What Is Recession and How You Can Prepare

As summer arrives, we’re still seeing mortgage rates climb and the housing market continues to transition to a more balanced environment between buyers and sellers. According to Freddie Mac’s latest survey of average mortgage rates, the 30-year and 15-year are both up slightly for the week. However, last week was significantly calmer in terms of volatility.

This week has begun with a bias toward increasing rates and we’ll have to wait and see how the week’s economic data plays out. We’ve got some important housing and inflation data coming as well as quite a few Fed Members speaking publicly, including Fed Chair Jerome Powell scheduled to speak Wednesday morning.

Also increasing was the number of homes going under contract. The report on pending home sales increased by 0.7 percent. Also increasing was the number of new homes sold, which increased by 11 percent.

As for what I’m watching for the rest of this week, we’re headed into the Fourth of July weekend and the pending home sales index – a measure of the sentiment of the nation’s Realtors – reported an increase in their expectation of coming contracts and home sales.

Wednesday we’ll get an updated report on the nation’s GDP (gross domestic product). First-quarter GDP is predicted to come in at minus 1.4 percent, expected to show little change from the second estimate of minus 1.5 percent.

Thursday we get a look at the Fed’s favorite inflation indicator, which will likely attract the interest of traders and markets as the economy continues to be plagued by rising inflation. This report is also what the Fed looks at in considering its monetary policy. Inflation readings, which have been stabilizing, are expected to mostly accelerate, to monthly gains of 0.7 overall for the month and for annual rates of 6.5.

What is recession and how can you prepare?

You may have been hearing more chatter in the media that recession is imminent so I thought I’d explain exactly what a recession is and how you can navigate it wisely. First, recession is a normal economic cycle or season when the rate of growth in the economy slows. We know this when we see the GDP recede for two consecutive quarters. There are also other measures such as the rate of unemployment and the level of retail and consumer activity that analysts look at.

So, how can you prepare? First, owning a home is a great move because currently, homes are appreciating more than inflation. Second, you can improve your personal financial picture by using the equity in your home to your advantage by using it to pay off high-interest debt, for example. If you’d like to explore other ways to shore up your finances, let’s talk and I’m happy to help you look at your options.