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Healthcare & Housing
I’ve been talking about inflation a good bit over the last few episodes. Well, today I want to highlight how inflation is actually affecting the way that we live. You see, people adapt their behavior when things cost more – sometimes in dramatic ways. I’m going to highlight two sectors that affect every one of our listeners, and how these two areas are likely to change in the future.
Let’s talk about how inflation is changing the way we do healthcare first. For one thing, there are new delivery methods for healthcare. According to a Health and Human Services Study in April, those using telehealth was as high as 30% in the early days of Covid. It has settled into the 20% range for their most recent survey period, but it’s obvious that telehealth is here to stay. Telehealth is interacting with a doctor or other clinician over the phone or over Zoom. It allows you to skip the line at your local urgent care facility. Because of rising costs in healthcare – not just during the recent inflationary period, but even before – healthcare is becoming more and more segmented. You often won’t see a physician for routine illnesses anymore. That trend has been happening for some time but is likely to accelerate in the years ahead.
Queue the arrival of Amazon Clinics. First of all, with Amazon Clinic you can be connected online with a clinician who has the ability to treat “30 common health concerns like urinary tract infections and pink eye” according to its website. Amazon boasts a 96% customer satisfaction rating, and they call this method of delivery “virtual health care” rather than telehealth. The clinic does not yet accept insurance for the virtual consultation, but prices via chat are as low as $35 and video visits run $75. While some medical interactions, particularly routine ones, are becoming more convenient, but less personal, there is another end of the spectrum in which healthcare experiences are becoming more personal and even more customized. It’s called concierge medicine. The way this works, you pay a flat monthly fee and have unlimited office visits, virtual visits, and even have a direct line to call your doctor. There is no insurance involved – just patients and doctors. Under this model physicians will typically have a smaller clientele of patients and may spend as much as 30 minutes with each of them in a typical appointment. There’s a cost to this, of course. According to an article by Forbes, these costs can range from $1200 to $10,000 per year, depending on where you live and what physician you choose. Obviously, many people will opt not to go this route. But as many patient loads increase at primary care clinics and wait times for appointments and/or test results increase, alternatives like concierge medicine are likely to gain steam.
The sector we’ve felt inflation more than any other is in the housing sector. A recent Wall Street Journal article titled, “Goodbye Bathtub and Living Room. America’s Homes Are Shrinking” identified how homebuyers and builders are adapting to these multi-year increases in costs. It’s obvious from the article title that bathtubs are a bit of a luxury now and sticking with showers can really save space when space counts on new homes. Likewise, many builders are doing away with living rooms and dining rooms, and instead having a great room that includes the kitchen and living area – sometimes only including an island on which to eat meals rather than a separate space for a table. It makes sense. If you have a dining room, how many times a year is it used? For many families, it would be less than a handful. Additionally, homeowners are moving outside for additional common space. They host get togethers under pergolas or on patios. The backyard is becoming the new living room, especially with outdoor friendly electronics becoming more readily available. These strategies aren’t surprising, considering the average square footage for new housing is down to about 2400 square feet. And the larger the metro area, the more that square footage for new homes seems to be shrinking.
Not only have housing prices in nearly every part of the county gone up – but mortgage rates are in the 7% range now. This double whammy is causing a mortgage “lock in effect” in which homeowners are “trapped” in their homes with an interest rate on their mortgage of roughly 3%. It would cost them too much to buy another house, both from the cost of the home and the higher interest rate. As a result, the supply of homes for sale is thin. So new homes are the only way to create more homes for sale – and as already stated, these new homes are smaller than in years past. Particularly when builders are realizing the rising cost of land, they are having to build dense neighborhoods on that land to recoup their costs and make a profit.
Another trend you’ll start to notice in the area of housing, particularly in West TN, is the rise of renters. People are more mobile now than they have ever been, and with home costs as high as they are, many will opt for renting. As more and more rental properties have the amenities of houses with upscale finishes, renting will lose some of its stigma and be more common – even in parts of West TN. In response to housing demand for Blue Oval City, we are already seeing hundreds of apartments and dozens and dozens of rental houses being built. So expect more changes and fluidity in the housing sector in coming years than you may have seen in your lifetime.
So what should you do in light of these changing trends? In regard to healthcare changes, I have one tip. Exercise. Whether you walk a mile or two every day or join a fitness studio to provide some accountability, the best way to combat increasing medical costs is to take care of yourself. This certainly doesn’t guarantee you won’t have health issues, but it will help. In regard to housing changes, consider remodeling or renovating your existing home rather than buying another. You’ll have to wait in line as contractors are still backed up, but it will allow for some change to your current setting without giving up that cheap mortgage rate you have.
At MBC/Foundation Bank we realize that things are always changing. But one thing we think won’t change – the need to trust your banker. We’ve been earning trust one relationship at a time, one conversation at a time, for nearly 90 years. We hope you’ll start your financial conversation with us today by exploring our website. If you’ve found this podcast helpful, we hope you’ll subscribe to it in your favorite podcast app and share it on social media. Until our next episode, God bless you.
-President Chad P. Wilson, CFP
Today’s episode of “Money Matters” was written and recorded by President Chad P. Wilson of McKenzie Banking Company / Foundation Bank on August 29, 2023. This episode does not constitute financial advice. Please consult a financial professional to discuss your specific needs. MBC/Foundation Bank is an Equal Housing Lender, Member FDIC.