Inflation, Inflation, Inflation! We all know it’s upon us…how it’s affecting Real Estate in Central TX, where not to keep your money, a historically good hedge against it, and what we’ve been told we can expect this year and next from the Federal Reserve.

As I’m sure you’ve noticed, inflation has been rapidly increasing. We actually haven’t seen this high of inflation since the 1980s. Obviously, COVID has really constricted supply chains and with the federal government increasing stimulus and pumping money into the system, demand has gone up while supply has gone down. Simple supply-demand economics, prices are going to go up. We’ve also seen that in the real estate market. Austin board of realtors just released their statistics last month, The median home price in Austin is now (in the Austin MSA) is now $500,000. That is a 27% increase year over year, which is pretty incredible.

How’s the Federal Reserve responding to all of this? Initially, the Fed Chairman, Jerome Powell said that they weren’t going to raise interest rates because this inflation was transitory, right? Well, now they’re saying they are going to rapidly increase interest rates. Just the other day I read in the Wall Street Journal, I believe it was the Bank of America or JP Morgan, they are predicting interest rate hikes 8 to 11 times in the next two years.

So, what is the implication for all of this with your investments. If you have cash sitting in the bank and inflation is hovering around 7-8%, you are losing your purchase power substantially. What is a great hedge against inflation? Real Estate, historically, has been a great hedge against inflation. So, when looking at land in the Austin market or looking at residential properties, it can be a great hedge against this rapidly inflationary environment. Also, if interest rates are going up, well, we have historical low interest rates right now, so it could be a great time to purchase a property. Of course, we always always recommend get with your financial analyst, get with your CPA, get with your attorney. We are not recommending properties for you, but it could be a great time to purchase in this interest rate environment and this inflationary environment.

Feel free to reach out to us with questions or other topics you’d like to see covered.

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