Markets are by definition: a means by which the exchange of goods and services takes place as a result of buyers and sellers being in contact with one another, either directly or through mediating agents or institutions.
How exactly do you track a market? I have that answer… It is a fool’s errand. Gauging a market is kind of like tracking a tornado, you can make educated guesses of its path, but it could change directions at any moment.
I have been wanting to do this post for a while because in the current market I have heard so many varying predictions: an imminent crash, another 20% spike, corrections, stabilization, etc.
I understand that we can make educated guesses and sometimes we get it right, but often just like a tornado, the true path of the market is not revealed until it is in passing.
The bigger picture that I would like to touch on is the macro/microeconomics and geopolitics that have recently been at play and affecting the real estate industry. If we look at the fiscal policy of the U.S., we have been running a budget deficit many times more than we have had surplus. Knowing this is key because it helps to explain why interest rates dropped so low and why we could potentially see them stay high for a while (rates are dropped to help stimulate economic activity).
Taking a deeper dive, our economy is on the curtail of one of the biggest shutdowns in current history and furthermore a war has kicked off in the European continent. Add in the stressed supply chain and the fact that Ukraine is a large exporter of wheat…also a 40% surge in petroleum prices and hikes at the grocery store and fast-food chains (also secondary markets have seen price surges)…
This all sounds horrible, doesn’t it? Well, it would be if we had no way out. In reality, a few things that we can expect to happen is an increase in wages or a market correction of prices, and a full economic collapse if the above do not happen.
This all ties into my final point which is the fact that there is a surplus of money in circulation, and it does very little to help current lack of supplies and labor shortages. I will say that an increase in rates really as a necessary evil that would help take money back out of the economy to stave off inflation.
Extremely high prices for goods = a slowing in demand and in theory should start to correct the markets. but much like a tornado, only time will tell if chaos will break out or if it will be a near miss.
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