How much longer can we talk about how bad the US economy is when GDP is growing at 4.9% and unemployment is at 3.8%? Especially considering all the economists were predicting a recession this year and all the other major economies have higher unemployment, slower growth and/or higher inflation.
Because unemployment is a lagging indicator and GDP is one metric that is hard to say the economy is good or bad. On the flip side interest rates at at 20 year highs and housing is becoming more unaffordable by the day as are many other things. Inflation is down to under 4% year over year, but prices are still extremely high compared to 2 years ago.
I am not an economist at all but I think there is a lot of unknown so people are unsure of how to react and thus become fearful.
People usually look at the costs of what they need first; food, housing, gas all are up significantly from years past.
Personally for me in my niche, it’s harder to grow my business on all fronts now than it was 4 years ago, even 2 years ago post covid. I am doing well financially, but my portfolio hasn’t grown as much the past 2-3 years as it did 4-6 years ago. I don’t think the economy is as strong as it was pre-covid, but that doesn’t mean it it’s “lousy”.
On the flip side interest rates at at 20 year highs
That’s deceptive because interest rates were insanely low for 20 years. Now they’re back in the range of historical norms.
This is good for savers. (Though bad for financers).
On the flip side interest rates at at 20 year highs
That’s deceptive because interest rates were insanely low for 20 years. Now they’re back in the range of historical norms.
This is good for savers. (Though bad for financers).
Yes, that is true, but when housing prices have increased as much as they have (well beyond the historical norm rates), those interest rates are not back to historical norms.
EDIT: Also wages have not increased in line with housing prices, so it’s a double whammy to the buyer.
I don’t think you’ve done the math on the effective price of a house in the early 80s with 13% interest.
I was at an alumni group football watch party today and one of the women is a realtor who has been selling real estate for about 30 years. This is exactly what she said to another person when we were having a discussion today about real estate in Middle Tennessee.
On the flip side interest rates at at 20 year highs
That’s deceptive because interest rates were insanely low for 20 years. Now they’re back in the range of historical norms.
This is good for savers. (Though bad for financers).
Yes, that is true, but when housing prices have increased as much as they have (well beyond the historical norm rates), those interest rates are not back to historical norms.
EDIT: Also wages have not increased in line with housing prices, so it’s a double whammy to the buyer.
I don’t think you’ve done the math on the effective price of a house in the early 80s with 13% interest.
Agreed, imagine when it was 17% interest in the early 80’s.
So what are we calling “normal” interest rates here? I would put 13% on the high side of “normal”. Early 2000’s rates were near the high 7% they are right now. It was much more affordable than to own then compared to now.
I think also housing supply is constrained in many markets.
Bloomberg and wsj coverage recently seems to be emphasizing folks that have 3% or less mortgage, and how that factors into their consideration to take a job that requires giving that up.
Builders/developers being more conservative vs pre 2007 gfc or global financial crises. I saw this in SE WI in 2022 when considering buying.
Rise of STRs short term rentals, eg airbnb, vrbo. The mom and pop and real estate investors or hotel owner/operators.
REITs, real estate investment trusts, were big pre 2022, imo.
In the rural area I primarily reside in, long term rentals are difficult to come by, thus feeding back into the labor shortage for the service and hospitality jobs. but str’s are trhiving. Many fully booked >85%.
On the flip side interest rates at at 20 year highs
That’s deceptive because interest rates were insanely low for 20 years. Now they’re back in the range of historical norms.
This is good for savers. (Though bad for financers).
Yes, that is true, but when housing prices have increased as much as they have (well beyond the historical norm rates), those interest rates are not back to historical norms.
EDIT: Also wages have not increased in line with housing prices, so it’s a double whammy to the buyer.
If housing prices collapsed, would that be a sign of a good economy? Talking about housing prices solely from the buyer perspective ignores the fact that each sale involves a seller, too. Buyers don’t like high prices, of course, but that does not mean the economy is in a slump.
On the flip side interest rates at at 20 year highs
That’s deceptive because interest rates were insanely low for 20 years. Now they’re back in the range of historical norms.
This is good for savers. (Though bad for financers).
Yes, that is true, but when housing prices have increased as much as they have (well beyond the historical norm rates), those interest rates are not back to historical norms.
EDIT: Also wages have not increased in line with housing prices, so it’s a double whammy to the buyer.
If housing prices collapsed, would that be a sign of a good economy? Talking about housing prices solely from the buyer perspective ignores the fact that each sale involves a seller, too. Buyers don’t like high prices, of course, but that does not mean the economy is in a slump.
