I just read an article in Fortune magazine where the reporter was interviewing Mohamed El-Erain, who has has earned his status as one of the investment world’s rock stars.

Here’s and excerpt:

What makes you confident that inflation will be coming back soon?

We’re looking at a world where not only is demand going to pick up, but there’s also going to be a lot of supply disruption. The old normal was a world where credit was freely available. Well, credit will no longer be easy. So we’re going to have demand picking up, and we’ll also have supply coming down.

My thoughts on the above comments and how it could apply to the Boston condo market. We’re looking at a market where demand will pick up as more and more “echo boomers” and “empty nesters” enter the Boston condo market but, access to credit to condo developers will no longer be easy, so supply will be coming down. For example, think about the big hole in the ground in Downtown Crossing. Developers can’t get credit to start the condo project.

The second part of Mohamed El-Erain answer on inflation

So you think, okay, there’s a recession going on – I should be able to buy a plane ticket cheaply. And initially you can. Then suddenly they take a lot of planes out and park them in the desert. They take the supply out, and you get inflation coming back…(without the liquidity in the market) at some point we’re going to face an inflation risk, and most people are not prepared for that.

My thoughts on the above comments: Can you see the comparison between the plane ticket scenario compared to the Boston condo market? Or do you think this is too much of a stretch?

Your thoughts?

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