What is going on? I have found myself saying this often. As I read news headlines. I hear experts talk about inflation, a possible recession, the fed hiking the interest rate, again, nurses and railroad workers striking, grocery and gas prices reaching an all time high. It all seems unbalanced based on compensation of the American Worker. If I am honest, it is really depressing to focus too long on.
All though I do not have any answers to how to resolve the bad behavior of our economy. I can highlight what is going on in some more specific areas.
Real Estate Market (Minnesota & Colorado): The Market has began to shift based on how it was performing 3-6-9 months ago. We are no longer seeing homes selling in 24 hours with 20 offers. The cost to borrow is rising as rates have hit a high that my peers and I have never seen. This has caused sticker shock for most of the buyers who continued to lose during Q1 and Q2. Stas Manchik with Monoceros Real Estate believes that there will be a decrease of transactions by 50% going into 2023. This will require the most serious of buyers to be shopping as the cost to borrow is sky rocketing and not everyone can afford the monthly payments. Sarah Bates of Compass Real Estate in Colorado says that the greater metro market of Denver has seen a slight increase of inventory compared to the first part of the year. She believes this is a great time for anyone whom can afford a slightly higher payment to start shopping again. Homes are slowly becoming more available and prices are competitive. If you are waiting for rates to drop to get back in the market you will likely be waiting for an extended amount of time.
Federal Interest Rate: This week the Fed is set to announce what their plan is with the federal interest rate. The Feds are hoping that the increase of rate will continue to curb the rapid climb in inflation. Many economists are worried this could send our economy into a recession because the increases are happening so fast and without concrete data to know if they are helping or not. In the interim, the rate hikes are directly impacting both the Mortgage Market and the Stock Market.
Both are showing, to the majority, a negative impact to the general consumer as they are unable to purchase the homes they desired 9-12 months ago with their new projected payments. The dollar is not stretching like they once believe it could. In addition, the general consumer is seeing their investments losing ground more days than not all while their daily expenses are reaching an all-time high. All of these factors are making it very difficult to cover ends meet.
Like I mentioned earlier, I do not have a solution to tell you to do that would allow you to snap your fingers and see this all disappear over night. What I can say is, I don’t believe we have hit the bottom of this cycle. I think rates are going to continue to climb, the dollar is going to continue to be more expensive as a resource, and money management is going to require an even tighter awareness. I believe life got sloppy financially during the pandemic as payments were deferred, money was being passed out to anyone willing to take it and consumerism was trapped at home while we were all bored. I believe the pendulum is swinging and the intensity of the squeeze is just beginning.
My recommendation: is to get serious about knowing exactly where your money is going. This starts with login onto your bank accounts and tracking your spending habits. This is recommended to bring awareness to you. Take an honest look at what expenses are needs and what are wants. Eliminate the wants as fast as you are able. Then start to save or pay down your debts smallest to largest. Even if it is a little bit at a time. Due to the stock market behaving as it is, it is actually a good time to buy into the market. In theory, when the market is down you want to buy in. When it is high that is when it is recommended to sell out of the market. If you have extra funds available after all debts are paid off per month. I would recommend saving into a mutual fund. This will be a small step to start your investing journey. Although, the economic forecast seems a bit depressing at first look there are opportunities to still win within it. It will just take more intentionality than it has over the last few years.