Inflation
- I think I mentioned this 12 months ago…. INFLATION is FULL STEAM AHEAD!
- And it’s not over yet.
- Just a recap of what inflation is:
- Inflation is an increase in the price level of goods and services throughout a specific time frame. Basically, it means that a dollar today buys less than it used to. It’s usually discussed in terms of a percentage rate. So, if inflation is 2%, a carton of eggs that was $3 is now $3.06.
- Main causes of inflation:
- Growing economy
- Expansion of the money supply
- Government regulation
- National debt
- Interest rates, which are rising, and this is not slowing down the purchase market. We will get to supply and demand in a minute….
- Just a quick summary of the average increase in consumer goods:
- Meats, poultry, fish and eggs: 12.2% increase
- Fruits and vegetables: 5.6% increase
- Electricity: 10.7% increase
- Furniture and bedding: 17% increase
- Rent of primary residences: 3.8% increase
- gasoline and airfare saw giant price increases over the last year, partly due to prices being deflated by lack of demand
- Used cars and trucks, for example, saw a 40.5% price increase from January 2021 to January 2022.
- https://www.forbes.com/advisor/personal-finance/inflation-more-expensive-january/
What has all this done to Housing costs:
- Home Builders are STILL feeling the pain of inflation as well:
- Lack of employees
- Rising costs of everything…
- Lumber
- Oil
- Petroleum based products are so on…
- Average lumber package in the Willamette Valley for on a new build = $40,000.
- On a 1,600 sq foot home.
- Appreciation continues to rise
- How can this be? Aren’t people getting priced out?
- Well, some… yes, AND let me give you some perspective on that…..
Rising Rents!
- Rents, Year over Year saw a national increase of 3.8%.
- That doesn’t single out states like Oregon, who have Rent Control in place.
- Which means, your landlord, will almost certainly, raise your rent 2-7%, each and every year you rent.
- My question to you and your clients, can you afford that year over year, monthly debt to income increase?
- For example; lets say you pay $1,800 in rent this year.
- 1,800 * 3% = 1,854
- 1,854 * 3% = 1,909
- Year 3 = 1,966
- Year 4 = 2026
- Year 5 = $2086
Supply and demand in today’s market
- Today’s market is a DIRECT result of lack of supply.
- Which means, buyers, expect competition.
- You likely, will be settling
- MOVE FAST
- Seller’s, this means, you better have housing lined up, or see above!
- Prepare for multiple offers.
- And NO, rising rates are NOT slowing down the purchase market.
- Refinances, yes, those came to a screeching halt!
- Until supply reaches demand, we will continue to see a very strong purchase market.
WVMLS outlook:
- Which leads me to our LOCAL OUTLOOK:
- Year over year – residential listings are up by almost 200
- Year over year – residential closings are up by 50
- Inventory just hit a month and some markets are less than 2-3 weeks
- We still need supply!
This will present for a strong residential market in 2022.
