Holding the bag…
Prior to every market correction that has ever occurred, the general public has been told by countless “experts” that it wasn’t going happen… And for the most part, the reason given is typically the same. Because “It’s different this time.” We are told that the economic environment is better,
demand is more sustainable, that supply is years away from catching up, or in the
case of the COVID economy –because the world has changed permanently and this is the new normal… But despite all of this reasoning and the hope which drives much of it, the correction always comes. Throughout history some have been worse than others, but the reality is that the economy is cyclical and it cannot continue in an upward manner in perpetuity. It just doesn’t happen… So, what will cause the corrections of the future? There also seems to be no shortage of theories, predictions and experts when it comes to this side of the coin. But as with those that deny the potential of a correction, those that predict its exact cause are typically incorrect in their assumptions as well. We have to accept the fact that, there far too many things that remain unknown and out of our control. Any prediction for, or against a changing economy is really at best a moderately educated guess.
One of the best explanations of this comes in a fantastic book by Nasim Talib titled “The Black Swan.” In it, Talib makes the case that despite all signs pointing in a certain direction, all it takes is one Black Swan event for things to go drastically off course and to completely prove false all that was predicted.
As an example of this, I remember sitting in a meeting just months before the last housing crises hit, and listening to a real estate Economist state something along the lines of “We predict that demand will remain high in the housing market and that prices will continue to rise moderately
over the next twelve to twenty-four months.“Not long after this, demand for houses basically came to a screeching halt and prices began to fall at a rate that we had never experienced before. Ironically it was the same Economist that spoke to us at another meeting a few years later in which she explained
that “Market factors that nobody could have seen coming” were the cause of the housing crises… Precisely…
As the housing market nationwide seems to be creating new records on an almost-daily basis, the affordability that was created by historically low interest rates has been eroded. Now, with
rates increasing to levels we have not seen in the better part of a decade, and with record inflation running rampant through our economy, one begins to wonder which of these straws will be the one that breaks the proverbial camel’s back. When the correction comes, what will it look like and how bad will it be? And at the end of the day, who will be the one left holding the bag?
Dan Bosch is a Realtor Associate with RE/MAX of Chico and the team leader for the Premier Professionals Real Estate Team... Dan specializes in residential and investment properties. He can be reached at (530) 896-9330 or via email at
danbosch@sbcglobal.net. You can also follow him at @dan_bosch on Instagram