The Market is starting to scare me
As I scrolled through Yahoo News—where all the most hard-hitting journalism lives, conveniently sandwiched between articles about Taylor Swift getting booed at the Super Bowl halftime show and the eyebrow-raising gossip about how young Bill Belichick's girlfriend is—I came across three stories that made me, as a mortgage loan officer, deeply uneasy. Not going to lie, it feels like we’re standing on the edge of oblivion. Inflation, sky-high prices, crushing debt—it’s a perfect storm brewing, and it’s hard not to feel a little scared.
How Did We Get Here?
It’s easy to wonder how everything unraveled so quickly, but this mess has been brewing for a while. Here are the main culprits:
Pandemic Fallout: During COVID-19, the economy was flooded with stimulus money, and interest rates hit record lows to encourage borrowing and spending. While this was necessary to prevent total collapse, it also fueled a surge in spending, cheap credit, and speculative housing demand. People took out loans, bought homes at inflated prices, and overused credit cards while living in a bubble of low interest rates. Fast forward to today: rates have skyrocketed, and many are left drowning in debt they can no longer afford.
Inflation on Steroids: Inflation has hit levels we haven’t seen in decades. Pandemic-era supply chain disruptions and labor shortages collided with massive consumer demand, creating the perfect storm for rising prices. Once inflation took hold, everything got more expensive—groceries, gas, housing, and rent—and the Federal Reserve has been scrambling to fix it by aggressively raising interest rates. These higher rates are now hitting consumers, businesses, and homeowners squarely in the wallet.
The Housing Market Frenzy: For the past few years, the housing market has been a circus. Low interest rates during the pandemic spurred a buying spree, driving up home prices to unsustainable levels. Add to that the lack of affordable housing and big investors swooping in to buy properties, and you’ve got a housing market that’s completely out of reach for most Americans. Now that interest rates are high, people can’t afford to buy, which pushes them into renting—and guess what? Rents have skyrocketed too.
Wage Stagnation: While prices have soared, wages haven’t kept pace. This has been a long-term issue, but inflation has made it even more glaring. People are working harder just to stay afloat, relying on credit cards and eating into their savings to cover everyday expenses. It’s a recipe for disaster.
Rising Interest Rates: The Federal Reserve’s fight against inflation has driven interest rates higher than we’ve seen in years. This has made borrowing—whether for homes, cars, or credit cards—far more expensive. While the goal is to cool the economy, it’s also pricing people out of homeownership and driving up defaults and delinquencies.
1. Credit Card Debt: The American Trainwreck
Well, folks, we’ve hit $1.21 trillion in credit card debt. Yep, trillion with a "T." And delinquencies? Oh, they’re climbing faster than my stress levels when I see gas prices. Inflation has pushed people to rely on credit cards just to survive, but with interest rates that might as well be labeled "legalized robbery," this is quickly becoming unsustainable.
2. Mortgage Defaults: The Slow-Motion Crisis
Mortgage delinquencies are sneaking up across FHA, VA, and conventional loans. First-time buyers are especially getting hit hard, squeezed between high interest rates, inflated housing prices, and rising costs of everything else. It’s like watching a balloon slowly inflate, knowing it’s going to pop—it’s just a matter of when.
3. Savings Accounts: Gone, Gone, Gone
Remember when we all had a little savings buffer after the pandemic? That’s now ancient history. Inflation has drained savings accounts faster than a toddler with an open bag of candy. Lower- and middle-income households are relying on credit cards to make up the difference, which is only digging them into a deeper hole.
4. Rent Prices: Out of Control in Cleveland and Pittsburgh
If you think owning a home is rough, let’s talk about renting. In Cleveland, the average rent has skyrocketed to $1,219, and in Pittsburgh, it’s now $1,469. (rentcafe.com) This might not be New York City numbers, but for cities with traditionally affordable markets, this is a serious strain on renters. Wages in these areas haven’t kept pace with rising rents, leaving many households stretched thin and with little hope of saving for a down payment.
Landlords, meanwhile, are benefiting from this surge in rental demand as potential homebuyers are priced out of the housing market due to high interest rates. This creates a vicious cycle: people can’t afford to buy, so they rent, and rents keep climbing. The result? Tenants are stuck paying a significant chunk of their income for housing, often with no room for anything else—like, say, saving for the future.
5. Inflation and Prices: Bleeding Us Dry
Inflation is the uninvited guest at this financial disaster party. Groceries, gas, rent—everything costs more, and wages aren’t catching up. Eggs feel like a luxury item, and filling your gas tank can feel like taking out a small loan. Inflation doesn’t just hurt—it amplifies all the other problems, from rising debt to dwindling savings.
What We Really Want: A Housing Market Cooldown
Let’s be clear: we don’t want a full-blown recession. What we do need is a controlled cooldown of the housing market. Housing needs to be affordable and available, not just for wealthy investors or cash buyers, but for regular families who want a place to call home. A slow and steady correction would stabilize prices, balance supply and demand, and make homeownership more attainable.
How Can We Avoid Financial Armageddon?
Tame Inflation: The Fed needs to carefully balance cooling inflation without sparking a full economic meltdown. Easier said than done.
Raise Wages: People need to make enough to keep up with the cost of living, period.
Build More Housing: More affordable options and less investor-driven price hikes are key to fixing this mess.
Encourage Savings and Financial Literacy: Help people rebuild their savings and get off the debt treadmill.
By doing above, issues with higher credit rates, inflation, costs, housing would be solved. But it has to be done quickly but while walking on a tight rope. Adjust too quickly or to slowly and we will fall and fall hard.
Final Thoughts: Are We Fine? Not Even Close.
Let’s recap: credit card debt is exploding, mortgage defaults are creeping up, rents are skyrocketing in cities like Cleveland and Pittsburgh, savings accounts are running on fumes, and inflation is crushing everything in its path. Not going to lie, it feels like we’re standing on the edge of oblivion. All signs are pointing to an economic collapse, and I really hope I’m wrong. But unless something changes soon, we might all be in for a financial crash of epic proportions. Buckle up—it’s going to be a bumpy ride.
