It is the first week of December and before tinsel, wrapping paper, and the sugar from gingerbread cookies & hot chocolate hits your system, let’s talk about a topic that lots of people are dancing around.
That’s right, the R word: recession.
A recent finance section article title read: “Is a Recession Coming—or Are We Talking Ourselves into One?” This affects our clients: homeowners, potential home buyers, investors, and all of us. Newspapers and online articles are geared around hooking the reader. Click bait is what gets people to open articles, not moderate headlines.
First, not all recessions are the same. If there is a recession in the next few years, it will not be a play-by-play repeat of 2008. It might surprise us. It might affect trade or the stock market more than the housing market. It might have different winners and losers.
Second, what we think about the economy actually has an affect on the economy. Easiest example: “A recession is coming!” runs in bold font on the front page of newspapers makes people worried. “If a recession is coming,” thinks the average Joe, “then I need to save more. To save more, I am not buying new furniture or a new car because I need the money for my emergency fund.” Then retailers suffer. Retailers aren’t making enough money to warrant their payroll costs, so they cut hours and employees. Unemployment goes up. People are buying less because they have less disposable income. The housing market slows down. All of that based on what someone says is going to happen in the economy. Economists call this a “self-fulfilling prophecy”. In a way, we get the economy that we expect because we change our behavior to match our expectations.
Third, “consumer confidence measures consumers’ willingness to spend, but not necessarily their ability to spend. That comes from wages and income“*. Someone might have the money to buy a new boat or refrigerator, but does not want to buy it for whatever reason.
What do the experts have to say? “Most economists say it’s possible – but not probable, with the average forecast betting on a 41 percent chance [of a recession between now and the presidential election in November 2020]“**
Most economists are citing the ongoing trade war as a primary cause of a potential recession, but their predictions range from 20 percent to 75 percent and everywhere in between.. “Odds of a recession between now and the November 2020 election are 55 percent. The major risk to the economy is the ongoing and growing trade war,” said BERNARD MARKSTEIN, PRESIDENT AND CHIEF ECONOMIST, MARKSTEIN ADVISORS. **
Why do we bring the R word up? Because as a real estate brokerage, we monitor the housing market, real estate trends, rates, and other economic indicators because they affect our clients and business.
What are your fears about a recession? Are you worried about buying in the next couple months and missing out on an opportunity to buy when housing prices bottom out at the trench of a recession?
This is an open door invitation to call our real estate agents and start a dialogue about any concerns you have about buying or selling your home.
Talking about the economy shouldn’t be scary, but the unknown can be intimidating. Our goal is to talk about it so the “what-ifs” don’t keep us from making wise real estate and financial moves.