Does anybody really know what’s going on with the economy? 

April 15 – One headline says good times are ahead. Another headline says treasury demands are weakening. 

So which is it? 

Attorney Clint Barkdoll said, “The treasury demand weakening I think is really interesting. That story is pointing out that the government is starting to see some weakness in the treasury market. So when they go out and sell bonds and T bills and T notes that there’s some indication that the buyers aren’t there like they used to be. Those buyers mainly being institutions and other governments from around the world.” 

What about the supposed good times ahead? 

Barkdoll noted, “I keep saying it’s the tale of two economies. Corporate earnings continue to set record quarter after record quarter. There was that very hot inflation report again last week that sent the markets tumbling. But again, you get into the details of that, the economists are saying that the inflation number is staying too hot, that the economy is just too strong and the Fed needs to bring that under control. That’s why the markets are going down because the thinking had been the Fed would start cutting interest rates, that inflation was under control, cut the rates to make this more of an even keeled situation, but when that hot inflation report came in, now the thinking is maybe the Fed is going to have to hold off lowering interest rates. Lawrence Summers last week, the former Treasury Secretary, said he would not even be surprised if you saw a Fed rate increase to try to cool off this economy. It’s the strangest dynamic that I’ve ever seen because as we’ve talked about at the street level, consumers are absolutely feeling the pinch of this inflationary environment, but yet at the corporate level, companies are making money like they’ve never made before. It’s a really strange disconnect.”

Pat Ryan of NewsTalk 103.7FM pointed out, “Three years ago, your 3% mortgage rates, your gas, your groceries, in good shape and a far more secure border and to where we are now. It’s a tale of two situations out here.”

Can interest be a write off on taxes? 

Barkdoll said, “Well, technically, it is. Interest can be an itemized deduction. But the problem is, I don’t know if I’d say it’s a problem, but remember the standardized deductions are so high now for individuals and married filing jointly, very few people itemize anymore because your standard deduction is so high, very few people get above that threshold anymore.”

Another issue with the tricky economy is the Baby Boomers aren’t leaving their homes – they’re not selling. Instead they’re fixing up their homes so they can stay put.

Barkdoll said, “That’s contributing to the housing situation in the country right now. Inventory is very, very low and if you’re sitting in a mortgage at two and a half, three and a half percent, you’re not going to move because when you move, you’re suddenly going to get into a new mortgage a 7 or 8% maybe for a house that was double the cost of what you’re leaving. That’s contributing to this issue. The old idea of Boomers and as we get older, we start downsizing, that now seems to be changing. These analysts are saying a lot of that demographic, they’re just staying put. They’re not downsizing. They’re staying right where they are and again, that’s contributing to a shortage of houses.” 

Michele Jansen of NewsTalk 103.7FM added, “I think owning property is becoming something people see as valuable as well. So maybe selling my bigger house that will give me some income and then going to some kind of place where I’ll be renting and getting things taken care of is not as attractive to older folks who are kind of feeling like they’re being told I can’t own anything anymore and so they want to keep on owning and I think that might be a little bit of the push for some. It’s part of the reason I’m thinking of staying put in my house.” 

Barkdoll said, “You talk to any of the realtors in the area, they’ll all say inventory is so low. Listings come on the market, the places sell immediately. There’s just incredible demand. Sunday’s Washington Post had a big story about this. The housing crunch in the DC metro area and the numbers were just mind boggling. The tens of thousands of new units that would be required to be created in that DC Metro market just to meet the minimum demand right now of housing needs. The problem is if you’re a younger person or a younger couple trying to get into the market, it is virtually impossible due to costs, the interest rates and just inventory in general and that’s a problem happening all over the country.”