Are some economic statistics suggesting that the United States may be on the edge of a fiscal cliff?
And if that’s the case, what impact would stepping-off of the said cliff have the real estate market?
Spoiler alert, as this is actually somewhat of a rhetorical question. By asking anyone old enough to notice in 2007-2010, you will learn exactly the impact a recession can have on buyers, sellers, financing availability and prices!
That said and depending on who you may be speaking with, the U.S. economy is either going gangbusters or is merely holding on for dear life in the face of serious headwinds!
Similarly, depending on your economic audience the U.S. federal deficit of $1 trillion or more with GDP rising at a fairly decent clip, unemployment at an extremely low level and tax cuts reducing federal revenue, poses a great risk to life as we know it!
On-the-other-hand, ask some economists or financial market prognosticators and they will tell you that deficits really don’t matter.
Of course the reality is that deficits don’t typically matter for governments with unlimited taxing power, that is until its borrowing costs rise to unsustainable levels because buyers of its debt demand higher returns to compensate for the risks posed by said governments monstrous deficits.
For the average citizen, however, who needs to make ends meet and can’t borrow in unlimited amounts to do it, deficit spending can have catastrophic consequences!
One might actually shudder to think what the U.S. federal deficit would be if (when) the economy significantly slows or dips into recession.
Spring Real Estate Selling Season
A title insurance company, much like real estate agents, mortgage banks, real estate attorney’s, real estate inspectors, surveyors, etc. depends on a vibrant commercial and residential market.
On a positive note, the Federal Reserve is now likely to leave interest rates alone, mortgage rates have come down, personal income is rising and we are definitely in a buyers market in the New York region.
Of course, real estate buyers need to be able to get a mortgage and, in addition, have some sense of urgency that if they don’t ‘pull the trigger’ now that they will quickly lose the opportunity.
The effects of SALT are yet to be fully known in terms of the buy vs. rent decision and in New York taxes will likely only move in one direction – up!
All of that said, following are some statistics that may presage an upcoming economic problem or, at the very least, potentially serve as the proverbial ‘canary in the coal mine’!
Just some food for thought…
Economic Statistics: Irrelevant or, Extremely Relevant?
#1 Consumer debt – For the first time, United States consumer debt is beyond the $4 trillion mark. (USA Today)
#2 Total Debt – Including mortgage debt and other types of debt, consumers in the United States are in debt to the tune of $13.5 trillion dollars. (Bloomberg)
#3 Outstanding Consumer Credit Card Balances – How does 870 billion dollars sound? (TEC blog)
#4 Credit Card Balances Held Beyond 1-Year – 56 percent of Americans with balances have them for over 1-year. (USAToday)
#5 Credit Cards Accounts Seriously Delinquent – More than 37 million. (Business Insider)
#6 Delinquent Auto Loans – With more than $1.3 trillion outstanding, an astounding 7 million are delinquent. (CBS)
#8 Potential 1st-Time Homebuyers Like to Borrow – At this stage of their lives, millennials as a generation are over $1 trillion in debt. (TEC blog)
#9 Missing…Adequate American Savings – About 78% of Americans live ‘paycheck to paycheck’. To reach that statistic consider credit card debt, student loan debt, auto debt and other consumer debt that are often at crippling interest rates. (Forbes) (source article)