Tag: inflation

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Housing Market During Inflation

Housing market on fire in 2020, unsustainable in 2021 and beyond — without runaway inflation.

For 2021, the real estate market is expected to be more volatile, varied and less predictable than normal. The national housing market is now overheated as compared to five years ago. Greater Los Angeles Area single family home prices are expected to plateau, while urban condominium prices shall continue to fall. Los Angeles, New York and other big city urban center property prices have already been falling for several years.

Price inflation normally has an upward price pressure on most things, including residential properties. Inflation is correlated to a reduced value of the U.S. Dollar. The federal government and Federal Reserve have indicated that they plan to increase spending, increase the national debt, increase the money supply, increase quantitative easing and increase radical new measures to stimulate the economy and liquidity. Most of these measures reduce the value of the U.S. Dollar in the future, resulting in inflationary pressures that build up over time, which can result in sudden, unexpected runaway inflation, immediately followed by rising interest rates. | Blog Video

While the Federal Reserve chairman downplays real estate froth, Chairman Powell agrees that rapidly rising home prices are unsustainable. Many housing markets have doubled or tripled in price since 2011.

More and more economists and billionaire investors have been raising concerns about runaway national debt approaching $28 trillion, tidal wave of corporate debt and crushing personal debt. Unusually large, rapidly growing debts can indicate looming financial disaster in the form of a debt bomb explosion, which could potentially wipe out even the safest of retirement funds. High debt increases inflationary pressure for the future.

The primary counterforce keeping prices down is a declining GDP and surge in unemployment — The Greater Depression of 2020s. Stock market volatility tends to have a neutral impact on the dollar value and housing market provided that the long-term end result is near normal.

As 2021 is largely a repeat of 2020 in many ways, we can see most home prices continue to accelerate only if the federal government and Federal Reserve loosen purse strings even more than they did in 2020. These extreme measures are unsustainable, as 2020 already created price shocks in real estate and in many products while the average income went down, resulting in reduced productivity and declining net worth for the average American. Inflation is linked to inefficiencies and detrimental effects such as currency crises, shortages and decreased overall standard of living. The only way to keep pumping up the housing market is by pumping up inflation and costs of living in general.

The most practical ways to protect one’s finances, and to benefit from inflation, is by owning assets such as gold, bitcoin, stocks and real estate. Renters and paycheck-to-paycheck consumers tend to suffer the most when severe inflation takes hold.

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Today’s debt bomb is 75% larger and more explosive than when this scintillating video appeared.

Copyright © This free information provided courtesy L.A. Loft Blog with information provided by Corey Chambers, Realty Source Inc, BRE 01889449. We are not associated with the seller, homeowner’s association or developer. For more information, contact 213-880-9910 or visit LALoftBlog.com Licensed in California. All information provided is deemed reliable but is not guaranteed and should be independently verified. Properties subject to prior sale or rental. This is not a solicitation if buyer or seller is already under contract with another broker.

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Inflation: Panic Prices and Real Estate

Pandemic price increases abound on Amazon.com, according to Financial Times.

Essential items see sustained significant price increases on Amazon in 2021, with some products jumping up many times their original price. Analysis by the US Public Interest Research Group studied 750 essential items sold on Amazon’s marketplace, comparing their pre-panic prices to what customers paid for them at the end of 2020.

Of 750 items, the prices of 409 increased by more than 20%, while 136 had more than doubled. Patio heaters, suddenly a must-have during winter lockdowns, saw the most significant percentage increase. One model skyrocketed from $150 to $699 — a 366% jump. | Blog Video

Home Prices Plateau

Despite massive federal spending, money printing and quantitative easing, some experts expect home prices to see a smaller rise this year than in 2020.

Southern California home prices and sales rose in December from a year earlier, continuing a so-called “pandemic housing boom” driven by rock-bottom mortgage rates and people needing more space to cope with lockdown.

The 6-county region’s median sales price jumped 10.1% from December 2019 to $600,000 last month, according to data released Friday from real estate firm DQNews. Sales rose 29% from a year earlier.

Real estate agents and other housing experts say the pandemic had supercharged the market. People with higher incomes who are most likely to buy a home in the first place have been relatively unscathed by the economic downturn. And some are looking for more space as some workplaces remain closed. Mortgage interest rates dropped to record lows, in part because of a Federal Reserve policy designed to stimulate the economy. Government -controlled mortgage company Freddie Mac reported the average rate for a 30-year fixed mortgage was 2.77% this week, down from 3.6% a year earlier. The drop has lured more buyers into a market in which they’ve found few homes for sale, prompting bidding wars on the most attractive homes.

Like gold, stocks and bitcoin, real estate provides a hedge against inflation. In Los Angeles County, the median price rose 11.4% from a year earlier to $700,000, while sales climbed 26%. 

The upswing in the for-sale market is in stark contrast to the rental market, where struggling tenants have disproportionately been hit by job losses. The contrast shows how the coronavirus panic has exacerbated economic disparities in California, and in the U.S. at large.

Many low-income renters are behind on rent and worry they’ll eventually face eviction during a pandemic that has killed more than 400,000 Americans. The average rent in Los Angeles has also fallen as vacancies rise, in part because some higher-income renters are choosing to buy for the first time.

Stagflation, the collapsing economy with higher prices, best explains the crazy combination of up, down and stagnant prices. While it is true that some suburban neighorbhood prices went up in 2020 because families and office workers were locked down, forced to stay home more, the prices increases reflect a temporary need for more suburban style safety and more square footage due to temporary overuse of residences, not because of a long-term increase in value. Based on true accounts from actual real estate professionals in Los Angles, reports of a “pandemic real estate boom” are as overblown as other pro-pandemic propaganda that we are being forced fed by politicians and biased media. Most home values are stagnating or falling nationwide. Most urban home prices have been tumbling for several years. Commercial real estate has fallen off a cliff, as investors like Ben Mallah sell loser hotels in favor of safer properties anchored by major national brands.

Shorting oil is the money-making play as a new presidential administration confirms plans to reduce oil demand considerably by extending lockdowns and increasing regulations.

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Copyright © This free information provided courtesy L.A. Loft Blog with information provided by Corey Chambers, Realty Source Inc, BRE 01889449. We are not associated with the seller, homeowner’s association or developer. For more information, contact 213-880-9910 or visit LALoftBlog.com Licensed in California. All information provided is deemed reliable but is not guaranteed and should be independently verified. Properties subject to prior sale or rental. This is not a solicitation if buyer or seller is already under contract with another broker.