A dangerous economic situation has developed in the world since the GFC.
Interest rates have not risen, they did for a bit here in Aus, then dropped again very quickly. Most of the world has been operating on very little or zero interest rate since the GFC. The housing industry was plodding along ok before the onset of the pandemic when I say ok, it was healthy, meaning it was moving in the right direction.
Economists predictions mean very little to me, they tend to predict for 10 years doom and gloom, then when it happens they say I told you so. But they never seem to be able to predict what causes the ups and downs.
I've worked in the building industry since I was young, my Dad was a carpenter in the industry. Boom and Bust go hand in hand with the building game. It's usually the first to recover, the first to falter. What has become concerning is the amount of government economic stimulus now being pumped into the industry. For me, it's very worrying, because I've learned, the bigger the boom, the bigger the bust.
Once upon a time governments could rely on interest rates delivering relative control of economic activity...if things began to heat up, inflation rise, the reserve would increase. If inflation rose, so usually did wages growth. If things slowed down, interest rates would be lowered to increase consumer confidence and spending. There have been a large number of shifts in the world through many years in regard to product manufacturing, wages growth etc which have made this way of economy control not viable.
Stimulus packages worked well, back 60 70 years ago... The whole of the economy benefited. Factories were there after the war to transform from building ammunition and war machines to appliances, turning skills to invention, creation, production, employment and prosperity. Things have changed drastically since those times.
Governments have done the same now, because of covid, they didn't need to, shouldn't have done so. .....but everything else is out of kilter. Material shortages have caused prices to rise, here its been about 20% over in the US, timber has risen close to 130-150%. There are skill shortages, manufacturing shortages, wages are stagnant, no inflation other than fuel and building products, no interest rate.
There are other things I wanted to say as it's more complicated, but I get bored....
But, I don't see it ending well.