The Economy, Inflation and what it means for Corpus Christi

The economy and inflation

There is a great deal of uncertainty and anxiety regarding the economy and where things are headed. Here in Corpus Christi, we’re not exempt from this and many people here wonder where things are headed. We’re feeling it every day at the gas pump and grocery store. The big economic news today is that the current inflation rate is at 8.3% annualized. These are the highest inflation numbers in 40 years. Of course, these inflation numbers have been redefined over the years and if measured in the same way as they were back in 1979, the true inflation numbers would be over 10%. Most people don’t understand what causes inflation, but it’s really pretty simple as it comes down to the laws the supply and demand. More dollars chasing the same or fewer supply of goods will cause prices to rise. It isn’t Vladimir Putin or supply chain disruptions. Over the past 2 years the US money supply has increased by over 40% as the government handed trillions of Covid relief dollars out supported by the Federal Reserve which effectively printed 40% more dollars to enable this effort. The officials who acted surprised that inflation took off or attempted to say that it was temporary were either being deceitful or just plain stupid. Inflation was the inevitable result of the Government’s Covid response. I won’t bore you with further economic theory but it’s important that people understand what the true causes of inflation are.

What does this mean to us here in Corpus Christi?

Inflation will be here for the foreseeable future as I don’t believe that our political class has the backbone to do what will be required to eliminate it. Interest rates will continue to rise as bond buyers will demand a higher yield to offset the inflation. 30-year Mortgage rates are now over 5% versus 2.75% a year ago and we will likely be close to 7% by year end. This means that a $250,000 mortgage will cost $360 more a month today than a year ago. Home ownership affordability will be negatively affected as a result. This will eventually cause real estate values to level off or even decline in some markets. We’re fortunate here in Corpus in that our underlying economy is very strong and there currently exists a significant housing shortage will likely insulate us from home prices declining but future price increases should level off. Our local home builders are working hard to fill this housing shortage but will be challenged by rising construction costs in both labor and materials. New home prices will continue to increase but rates are still historically low so it is still a good time to buy. Entertainment and restaurant businesses will get squeezed as inflation will take a significant bite out of working people’s pay checks. Our current inflation will cost families an average of just over $5,000 a year. Discretionary household spending will take a big hit as people will still have to feed their families and fill their gas tanks….something will have to give. People will cut back on vacations, eating out and other luxury items. It will be a challenging time for all of us so hold on tight and spend your dollars carefully.

John Wilson

I am currently the Chief Financial Officer for an independent mortgage company based in Texas. I’ve held senior financial management roles with several of the largest banks in the US over the past 25 years. I’m a graduate of the University of Texas at Austin with degrees in Finance and Economics.