The Fed is poised to raise the overnight cost of money (the “Fed funds rate”) a series of times because the rate of core inflation is approaching the Fed’s 2 percent target. What does this mean for your buyers and sellers? What to tell clients Be very careful with any discussion of inflation with clients. Many theorists in markets and theorists outside are given to claims of government conspiracy to under-report inflation (especially right-side bond market types and bankers), or to mis-describe inflation. Others highjack the word to describe rises in asset prices as “inflation.” I’ve spent a lifetime studying government reports on inflation, and they are as honest as can be, no matter how often they fail to predict the future. Second, keep clear that there are several types of inflation. The most basic is money-printing, “too much money chasing too few goods and services.” But, even in that classic definition, how can we be sure that prices are rising because...
- One of the hardest prices to nail down is housing. Less than 5 percent of housing changes hands each year, so even if prices are rising at a given moment, only a handful of people pay the higher ones.
- Land itself is too scarce and costly in most metro areas, and cost-pushed by a large array of development fees.
- In a commodity like housing, we know for sure that we can overbuild and cause prices to drop, and for equal certainty we can under-build and create an expensive shortage.