Inflation is dominating what’s happening in the economy, and the Fed is raising interest rates so that prices will go down again. Unfortunately, that means it’s going to hurt everyone in the pocketbook in the process. Part of the reason is the long period of availability of cheap products that have been manufactured outside of the country, which has not built up production domestically. With more merchandise coming from outside of the US, supply chain issues create even an even greater bottleneck, and consumers have to make do with what is made locally, which usually costs more. Wages here are higher and shareholders require larger profit margins, driving up prices as well. The need for labor is at a ratio of two jobs for every person available to work, with many not returning to the workforce. When employers must pay more to attract labor, they in turn charge more for goods and services, so profits are not as robust.

A prime example of how shareholders drive the availability of products can be seen in the oil industry. Gas prices are the highest they’ve ever been, with US oil refineries at their lowest production point in 30 years. Before Covid, oil was available from all over the world and could be refined quickly, then released in a timely fashion for consumption. Currently, the demand for oil created by less refining capacity raises prices and increases shareholder value, so refining has decreased dramatically to satisfy those shareholders. Following in conjunction with gas prices are mortgage rates, which are also affected by the 10-year note, and the real estate industry is certainly feeling the pinch. The housing market is slowly turning around, so in the meantime, buyers should wait unless the need for a home is immediate, and sellers would be wise to act now, as in six months they might not be able to get the price they can get today. Jeff’s guests include:

– Sonya Hadley (Excelerate Capital) explains DSCR loans for investors.

– Mark Hays (KSHP Radio) talks about changes in the focus of Las Vegas radio stations coming out of the pandemic.

– Richard Greene (New Mexico Mortgage Company) discusses the New Mexico real estate market.