There are three things happening in the economy that should be considered when planning your business’ future…
Home Prices Rise
The Federal Housing Authority is saying that the price of homes increased 4.3% between the third quarter or 2024 and the year earlier period. This was an increase of 0.7% over the prior quarter’s numbers.
Homes Sales Fall To Lowest Level In 3 Decades
Existing homes sales fell to their lowest level since 1995. The average rate of interest on a 30 year mortgage has been hovering between 6% and 8% since 2022. As long as interest rates remain high, economist aren’t expecting this trend to change.
Americans Are Carrying Higher Credit Card Balances
Our largest banks including JP Morgan Chase and Capital One are reporting that credit card balances have skyrocketed and that a larger percentage of cardholders are again making only the minimum monthly payment on their cards to keep them open.
This phenomenon had ended during the pandemic when the government pushed out massive amounts of cash to keep the economy rolling. Most consumers used that cash to pay off their card balances and grow a nest egg for the future.
But the cumulative effects of inflation and higher interest rates seem to have taken their toll. Now that many of those nest eggs have dried up, people seem to be financing their lifestyles with high interest credit cards.
But that has its limits, so what’s next?
Let me leave you with this…
You might be wondering why I’m writing about these three things in one column. Please allow me to help you connect the dots.
A few years before the housing crash of 2007, I was sitting on the Seagrape Terrace at the Half Moon Club in Jamaica having breakfast with my family. The hotel had a scaled down version of the London Times that I was reading.
There was an article in the Financial Section of the Times about the American Housing Market. It detailed how Americans were living beyond their means, running up their credit card balances $15K or $20K per year, and then refinancing their homes every couple of years to pay off the debt to begin again.
This went on for several cycles until the housing market exploded and the real estate recession plunged our economy into a four year nightmare. Are any of you seeing the parallels?
It’s obvious that we could again be poised for a similar trajectory. Whether you’re optimistic or pessimistic about our economy is your business, but the simple economic factors that all seem to be all hitting at the same time cannot be ignored.
And the implications are staggering.
How this could affect your business will have everything to do with the type of products or services that you sell. But take some time and think it through.
Be prepared and ready for any eventuality. I hope this doesn’t come to pass. We all need a strong economy where inflation and monthly family budgets are under control.
But history teaches us that our elected officials can only do so much and that the proper leadership of our businesses require careful forethought and planning.
We’re all going to get through this. Let’s get through it together.
Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. Whether you need Payroll Services, or Accounting and Tax Work, you have but to ask. I’m here and I remain,
Sincerely yours,
Chris Amundson
President
Accounting Solutions Ltd.
773-267-7500
888-310-0300
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