Deflation ahead after hyperinflation?

Question

What's ahead for RE investors? I'm particularly focused on those of us utilizing the Brrrr method.  I think continued investing in RE is may still be my best option, even if housing prices tank and rents follow.  Check out the video if you have time:

Mike Dymski · Answer

What's ahead for RE investors?  Inflation?  Deflation?  Flatulation?  Nobody knows.  Focus on what we can control...adding value, good locations, cash flow, prudent debt, and reserves and we will be fine.

Jody Sperling · Answer

While you're forecasting doom and gloom, people are getting rich.

Jill F. · Answer

@David Lewis Interesting interview. I'll probably order Jeff Booth's  book, though I'm betting the big systemic issues   he's addressing are more likely to play out over a very long period-- throughout my grandchildren's lives.  But as a risk mitigation strategy in the shorter term for future eviction moratoriums, high unemployment and other (landlord) unfavorable politcal or economic policies, we are planning to make a big effort to find section 8 tenants for maybe 10-20% of our units.

Steve Morris · Answer

Well, good morning sunshine.

Have no clue what I'm supposed to do with a singular YouTube video.  You buy a property and you make plans / reserves on things going sideways.

A lot the bad stuff that happens never gets on YouTube a year before it happens (look up "black swan").

Eron A. · Answer

people will get burnt in a deflationary environment if they took this easy money and have a high mortgage. it will be harder to borrow, and they will likely get lower rents. they will drown in debt. banks will repo. investors wont come in to save them b/c they wont have enough equity. they will lose their primary home that they tookt he heloc on in order to get a new property to short term rent.

people took the bait. dont ever...take the bait.

Bill F. · Answer

Thanks for responding to my question David, but I don't quite think it got there. Here is how I see it: One of the factors needed for Hyper Inflation is for the supply to money to massively outstrip the demand(either through deficit spending or supply shock), think post WWI Germany. So we can make an argument for an increase in the supply via the federal government.  But what about demand?

Pre-Covid lets say the US had a demand for money of x, what quantitative and/or qualitative factors have lead you to conclude that the demand for money in the US has fallen to .3x or .2x?

Dan DiFilippo · Answer

@David Lewis in commodities, they say the marginal ton prices the whole.  And real estate aren't commodities, but they are illiquid enough to have pricing work in a similar manner.  I keep asking people, what is going to happen when all the A tier and B tier cities that have suburbs crowded up with Boomers start to hollow out?  It's going to completely change things.

David Lewis · Answer

@ Jill

@Jill F. Thank you for the post.   I've been thinking about implementing section 8 as well.  My property manager is very reluctant about this, however, I think having a serious conversation about the screening process will hopefully get him to be a little more open-minded.

David Lewis · Answer

@Bill F. I think a lot depends on what Congress decides to do in terms of bailouts (airlines/hospitality, etc), more stimulus checks, and the election.  Personally, I think we will see another stimulus bill passed to prop up the economy regardless of who the next president is.  In terms of unemployment, a majority of these folks are getting unemployment plus an additional $300/week for now.  They have money to spend as if they were working a full-time job.  The forbearance program may actually add to the inflation we're seeing.  I say this because we're seeing a shortage in housing with low-interest rates drawing in more buyers and, because of the forbearance program, folks can sit tight and weight to sell their home for more as home prices are increasing.  I may not have articulated my thoughts very well but hopefully, this makes some sense...

Bill F. · Answer

@David Lewis so if I could ask you in your own words, what do you think will cause hyperinflation?

Specifically, how will the supply of money outstrip the demand, when we have record high unemployment and a pretty active mortgage forbearance program?

Deflation ahead after hyperinflation?

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