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 months of October 20th – November 17th, 2023.
Israel Hamas War
The Israel Hamas war threatens to bring oil price shock to net importers of oil, particularly China. The United States, as a net exporter of oil, is somewhat insulated against conflict-spurred fuel sticker shock. However, the war is likely to elevate interest rates in the U.S. due to “flight to quality” reactivity as investors flow out of perceived “high risk” markets (such as the stock market) and reallocate dollars into perceived “safe” assets (such as the U.S. Dollar).
China’s housing crisis, in particular the largescale defaults of mega-developers Evergrande and Country Garden, continues to erode Chinese consumer confidence. With over a million homebuyers now bound to mortgage products for undelivered homes, prospective buyers are declining to engage in the beleaguered Chinese housing market. This stagnation in consumer activity is resulting in deflationary pressure across the country. Deflation and consumer skittishness, compounded with China’s rising oil prices and a newly-declining population, have prompted the International Monetary Fund to downgrade China’s 2024 growth forecast to 4.2 percent.
The U.S. economy continues to hold at a strong 5% growth rate. Employment remained unchanged at 3.8% in September, and economists are now predicting that the likelihood of a U.S. recession is less than 50%. On October 19, Jerome Powell announced that the Federal Reserve would likely hold rates steady in the near term, with no additional tightening through the end of the year. Dr. Rossell believes that the Feds are likely to begin cutting rates in Q2 of 2024.
U.S. Housing Market
Despite a strong overall economy, the U.S. housing market remains challenging for consumers and industry professionals alike. As of mid-October, mortgage rates on 30-year fixed products were above 8%, inventory remained tight due to locked-in syndrome following ultra-low refinancing in 2020-2021, and home sales slowed to the lowest rate in 13 years.
September brought a bright spot for consumers seeking inventory in an otherwise sparse market, as housing starts rebounded to a healthy 7% month- over-month increase. While industry professionals caution that elevated mortgage rates are likely to dampen new construction in the coming months, for now we can anticipate a hopeful increase in singly-family new build activity.
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.