Does academic research about higher rates overlook regular Americans?

Interest rates may be approaching their peak just as jobless rates, as indicated by initial claims, recently reached their highest level since Oct. 30, 2021. The Federal Reserve held rates steady at its June meeting and will meet again in July, resulting in another round of speculation, data interpretation and analysts citing studies ostensibly supporting their forecasts.

I've reviewed numerous academic research papers and economic journals, which provide divergent economic outlooks. Some offer a dire message of long-term recession. Others suggest a soft landing. And sometimes the same research predicts both: a real-life example of the joke that two economists will yield three opinions.

What all these papers and pundits seem to ignore is that real people, not just numbers on a page, are suffering, and they'll continue to do so regardless of the Fed’s actions.

Our economy requires that regular Americans, citizens with mortgages and car payments, take risks and build new businesses. According to the U.S. Chamber of Commerce, there are 33.2 million small businesses, which in aggregate account for 99.9% of all U.S. businesses. These enterprises were responsible for creating slightly less than two-thirds of all new jobs from 1995 to 2021.

And that required access to capital.

Currently, the cost of capital through a traditional loan will remain well out of reach for many potential entrepreneurs due to higher interest rates. Regardless of academic economic perspectives, the fact remains that our economy requires more cash to flow to regular Americans willing to take the calculated risks inherent in establishing businesses and creating jobs.

Luckily, most of the Americans willing to do so are sitting on one of the largest resources in our economy. There is currently $29.5 trillion of capital in accessible home equity. Utilizing this dormant capital could unleash a massive boom of entrepreneurial innovation, especially in communities with meaningful homeownership rates that are often overlooked by traditional loan institutions.

The adoption of home equity agreements allows homeowners to sell a small fraction of their property’s equity to an institutional investor for a lump sum of today’s present value. Accessing this capital and putting it to work serves all parties — driving economic sustainability and growth while mitigating interest rate risk.

It’s important to note that HEAs are not loans. Homeowners make no monthly payments, and when interest rates fall in the future, they can refinance their first mortgage, using the proceeds to buy back the fraction of the equity they sold through an HEA.

As the presidential campaign heats up, we will likely hear promises about policies that will bring inflation under control, jump-start a stock market rally and otherwise save the economy from destruction.

In a world where rosy promises are likely untrue and absolutes have at least two interpretations, will regular Americans become tone-deaf?

Will regular Americans want tangible and practical solutions to their very real problems — not ones that fill the pages of academic and economic publications? Do regular Americans need clear ways to build their futures? Could utilizing the slumbering capital in their homes make a major difference in their lives and our nation’s economy?

We do know this: Widespread utilization of loan alternatives like HEAs provide a clear path to sustainable economic growth for “everyday people,” regular Americans who want to revive their pandemic-impaired businesses, and potential business owners who want to build enterprises and create jobs.

Ashley Bete is CEO and chief investment officer at Leap Analytics, a fintech real estate investment firm that seeks to transform the home finance marketplace.