June 04, 2019
Examining the Tea Leaves: Is Another Recession on the Way?
According to a recent report by Realtor.com, we may see a downturn in the economy in the near future—but don’t go looking for a 2008-level crash. “Recession Watch: Will Another Downturn Rock the Housing Market?”, which the website released in late February, assessed the situation as compared to our last national recession—the recession against which the next recession will naturally be compared with a sense of trepidation. One of the sources quoted in the piece was a Gallup Poll taken not long before the report’s publication that noted around 40 percent of Americans believe the economy is slowing down, while a full 17 percent actually believe we have already entered the next recession, even as unemployment sat at 3.8 percent through March—which, it must be noted, is a historic low.
The factors—particularly the financials—that fomented the 2008 recession are not in place in today’s economy. Besides the record-low unemployment, underwriting for housing is tighter, and loans are much less risky; so the likelihood of another foreclosure crisis striking is very unlikely.
But a recession at some point is a virtual inevitability. Record low unemployment simply cannot last. When national unemployment levels are this low, employers must compete fiercely for labor and skilled employees using the lure of higher wages. The cost of such wages generally get passed through to the consumer through higher costs on products—which leads to inflation. Once inflation outpaces rising wages, the economy takes a turn for the worse. The Federal Reserve may combat inflation by raising interest rates, but this increases the costs for businesses to borrow money and to bring on fresh labor, which slows the economy.
So we may indeed be set for a new recession. But expect this to be a mild recession, not a near-catastrophe like 2008’s .
Recession or no, at Topouzis & Associates, P.C., we are experts at ferreting out and disposing with problems that may occur with property title in advance of closing. We take pride in the great amount and quality of experience we bring to the closing table in Rhode Island, Massachusetts, and Florida. Contact us if you want a partner in your property closing—one who makes everyone involved feel like family.