Page 7 - BusinessWest September 2, 2024

Points of Interest
One of the key indicators of a slowing economy is the hous- ing market, which has slowed considerably in 2024 — from a sales-volume perspective because of interest rates, which are keeping many people in their current homes, and overall due to a persistent lack of inventory that has kept prices high and the homes that do come on the market moving quickly.
“People are not buying new homes, so that slows down the demand for new construction,” Nakosteen said. “And they’re not selling their homes, which diminishes supply, so it’s a really interesting phenomenon we’re seeing right now in housing.”
Peter Ruffin, current president of the Realtor Assoc. of Pio- neer Valley, acknowledged that this has been a slower year, sales-wise, than previous years, although he views steady (if not rising) values, especially in communities like Springfield, as an overall sign of strength within the market.
And also a reason why homeowners should maybe rethink that strategy of staying put until interest rates come down.
“You can refinance your interest rate down the road, but you’re never going to get a second chance at price,” he said. “And prices are going to continue to go up.”
And while higher interest rates are keeping some in their homes when they might be trading up or down, and thus putting more homes on the market, he blames the overall lack of inven- tory on a lack of building, a problem he hopes can be addressed by the Affordable Homes Act recently signed into law by Gov. Maura Healey.
“We haven’t built enough houses in Massachusetts, period,” Ruffin told BusinessWest. “And it’s housing of all sorts, and that’s what we need to fix for the long term.”
Meanwhile, some homeowners, like business owners, are somewhat reluctant to move forward in an election year like this one, he said, not knowing who will be in the White House and what will happen next.
Which brings us back to the phrases ‘soft landing’ and ‘calm slowdown,’ and whether this is where the economy is headed.
They both indicate a slowing of the economy but not a dip into negative GDP territory, said Nakosteen, who said he dis- likes making projections, but, when pressed, made one when it comes to the balance of 2024 and likely beyond.
“Maybe we see a 1% or 1.5% rise in GDP, and maybe unem- ployment rises a few more tenths,” he said, adding that at least one economist was projecting that, to fully tame inflation down to 2% or 3%, the Fed would have to take steps that would take unemployment rates into the 6% to 7% range.
Instead, it’s just over 4%, a rise, and a number, that Nako- steen said is “the very definition of a soft landing.”
The questions to be answered concern just how soft and whether it stays soft, said those we spoke with, noting that con- sumer spending will be the key factor, as it usually is.
“When you read anecdotes from corporate offices, especially consumer product companies, they say there’s a real weaken- ing in consumer demand,” Nakosteen noted. “You don’t see it in the numbers — you don’t see it in retail sales or other measures of consumption — but there are a lot of companies that feel a weaking of demand for their products at the retail level.”
These include McDonald’s (which reported its first world- wide sales drop in four years in late July) and other fast-food providers, which have hinted strongly that the increases in pric- es they’ve instituted, forced by the higher costs of labor, food, and energy, have taken their toll. They’re responding with value meals and specials, but overall, the restaurant sector, one of the bellwethers of consumer sentiment and the economy on the whole, is seeing a decline in business.
Sosik acknowledged that this sector and other pockets of the economy may be experiencing some slowing, but, overall, what he senses is that consumers are still spending — if not on Quar- ter Pounders or Frosties, then on something else.
And as long as that continues, he and others said, the economy should continue to hang in, and the ‘R’ word can be avoided. BW
“When you look at the number of people who are maxed out on their credit cards, for example, credit-card delinquency rates, student- loan delinquency rates ... these
are all examples of metrics that are not trending in the right direction. And they imply that consumers are pretty stretched.”
BusinessWest
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