Very good news: inflation eased to 3% in June.
That means all of the money printing and lockdown effects during the pandemic have mostly flushed through the system and we’re starting to get a clearer picture of what the baseline economy looks like here in the United States. And… it’s not bad! Especially compared with Europe and China.
That said the rate hikes have had their effect, particularly on the real estate market. Interest rates that remain at or above 7% are having a meaningful impact. Buyers have fully accepted the rates, but prospective sellers have not, which has locked up an already tight inventory situation even further. Rates aside, we are desperately short new housing starts in our growing country and until we can build more units, faster, we’re going to see demand outstrip supply.
So what does this mean? Jerome Powell has said rates are going to remain higher for longer than people appreciate. I’m taking him at his word and not expecting any rate of relief for many months. But the equities markets are likely to benefit from that and I suspect they may rip quite a bit higher this quarter. And the overall investment environment, which has been extremely defensive for the last several months, probably turns over to growth mode in 2024.
The real estate market though I think will remain difficult. Most indices still predict a decline in home prices this year of 2-5%, which I don’t think is a bad thing given how significantly they climbed from 2020 to early 2022. We’re still way ahead overall. Goldman Sachs predicts, and I agree, that sales volume isn’t likely to return to pre-pandemic levels for a few more years.
So if you’re a Realtor, the market you’re experiencing now is your reality for the foreseeable future. Find the opportunities in it, as there are many.
