rates again.  Inflation is extremely high already.  Interest rates are high, but haven't affected pricing as much as you'd think in the Tampa area.  Is past inflation keeping the prices high amidst high rates?

Kiyosaki recently said our economy is going into an "aerodynamic stall".  Curious to hear opinions bounce around because IF rates were to drop again in ~ a year, that would affect the way investors viewed deals right now.  

The answer is simple: supply vs. demand.  There are various cities in the US that have seen pretty significant declines, but Tampa hardly anything at all.  This is because the demand is still much higher than the supply.  I believe we were slowly increasing in supply in December and going into January, but a sharp increase in buyer demand with that small dip in interest rates in January erased that completely.  I've seen it personally the past couple months - suddenly it has become much harder negotiate aggressive seller credits, showing requests have dramatically increased, properties are selling quicker again, multiple offer situations, above list price offers - all before we had a chance to breathe.  No telling what will happen the next six months, but my money is on a new peak in housing prices here locally IF interest rates drop 1% or more and stay there.  The only way we are going to see prices decline is first seeing the rate of new listings outpace the demand for enough time where the supply is at least 3-4 months (still considered a seller's market under 6 months).  

[John Clark]

First thing you need to do is to define what constitutes "hyper"inflation.

[Bill B.]

Don’t forget: Kiyosaki been calling for hyper inflation for at least 10 years. I don’t know if they forgot the definition of hyperinflation or just wanted to sell books.

Inflation’s been going down for 2-3 months even as the job market refuses to die. But at least there’s ZERO penalty when “the experts” are wrong. So they’ll keep guessing. And the “journalists” will keep pretending they aren’t guesses. 

[Eliott Elias]

Whatever it is, I am taking full advantage. 

[Doug Smith]

I totally agree with @Josh Green. We started this company prior to the last crash when we saw it coming. I'm not seeing the same indicators that we did the last time...particularly in the Tampa market. I think you'll see issues in markets like NY, Chicago, and parts of CA where people are leaving in droves, but there is a huge net migration to Tampa. Couple that with the a low amount of housing starts relative to net migration to the area and I can't see a drop in prices in this area for the foreseeable future. It's simply low supply with higher demand. Our applications have dramatically picked up in the past 30 days. Mortgage rates are driven by the bond markets...particularly the 10-Year Treasury and not the Fed Funds rate (that will impact HELOCs directly, but won't directly impact the 30-year fixed-rate mortgage). I think inflation is a different issue and has primarily been caused by government overspending, government borrowing, and the amount of currency in circulation (M2...see St Louis Fed numbers). With so much currency now in circulation, prices have to go up...that's Econ 101. In 1990, there was about $3.2 Trillion in circulation (seasonally adjusted). In 2010, it was at $8.5T. By Jan of 2020, we were about $15.4T but that dramatically jumped to $21.7T just 2 years later in Feb of 2022. When you inject that much money into circulation, you get inflation. That's basic econ. That being said, real estate has almost always outpaced inflation and a market like Tampa, at this time, might be one of the best places in the country to own real estate. Sorry for the long winded diatribe. 

[Nick Robinson]

@Dillon Cook
First if you look at the data the increase in consumer prices was caused by supply shocks, government transfer receipts (stimulus), and FOMO. @Bill B. is correct the CPI reading has been going down for the last 7mo. and that is including Owners' Equivalent Rent, which has a lag, and the gas prices that saw an increase in January. If you annualize the last 7 months, you would be at 3.3%. If you figure shelter went up 7.9% last month and is the biggest component of CPI and it's a lagging indicator you are seeing a major slowdown in prices. Like most data points everything has been dropping since June.

The bond markets and Euro$ Futures curves are pricing in a greater probability of recession. Look at the difference between the movement of short-term UST compared to Longterm UST over the past year. The first inversion of the 10/2 was in March which historically means in the next 6-24months we will have a recession with the avg. at 16mo putting us around July, or second half of 2023. The spread of the 3mo/10yr is crazy as the inversion moves its way down the curve. I do not see any data points besides the government employment data which is run through logarithms that is projecting growth or a positive outlook. 

I would think a recession is very likely in the near future, next 6mo to a year, and the probability of hyperinflation being at 0%. Hyperinflation is prices increasing 50% MoM so that to me seems like a very low probability. 

[Zane Cress]

If you can make a deal cash flow that's all that matters in any market. Personally I would take a recession if the inflation could be tamed, but I don't think it can. Way too many macro economic factors around the globe that will continue to drive prices up and commodity scarcities. 

[Michael Hutchinson]

Quote from @Doug Smith:

I totally agree with @Josh Green. We started this company prior to the last crash when we saw it coming. I'm not seeing the same indicators that we did the last time...particularly in the Tampa market. I think you'll see issues in markets like NY, Chicago, and parts of CA where people are leaving in droves, but there is a huge net migration to Tampa. Couple that with the a low amount of housing starts relative to net migration to the area and I can't see a drop in prices in this area for the foreseeable future. It's simply low supply with higher demand. Our applications have dramatically picked up in the past 30 days. Mortgage rates are driven by the bond markets...particularly the 10-Year Treasury and not the Fed Funds rate (that will impact HELOCs directly, but won't directly impact the 30-year fixed-rate mortgage). I think inflation is a different issue and has primarily been caused by government overspending, government borrowing, and the amount of currency in circulation (M2...see St Louis Fed numbers). With so much currency now in circulation, prices have to go up...that's Econ 101. In 1990, there was about $3.2 Trillion in circulation (seasonally adjusted). In 2010, it was at $8.5T. By Jan of 2020, we were about $15.4T but that dramatically jumped to $21.7T just 2 years later in Feb of 2022. When you inject that much money into circulation, you get inflation. That's basic econ. That being said, real estate has almost always outpaced inflation and a market like Tampa, at this time, might be one of the best places in the country to own real estate. Sorry for the long winded diatribe. 

Spot on analysis IMO.  Well done.

[Mike Dymski]

The government increased the money supply by a whopping 40% in one year...that's why prices for everything are high.