Energy & Ukraine Crisis Compared to 1970s Inflation

high inflation

Russia’s invasion of Ukraine has emerged as a black swan event rattling the world during the past several weeks. We are witnessing on our TVs screens what a barbarian and treacherous dictator has unleashed on an innocent neighbor. Destruction of a beautiful country, innocent loss of life to its citizens and children, and a resulting humanitarian crisis on a magnitude of world war II. Apocalyptic describes the current war in Ukraine.

Russia’s huge invasion appears to have ended any hope the US consumers might possibly have had for any relief from skyrocketing inflation. As of Thursday morning, the average national price for a gallon of regular gas touched at $4.32 a gallon, according to AAA. This is the highest price in history, not accounting for inflation. Additionally, the White House announced its ban on purchasing oil and natural gas from Russia this past week.

So are we in the early stages of an energy crisis which threatens the return of 1970s inflation? It brings me back to 1971. I had just graduated from college and started my first real job at Coopers and Lybrand in Boston. Those were exciting years until 1973 when the Arab Producers of OPEC put in place an embargo on oil exports to the United States. This was in response to America’s support of Israel in a war. The result was an oil shortage across the country which led to panic at the pump. Back in those days, we called it an energy crisis; however, in many ways, it described the decade of the 1970s when oil shocks and soaring inflation defined the economy. During the 1973 oil embargo, the price per barrel of oil quadrupled, and then it doubled again in 1979 as a result of the Iranian Revolution.

The initial embargo stunned Americans as if we had come under a surprise attack. I can remember the scarcities and shortages as well as the higher fuel prices. We learned at that time that oil was the lifeline to the economy. It also remained vital for the country’s national defense. Back then, the gas lines that curved down the streets provided an atmosphere of pessimism. Fortunately, at that time, my means of transportation was a Volkswagon Beetle. The high oil prices also encouraged a switch to smaller vehicles and helped create the environment in which Japanese firms such as Toyota and Honda became dominant in the states. I can remember gas stations closing on Sundays and homeowners refraining from putting up holiday lights on their trees. I started my real estate career in the Lakes Region in 1976. We had to guarantee potential clients gas to get back to Massachusetts or Connecticut after looking at properties. Drivers would go to stations before dawn or late at night, hoping to avoid the long lines. In addition to gas rationing, the national speed limit was cut to 55 miles per hour, and daylight saving time was adopted year-round around 1974 or 1975.

If we think inflation is through the roof today, compare it to 1974 at 12% and 14.5% in 1980. Previously the Federal Reserve did not react until President Carter appointed Paul Voleeker as the Federal Chair, and we saw huge increases in interest rates to stop inflation. It’s hard to believe; however, in 1981, I was quoting a 30-year variable interest rate at 18% to my clients with a 5 cap over the length of the loan. You could not get a fixed-rate mortgage. It’s obvious that these outrageous rates killed the housing market in 1980-1982. Sadly it was runaway inflation which caused exploding interest rates, housing’s arch-nemesis. The eye-watering interest rates drove many consumers into renting rather than purchasing homes. The result was several years which were problematic for buyers, and I remember them well.

Millennials and Gen Xers are lucky they missed the harrowing economic events of the late 70s and early 80s. Right now, interest rates are still super low, and all of the Realotrs® in the Lakes Region have experienced a golden era for home buying. It’s like the Fed has pumped helium into the economy for over 10 years, and the stimulus incentives have been jaw-breaking.

However, let’s fast forward and look where we are today. We are seeing steady increases in inflation. The CPI index increased 7.9% year over year in February of 2022. This is the biggest annual rise since January 1982 (40-years). As the impact of the Ukraine war intensifies and the huge humanitarian crisis unfolds, it’s obvious it will fuel a continued sharp hike in inflation, and the increased cost of energy will play a significant role. The shock waves from the Russian invasion and the pressure on oil and gas will ultimately lead to higher inflation, and we will likely see continued volatility in the stock market. Consumer confidence is key, and right now, there is major uncertainty around the world as to what the outcome will be.

