"The first lesson of economics is scarcity: there is never enough of anything to fully satisfy all those who want it. The first rule of politics is to disregard the first lesson of economics." ~ Thomas Sowell
For those of you following my weekly musings on the real estate market, you won't be surprised to read I have a different take on our markets than the talking heads. While another round of stimulus checks gets distributed, many predict massive growth in our economy for the remainder of 2021. While the markets might maintain momentum, for the time being, the indicators show trouble brewing. Restauranteurs are struggling to hire, the cost of lumber is skyrocketing, mortgage interest rates are rising, unemployment is high, and taxes are on the way up. Yet, buyer demand is still off the charts. Who is correct? As we have seen throughout the last year, the impacts on our economy are uneven, affecting some more than others. If you are familiar with the Phillips Curve, some of our current economic policy looks familiar. Keep in mind that my view of what might happen comes on the heels of the hottest first quarter in real estate history!
From 1965 to 1982 has been dubbed "The Great Inflation," with inflation peaking at more than 14% in 1980. The economic policies used by the Federal Reserve Bank at the time, before Paul Volker took the reigns, were the direct cause of this dark time of our macroeconomic past. I doubt I am the only one that sees a correlation between the policies of the Great Inflation and today. Recently, I've spoken with local contractors that are writing change orders to compensate for skyrocketing material prices. These are not client-driven changes but purely an adjustment based on rising material costs. Imagine the difficulty in planning a project where the cost of materials is rising before it can be delivered!? Like the restaurant business, laborers are in short supply locally. Why do some bristle at the mention of an inflated housing market?
Not every buyer coming to Central Oregon is impacted in the same way by the economic headwinds, and I do not anticipate a slowing of demand at this point. But, if you are stretching financially to purchase, take the time to ensure you are not over-leveraged in your new home!
My view of the economy and Central Oregon may not be the majority, but many in the industry quietly voice the same concerns. I've linked several articles that support my position, but I'd like to know your opinion! Please send me an email or pick up the phone and let me know how you see the market progressing.
