Inflation – How Long Will It Last?

The Mortgage Voice
The Mortgage Voice
Inflation - How Long Will It Last?

Inflation. The word alone causes anxiety and manifests itself in so many forms. When people get a raise at work or move to another job and earn more money, that’s wage inflation. When there’s a government stimulus distribution, a bump up on an unemployment check, or continued purchases of mortgage-backed securities and bonds from the Fed, that’s also inflation. Prices have risen from all of the money put into the economy by the Fed and should go back to normal on things like food and cars, but will stay elevated in other areas, like wages. The labor market is very tight, experiencing a high quit rate due to so many people leaving their jobs for better pay or deciding to retire. A positive result of the current economy is that we have not gone into a recession or a depression because the Fed has made money plentiful to big and small businesses, as well as to the public at large. This has enabled employers to increase salaries to attract workers and offset the higher cost of doing business during the pandemic. Experts say that if the government had spent large sums of money on citizens in the 1930s, the Great Depression would not have been as dire, and if the money given to big businesses in 2008 had trickled down to smaller businesses and individuals, we would have also avoided the Great Recession. Since the economy is doing well and an overabundance of money is available, people have been able to pay more for products, making some things scarce and causing supply and demand issues. When things are scarce, prices go up, spurring another form of inflation.

In the coming months, the tapering of treasury purchases, raising of rates, the drying up of the influx of stimulus money, and the government selling off of assets, which will take private-sector money out of the economy as well, will all help to bring down inflation. The labor shortage should turn around as people receive less money from the government and need to go back to work or augment take-home pay to afford things that now cost more. Wage inflation looks to remain with us in the form of higher compensations, and there is a certain amount of inflation already built into the economy, but the current rate of inflation will most likely ease by mid-2022. Joining Jeff this week:

– Jason Frasier discusses the many options buyers have for mortgage products.

– Richard Greene gives an update on the real estate market in New Mexico.

– Gentille Chhun talks about the flip business.