Will Expanding Welfare & Stimulus Create A New Surge In Housing Prices?
Could expanding welfare and stimulus programs lead to a new surge in housing prices and rents?
COVID stimulus certainly brought a boost to the economy, along with hyperinflation. With more crises seeming likely, and more government welfare programs being expanded, might we be on the verge of a new surge in prices?
What might be the downside of this? How can investors invest through this?
Is The Recession Over?
According to the latest government data, the recession is already over. The economy reportedly rebounded with a strong 2.6% rate of GDP growth in Q3 2022.
Of course, there don’t seem to be any CEOs that agree with this. 98% or more of them are planning to deal with a recession over the next year. Even Jeff Bezos faces a $23B cut to his net worth as Amazon cuts its expectations for the end of year shopping season.
Moving To A Welfare State
Arizona, Massachusetts, and Oregon appear to be test subjects in dramatically expanding welfare programs.
New initiatives in these states have begun using medicare and medicaid funds to pay for just about everything, including housing, appliances, and furniture.
With previous COVID stimulus trailing off, a new Newsweek poll reports that 63% of Americans support sending out new inflation relief checks. Funds that would help offset the Fed’s recent rate hike spree, though obviously would spike inflation even further.
Of course, this is like catching a double edged sword. More government welfare and stimulus has to be paid for in new and higher taxes. Ultimately, pushing those on the edge into needing full time government assistance. Or just making it so unprofitable to work that it is better to stay unemployed and live on welfare permanently.
Will More Stimulus Stimulate The Housing Market
Housing prices and rents soared with COVID stimulus money. With more money like this in the economy, and the government absorbing inflation in rents, it is quite likely that rental rates could continue to rise fast. Low end house price increases may also surge.
The middle class being taxed out, and who just can’t keep up with extreme inflation in food and living costs may be more likely to let their homes go and fall into distress. Lowering homeownership rates, and creating more rental inventory.
Investing
Whether we fall into a new depression, or government programs flood the economy with cash and fuel inflation, real estate investors can find some sweet spots to operate in.
Most notably, these may be wholesaling affordable housing, and flipping rental housing, including whole communities to bigger funds.
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