SHOULD MULTI FAMI LY I NVESTORS BE CONCERNED ABOUT I NFLATI ON? Multifamily investing is a crucial sector of the economy. Multifamily investments are less likely to be affected by shifts in the stock market, and prices make slow and gradual changes over time, almost never displaying the volatility of typical investment vehicles.
In the uncertainty of the economy since the emergence of Covid-19, the multifamily market has remained relatively solid. Still, no one knows what the economy will look like in the next year, so it is imperative that investors try to make informed decisions to protect against the unknowns of the near future. Luckily, there is one trait that many investors can count on regarding multifamily assets, and that is the defense against inflation. In the most simplistic of explanations, inflation is when prices of goods and services rise across a period of time. Inflation can occur in an economy when “demand” exceeds the given “supply”, or when the cost of materials causes a hike in production costs of the supply. Whatever the cause may be, there is a noticeable decrease in purchasing
power for the consumer, being that they must now pay more money for the same amount of goods and/or services they used to pay less for. Now, while it may raise an alarm in the heads of many a consumer, inflation isn’t all bad. As a matter of fact, a little inflation is actually a sign of a healthy economy. Prices that slowly inch higher tend to encourage people to purchase more, since they speculate that they will be “buying in” while the price is low. This, in turn, creates a positive trend in economic growth, which can be felt across many facets of the economy. But, as is the case with most things, too much inflation can cause chaos in an economy, and may even cause it to crumble in extreme cases. That isn’t the cue to start panicking
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