A recipe for recession... we all know that we are on the brink of an economic slow down but it begs the question... are we in for a "soft landing" or an economic meltdown?
For all of the years that I have been trying to read a crystal ball and make predictions about economics, I have to admit that I have been wrong every single time. When predicting, you have to understand that you too, will always be wrong. The objective is not to be right (because that is impossible), but to be less wrong. The Federal Reserve bank has made one thing remarkably clear. They are going to get this inflation thing under control and back to it's target of 2% at ALL COSTS. Jerome Powell, Chair Of The Fed has basically said that the reserve bank is going to ignore its dual mandate of balancing inflation and unemployment and focus solely on its inflation target. Our opinion is that the Fed will overshoot its quantitative tightening policy and the recession will be led by a drop in consumer confidence and thus consumer spending. Below, I feature some stats on why we believe that will happen:
Although we typically talk a lot about commercial real estate on this blog, I would be remiss if we didn't occasionally talk about the single family home market in our region. The reason why it is important is because, single family home sales can help us check the pulse on economics and consumer sentiment that drives other facets of the real estate market in our area. For instance, when home prices go up, home owners feel wealthier. Their home equity goes up and they tap that home equity to fund home improvement projects, or to send their kid to college, or go on a big vacation, etc. Increasing home values also give lift to the economics of new home construction, which has a whole myriad of different economic affects for a given area. On the other side of the coin, rising home prices can also place homeownership or upgrading to a larger house out of reach for many people as well. Below is a recent report of home price performance that has been sorted by each school district in Monroe county. The findings were interesting to say the least and also provided some confirmation of things that I have seen first hand as a REALTOR and heard second hand, anecdotally from my real estate colleagues.
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