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SHELTER-flation

 

I have spoken about all variations of Inflation in what I viewed as a rolling recession between 2021 and today:
 
1. "REGULAR" inflation that has existed through the decades of around 2%. We barely noticed that price creep, but it has always been there. And some prices have been rising for many years prior to 2020 more than 2%, especially in the luxury markets. (PS: 2% per year compounded over 10 years is 21.8%...)
 
2.  COVID-flation: This was the inflation related to massive global supply chain disruptions. Combine supply disruptions with massive demand fueled by massive government stimulus and spending, ultra low rates, etc.
 
3.  GREED-flation: Many corporations smelled opportunity to raise prices well beyond rising costs and they could get away with it as consumers had excess savings.
 
4.  WAR-flation: The Russia-Ukraine war triggered an implosion in many areas of the global economy mostly around the supply of oil and natural gas, combined with OPEC's desire to keep prices as high as possible. This war has impacted food and shipping prices too.
 
5. TAX-flation: when governments spend more than they collect, borrowing costs rise and they rise even more when rates soar. GDP growth can only compensate for so much.
 
6.  MADE-IN-THE-USA-flation: Our desire to make more things locally while saving huge long distance shipping costs and allowing more control of production reliability (all wise) inevitably costs more. Simply put, it costs more to make things in the USA......and trade tariffs add to consumer costs.
 
 
One of the stickiest forms of inflation remains: SHELTER-flation. Yes, a lot more rental units are coming to the market and this could lower rents for many, although not everywhere in grossly under-supplied markets where excessive new demand was not anticipated. Shelter-flation will differ from area to area, but in a country where most agree we have a shortage of housing units of at least a few million (some estimate up to 4.5 million units!), combined with aging housing stock and natural disasters/weather events that require repairs and replacement, combined with higher labor and materials costs, combined with cumbersome regulations that slow construction, combined with higher borrowing/financing costs to build, combined with skilled labor shortages, combined with antiquated, slow construction methods..... you get the picture.
 
 
Shelter-flation may be the stickiest inflation of all. (My conclusion: buy now or pay more - LOTS more - later?)

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