Try to keep calm, be positive, and don’t listen to pundits’ predictions about the economy.
So many pundits want to act like we are either already in a recession or will be in one shortly. I don’t agree, and I don’t think we have to talk ourselves into having a bad economy.
I’m not an economist. But I try to keep well-informed and I have lived through many recessions over the last 64 years.
Let’s talk interest rates. Home mortgage rates are back below 5 percent. Sure, they were below 3 percent for quite a while, which is insanely cheap, but borrowing money is still very affordable and it will still be if it goes up to 6 or even 7 percent. My first house was built in a subdivision where there was only our house and one other occupied. The initial interest rate was 18.88 percent but was bought down by us paying eight points on the front end of the mortgage to get it down to 10.88 percent, and yet we still had negative amortization. That means each month we owed more than we started out owing, if you can believe it. The first car I financed, a 5-year-old used car, I paid 21 percent interest on the loan. THOSE are high rates.
There is still a huge housing shortage, with experts claiming we need at least 4 million more housing units to meet current demand. Yes, prices have fallen in some places. Even here in Northwest Arkansas, where I follow the market very closely, we have had some price reductions. But let’s face it, if a house that cost $350K three years ago went for $650K six months ago after a bidding war, and now the “poor owners” have to reduce the price to $620K to sell it, it’s hard to feel too bad for those sellers.
The national unemployment rate is 3.5 percent. That is ridiculously low. In April of 2020 it was 14.7 percent, and it was 10 percent in 2010.
Inflation, which has been pretty wild, has gone from a 9 percent annual rate to almost zero. Prices appear to be stabilizing. Gas is about $1 a gallon cheaper than it was as little as 90 days ago.
Demand still exceeds supply in so many industries. Cars are still in short supply and making auto dealers record profits. There are materials shortages everywhere. It just took us 22 weeks to get the windows for a new garage we are building, and some window manufacturers are a year or more behind.
In the AEC industry, we are still facing unprecedented demand in just about every market sector firms in this business serve. There is also a corresponding labor shortage. I don’t think I am seeing the world through rose-colored glasses. I just don’t see a recession as imminent.
So let’s try to keep calm and be positive. I think it is a well-accepted fact that as a leader, positivity is going to get you a lot farther than negativity will!
Mark Zweig is Zweig Group’s chairman and founder. Contact him at mzweig@zweiggroup.com.