Rent Increases, Negative Interest Rates and DIY Shrinkflation

It’s no secret that institutional investors are currently engaged in massive rent increases, but it’s normal to have fluctuations in various markets; sometimes it’s less expensive to rent and sometimes it’s less expensive to own. However, as we hear reports of the “market” slowing down ever so slightly, it can be misleading because that is certainly not the case in the low priced, entry level, bread and butter housing – the kind that makes for great rental properties. Those are flying off the shelves and inventory is extremely restricted. You simply cannot gage all markets by a national average! Yet, that’s what we hear in the news every day…

The number of available homes has fallen steeply across the country and if you segment it by price, you’ll see that the situation is much more severe than sources are revealing. Let’s look at some American cities. Atlanta, for example, has a deficit of 9,000 homes for sale, Austin a deficit of 2,000 homes, 17,000 in Chicago, 30,000 in NYC, 6,000 in Washington, 2,000 in Cleveland, just to name a few.

So as you can see, entry level housing is suffering greatly from a severe housing shortage. Currently, almost everywhere, it is better to buy than rent in terms of the monthly cost because the interest rates are so low. Yet at the same time, landlords are taking advantage of incredibly low rates. This may be the first time ever that we have negative interest rates “officially.” But how is this possible? How do you arrive at a negative interest rate? Here’s how: you take the official inflation rate according to the most widely used measure, the Consumer Price Index and compare it to the interest rate on a 30-year fixed rate mortgage. You are literally getting paid to borrow money, even if you never rent your house out. You are borrowing money at below the cost of official inflation. And let’s be real – unofficial inflation rates are much, much higher than they’re saying. All you have to do is take a look around you to see so many examples of this.

Shrinkflation, for instance, is everywhere now; services have massively been reduced while at the same time, prices have gone up. We are getting less and less for the same consumer products, yet the prices are higher and higher. No one answers the phone anymore. It’s all DIY nowadays. Pump your own gas. Serve your own food, pick it up at the counter, bus your own table, but don’t forget to leave a tip… it’s all self-service and do it yourself. Not to mention health insurance companies which hardly cover anything anymore. Buckle up for the ride folks, this is just the beginning! But unlike the politicians in the swamp who we won’t be able to rely on, Jason is ready to teach you with his proven real estate strategies, help you survive inflation (and the oh-so-aggravating DIY shrinkflation), and come out on top, so stay tuned!

Ashley & The Jason Hartman Team