There are a lot of words printed in popular articles in Bloomberg, Washington Post, Morningstar, CNN, NBC News, Reuters, Wall Street Journal, and others that makes people nervous about "The Bubble, Recession, and Inflation." Is the Bubble on the verge of a big burst? Are we in a recession? What does inflation do to the housing market?
If there was a true and accurate crystal ball, would we know what to do and how to prepare or prevent the evitable? How well do predictions work and can anyone really do anything to stop a crisis? First, breathe! Be a critical thinker. Stop listening to what everyone else is saying. Panic does not solve anything. Education is valuable but not all educators agree. The truth is, there is no "Wizard of Oz." The bottom line is the more you know, the easier you can make critical decisions.
RECESSION does not mean the sky is falling and it does not equal a housing crisis. It is important for home buyers and homeowners to know that "A recession is a significant decline in economic activity spread across the economy, normally visible in production, employment, and other indicators. A recession begins when the economy reaches a peak of economic activity and ends when the economy reaches its trough. Between the trough and peak, the economy is an expansion."
Source: The National Bureau of Economic Research (NBER)
INFLATION is nothing new. It is a decline in the value of money. Our government plays a crucial role in the economy by the decisions made at the top. When inflation rises, you notice it at the grocery stores, building supplies, quantity and quality of merchandise including anything for sale. When the rate of inflation rises and keeps rising inflation is at work for goods and services. If you notice every day that your money buys less that is inflation.
PAY ATTENTION - stay alert. Read and get familiar with credible reports and resources but do not believe everything you hear. Now might be the perfect time to take a college course on economics, finances, or subjects pertaining to buying land, property, and investments. Timing is everything. They say knowledge is power - it really all depends on accuracy, being responsible, and making wise decisions.
CONSUMER PRICE INDEX is just a standard measure of inflation. From January 2021 to January 2022, prices increased 7.5%. Is inflation a bad thing? Not necessarily. A little is good and healthy for the economy. 7.5% or more is something to worry about because that is HIGH!
LIMITS teaches us to be better consumers. A dollar can only stretch so far. Creative thinking goes a long way to get your needs met without crashing your budget.
WAGES matter. Making household adjustments is not easy but is necessary. Recycling should be on everyone's mind.
Life is better when people depend more on themselves than on store bought items that one can make at home. Stimulating the brain is just as important as stimulating the economy. I look around and think to myself, do I want to contribute stimulating the economy in foreign countries or in stimulating my brain? Living in a world that is more affordable for others or for me is something I consider carefully.
REAL ESTATE is highly desirable and a proven hedge against inflation. The secret to wealth is in maintenance and keeping up with the payments for mortgage, insurance, property owner dues to an Association, and making timely payments while keeping your credit scores high. The question every renter should ask is, do I want to make my property owner wealthy or me?
HISTORY repeats itself but not always the same. For example, between 1980 and 2020 during the last great recessions documented, the years 1991 and 2008 were the worst. What happened and will continue to happen between 2021 and future years is unknown. Looking at historical data is interesting, but many people go on from day to day unaffected by a recession or what is deemed a "Housing Crisis." Also, important to know is that many people who lost their homes in and around 2008 bounced back. Many have pulled themselves up by the bootstraps and are now living in new homes. Check out the QR code. Source: CoreLogic, The Balance and see that in 1980, there was a 6.1% appreciation, 1981 3.5% appreciation, 2001 6.6% appreciation, and 2020 6.0% appreciation. During 1991 there was a negative -1.9% depreciation and in 2008 a negative -19.7% depreciation.
WHAT MATTERS MOST NOW is who are you going to believe? Headline news or believing in yourself by getting on with living your best life ---Patricia Feager
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