Market NewsReal Estate September 29, 2023

Economic Insights for Real Estate Market by Dr. Marci Rossell – LeadingRE (September/October 2023)

The economic landscape is ever-changing and can have a significant impact on the real estate market. As an affiliate of Leading Real Estate Companies of the World®, Weidel Real Estate is committed to staying ahead of the curve and keeping our clients informed of the latest economic insights. Dr. Marci Rossell, the Chief Economist at LeadingRE, has provided her top five economic insights for the month of September 15th – October 10th, 2023.

 

Labor Strikes

Autoworker strikes commenced in mid-September, conflating strike concerns across the U.S. considering the increasingly drawn-out strikes in Hollywood. Dr. Rossell believes a ripple effect from the auto strikes will be felt most acutely regionally, particularly by small to midsized suppliers who lack backup income and may be forced to lay off or furlough their workers. Nonetheless, Dr. Rossell is optimistic that the economy, currently tracking GDP growth at a strong 5%, is robust enough to withstand the strikes without sinking into recession.

 

Fed Activity

While the Federal Reserve has been hedging its public statements carefully in recent weeks, as of September 15 Dr. Rossell believes it is unlikely that we will be seeing another rate hike at their meetings later this month. The Fed’s hike campaign has fulfilled its mission to bring down inflation, and while the current rate of 3.6% is still over the target 2%, it’s tracking at a relatively steady downward trend from last June’s 9% high. Dr. Rossell anticipates that we may see the first Fed rate cut in or around May of 2024.

 

Housing Market Forecast

Fed rate hikes and rising mortgage rates have curtailed movement in our industry since early 2022, and Dr. Rossell predicts that we will close out 2023 at around 4M in existing sales, representing a steep decline from last year’s 5M. Nonetheless, if the Feds cut rates as expected in May, Dr. Rossell anticipates a healthy uptick in transactions in the second half of the year as mortgage rates decline and inventory subsequently increases.

 

Europe

European consumers continue to feel the pinch of inflation, with increasing prices for goods and services and an ongoing struggle to move away from a dependency on Russian energy and sluggish Chinese trade. In the real estate sector, the prevalence of adjustable-rate mortgages means current homeowners, not just prospective buyers, are experiencing an affordability crisis.

 

China

China continues to struggle with the “three Ds”: debt, deflation and declining demographics. While pundits have raised concerns that a “lost decade” is in the makings, Dr. Rossell advises that with appropriate governmental action, including the implementation of stronger financial safety nets for its citizens, China’s economy could avoid a years-long crisis. China’s real estate quagmire continues to serve as an albatross to any hope of near-term economic recovery, a crisis highlighted most recently in headlines by the police detention of key executives at Evergrande’s shadow bank. Unless government-driven change is implemented, consumers’ panic-driven savings campaign will only serve to drive the economy into an increasingly pronounced slump.

 

As an affiliate of Leading Real Estate Companies of the World®, Weidel Real Estate is committed to providing exceptional client experiences and staying up-to-date with the latest economic insights to best serve our clients.