“Keep Calm and Carry On (with Your Business): Our Guide to Navigating the Tricky Waters of the Impending Slowdown.”
So, the big debt-ceiling debate/negotiation is over and it ended with a bit of an anticlimax. But, let’s focus on the positive -the United States (and the global economy) won! I mean, we’re all winners here, right? Of course, we still have to wonder about the US Treasury’s ability to repay future debt when the debt ceiling issue comes up again.
But, let’s save that for another day. For now, we can all breathe a little easier knowing that we won’t be throwing global financial markets into chaos or risking an economic recession anytime soon. Can we give a little shoutout to those negotiators from both parties?
So the feds have agreed to cut spending by a *teeny tiny* bit and honestly, it won’t make much of a difference to our wallets. Don’t get too excited about a perfect economy just yet though, because according to Deloitte’s forecast things are gonna slow down in what’s left of 2023.
But hey! Let’s focus on the positives, shall we? The job market is looking pretty good! Speaking of which, have you ever heard of the Sahm rule? It’s like a magic 8 ball for the economy, but we’re not seeing any signs of a recession just yet.
So, the economy is looking pretty good… but we can’t ignore the risks that come with the Fed’s tightening cycle. One problem that’s already popped up is marking down low interest rate securities to market, but it seems like the Fed has been doing a pretty good job managing that mess. There’s also some hints that lending standards might be tightening up, but thankfully the small banks are still truckin’ along. While things might be slowing down a little, it’s no time to panic- we’re not quite at recession level just yet. (And if we were, remember, our system knows how to SURVIVE IT)
Another fact is that the housing sector really held its own. Buyers and sellers found ways to make things work despite all the crazy restrictions. Unfortunately, when the Fed raised interest rates and inflation popped up, long-term interest rates took a hike too. The result? Housing starts dropped from 1.7 million in 2022 to 1.4 million in 2023, and house prices stabilized or even went down in some areas. (Inflation? We are also PREPARED FOR IT)
And while lower prices might sound great, the jump in mortgage rates means that affordability is still a problem in general, but not to us since this is where our Philanthroinvestors (PIs) really excel at: Selling their properties through loans to families that can’t get a traditional mortgage!
Some experts think that construction will keep going down for a little while longer, but then it will start to bounce back. That being said, we’re only expecting a modest increase, with housing starts reaching about 1.5 million units per year by 2025. Plus, the current demographics don’t suggest that housing will be a big driver of economic growth anytime soon. Unless we see faster population growth, the heightened demand for housing we saw during the pandemic is probably just a temporary thing.
And that’s when E&H’s program connects a second hit and occupies another base, since we do not rely on housing starts or traditional real estate methods: As a PI, you purchase properties at their lowest prices where many of which are between 70 to 100 years old and in excellent condition, just needing some tender loving care to reach their full potential and value.
There’s even more! We have another hit and thus, another base: By the end of 2024, CPI inflation is anticipated to fall below 3%, based on Daniel Bachman’s predictions on the Deloitte Insights website. Our team is convinced that the current generation of consumers and companies won’t have to go through the same terrible experiences as previous generations had during the period of 1970-1985, such as suffering lengthy inflation and painful periods of disinflation.
So, what’s the secret to hitting a home run with all bases loaded?
It’s the labor market. Nowadays, companies trying to get ahead need to go the extra mile to recruit and keep their employees happy, especially since there will be serious competition in the post-COVID era.
Most analysts predict that job growth will soon slow down to more sustainable levels. But don’t get worried if this happens! It’s not necessarily a sign of bad times ahead. The reality is that there just aren’t enough people to fill all those job openings.
So, as long as unemployment stays low, slowing down job growth doesn’t necessarily mean worse economic times are coming. In our forecasts, we expect that the unemployment rate will rise slightly when growth slows down in 2023, but the job market should still remain tight. However, over time, things may change.
Labor force growth will slow down to only 0.2% per year – that’s just a simple fact of demographics – which means that employers will need to keep adjusting to make things work. And this means that it’s likely that families that live in our houses won’t face unemployment, which also means that it reduces the likelihood of being late with their payments to our PIs.
Basically, the following should be understood from our article:
- We are eager to continue assisting families with the support of our PhilanthroInvestors because the recent increase in mortgage rates really opens up the market for us rather than the other way around.
- We don’t feel the effects of the decline in house starts since we buy older homes with lots of potential. This means we can give people quality houses to raise their family in.
- This is excellent news for the families living in our houses since it predicts that inflation will fall below 3% by the end of 2024. It implies that they won’t have as many problems with their payments and money.
- Low unemployment rates and slow employment growth are great signs for our families. It increases the odds of having fewer delinquent families, making homeownership an even more achievable goal for those in our community.
See you next week!