Podcast Summary
Unpredictability in the Economy and Housing Market: Despite the Fed's efforts to manage the economy, external factors can cause unexpected market reactions, emphasizing the importance of staying informed and adaptable for investors.
While the economy and housing market show signs of solid growth in 2024, there is still a significant amount of uncertainty and unpredictability. The Federal Reserve, which has a significant impact on short-term interest rates, has less control over long-term rates, particularly those affecting mortgages. The unexpected rise in mortgage rates in late 2023 serves as a reminder of this. Despite the Fed's efforts to manage the economy, external factors can cause unexpected market reactions. As investors, it's crucial to stay informed and adapt to these changes while maintaining a long-term perspective.
Economic uncertainty during election years: Election years bring economic uncertainty, making it hard for consumers and businesses to plan and invest, potentially leading to slower economic activity and disinflation, impacting areas like housing and mortgage rates.
Economic uncertainty, particularly during election years, can act as a headwind for the US economy. This uncertainty makes it difficult for consumers and businesses to make plans and invest, leading to slower economic activity and potential disinflation. Specific factors contributing to this uncertainty in the upcoming year include the expiration of Trump's tax cuts and policy uncertainty surrounding the election outcome and potential policies. These headwinds could impact the housing market and mortgage rates, among other areas. It's important for individuals and businesses to consider these potential headwinds when making financial plans and forecasts.
US Consumer Remains Strong Despite Challenges: The US consumer remains in a strong position despite macro and micro economic headwinds, with real income growth, a strong labor market, and low mortgage delinquencies.
Despite some macroeconomic headwinds and microeconomic challenges for certain consumers, the overall US consumer is still in a relatively strong position. While excess savings have dwindled and credit card delinquencies have risen, real income growth, a strong labor market, and low mortgage delinquencies indicate that the consumer is faring well overall. The consumer's position is consistent with the broader economic message of cooling but not cause for significant concern. For those seeking passive income, investing with experienced teams like PPR Capital Management, which has a strong track record and over $500 billion in assets under management, can provide a steady source of income.
Economy's Strong Signals Amidst Personal Challenges: Macro indicators suggest a strong US economy, but individual experiences vary widely, leading to a disconnect between economic data and public sentiment.
Despite the cooling economy and some feeling the pinch, the US economy is still in a relatively strong position based on macroeconomic indicators. Debt servicing as a share of personal income remains low, and the labor market is stable as long as people have jobs. While some may be in a worse position than previous years, historical context shows that things are still decent. However, there seems to be a disconnect between the positive macro data and the negative feelings people have about the economy. This disconnect may be due to the wide distribution of economic experiences, with some individuals having vastly different experiences than the average or median person.
People's perception of inflation's impact takes time to adjust: Despite the Fed's efforts to control inflation, people may continue to feel its impact due to psychological adjustments. Disinflation, not deflation, is the desired outcome for a stable economy.
Despite the Fed's efforts to tame inflation, people are still experiencing sticker shock from the recent price level jump. This psychological adjustment takes time, and for those who haven't benefited from the economic recovery, such as first-time homebuyers or those without stock investments, negative sentiments persist. It's important to note that disinflation, which is the slowing down of price gains, is different from deflation, where prices decrease. While we aim for a stable 2% inflation rate, deflation is undesirable as it can lead to economic instability, including high unemployment and business closures. In the housing market, we anticipate improved conditions for buyers in 2023 due to affordability factors, such as declining mortgage rates.
Housing market to become more affordable in 2024: Lower interest rates and softening prices will make buying a home more affordable in 2024, with the Fed signaling rate cuts and predicted price declines or stability in real terms. Buyers can expect a larger selection of homes due to increased inventory.
The housing market is expected to experience improved affordability in 2024 due to lower interest rates and softening prices. The Fed has signaled a pivot towards rate cuts, and while the exact number and timing are uncertain, it's clear that rates will be trending downward. Additionally, prices are predicted to either remain flat or decline slightly in real terms, as nominal price growth may be offset by inflation. This affordability boost will be welcome news for buyers, who have seen their purchasing power erode in recent years due to rising prices and rates. Furthermore, an increase in inventory is anticipated, as more sellers list their homes in response to these market conditions. This could lead to a larger selection of properties for buyers to choose from, making the market more competitive and potentially leading to softening prices. However, it's important to note that while demand may decrease slightly due to higher interest rates, the increase in supply could result in a higher total transaction volume. Overall, the housing market outlook for 2024 is more optimistic than 2023, with buyers likely to benefit from improved affordability and a greater selection of homes.