Could the 1970s inflation era happen again? We will tread carefully as time unfolds. There could be political surprises like Brexit, the handling of fiscal and monetary policy could bring about the devaluation of the dollar, which I worry about. That could lead to high inflation. We have seen the Federal Reserve flooding the economy with dollars simply by printing, and the national deficit is reaching for the stars ($30 trillion). We have soaring commodity prices which adds more confusion to where the Fed goes from here. Russia’s invasion has led to some of the most punitive economic sanctions in history. Russia’s currency and the stock market have tanked. Interest rates are at 20% in Russia, and US corporations are exiting the county in droves. Russia is the world’s largest exporter of natural gas and the second-largest oil exporter, which draws parallels to the oil price shocks of the 1970s, which led to galloping inflation. Also, the invasion threatens the global food supply. The two countries supply nearly 1/3 of global wheat and barley exports. Wheat prices have jumped to the highest level since 2008. Think of how many food products have wheat as a primary ingredient. Add to the list many minerals, aluminum, nickel, fertilizer, corn, and other exports that Russia and Ukraine export.

It appears that higher energy and commodity prices could make consumers more apprehensive about making big purchases, and the situation in Russia and Ukraine is creating significant uncertainty. But for now, experts are reticent about changing their forecast for the spring housing market despite acknowledging that the future is more unpredictable than it was before. I have not seen demand slow down in the Lakes Region thus far. Most of our Realtors® at Roche Realty Group have a lot of showings scheduled for this weekend. The demand is there, and the inventory shortage is the lowest in the state’s history. At the present time, there are only 683 single-family homes for sale in the entire state of New Hampshire, and there are only 177 priced under $300,000. However, according to Dolly Lens, a luxury real estate Broker in New York City, “She’s getting inundated with Russian clients who are considering selling their US real estate holdings located in some of Miami’s and New York Cities most exclusive neighborhoods…the heat is up, and they’re scared that they’re going to potentially have their real estate seized.” Sounds like the definition of “what goes around comes around.’

Frank Roche, President of Roche Realty Group, Inc. with offices in Meredith and Laconia, NH

This article was written by Frank Roche. Frank is president of Roche Realty Group with offices in Meredith and Laconia, NH, and can be reached at (603) 279-7046. Housing data was pulled from NEREN 3/10/2022 at 4:30 pm EST and is subject to change. Please feel free to visit www.rocherealty.com to learn more about the Lakes Region and its real estate market.

NH Lake Sales Activity - picture of lake with mountains and homes

Lakes Region Waterfront Sales 2022 vs. 2023

We’re getting near the end of the year, and I thought I would pull up ...
Read More →
Winter Snowmobile

Real Estate in a Winter Wonderland

As I drove around the other day with my kids, I was looking at some ...
Read More →
Toys for Tots Drive

Roche Realty Host Annual Toys for Tots Drive

As the holiday season approaches, Roche Realty Group is excited to announce the kickoff of ...
Read More →
Small Business Saturday New Hampshire

Small Business Saturday Living Gratefully in New Hampshire

We have so many things to be thankful for here in New Hampshire: plenty of ...
Read More →
Annie Brown Joins Roche Realty Group

Annie Brown Joins Roche Realty Group

Meredith — Frank Roche, President of Roche Realty Group, Inc., with offices in Meredith and ...
Read More →
Gunstock Mountain in Gilford, NH

Gunstock Upgrades for Winter as Real Estate Shows Resilient Growth

As the leaves of New Hampshire’s forests transition from the vibrant hues of fall to ...
Read More →
Preserving New Hampshire's Lakes

Preserving New Hampshire’s Lakes: A Community Effort

With over 250 lakes and ponds throughout New Hampshire’s Lakes Region, there are unlimited outdoor ...
Read More →
Home Inspections — The Uninspected Abode: A Spine-chilling Tale of Regret and Terror!

