Friday, September 2, 2022 / by Jenny Carroll
By John Case
Cause and effect are often confusing when discussions of economics arise. Arguments pop up, primarily blaming an upcoming recession causing the number of property sales in recent times. The flip side of the argument is that the recession is causing a drop in real estate transactions. Neither of these arguments are true simply because slowdowns occur all of the time (economic increases also happen all of the time as well).
The real problem, if there is one, is that we like to hang labels on things which do not have solid definitions. The term ‘recession’ has this problem and causes arguments on whether there is one at all. The longest living and most used definition is as follows: ‘When the Gross Domestic Product (GDP) is 20% or more below the previous quarter for more than 2 consecutive quarters, the economy has entered into a recession’. This is all well and good but ignores some situations. The most obvious one is when the economy decreases 19% for 2 consecutive quarters. I will posit that these 2 scenarios are indifferent a recession to those who are living in these economies. If we were to extend to a 3rd consecutive quarter of economic slowdown, it would be seen as a severe economic slowdown by the economists, but it would feel like a very real recession to those having to feed their families, pay the bills, and most importantly, keep their jobs.
Regarding real estate, we need to reject the labels of the economic swing labels and focus on the cost of owning a home. For example, if interest rates are increasing, it is likely that the prices will be reduced due to current prices being higher than the population can afford. Home sellers, guided by a professional in the market, will adjust prices that are affordable to the incomes of the people who mean to live in the area. To be sure, these adjustments are not automatic and there are lots of other factors that come into play such as employment, amenities, quality of life, and other that also change all of the time.
The impact of other information channels also has an impact on the economy. In today’s culture, the media probably have the greatest impact on how people react to the economy. As this is being written, I believe that many people believe that we are currently in a recession, even though employment numbers remain solid. Of course, to those of us who remain employed do not see the causes of an economic slowdown. Things will change, of course, but only you know how you stand economically.
If all of this makes you wonder if this a good time to be buying or selling real estate, please give us a call. Everyone has a different set of circumstances that need to be addressed and we can assist by answering any questions you may have, help set up a plan for a purchase or sale of property, or any other real estate issues you may wish to discuss.
Real estate is an important and complex thing in our lives, but it can be one of the most rewarding things you do in your life. Let us be a part of this and obtain the results you desire. We re looking forward to speaking with you.