Inflation: Shelter

Last week Evolution gave you proof of the Fed's lies on inflation with food prices. This week we will attempt to show you the second piece in necessities. Energy is the third component. There is no need to write about the oil commodity. You can it see on a daily basis as gasoline is up almost one dollar from this time last year. However, Evolution uses the three components to determine if inflation is present. Dear Reader, it is not only present, it is rising to dangerous levels. The Federal Reserve, by the way, does not include in its matrix formula for inflation, these three necessities. We need to eat everyday. We need shelter and fuel for energy, whether heat or air. We don't buy a computer everyday and whatever other nonsense the Fed's utilizes in their formula.

During last year...

Sebastian wrote a piece on the rental market with a national view. He showed how high rents have risen for tenants who seek a one-bedroom apartment. In many large cities like New York, Seattle and San Francisco as well as other locations, renters need two or more paychecks to meet that monthly obligation. Shelter, particularly, rentals does not see a lot of ink these days. There are two reasons. The first you know, is the pandemic. The second is the eviction moratorium that both President Trump and Biden have requested. This moratorium also applies to mortgages. Renters have not been paying their lease obligation. Landlords are tacking on late fees to the missed months that rent was due. So, whenever this moratorium is ended or challenged in court, a day of reckoning is coming. We, at Evolution predict that new leases will rise dramatically. Many people will be displaced, sleeping in cars or joining the homeless society. By the way, sadly, the second and third biggest growths in the US is poverty and homelessness. You should know the first. It has been the leader ever since Reagan - DEBT  

Landlords

are holding an empty bag at the moment. There are 40 million renters in America. There is an even divide between large real estate firms and small or single person rental owners. The president of the National Apartment Association, Pinnegar says this pandemic and moratorium as been particularly tough for the smalltime landlord. Many are not getting rents on their property, but they still have a mortgage on the real estate. Banks may not be able to foreclose on them, but late fees are higher than lease fees and these small landlords also face a day of reckoning when the moratorium is lifted.

Renters...

owe an estimated $30 Billion to $70 Billion in back rent according to a report in December 2020. Now, it is worse. The last stimulus provided $25 Billion for renters to meet their obligation. President Biden has bought more time with his new stimulus as well as his moratorium. His plan will give another $25- B for rents, $5-B for utilities and another$5-B for homelessness. Dear Reader, a government subsidized economy is unsustainable. Nevertheless, the government is holding by a thin thread, our economy. Even with this new dole, it is estimated that there are still 10 million renters who are behind in payments. The rental hole will continue to get deeper as long as the virus wreaks havoc on the economy.

Lumber...

is another commodity that does not gather any ink. We include it because it is a closely related aspect. The price is at all-time highs. We mention wood because whether new rentals are being built or housing, it is a prime component. Builders are aware and they realize that there is a shortage of lumber due to the pandemic. Builders also see Millennials entering the market. It is a major reason why builders added the highest new construction last year that touched a 14-year high. By the way, due to the lumber shortage, the cost for wood has added $14,000 to the price of a new home. That medium price for a new home in a Federal Reserve report is $346,400. The medium price for an existing home is $286,351. If you do the math, if workers were to realize the $15 an hour threshold, they could afford to purchase an existing home. At present, JFL reminds us in a report by CBS, that 71% of Americans cannot afford a home with their present wages. The battle to see if we become a rental nation or return to the American Dream with home ownership is at hand. It is a battle between a living wage and housing inflation.  According to Jalbeit, a senior economist at Fastmarket RISI, he believes the cost for lumber will hold up well into the second half of 2021.

There you have it. The market and the public will feel the effects of housing the moment the moratorium is lifted. Can anyone say another stimulus just before the mid-term elections? We do. Hosing is a necessity. It reveals heavy inflationary costs at present and into the future. Just another case for the meme, End the Fed!   Peace.  

PS: A special thought for today from Joe Devlin, an Irish rebel character on Columbo. "Justice for the free. Let each man be paid in full. That's enough for me."

 HAPPY ST. PATRICK'S DAY!