The Uninspected Home: A Spine-chilling Tale of Regret and Terror!

One night, not many years ago, in a quaint, somber town nestled amidst the haunting ...
Read More →
Interest Rates

Interest Rates Impacted by Treasury Yields

It looks like the national picture for housing stats has not improved in recent months; ...
Read More →
Local Housing Crisis: Challenges and Solutions

Local Housing Crisis: Challenges and Solutions

Our communities are facing a shortage of both residential and commercial properties, a scenario that’s ...
Read More →
Fall Splendor In New Hampshire

Fall Splendor in New Hampshire

New Hampshire in the fall is akin to stepping into a live canvas painting — ...
Read More →
Samoset Condominiums on Lake Winnipesaukee

Condominium Sales Surge in New Hampshire’s Lakes Region!

As we start entering October’s bright fall colors, I thought I’d take a look at ...
Read More →
Empowering your offer

Empower Your Offer in a Sizzling Real Estate Market!

As a seasoned real estate professional, I often consider the market conditions to keep myself, ...
Read More →
Reviews of New Hampshire's Lakes Region

Reviews of New Hampshire’s Lakes Region

We’ve had a great summer in New Hampshire’s Lakes Region, and we’re approaching the brilliant ...
Read More →
Waterfont Sales Activity Wolfeboro, New Hampshire

Waterfront Sales Activity in the Lakes Region

As we head into September, I have compiled data and insight into what is happening ...
Read More →
Labor Day Weekend

Labor Day Weekend in The Lakes Region

Labor Day Weekend has arrived, and the weather forecast for the Lakes Region looks fantastic, ...
Read More →
Interest Rates

The Mortgage Interest Rate Dilemma

This past week, we saw an increase in mortgage rates following a rise in bond ...
Read More →
Best State To Live In — New Hampshire at #3

New Hampshire 3rd Best State To Live In!

WalletHub just released its rankings of the best state to live in for 2023. It’s ...
Read More →
City/Town Comparison can make the research process easier

City/Town Comparison For Your Move

Some studies place moving to a new location as one of the top ten most ...
Read More →
New Hampshire Real Estate Lacks Inventory

New Hampshire Real Estate Inventory Crisis

A Multifaceted Analysis of Rising Interest Rates and Beyond New Hampshire is currently facing a ...
Read More →
Peaks of New England

Exploring the Peaks of New England

In my younger years in school, I always loved geography. Living in New Hampshire, there ...
Read More →
Climate Exodus: Insurance Companies Seeking Refuge from High-Risk Sates

Climate Exodus: Insurers’ Fleeing High-Risk States

Flooding, Forest Fires, Heat Waves, Tornados, oh my! The recent stretch of weather has certainly ...
Read More →
Real Estate News Headlines - Lakes Region NH

Real Estate Tidbits to Consider

Here are a few real estate tidbits I’ve pulled to keep you up to speed ...
Read More →
Roche Realty Group Sells out Lakeside at Paugus Bay

Roche Realty Group — 6 Months in Review

Closed sales for the first 6 months of 2023 have been impressive at Roche Realty ...
Read More →
Newfound Lake

Lakes Region Waterfront Sales Activity 6 Month Comparison

Below you will find data and insight into what is happening in sales activity on ...
Read More →
Buying Land

Buying Land in New Hampshire — Comprehensive Guide

New Hampshire, also known as the Granite State, offers a diverse landscape that includes picturesque ...
Read More →
Weirs Beach: A Tale of History, Community, and Natural Beauty

Weirs Beach: A Tale of History, Community, and Natural Beauty

As we celebrate the 100th anniversary of the oldest bike week in the country, let’s ...
Read More →
First Five Months of Lakes Region Real Estate

Five Months of Lakes Region Real Estate Activity

The month of May’s real estate statistics just came out for New Hampshire, and it ...
Read More →
A bird's eye view of Long Bay on Lake Winnipesaukee

South Down Shores and Long Bay on Lake Winnipesaukee — Its History

When construction started in 1981, Laconia’s South Down Farm offered a picturesque setting for condominium ...
Read More →
Memorial Day — rows of gravestones with flags in military cemetery

Memorial Day Weekend Arrives in the Lakes Region!