I am not sure where I said the economy was in a slump?
Collapses are not good for economies in general, but again, not sure where I suggested that?
Point is simple, it’s harder for the average American to buy a house at the prices they are at now and where rates are with what wages are versus 20 years ago.
Here’s a data point on affordability.
https://www.statista.com/statistics/201568/change-in-the-composite-us-housing-affordability-index-since-1975/
It’s on a 3 year trend down (170 down to 104), 100 is the standard for “more than enough income to purchase median priced home”. If this trend continues it doesn’t have a good outlook in 2024.
Going back to the economy question posed, trends and data like this do not give consumers tons of confidence which I believe plays into a healthy economy. But I don’t think the economy is “lousy” right now either.
Today’s housing market is weird. I would say frozen rather than broken. All due to the sharp increase in rates and that shock is going to take a while to make its way through the system. 7% today is very different than 7% 20 years ago. Inflation (also a lagging indicator now driven by housing) is in the 3’s which isn’t bad historically, but like mortgages, are a real shock after decades of sub-2.
But putting aside housing, we are seeing real growth in GDP, real growth in wages and a tight labor market. This is when all experts and indicators say we should be in the crapper. People talk about how bad it is, but are spending like they’re drunk.
On the flip side interest rates at at 20 year highs
That’s deceptive because interest rates were insanely low for 20 years. Now they’re back in the range of historical norms.
This is good for savers. (Though bad for financers).
Yes, that is true, but when housing prices have increased as much as they have (well beyond the historical norm rates), those interest rates are not back to historical norms.
EDIT: Also wages have not increased in line with housing prices, so it’s a double whammy to the buyer.
If housing prices collapsed, would that be a sign of a good economy? Talking about housing prices solely from the buyer perspective ignores the fact that each sale involves a seller, too. Buyers don’t like high prices, of course, but that does not mean the economy is in a slump.
I am not sure where I said the economy was in a slump?
Collapses are not good for economies in general, but again, not sure where I suggested that?
Point is simple, it’s harder for the average American to buy a house at the prices they are at now and where rates are with what wages are versus 20 years ago.
Here’s a data point on affordability.
https://www.statista.com/...ty-index-since-1975/
It’s on a 3 year trend down (170 down to 104), 100 is the standard for “more than enough income to purchase median priced home”. If this trend continues it doesn’t have a good outlook in 2024.
Going back to the economy question posed, trends and data like this do not give consumers tons of confidence which I believe plays into a healthy economy. But I don’t think the economy is “lousy” right now either.
You just indirectly summed up the inverse relationship between consumer spending (which is 2/3 of the economy), and inflation.
The Fed is playing this balancing act right now trying to get their soft landing. They want to cool some of that spending side without completely crashing the economy. This is exactly why they raise interest rates, and this discussion shows the way it works.
Yep…
On the flip side interest rates at at 20 year highs
That’s deceptive because interest rates were insanely low for 20 years. Now they’re back in the range of historical norms.
This is good for savers. (Though bad for financers).
Yes, that is true, but when housing prices have increased as much as they have (well beyond the historical norm rates), those interest rates are not back to historical norms.
EDIT: Also wages have not increased in line with housing prices, so it’s a double whammy to the buyer.
If housing prices collapsed, would that be a sign of a good economy? Talking about housing prices solely from the buyer perspective ignores the fact that each sale involves a seller, too. Buyers don’t like high prices, of course, but that does not mean the economy is in a slump.
I am not sure where I said the economy was in a slump?
Collapses are not good for economies in general, but again, not sure where I suggested that?
Point is simple, it’s harder for the average American to buy a house at the prices they are at now and where rates are with what wages are versus 20 years ago.
Here’s a data point on affordability.
https://www.statista.com/statistics/201568/change-in-the-composite-us-housing-affordability-index-since-1975/
It’s on a 3 year trend down (170 down to 104), 100 is the standard for “more than enough income to purchase median priced home”. If this trend continues it doesn’t have a good outlook in 2024.
Going back to the economy question posed, trends and data like this do not give consumers tons of confidence which I believe plays into a healthy economy. But I don’t think the economy is “lousy” right now either.
Sorry, I understood the second sentence of your first post to mean that on the “flip side” housing unaffordability was a negative metric for the state of the economy. I basically agree with your last point: in the long run, gradual housing price increases are better than any boom/bust cycle.
How much longer can we talk about how bad the US economy is when GDP is growing at 4.9% and unemployment is at 3.8%? Especially considering all the economists were predicting a recession this year and all the other major economies have higher unemployment, slower growth and/or higher inflation.
