Shaking off the pandemic-driven slowdown, the country’s GDP grew 1.6 percent in the first quarter. The Fed is expecting 6.5 percent growth for the year—the fastest increase since 1984.
Meanwhile, the consumer price index rose 0.8 percent in April after increasing 0.6 percent in March, according to the U.S. Bureau of Labor Statistics. Overall, the index is up 4.2 percent year over year, the most significant 12-month increase since 2008. More robust demand for goods and services—everything from gasoline to food to building supplies, appliances and vehicles—boosts prices across the board.
According to Berkshire Hathaway Chairman and CEO Warren Buffett, “We are seeing very substantial inflation. It’s very interesting. We are raising prices. People are raising prices to us, and it’s being accepted. We’ve got nine homebuilders in addition to our manufactured housing operation, which is the largest in the country. So we really do a lot of housing. The costs are just up, up, up. Steel costs, you know, just every day they’re going up.” Berkshire owns Clayton Homes, one of the nation’s largest homebuilders, and other housing-related companies, such as Benjamin Moore paints and Shaw flooring.
Price increases are affecting virtually every aspect of the employee relocation process and average relocation costs:
As discussed in a recent TRC blog, the housing shortage is driving up home prices and closing costs on the sale and purchase transactions. National housing inventory was 53 percent lower in April than in April 2020, and the median listing price of $375,000 was up 17.2 percent over last year.
Household Goods Transportation
Summer is traditionally the busiest season for the household goods industry. Add in today’s heated real estate market, the resumption of corporate relocation activity, the continuing shortage of drivers, and rapidly increasing fuel costs, and it’s clear why household goods transportation costs are rising.
Demand for temporary housing plummeted during the pandemic, with limited relocation activity and frozen business travel. Providers divested thousands of apartments to align supply with demand, and some went out of business. Limited supply is leading to a narrower selection of apartments at higher prices.
Rental car companies also divested much of their inventory in the face of collapsing demand: about one-third of their combined fleet. Meanwhile, a computer chip shortage has shut down many automakers and drastically reduced production. With demand snowballing and no ready way to add supply, the companies are charging hundreds of dollars a day for basic economy cars. Airfares are also increasing as demand continues to grow for a reduced number of flights and seats. The return of business travelers will only add to the price pressure. Hotel rates are also rising as demand recovers.
Taking all of this together, companies that relocate employees will face higher domestic and international relocation costs, at least until supply and demand are re-aligned. At TRC, we continue to work closely with our supply chain network to ensure their pricing is competitive and represents a good value. We’re also working closely with our talent mobility clients to find creative ways to contain average relocation costs while remaining competitive and focused on the employee experience.