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Increasing cost of living

Updated: Mar 19, 2022

At the time of writing this, March 18, 2022, we are currently in the middle of a world crisis. With Putin’s decision to invade the democratic country of Ukraine on February 24th, 2022, the world changed. Whilst we stand with Ukraine, their people and President Zelenskyy, nothing can compare to the terror and brutality they are currently being subjected to. It is great to see the support and unity of the Western World against such actions of Mr. Putin and his inner circle.


We should be undeniably grateful of where we live and the freedoms we have, such freedoms that allow us to think freely and not brought up to be brainwashed in the mechanism of a tyrant and his unstable mind.


On the back of the invasion of Ukraine, sanctions were justifiably put in place to cripple the Russian economy and early signs show these sanctions are working. Because the Russian stock market closed for a record period of time is a sure sign that things aren’t going too good over there.


With the modern-day world economy, such sanctions also have a knock-on effect to all countries. Some countries win economically, some lose economically, that’s the way of the world on any given day. Sanctions including the banning of buying Russian oil, while the Russian oil only accounts for 2-3% of the US total oil consumption it still has an impact. For a start, its not just as easy as drilling more holes in Texas, secondly its not the percentage that matters it’s the supply and demand. With other countries also boycotting Russian oil the market becomes more competitive. With all these countries who used to be heavily reliant on Russian oil now going into the wider market, they will be bidding against other countries for the supplies and pushing the price of oil up. All the while, the price of oil in Russia drops, linked to supply and demand, other countries like India and China can come in and snap up cheap oil. Highlighting the earlier point, some countries win economically, some lose. Fuel prices at the pump rise in the West to record highs, fuel prices in the East, potentially decrease.


Oil is only one measure to the pressures of inflation and sanctions, many other factors exist.


As we have all seen, through the Covid pandemic, the cost of living rose, timber prices shot off like a rocket, again linked to supply and demand.


Adding to that pain, was the Zillow home-buying division, Offers were going off the charts. November last year, they announced their home-buying division over the past few months lost $300 million buying and selling houses. It is not just Zillow, others started in the I-buyer market using an algorithm they thought was safe to buy and sell homes. The problem was, for whatever reason, the calculations didn’t work and they lost a lot of money! Now, you may not care that a big juggernaut took a bit of a hit, they will rebound right? However, in doing that, in some markets, these I-buyers inflated the prices of houses by bidding against regular people within that market, artificially inflating prices. Followed by panic when members of the public would see the prices of houses, especially in markets like Phoenix, increasing greatly over time to then look a few months later and see houses for sale on the I-buyer websites at a greatly reduced rate to what it said it sold for a few months ago.


It was the I-buyer trying to cut their losses on a house that they overpaid for and subsequently had to list at fair market value. However, I recall the blogs and Youtube videos predicting a crash and that these I-buyers knew something we didn’t, wasn’t quite true but you can see how markets can be affected by something that isn’t perceived to be a direct threat to you and your real estate.


This in turn had a knock on effect with the price of land within those markets, house prices rise, land prices rise. Again, another victim of the inflated house prices error made by these I-buyers. Yes, these companies lost a lot of money but so did the average home buyer, regular hard-working people who potentially brought these houses from I-buyers before the error in the algorithm was found and brought at a premium. Not an issue if they don’t need to move within the next few years but if circumstances change, they, like the I-buyers, may find they are selling their house for less than they bought it for a couple of years ago.


Now we see the Federal Reserve has increased interest rates to 0.25% which sounds low, but they indicate its just the start. This of course affects more so short-term lending and savings and in doing that, they can try to stop spending. Again, many factors contribute to trying to stem spending but the basic is, if credit card interest rates are higher, people don’t want to spend so much on them and if savings accounts interest is higher, people want to save more and make their money work for them. All done in an attempt to tame inflation.


Mortgages are usually not impacted by the rates increase, especially if your mortgage is fixed, and if not, they follow the 10-year Treasury Yield anyway. However, inflation does have a slight effect on what rates are offered by mortgage companies for new home buyers and in general, mortgage companies offer higher and lower rates based on how much they want or need new customers or not.


At the time of writing this, inflation is up to almost 8% in January 2022, I don’t need to elaborate on that, we have all seen the cost of living rise!


We have literally just touched the basics in this article, economies are always complex and sometimes feel like a minefield at the best of times. However, with the current unrest in the world amplified with one man’s grab at power, uncertain times are ahead.


If you have unwanted land and are in need of a quick sale, please get in contact with us. We are here to help you sell your land fast. We buy land all over the United States and currently work mainly in the West but we are open to all land from all markets.


If you are wanting to sell your land and take the burden of paying money for unused land off your shoulders, send us an email at simplyacres@gmail.com or submit your details on the submission page here.


We are here to help! In such uncertain times, we can take that burden off your hands and buy your land.


All the best,


Matthew & Kathleen


The above is an opinion and is meant for information purposes only, this blog is not intended to be investment advice. Seek a licensed professional for investment advice.


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