WHAT WILL HAPPEN TO MY REAL ESTATE HOLDINGS IF INFLATION REARS ITS UGLY HEAD?

People often assume that because real estate is a “hard asset” it surely will go up as a safe harbor in times of inflation. The problem is that the Fed’s only way to fight inflation is by raising rates. And, they are very willing to raise rates and risk putting us in recession than to try to fight a possible stagflation scenario.

The key three drivers behind real estate’s up cycle are: rates, job growth and demographic growth. Real estate will be hurt by the first two.

On the commercial side, some of it will be offset by inflation clauses contained in the lease. In residential real estate, SFRs get hurt and apartment buildings go up in value.

Take note because stagflation is a killer of stock and bond prices. Stocks especially feel the brunt. And real estate prices, too. Stagflation is where real estate prices hang in unless of course there are forced sales. It is an ugly time where foreclosures affect many families, and cause many emotional crises and marital splits.