Too Much Money Breeds Demand For Real Estate

On today’s show we’re talking about whether inflation can breed demand for more real estate.

This year has seen dramatic increases in prices for real estate across the US and Canada.

In 94% of the metro areas in the Us, prices are up more than 10% from a year earlier. Nationally, prices are 22.9% from a year earlier. Many are decrying the affordability crisis. But it is a free market. There is clearly excess money sloshing around in the system.

So the question is, how many people will attempt to tap into their newfound equity? We’ve heard a lot about how the refi market is extremely hot in 2021. I predict it’s about to get even hotter. The refinance activity is going to continue for the next year, as long as interest rates remain low.

This means that there will be even more money sloshing around in the system, looking for real estate to buy. When there is more money than product, there is upward pressure on prices. This is the very definition of inflation. It’s the inflation of the money supply that is core inflation. The rising prices are merely the symptom.