The economy is currently experiencing a period of high inflation–and this is affecting everything in the economy. Why? The price of everything is going up. Ranging from food, gas, rent, and even travel expenses. Goods are costing double or triple what it used to be before the pandemic.
What is Inflation?
Inflation is defined as the increased cost for goods and services over a period of time, which happens when demand for goods is higher than what the supply chains can handle. Too much inflation is bad for the economy. Many economists can agree that an ideal rate that wouldn’t harm the economy is about 2% per year. The current inflation rate as of now is 8.20. That is 4 times the normal amount.
There are Three Types of Inflation:
Demand-pull inflation: There are not enough goods or services being produced to keep up with consumer demand, causing prices to rise
Cost-push inflation: The cost of producing goods and services rises, which makes businesses have no choice but to raise their prices.
Built-in inflation: Workers want higher wages to meet the rise in living costs. Businesses have to raise prices in order to counteract rising wages, leading to a self-reinforcing loop of wage and price increases.
The U.S is currently dealing with all three types of inflation but mainly the issue is the demand–pull inflation.
Americans have money saved and want to spend it, but companies cannot keep up with the amount of product.
What Does This Have to do With Property Owners?
One issue happening with inflation is that rising prices are causing people to move out of state. Many people cannot keep up with the rise in rent or cost of living, so they move elsewhere. Meaning less money is coming in for properties.
Higher costs and wait times may happen for any repairs needed to be made.
Supply chains are running out of goods faster than normal. When you go to the store, and look at the shelves, there’s a chance a lot of products are missing or there’s a limit to how much of something can be sold.
Prices of goods can fluctuate from month to month. Higher costs mean the need to save more for future projects. If an emergency repair needs to be made, there needs to be enough money saved in order to pay for that. With materials costing more than normal, the labor cost will most likely also rise.
Don’t be surprised if prices continue to go up.
It is unknown how long this period of inflation will last.
To maintain the pace of things, we must swiftly adapt to the current economy.