Inflation is up 7.1%, the highest since 1982. The 3 biggest forces driving this are supply shortage, rising labor and housing costs. The supply shortage includes:
1. Supply shortage of both raw and manufactured goods.
2. Higher retail demand than supply.
3. Transportation difficulties including backup at ports in California, availability of shipping containers, lack of trucks available.
While supply shortages may be resolved, labor and housing represent long-term increases.
Economists expect that this situation will force the Federal Reserve to raise interest rates. Indeed, already Jerome Powell has announced a tapering of the quantitative easing put in place during the covid crisis. The fed is already buying considerably fewer Treasuries and has announced that they will raised the overnight rate 3 times next year. Thus, long-term and short-term rates will increase.
What will interest rate increases mean for the commercial real estate investor? Rates should rise, but so should the competition in bidding, because CRE is viewed as one of the best places to invest.
As always, local markets will vary from national averages, and specific properties may vary even more. If you want help in identifying and evaluating some properties, feel free to give us a call. Sooner may be better than later. Yes, even in the Texas metroplex markets that have risen so much. Housing has risen in other places without the rise in business and population. Prices may seem high, but higher is on the horizon.