The Large Bifurcation of Views on Inflation

There was a good article in the Wall Street Journal last week about how the huge surge in inflation this year has erased the considerable wage gains that low wage workers have made lately. This theme has been echoed in recent weeks and months by other financial sites. Fed officials have also chimed in recently on how inflation is hurting those at the lower end of the income scale. Rising costs is a hot topic in 2021 on many levels. My small business friends constantly talk about the rising costs for everything, especially shipping and supplies. It is right up there with being able to find qualified people to fill job openings as their biggest worry for their business in general. I have also noticed a large bifurcation around views on inflation between my friends that own their own homes and those that rent. Among the homeowners, especially among those that are not also business owners, inflation is a nuisance more than anything else. They will let loose once in a while about how much gas costs now or that the weekly grocery store tab sure feels significantly higher than it was a year ago. One friend is not happy that his 28-year-old son has 'boomeranged' on him as his roommate moved out and he can't afford rent on his own. It is a whole different story with the renters I know. They are almost obsessed about upcoming lease expirations given what new rentals are going for in their buildings. Saturday, I had my hair cut by my friend Jade, another recent Delray Beach transplant from the tri-state area. She is actively looking for a part-time bartender gig to supplement her income as her rent is going from $1,600 a month to just less than $2,100 a month when her lease renews in December. I told her I would let her know if I hear anything and will inquire at places I frequent. Most of my other friends that are still renters, both across Florida, and outside the state, are facing the same dilemma. Obviously, this foreshadows a big drop in disposable income as leases renew across a large segment of the population. This is one key reason I continue to believe inflation is going to be more than 'temporary' or 'transitionary' for some time going forward. We are probably already seeing this anxiety in the falling Consumer Sentiment and Confidence surveys that have been posted recently. It is also should be a factor in why investment banks have been slashing their estimates for third quarter GDP growth over the past 4-6 weeks. I would imagine this is going to cut growth prospects at restaurants, which already have a litany of other problems to deal with. In addition, any business that relies on this population is also going to face challenges. Dollar stores and low-end retailers come immediately to mind. On the other hand, Apartment REITs should be sitting in the catbird seat as leases renew at much higher prices. This is one reason Camden Property Trust is up more 60% over the past year and near all-time highs. Camden owns over 170 apartment communities across the United States totaling nearly 60,000 units. These rent increases are also going to widen the discrepancy between the 'haves' and 'have nots' in our society. They are a good lesson on why the current Fed and government policies are widening wealth inequality in this country, contrary to intentions. This rental inflation also is going to play a significant factor across the economy in coming quarters.

The Large Bifurcation of Views on Inflation

Rent increases are going to widen the discrepancy between the 'haves' and 'have nots' in our society.

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