The forces bearing down on the US economy are so varied and mostly uncontrollable that it seems impossible for consumer-facing businesses to accurately forecast demand, let alone plan for it. Wall Street has already cast its vote — there’s a recession coming (or maybe already here).

Since the fourth quarter of 2021, investors have been punishing the S&P 500 index, driving it down by nearly 25% of its peak value. That roughly translates into a loss of equity, and a plunge in investment accounts, of $10 trillion.

If the money merchants are right, the question becomes whether a chart of the expected recession will be shaped like a soup bowl — a wide shallow sag, not so bad — or will it look more like a sinkhole?

What might Wall Street know that consumers don’t?

For the moment, the news about rising interest rates has largely been background noise. On the other hand, inflation is something consumers experience every day, everywhere, on every major street intersection. Consumers are paying attention to the price of everything, from eggs to cars.

But next year will be the real test as consumers become more aware of declining equity values in their homes. This is especially true for those millions who dashed out and bought second homes to escape the pandemic.

The survey found that 70% of buyers in 2021 and 2022 were first timers.

A third paid over asking price.

Because so much of American consumer wealth is tied up in real estate, home values could play a huge role in the depth and length of a recession.

As of now, those real estate values have been holding up, on paper. According to a recent report from real estate data firm CoreLogicCLGX 0.0%, the average homeowner’s equity is now nearly $300,000 — a record high. But prices rose so much so fast that current levels are unsustainable. If history is a guide, the best model for next year might look like the economic crisis that began in 2008 when the mortgage market collapsed. Or maybe not. No one really knows.

The key takeaway: it didn’t happen overnight or even in a few months. It took all of six years for the median price of an American home to collapse and recover to pre-calamity levels. Along the way the economy tanked, and unemployment soared.

Curiously, in this case unemployment rates are at all-time lows according to the following statistics.

Read the full report here