I must be honest when rates went from 2’s to 3’s, 4’s, and then in the 5’s, I thought, there is no way we are going to see rates above 6%. I thought it would crush the economy, stock market, and real estate, and people would just stop spending money, and rates/inflation would come down fast. Wow, was I wrong along with most people? What I did not consider, realize, and could not comprehend was how much money was in the system, and how strong employment and increase in wages can help combat high rates/inflation.
Here we are 1 year later since rates really took off and inflation was peaking around 9%. I am shocked how well Americans so far have handled this, I am still not sure how this ends and not sure how everyone is affording to live these days. The increased cost on essential items to me is insane, seems like we are being taken advantage of, and at some point, things must come down, right?
Inflation is starting to come down, much slower than we planned, this is really a result of way too much money in the system and rates being too low for way too long. Credit card balances are at all-time highs again and the data shows people love spending money on experiences these days. This summer is supposed to be a busy travel season is a long time, hotels and flights are booked up
The cost for big and small businesses is way up, wages, goods, supplies, labor, and cost of capital. Businesses have been used to borrowing money at 5 to 8% money and today that range is more than 15% to 20%. All this cost is passed to the consumer, and they are still paying it. Yes, some retail is down because most of us purchased what we needed already.
At some point, this cost will be just too much, right? I mean how long can we keep up these crazy prices and rates? Time will tell. Recession could fix these high prices, right?
Home buyers are learning to deal with higher rates, but they are not getting much love for home prices coming down due to a lack of inventory. Buyers and sellers both feel stuck, one is stuck at high prices/rates, and sellers are stuck with a low rate/payment and what they purchased the property for. Buyers today are paying the price with hopes of future rate relief and some buyers are sitting on the sidelines waiting for rates to come down. If rates come down and housing inventories don’t hockey stick up there will be even more pain for buyers.
Americans seem to be in a much better position and somehow, we are all dealing with today’s high inflation and rates. I still believe we are in need of a correction because the cost of life seems unsustainable for most and people can only hold on for so long.
How is this affecting you and your family these days?
