US should be more worried about deflation than inflation, some economic watchers say

Outside of the Great Depression of the early 1930s and for a very short period during the country's economic collapse in 2008 and 2009, the United States did not experience a prolonged period of the economic phenomenon known as deflation.

And although the United States has experienced unprecedented inflationary conditions over the past year, little has been said about the potential for deflation - when the prices of goods and services fall in the whole economy.

As Federal Reserve Chairman Jerome Powell leads the continued charge to tell Americans to feel the pain of interest rate hikes in an effort to rein in inflation, a recent opinion piece in Politico claimed that was the wrong strategy. Dartmouth College economics professor David Blanchflower called the Fed's reliance on interest rate hikes a "zero data guess" and predicted a period of deflation could result .

Another discordant indicator of deflation, according to Bloomberg, is that the home and apartment rental market has fallen sharply over the past 90 days, and vacancy rates increase.

The warning of deflation potential, using real estate trends as a marker, was also echoed by EasyKnock Inc. CEO Jarred Kessler, who told Benzinga in a broad interview that deflation could be at hand.

"I haven't seen real deflation in my life or my parents' life, but as bad as the economy we are looking at is", we could see a deflationary period ahead , Kessler said.

Kessler, who has over 15 years of experience in the financial services industry, has worked with leaders in the financial industry and launched EasyKnock as a way for owners to access the equity by selling their property and renting it out comes back.

Kessler thinks the current economic woes started with government stimulus programs and grew to an 18-year high in credit card debt, which means people will start to dip into their home's equity again because "there aren't many options left."

While he predicts the Fed will soon stop raising interest rates, he also thinks it will also be more careful about how it communicates any future increases, as she realizes that "they are scaring the market". In his industry, Kessler lamented the rise in mortgage lender bankruptcies in a housing market where buyers have become scarce.

"I have never seen an industry in my career go from hot to cold as quickly as today's mortgage industry," he said.

As we approach 2023, Kessler shared other economic forecasts, including:

The forecast of a drop in house prices of up to 25% by next summer is exaggerated. Kessler thinks the country will see a 10% decline in areas like the Midwest, but “high-migration cities like Nashville, Austin, Miami, and Phoenix, for example, which have had extraordinary journeys, are going to see steep declines. as people search for more affordable areas to move to. Hot cities like those in the Sun Belt are also being hit by the fact that “65 million people cannot qualify now for a mortgage they could afford six months ago.” The trend of buyer disappearance will continue, but while "most people think they are afraid to enter the market, the fact is that most, due to high interest rates, are not can't qualify because their debt to income ratio or their FICO credit scores aren't where they should be.That's a very big problem in this economy.

As for the consequences of a volatile housing market, Kessler says that next year people with means, including a cash reserve, will be looking for great opportunities .

"You're going to start to see sellouts and desperation in the real estate market, and people who can take advantage of this financially will benefit. My advice for them next year is to bid first low."

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Photo by Joshua Woroniecki