How To Model Inflation?
On today’s show we’re talking about a question that is on a lot of investor’s minds. We keep hearing from the Federal Reserve and government officials in the Treasury department that inflation this year, while elevated, is expected to be transitory. That is to say, it’s temporary. We have seen rents increase, sale prices increase sharply in response to low supply of housing.
When it comes to certain commodity prices, we’ve seen prices rise and later fall based on short term supply and demand dynamics in the market place.
Rents have a general tendency to stick. They tend to rachet upwards. Even older buildings tend to increase rent, but more slowly. Unless a building is truly an inferior quality living space, you can expect to see rent increases approaching the market average.
The rising cost of land and the rising cost of construction are the major factors that drive higher asking rent for new buildings.
Host: Victor Menasce