Lesson Plan For The Future

The Economy…Recession, it is cyclical

Are you prepared?

“The Fed’s hawkish pivot has raised the risk that markets see rates staying in restrictive territory,” BlackRock said in a research note.

“The year-to-date selloff partly reflects this, yet we see no clear catalyst for a rebound. If they hike interest rates too much, they risk triggering a recession. If they tighten not enough, the risk becomes runaway inflation. It’s tough to see a perfect outcome.”

A recession is defined as a contraction in economic growth lasting two quarters or more as measured by the gross domestic product (GDP). Starting with an eight-month slump in 1945, the U.S. economy has weathered 12 different recessions since World War II and up until the COVID-19 pandemic, which ended the longest period of economic expansion on record.

On average, America’s post-war recessions have lasted only 10 months, while periods of expansion have lasted 57 months.

Past recessions I recall – we made it through each one, no worse for wear, and a little wiser.

I remember the real estate and industry during 5 past recessions…

November of 1973 until March of 75. First OPEC Oil Embargo. I had a job as a Naval Officer, so I was not much concerned with it. I was deployed to the Western Pacific from September 1973 until May of 1974. in late 1975, I was in the market to buy my first home, purchased in 1976 (Substituted my VA Eligibility for the seller’s eligibility. Interest rate was 8 3/4%.

1980 – 1982. A second oil embargo and a “Double Dip Recession.” I was selling real estate, and managing an office for another broker. I took a night job, teaching real estate classes to supplement my income, to make ends meet. There was a gas shortage, and fuel was rationed. You could only purchase gas every other day (which day depended on the last digit of your license plate, odd or even). I purchased an Oldsmobile Diesel, and drove to Tijuana once a month to fill up with diesel, at 19 cents per gallon. Interest rates hit 18%, but on we marched, and were able to sell a few properties. the VIR, ARM and AML loans were created. Our property management accounts helped keep us afloat.

1990 – 1991. I was serving as an officer of our local association of REALTORS (San Diego), preparing to run for President Elect. My real estate and financial services business had grown. I had 12 agents working for me, and our property management business again helped pay the bills. I had clients from Mexico who told me “when the US catches a cold, Mexico gets pneumonia.”

2001 – March – November. 9/11 and the Dot Com crash. Prepared my real estate and financial services businesses for sale. Our technology company was growing. Our customers were REALTORS and our primary product was education and training. We won a trainer contract to create and operate technology training for NAR. The training was a Certification Program, ePRO. A contract we had for almost 10 years.

2007 – 2009. The Great Recession. I was CEO of Point2 Technologies (in Canada), syndicating MLS listing data and working with REALTORS. We earned US dollars and our expenses were paid in Canadian Dollars. One US dollar bought us $1.25 Canadian Dollars. I had Canadian friends who told me “when the US catches a cold, Canada gets pneumonia.”

“The Great Recession was part of a global financial meltdown triggered by the collapse of the U.S. housing bubble.

The Great Recession was the result of a financial house of cards built on the subprime mortgage market. Large financial institutions invested heavily in mortgage-backed securities. When homeowners defaulted on those high-risk mortgages, not only did they lose their homes, but huge investment banks like Bear Stearns and Lehman Brothers teetered on the verge of collapse.”