While mortgage interest rates remained at 3.1% this week, newly re-appointed Fed Chair Jerome Powell has indicated he will no longer use the word "transitory" to describe the inflation plaguing our economy. Instead, Powell said that tapering the purchase of bonds and potential rate hikes are tools that may need to be employed several months sooner than anticipated to combat rising prices. With only 425 single-family homes for sale in Deschutes County this week, low inventory has the most significant impact on housing presently. For example, 46 homes sold in Deschutes County last week, compared to 109 this week in 2020. Last year we witnessed unprecedented demand through the end of the year, although this week in 2019 saw 93 homes sold. With interest rates still low, why have the home sales slowed relative to years past? The lack of homes for sale has undoubtedly impacted buyers, while many families were more focused on Thanksgiving with family and friends than housing. Although, with 638 homes pending this morning, there will undoubtedly be more sales in the twenty business days remaining in 2021.
Our winter weather seemingly came and went, with daytime highs today in the 60s. As you can imagine, this weather isn't doing Mt. Bachelor any favors, with the mountain opening delayed indefinitely. The ten-day forecast doesn't show nighttime temperatures below freezing until late next week. While it may be too cold to float the river, hiking, biking, and even golf are options as we anxiously wait for snow!
Since I've been beating the drum regarding inflation for some time, I thought an economic synopsis by the Federal Reserve Bank of St. Louis regarding Milton Friedman's view of inflation would be appropriate. The article quotes Friedman as saying, "There is no way of slowing down inflation that will not involve a transitory increase in unemployment and a transitory reduction in the rate of growth of output. But these costs will be far less than the costs that will be incurred by permitting the disease of inflation to rage unchecked." I find it interesting that Friedman uses "transitory," although in the exact opposite of Jerome Powell. Interestingly, the article closes by patting current (written in 2007) policy makers on the back by intimating they've learned the lesson taught by Friedman. This article from 2006 about the transition from Fed Chair Alan Greenspan to Ben Bernanke is prescient, while this current article elaborates on Powell's predicament.
