If you are in the Mortgage or Real Estate business currently you are experiencing slow times and you are working harder than ever. I am here to tell you that these slow times are all part of the business cycle that has been disrupted over the last 20 years or so. With all the disruptions to the economy over the last 20 years starting with the rise and fall of the sub-prime era of the early 2000s and the recession that followed the recovery and then the pandemic the U.S. economy has been put the challenge. The Real Estate Industry followed right along with the economic rollercoaster. Having seen the type of market we are in for the first 20 years of my career I almost feel comforted by the normal slowdown of the Real Estate industry after the boom we just came through. In the late 1900s, the cycle for booms and busts was on an almost predictable 10-year cycle, and normal slowdowns during the months of November, December, January, and February (the winter months) were predictable. The change began when we should have had a slowdown in the early 2000s instead the Government came out pushing the Community Reinvestment Act of 1977 in an effort to get low-income folks into housing. Thus, beginning the “Sub-Prime” era of lending with little or no oversight over lending and financial institutions. By 2008 the economy was pushed past the adjustment period it should have had and coupled with financial institutions failing made for a perfect storm.
We know what followed, the crash of 2008, and in a lot of ways it is still affecting the ways we do business in the aftermath of no oversight to the new age of total oversight. Fast forward to today, we are coming off one of the hottest real estate markets since the “Sub-Prime “ era where money was flowing, and this time money was flowing with low-interest rates. So, it is perfectly normal for the economy to take a deep breath. During these adjustment times or slowdowns, you will typically see a consolidation of Financial institutions and Real Estate firms it is a time for the well-positioned companies to gobble up the companies that couldn’t see the change coming. We are seeing both Realtors and Loan Originators depart the business for a steady paycheck. This is normal, and so will be a sagging stock market as the Real Estate Industry is one of the largest manufacturing sectors of our economy and drives so many other industries like construction, home improvement stores, home furnishings stores, and so on. Technology is also affected when the housing industry slows as fewer people are investing in new technology when the old tech is working fine for time being.
This economy is normal but if the politicians see it as problematic for their future, they will do stupid things to try and stimulate the economy. The biggest mistake the government has done over the last few years, pandemic and post-pandemic were to issue “Stimulus Checks”. Putting more money into the economy does 2 detrimental things to the economy down the road, it devalues the dollar and creates inflation. This is where we are at today. As a follower of the economy with a degree in economics, it is not too hard to see the effects of Government intervention in the economy. Unfortunately, there is another way the government can stimulate a sagging economy and I don’t want even to bring this up, however, in light of recent events it must be said. War is a way to stimulate an economy and to keep power.
Ukraine is going to be the war our government will get us into if “We the People” don’t stand up to it. The reasons for this conflict are crystal clear from my standpoint. One: The formation of BRICS (Brazil, Russia, India, and China) is the formation of those countries denouncing the US Dollar and creating a new currency built on a precious metals standard. Since its formation, Saudi Arabia, and South Africa have joined. This could very well mean the end of the US dollar’s dominance as a world reserve currency. Second, is the United Nations, the World Economic Forum, and the World Health Organization and its push for global governance where the BRICS nations are not on board with this agenda, and quite frankly we should not be involved either. Third: Oil and the flow of this resource or more so the control of the flow of oil is what is going to turn out to be a part of this global conflict. I am not a doomsday kind of person, so I am praying that I am terribly wrong and the world turns to peace and unity rather than conflict.
Not to ignore the elephant in the room, but I prefer to stay positive and to look at this time in our economy as a normal economy taking a breath after a very busy and robust time. Going back to the crash of 1929 and the Depression that followed the nation's economy has seen this speed up and slow down pretty consistently. At the beginning of 1941, we were still in the depression but the recovery was well underway, but the end of 1941 December 7th to be exact is when we were officially out of the depression, and in 1945 when the war ended the economy was in full swing and returning Veterans had jobs to come home to and homes where being built and an extreme pace. Things slowed a bit by the end of the 1940s and we entered into the Korean war and things pick up again. The 1950s were a time of peace and prosperity. In 1960-1961 there was a recession caused by the Federal Reserve raising interest rates, then recovery. Then in the early 1970s was another recession caused by “the oil crisis” which also caused the stock market to crash as well. Then we had recovery and in the early 1980s we had the “crisis with Iran” again over oil and there was a recession. Recovery then followed and in the early 1990s due to the stock market crash of 1989, we again were in a recession. The early 2000s had a slowdown but not as much as it should have spurred on by the ease of obtaining money and the creation of the "Subprime Mortgage" era. This led to 2008 which as we know was the worst recession since the 1930s. By 2011 we, as a nation were in recovery mode again. Then in early 2020, COVID threw the country into an economic lockdown to a degree our nation has never seen. To get us out of this recession the Federal Reserve lowered Interest rates to the lowest levels in history and so began the last housing boom. Now we are resting and if we let our economy follow the normal cycle, we should be out of this by the end of the year 2023 or the beginning of 2024.
Invest and buy real estate now while the economy is resting for if you think that interest rates will return to the historic lows of 2000-2021 you would be drastically wrong. We are close to the equilibrium point with higher mortgage interest rates the economy will do far worse any lower we will have higher inflation. It is all guesswork on Federal Reserve’s policy with interest rates and they hope they get it right with respect to inflation. As a Real Estate and Mortgage Professional all I can tell others out there is to stay the course or if you can’t get out and find a steady paycheck. Those that can weather the storm will end up at the top of the food chain when this comes back around and it will, it always has. You see people always need housing and money so those of us that stick it out will be there first when it comes back. So don’t despair get everything in place for the next housing boom and when it comes you will be ready. Those consumers looking for housing now will find what they want a price that they can afford with a payment they can afford.