Will There Be a Recession in 2024? Here Are 4 Infographics To Help Explain

While the FED has been aiming for a soft landing post pandemic, the mainstream media has been hyping a hard landing while others are saying no recession. Online self professed economists on the internet are sighting various facts to prove all the cases above so I thought I'd throw in my two cents as to what is currently happening and what we should be on the lookout for if / when the next recession occurs.

• Infographic #1: What Causes a Recession?

• Infographic #2: What's Prevented The (2023) Recession?

• Infographic #3: What Is The Impact of a Recession To Real Estate?

• Infographic #4: When Will Be The Next Recession?

Infographic #1: What Causes a Recession?

Our (global) economy is interlinked, built upon systems / networks / relationships at all levels. To oversimply this, imagine we have Consumers, Businesses, and Workers. When people spend less money, businesses then make less profits, and as a result, businesses then begin to lay off workers. This cycle can accelerate rapidly if and when consumer confidence goes down dramatically.

Infographic #2: What's Prevented The (2023) Recession?

During the pandemic, most Americans were unable to spend their money due to stimulus checks, inability to travel, and inability to go to entertainment venues (e.g. restaurants, sports games, music festivals, etc). As such their savings increased dramatically on the whole. Now that people are feeling inflation and the FED's reactive tightening, they are spending less.

Businesses are now making less profit but their expenses have been trimmed considerably post pandemic. Many large corporations and other businesses refinanced their debt when rates were uber low or showing signs of going up significantly. Many are carrying much less debt so they are not being impacted by the higher rates as much as many anticipated.

Despite businesses making less, workers have not been laid off in massive droves (yet). Unemployment is currently below 5% and the wave of retiring baby boomers has left many vacant positions. With so many unfulfilled jobs (above 2019 levels), the results have been hourly wages growing faster than inflation. Additionally here in the Silicon Valley area, tech during the pandemic went on a hiring spree as store fronts focused on going online. There have been layoffs at various big tech companies over the last year, but this has scaled back dramatically.

Infographic #3: What Is The Impact of a Recession To Real Estate?

At the beginning of 2023, many were predicting house prices falling. Rather than falling, sales prices in the San Francisco Bay Area have remained stable throughout 2023 and many are anticipating home values to go up significantly in 2024 if the Recession truly hits hard and the FED has to tighten it's grip on rates.

The Great Recession of 2008, aka the housing bubble, was the result of banks who stopped lending to each other in fear of being stuck with subprime mortgages as collateral. Post 2008, the banking industry was required to implement more stringent standards due to federal regulations (i.e. the Dodd Frank Act) so the quality of mortgage and borrower improved considerably. And over the last few years, 90% of U.S. home buyers who bought or refinanced now have mortgages below 6%.

Because of these great rates, sellers are unwilling to trade their current low mortgage rate for higher rates, especially if upsizing to the next family home. This condition is commonly referred to as "Golden Handcuffs." This is resulting in an abnormally low supply of housing inventory for buyers to chose from.

On the other side of the supply curve is demand and it is growing. Approximately 2 MILLION households are being formed in the U.S. every month and because the inventory has been so low, buyers are continuing to compete with new(er) buyers every month.

So because of the low historic rates of our sellers and their inability to find homes to buy, they are staying put. This is resulting in the wave of demand to continue to rise, therefore keeping sales prices buoyant, despite the FED's raising interest rates.

Infographic #4: When Will Be The Next Recession?

We are seeing economic headwinds building and a recession could be on the horizon. What are key performance indicators (KPIs) that we are monitoring closely?

• Personal savings rates

• Credit card and credit utilization

• Impacts to businesses profits (i.e. GDP)

• Layoffs, specifically in the large tech of Silicon Valley