In the fall of 2022 and into 2023, many economists predicted a potential recession for the United States. However, as we approach the end of this year, it seems that a soft landing may be more likely than a downturn.
According to John Chang, senior vice president and national director at Marcus & Millichap’s research and advisory services division, most economists now believe in the possibility of a soft landing. In their recent video “5 Potential Risks that Could Derail a Soft Landing,” Marcus & Millichap highlights five factors that could potentially move us from an economic slowdown to an actual slump.
Firstly, there is still some uncertainty around how the Federal Reserve will handle interest rates in upcoming months. If they raise rates too much or hold them high for too long it could have negative effects on businesses and consumers alike.
Secondly, consumer spending has been driving our economy forward but there are signs that retail sales growth is beginning to slow down. With student loan repayments starting up again soon as well as other financial obligations becoming due for many individuals across America – discretionary spending may decrease significantly.
Thirdly higher interest rates not only affect commercial real estate owners but also impact businesses and consumers who have loans coming due with less money available for other investments such as hiring new employees or expanding operations.
Fourthly while things seem stable now compared to earlier this year – banks’ balance sheets could be impacted by debts coming due which includes CRE debt along with business loans or consumer loans which can lead towards another bank run if one significant institution were unable collect on its debts causing panic among depositors leading towards mass withdrawals creating liquidity issues within banking system itself .
Lastly extraneous events such government shutdowns surging oil prices union strikes global recessions etcetera all pose risks capable driving shock through economy thus requiring vigilance from market participants keep close eye out any potential warning signals emerge over next few years ahead before making investment decisions .
Despite these potential risks, Chang remains optimistic about the remainder of 2023 and expects solid growth in the range of 2%. He also notes that if economists’ predictions for a 1% growth rate in 2024 come true, it could be a very strong year for commercial real estate.
