Buckle Up: Three Things to Watch on The Long Road Back From a Downturn

By Ryan Casey Stephens,  FPQP®
Special Contributor

Over the weekend I had several conversations centered around the question of just how long we’re in for it.

At this point, no one’s doubting the economy is in trouble. But will this be a quick right hook, like the COVID-19 recession in 2020, or will this be with us for a while?

Layoffs And Unemployment 

You might recall a few weeks ago, I reported that PwC surveyed 700 corporate executives and board members, and more than half had frozen hiring and begun layoffs.

Now a new economic paper is predicting unemployment might nearly double in the near future. Their prediction describes increases in the unemployment rate well into 2024. It’s a painful, but often necessary measure, as inflation will cause workers far greater pain over time.

Date The Rate, But Marry The Sales Price

One of the more shocking headlines to come out of last week was it being the least affordable week to purchase a home in the last 35 years. The average mortgage rate edged up to a blazing 5.89 percent, however that’s not an accurate picture, with some days last week peaking over 6.25 percent.

Now consider that the median price of a home is more than $400,000 – up more than 40 percent in two years across many markets. While it’s true that lenders are already dreaming of refinancing these buyers in a year or two, lower rates will do little to abet the still-astronomical sales prices we’re seeing in Dallas-Fort Worth. Until both of those factors reduce, and there’s no sure bet they will, pressure on the wallets of homeowners appears to be here for the long term. 

No Brakes on This Fed’s Train

The key factor in all of this speculation rests on the Fed’s plan to tackle runaway inflation. Predictions are that this week’s CPI inflation report (the one you feel — it includes fuel and food), should provide us a welcomed cooler reading.

Don’t count on the Fed changing course, report many experts. After being behind the eight ball for too long, it’s likely the Fed will continue aggressive rate hikes until solid progress is made towards their goal of sub-3 percent inflation.

The current overwhelming opinion is that the Fed will hike .75 percent at their meeting this month. 

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Ryan Casey Stephens FPQP® is a mortgage banker with Watermark Capital. You can reach him at [email protected].