By Ryan Casey Stephens, FPQP®
Special Contributor
If you search the word ‘reality’ in a dictionary you’ll find it defined, as “the state of things as they actually exist.” Intuitively speaking, reality isn’t that simple, is it? It’s sometimes very difficult to distinguish fact from fiction.
Here’s a series of questions that demonstrate what I mean: Are we in a recession? Are we facing a housing bubble? Is it good to see gas prices lower than one month ago, or terrible to see them much higher than one year ago? If I line 100 people up, how many will answer them the same way?
Let’s take a deeper look into each in this week’s Three Things to Know.
Record Job Creations And Recession Layoffs
PricewaterhouseCoopers recently surveyed 700 corporate executives and board members and found that roughly half had already begun hiring freezes and layoffs. This is fascinating, because we’re simultaneously seeing record job creations and employers struggling to hire and retain top talent. We know that one key hallmark of recession is joblessness, but with less than 4 percent unemployment, it’s beginning to become a bit difficult to understand ‘the state of things as they actually exist.’
Joblessness is a lagging indicator, of course, so is this the beginning of the layoff spike, or are these corporations simply trying to be prudent?
When Housing is Both Up And Down
A recent report by Zillow made a big claim — namely that home values fell for the first time since 2012. That, combined with the news about imminent layoffs ought to remind you of 2008, but is it true?
If you dig a little deeper you’ll find they’re reporting the median price, which can be affected by all sorts of homes. Second, they decided to factor in price reductions, which is negatively skewing their data.
One dreadful hallmark of a bad housing market is high Days on Market, one where even well-priced homes sit for ages. Zillow may have benefited from pointing out that if a house is listed appropriately, it still flies off the shelf. Assuming they ascribe to their own data, they also don’t seem believe it will last long, and are apparently projecting a 2.4 percent appreciation rate ahead.
The Kind of Saving Where You Spend More
A CNN writer is being widely flayed this week for a piece where he attempted to pass off our presently high gas prices as a positive. Before you assume he did this in the typical fashion (prices leading to more electric vehicles or less driving), give it a read.
In his version of reality, the fact that a gallon of gas is down to $3.92 from its high of $5.02 on June 14 means the average consumer is receiving a $100-a-month tax cut (his own words). He misses, of course, that gasoline is up from $2.00 just one year ago, or nearly double.
He lands the article by suggesting that falling prices are a positive, not of themselves, but because it allows consumers to spend that money on other goods. Since we understand that consumer spending can drive up inflation, his reality seems to be causing a rub as we face down the highest inflation rate many of us have seen in our lifetimes.
Ryan Casey Stephens FPQP® is a mortgage banker with Watermark Capital. You can reach him at [email protected].