Exploring Valuable Tools and Resources for Investors and Business Owners: From real estate investment solutions to business banking and economic insights, these tools and resources equip investors and business owners with the knowledge and means to navigate the market and grow their portfolios.
Investors and business owners have access to valuable tools and resources to help them navigate the current market environment. First American Exchange offers solutions for various real estate investment needs, from simple rental property exchanges to complex commercial transactions. High interest rates have created a demand for funding, and Fundrise's new private credit strategy provides an opportunity for investors to earn healthy interest rates by supplying that demand. Relay simplifies the process of opening a business bank account online, and the Walker webcast offers insights into commercial real estate, entrepreneurship, and the economy. Whether you're an experienced investor or just starting, these resources can help you make informed decisions and grow your portfolio. Remember, it's essential to consult with financial, real estate, tax, or legal advisors for personalized advice.
Housing market pause with economic uncertainty and mortgage rate volatility: Despite challenges, the housing market is expected to see more transactions due to increased supply and continued demand.
The housing market is experiencing a pause due to various factors including economic uncertainty and mortgage rate volatility. However, with the normalization of these factors, more people are expected to enter the market, leading to an increase in supply and potentially softer home prices. Despite affordability concerns, historical data shows that a significant percentage of sellers end up buying again. Additionally, while new construction is adding to the supply, the demand still exceeds it on average. Overall, the market is expected to see more transactions going forward. However, it's important to note that affordability remains a challenge in certain areas, and builders may be hesitant due to the large inventory of unsold units.
Factors supporting home prices: Despite affordability concerns, home prices are likely to be sustained by demographic trends, mortgage rate decreases, and wage growth
While affordability remains a concern in the housing market, it's unlikely that we'll see a major price decline as there are several factors supporting home prices. These include demographic trends, such as millennials and gen Z entering home-buying years, and immigration leading to an increase in families and demand. Additionally, mortgage rates are expected to decrease in the coming years due to disinflation and potential market calm. Affordability can also be influenced by wage growth and home prices, making it a complex issue. Overall, the housing market outlook is optimistic for the next few years, with potential for improved affordability through a combination of factors.
Factors influencing long-term yields beyond Fed's control: Investors need to monitor economic conditions and geopolitical tensions for their impact on long-term yields, as they are influenced by factors beyond the Fed's control.
While the Fed has some control over short-term interest rates, long-term yields like the 10-year treasury are influenced by various factors beyond the Fed's control. The uncertainty surrounding economic conditions, government debt levels, and global economic circumstances can significantly impact long-term yields. For real estate investors, regional risks are a significant concern. Despite the Fed's indication of potential rate cuts, volatility in yields is expected, and there's no guarantee that the Fed will stick to their plan. Investors should closely monitor economic conditions and geopolitical tensions to anticipate the impact on long-term yields.
Caution in Markets with Significant Growth and New Housing Supply: Investors should exercise caution in markets with high population growth and new housing supply, as they may experience price declines. However, these declines could also present opportunities for investors from more expensive markets.
While real estate prices are expected to remain stable overall, investors should exercise caution in markets with significant population growth and new housing supply, such as Austin, Texas. These markets may experience price declines due to an oversupply of homes and decreased demand from local buyers. However, these declines could also present opportunities for investors from more expensive markets, like California, who are looking to relocate. Additionally, markets with lower housing prices and high demand, such as upstate New York and the Midwest, are expected to remain tight and attractive for investors. It's important for investors to consider the local market dynamics and competition from builders and other investors when making investment decisions.
Multifamily Market Surge and Regional Trends: Experts predict increased competition and potentially stunted rent growth in some regions due to a surge in multifamily supply, while West Coast markets are seen as interesting for potential returns due to previous price corrections and returning urban migration.
The multifamily market is experiencing a surge in supply in certain regions, leading to increased competition and potentially stunted rent growth. Orfeh's personal experience in Denver serves as an example. On the other hand, Chen highlights the West Coast markets as particularly interesting next year due to their previous price corrections and the potential for returning migration to urban areas. Overall, both experts agree that keeping an eye on regional trends and staying informed about market changes is crucial for investors. To learn more about Zillow's research, visit zillow.com/forward/research, and follow Orfeh on LinkedIn. For Redfin news and updates, visit redfin.com/news and follow Redfin on various social media platforms.
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