Sigh…read the op Ed in the WSJ from this week … we’re fucked with interest tmrate delta v stock appreciation
I’d find it but been boozing
This is good for savers. (Though bad for financers).
False
How much longer can we talk about how bad the US economy is when GDP is growing at 4.9% and unemployment is at 3.8%? Especially considering all the economists were predicting a recession this year and all the other major economies have higher unemployment, slower growth and/or higher inflation.
Sigh…read the op Ed in the WSJ from this week … we’re fucked with interest tmrate delta v stock appreciation
I’d find it but been boozing
Great post. Read an article behind a paywall that I won’t sum up and can’t be arsed to find. For someone who claims to work in financial markets that’s pretty weak sauce.
How much longer can we talk about how bad the US economy is when GDP is growing at 4.9% and unemployment is at 3.8%? Especially considering all the economists were predicting a recession this year and all the other major economies have higher unemployment, slower growth and/or higher inflation.
Sigh…read the op Ed in the WSJ from this week … we’re fucked with interest tmrate delta v stock appreciation
I’d find it but been boozing
The big risk in the short term is not individual home prices so much as the crash in the commercial real estate market. That’s going to bleed into the rest of the economy.
Yes
But to be more specific, the crash in OFFICE product. Everything else is going pretty well.
Have valued the same class A building in a large, growing MSA past three years in 3Q 2022 vs 2021 was a 7% drop in as is value, 2022 to 2023 is about a 20% drop.
It’s a nice building, but when loans out strip the possible yield it’s not gonna be pretty. Added to that are significant leasing headwinds in almost everything but the absolute top of market product. It’s absolutely not good.
How much longer can we talk about how bad the US economy is when GDP is growing at 4.9% and unemployment is at 3.8%? Especially considering all the economists were predicting a recession this year and all the other major economies have higher unemployment, slower growth and/or higher inflation.
We face a daily barrage of stories in Canada about how people are increasingly using food banks. Gdp growth is currently stalling. Unemployment is 5.5 percent which is low for Canada. People don’t seem to be keeping up. Also an absolute housing affordability crisis for pretty well everyone excepting the well off.
Is the average person doing better in America?
On the flip side interest rates at at 20 year highs
That’s deceptive because interest rates were insanely low for 20 years. Now they’re back in the range of historical norms.
This is good for savers. (Though bad for financers).
Yes, that is true, but when housing prices have increased as much as they have (well beyond the historical norm rates), those interest rates are not back to historical norms.
EDIT: Also wages have not increased in line with housing prices, so it’s a double whammy to the buyer.
If housing prices collapsed, would that be a sign of a good economy? Talking about housing prices solely from the buyer perspective ignores the fact that each sale involves a seller, too. Buyers don’t like high prices, of course, but that does not mean the economy is in a slump.
I think you nailed it. And I think when most people say the economy sucks, it’s would be more accurate to say cost of living and financially things suck for people. That is reflective of our current economy. We have a huge homeless problem, housing (as mentioned sucks for a lot of people). Cost of food, gas, etc. his too high. Interest rates are high. Travel costs, high. The price of cars both used and new is too high. And salaries are not matching. The stock market is not growing like it was and many stocks are suffering though overall not horrible.
People on this forum tend to do alright financially, but we’re not blind. There are some serious indicators that as a country that people are hurting financially and the debt that people have is maybe starting to negatively affect them. I would say the economy is not prosperous for many right now, so even though indicators say it is not horrible. For many times are very tough. The gap between the haves and have not is growing rapidly.
People usually look at the costs of what they need first; food, housing, gas all are up significantly from years past.
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Yeah most of those prices wont come back down. Ever.
How much longer can we talk about how bad the US economy is when GDP is growing at 4.9% and unemployment is at 3.8%? Especially considering all the economists were predicting a recession this year and all the other major economies have higher unemployment, slower growth and/or higher inflation.
We face a daily barrage of stories in Canada about how people are increasingly using food banks. Gdp growth is currently stalling. Unemployment is 5.5 percent which is low for Canada. People don’t seem to be keeping up. Also an absolute housing affordability crisis for pretty well everyone excepting the well off.
Is the average person doing better in America?
That is the issue I am trying to figure out. According to the data, the US economy is booming. Wage growth is outpacing inflation, especially for hourly workers. Anyone who wants a job can get one. Unions are winning massive income increases. And yet, many posts on this thread are about how hard things are these days and how much people worry about them getting worse.
There are two things that look bad from a numbers point of view, home prices and the markets. Both of those don’t really impact the average person, but they do impact the average person’s perception of the economy.