Signs of “Cooling” Everywhere
It appears that the stock market (capital markets) and the real estate markets are heading southbound. Up until earlier this year, our nation has enjoyed very low interest rates (financing costs) since about 2010. On top of this scenario, you can add Pandemic fueled high (personal) savings rates and growing demand for housing. If you remember Economics 101, when demand is high and supplies are low, then prices increase (sparking inflation). Then, when you look at the war in the Ukraine and oil shortages, you get spiking fuel prices. As you know, this will trickle down to even the simplest of grocery items. Why? …well, there are many reasons, but one is the increased fuel costs by trucking companies to get the products to your local market. Another is that fuel and electrical energy is needed to produce almost every product in your home, and energy is more costly as well.
Some industries suffer (a small mom and pop bodega for example), while others prosper (Exxon Oil for example). When looking at publicly traded companies, the same holds true…which also explains the up and down motion we’ve seen with the stock market since February. I forgot to add in the supply chain disaster we are still experiencing, which also adds to inflation and subtracts value from many publicly traded companies (stock values).
The end results are that both the housing market and financial market (s) have begun to cool down, and in some cases freeze. Financing (loan) costs are skyrocketing, and with The Federal Reserve scheduled to continue their onslaught of taming inflation [through rate hikes] …trouble is a brewing. You see, according to some experts, the cost of mortgage payments have increased about 60 percent compared to last summer. What we are seeing now, is the beginning of a big Recession that could get very scary next year. Almost all the data being published surrounding the housing market is the opposite of good news this month (August 2022). We have a very strange situation in housing: 1) Inflation induced skyrocketing home prices, and 2) Sky-High mortgage rates. One or the other has got to give, and it’s not going to be interest (mortgage) rates. If you own stocks in home builders, and have made money over these past few years, my advice is to get out now before the tears start to flow down your cheeks. Home prices…