By Ingo Winzer | Forbes
There might have been some question whether the coronavirus would lead the US into a recession, but the hoarding of toilet paper makes me think it’s certain. Not because we’ll run out of toilet paper – the US and Canada produce volumes of it – but because hoarding means consumers are really worried and are changing their spending behavior. That won’t just flip back in a few months.
It’s what consumers think and do that grows or shrinks the economy, not bank failures or layoffs at airlines. Consumers are 70 percent of the economy and they’ve already been on edge the last few years.
Toilet paper is for sale at a Kroger in downtown Bloomington…
Consumer debt, even after you consider inflation, is at the highest levels we’ve ever seen, $12,000 per man, woman and child. A survey done by GoBankingRates late in 2019 found that 69% of Americans have less than $1,000 in savings. And the growth of jobs in 2019 was at the lowest rate since the last recession. So it’s not surprising that the rate at which consumers have been spending was already slipping. As I noted in Four Trends For Real Estate Investors in 2020, this year was already a challenging time for investors because the economy was slowing. I didn’t expect a severe slowdown this soon, but when the economy is fragile to start with anything can happen.
That’s why the coronavirus isn’t the cause of the recession that now seems inevitable but the catalyst, suddenly accelerating a slowdown that was already in the works. Patrick Crowley, Professor of Economics at Texas A&M University says “Although we were definitely due a recession, as usual, the source of the recession was somewhat of a surprise.”
“My opinion differs entirely from the author of this story, whose apparently crunching data from an office somewhere else in the U.S. to come up with an idea of overpriced and underpriced markets throughout the country. I’m not a fan of the methodology. In the case of Phoenix, my local perspective is they are not overpriced; they are fairly priced given supply and demand; further, the latest NAHB / Wells Fargo Housing Opportunity Index data suggests the Metro Phoenix Area is one of the most affordable markets in the country for its residents.” ~Jim Belfiore, Real Estate Consultant