OK, guys, so today we're going to talk about real estate
and inflation, as you guys know, I love both.
I've been talking a lot about both, but this is really about a prediction
for 2022, which a lot of people have been asking about.
So if you been to the grocery store, the gas pump or even if you've just bought
anything recently, you know that inflation is here.
So how long will it last and what will 2020 to look like?
We're going to be getting into all of this soon.
But stick around because this is going to be a big issue.
So hey, everybody.
Ken McElroy here.
I have over 30 years of real estate investing experience,
and I'm here to share with you how to invest the right way.
But first, if you're enjoying our content, please be sure to like
and subscribe so you'll never miss any more of our videos.
OK, so there's no question about it.
High inflation is here, and as many of you know, it's at a three decade high.
We've been seeing prices skyrocketing in multiple areas,
and it's already impacting pretty much every sector of the economy.
Food, electronics, gas have all seen massive price increases.
Everything involving microchips is more expensive now,
including video games and a lot of medical equipment and cars.
There have been price increases in clothing and books,
and you can even expect to pay more for Christmas trees this year.
So stepping back for a moment, what exactly is inflation
and how do we measure it?
Simply put, inflation is defined as an overall increase in prices
and corresponding fall in the purchasing power of your money.
The Consumer Price Index, or CPI, is
the most widely used measure of inflation.
It's a number that the Bureau of Labor Statistics calculates
based on the prices of over 80,000 different goods and services, and includes
the cost of food gas, doctor's visits, cable TV, among many other things.
Now this graph offers a snapshot of where we are currently.
So the annual inflation is 5.4%
for twelve months, ending September of 2021.
Now, you could see from this graph that what a change this represents.
Before this past year, inflation was only about one or 2%.
And in many years, it was just 1%.
So currently, a lot of people are trying to anticipate
when inflation will level off and by how much.
Now opinions are mixed on this, of course, and the Fed
anticipates that inflation will drop by the middle of next year.
Of course they do.
Goldman Sachs, On the other hand, they recently released a report
stating that they expect a year over year inflation to drop to
3% by June 2022 and 2.15.
I don't know how they came up with that.
By December of 2022.
Now The Wall Street Journal, they did their own survey of 67 economists.
Now be careful with economists.
And this graph represents the average inflation
that they're predicting for the next few years.
They're anticipating inflation dropping below 3% next year.
I think they're all on the same payroll, by the way.
But for real estate.
Goldman Sachs is anticipating continued high inflation,
so their report states that of all the shortages affecting the U.S.
economy, the housing shortage might last the very longest.
The housing inventory remains well below pre-pandemic levels,
and the outlook, of course, offers no quick fixes for the shortage.
The high demand and continued shortage of supply means the U.S.
homes will potentially climb to another 16% higher through 2022.
Now this is according to Goldman Sachs, so don't beat me up on this.
They also expect that this will mean increases
in the rental housing through 2022.
So, like I said, opinion is divided on how long we'll be seeing high inflation.
There are some people like myself who see inflation
remaining high through 2023.
A more optimistic projections are based on supply chain issues
that most people think are going to be resolved next year.
But I don't know if they will be.
And of course, we still have a major worker shortage on our hands.
Job openings today nationwide will stand at 10.9
million people, which is, of course, up from 7 million pre-pandemic.
So what are the solutions?
My first solution, you guessed it, is to invest in real estate.
Now I I talk about this a lot
and some people are knocking me right now because prices are so high.
And I know that a lot of you are watching
have already had that mindset or trying to save for your next property.
If that feels out of reach, it might be time to consider buying property
with a friend, partner or someone else that maybe you're close to.
We did a video recently about millennials who are buying houses with their friends.
It's not forever one,
but you can drastically increase your buying power this way next.
If you have any luck.
Shedding debt now is the time to switch it over to fix that for people
who have had an adjustable rate mortgage, which is never a good idea.
I recommend that you refinance to get a fixed rate right now as soon as possible.
Banks could use inflation as a justification for adjusting your mortgage.
Of course, your mortgage payment, which is your mortgage rate,
so you definitely will help yourself by fixing that right away.
Also, if you have any items that you're going to buy reoccur currently,
do what you can to stock up or any extra food you have in your freezer.
Now lock in some prices on things like meat.
And if you have any prescriptions.
See if you can get refills in advance before the prices go up.
Things are going to go up if you're still renting your home
and expect to be there for at least another year.
I would look into asking for a two year lease the next time your lease comes up.
Now I know some of you might be apprehensive
about all this, especially if you feel like
you could be buying a home a year from now.
I would advise you to cross that bridge when you come to it as a property owner.
I'm not encouraging you to break your lease, but they may work with you
if you find a new tenant or sublet your place.
If buying your own rental property isn't in the cards right now,
a real estate investment trust, or RYT, are a good way to invest your money.
Rates are companies that own and operate real estate for a profit.
When inflation rises, so can rental income.
Different rates invest
in different types of assets, so you will need to do your homework here.
I recommend that if you are investing in rates that you take a look
at multifamily housing, data centers and industrial real estate,
all three types of this type of real estate are poised
to keep going up and investing in those types of REITs
because its real estate will also allow you to basically capitalize
on future inflation if you like to know more about the rates.
You can also check out my video that we did on those recently.
So that's my take on where we're going to be in 2022.
My hope is that the experts are right and that will see inflation
drop below 3% next year.
But like I said earlier, these labor shortages do not seem to be improving.
Supply chain issues also don't seem to be improving.
In the meantime, take whatever steps you can to hedge against inflation
because this issue doesn't look like it's going to go away quickly.
Until next time, I'm Ken McElroy.