The long-anticipated Memorial Day weekend has arrived after a long winter, and the Lakes Region ...
Read More →
Unlike the dandelions new listings aren't popping up in the Lakes Region

Will Listings Start Bloom Like Dandelions?

Will Real Estate Listings Bloom Like Dandelions? During my rides around the Lakes Region, I’ve ...
Read More →
boat launch

Public Boat Launches in the Lakes Region

New Hampshire’s Lakes Region is a paradise for boating enthusiasts and we are now entering ...
Read More →
Real Estate Scams

Real Estate Scams to Be Aware of

One of my Realtors® received a call today from a gentleman purporting to be the ...
Read More →
Brant Point Lighthouse, Nantucket overlooking the ocean

From the Lakes Region to Nantucket

I spent a few days on Nantucket Island this past week for a quick getaway. ...
Read More →
Lakes Region Real Estate Is Still Hot

Lakes Region Real Estate Market is Sizzling

The real estate market in the Lakes Region and the state of New Hampshire is ...
Read More →
Lake Winnipesaukee Kayak

Buying a Lake House — Where to Start?

Owning a waterfront home in New Hampshire’s Lakes Region is a treasured experience. For many ...
Read More →
Home improvements

Home Improvements Before You Sell

One question I commonly get asked is, “What type of projects or improvements should I ...
Read More →
Single-Family units are down

How’s the Lakes Region Market Looking?

We’ve already passed the first quarter of 2023 for real estate sales in New Hampshire’s ...
Read More →
Moving into new home young happy couple celebrating toast Champagne

Buying a Home? Follow These Tips & Tricks

Spring has officially arrived and launches the beginning of our spring selling season for real ...
Read More →
Marketing

How Marketing Real Estate Has Evolved

Back in the year 2000, the world was at the beginning stages of a major ...
Read More →
Mount Washington, New Hampshire

New Hampshire — 30 Reasons to Move Here!

With lakes, beaches, mountains, forests, rivers, and the ocean for people who enjoy the outdoors, ...
Read More →
New Hampshire Ski Resort

Ski Resorts in New Hampshire Are Ready for Spring Skiing!

It’s been a good week, and mother nature hit our region with a blanket of ...
Read More →
Market Trends

Real Estate Market Trends to Follow

I’ve been pulling up some current research on the real estate market on a national, ...
Read More →
Carol Mattice

Roche Realty Group Welcomes Carol Mattice

Meredith — Frank Roche, President of Roche Realty Group, Inc, with offices in Meredith and ...
Read More →
Kevin Shaw - Roche Realty Group

Kevin Shaw of Roche Realty Group is Top Producer for 2022

Laconia— Frank Roche, president of Roche Realty Group with offices in Meredith and Laconia, recently announced ...
Read More →
Lisa Lewis

Lisa Lewis Joins Roche Realty Group

Meredith — Frank Roche, President of Roche Realty Group, Inc, with offices in Meredith and ...
Read More →
Wanda Keenan

Wanda Keenan Joins Roche Realty Group

Meredith— Frank Roche, President of Roche Realty Group, Inc. with offices in Meredith and Laconia, ...
Read More →
Land for sale

Buy Land in New Hampshire — They’re Not Making it Anymore

The science is in and the more trees a state has, the happier and less ...
Read More →
The Price of Real Estate

Did The Price of Real Estate Increase in Your Town?

Everyone’s always interested to see how their real estate values have performed over the past ...
Read More →
Laid off employee in recession

Are We Headed into a Recession?

It’s pretty big news lately; Microsoft, Amazon, and other tech companies have laid off more ...
Read More →

Leave a Comment