With it being in the middle of the year, there has been some speculation of a recession happening. With people worrying about the possibility of a recession, people are also concerned what it would mean for both homeowners and those purchasing a home. No one can predict the future, that is certain. We have no crystal ball for this type of thing. However, there are a handful of signs that indicate if a recession is likely to occur or not.
To start, if the unemployment rate is high, it is a sign of a potential recession. If people are struggling with finding a job, the money they have is being used on necessities. This means that there is not “extra” money being spent eating out or buying clothes, etc. So overall, unemployment means less money going into the economy.
Another potential sign of a recession is when inflation starts to happen. This means that money, overall, holds less value. Right now, inflation is at a forty year high. It is predicted that this will hold until at least the fall. It does not mean after the fall, things will go back to “normal,” though. It does mean that consumers are less likely to spend money since the cost of things are so much higher than normal. This is especially true for the unemployed. Again, this means less money going into the economy.
The Federal Reserve has a huge influence on whether a recession will or will not occur. The central bank is doing its best to fight against inflation. Let’s hope that they are able to influence things positively. There are some big meetings that are due to occur. The outcome of these meetings will influence a possible recession in general, but also mortgage rates as well.
Compared to a year ago, home building has taken a huge backseat. There are a lot of reasons for this. To start, the cost of materials has skyrocketed, along with issues in the supply chain. There has also been a labor shortage as well. With all of these things combined, builders are simply just not building as many houses. In the past, this usually indicates economic troubles.
Next week, we will talk about how a potential recession would affect the housing market.