Economic insights: September/October 2024

In the real estate industry, it is crucial to stay on top of market trends, of course, but also those of the global economy, which affects not only real estate, but most aspects of daily life.Keep up to date with Luxury Portfolio International here, where Dr. Marci Rossell, chief economist for Leading Real Estate Companies of the World, shares her top five insights from the past month.1. Surprising Federal Reserve rate cutThe Federal Reserve had telegraphed their plan to cut rates for weeks, but shocked many by cutting rates by 50 basis points instead of the anticipated 25.This was the first time in 20 years a Federal Open Market Committee (FOMC) voting member dissented, preferring the smaller increase. The decision suggests that the Fed may be responding to deeper concerns about the economy, despite no immediate, clear justification from their statements. 2. Mortgage rates and refinance risk easingMortgage rates dropped to 6 percent.As rates roll down and refinance risk becomes less of an issue, the Federal Reserve is indicating that we have largely recovered from the COVID-induced economic disruption from 2020 – 2023. By the end of next year, rates are predicted to stabilize between 5 and 6 percent, signaling a return to pre-COVID mortgage norms.3. Pent-up housing demand as lock-in effects fadeThe mortgage rate “lock-in” effect, which kept many homeowners from selling due to the disparity between their low fixed rates and higher market rates, is starting to fade as interest rates normalize.The Federal Housing Finance Agency reported that 1.72 million fewer home sales occurred in the past two years due to this effect. As rates fall, pent-up demand, particularly from luxury homeowners looking to downsize, is expected to drive increased activity.Additionally, lower interest rates and costs of materials are expected to spur more home-building. 4. Fed’s focus on employment over inflationThe Federal Reserve appears more concerned about the labor market than inflation at this point.With the U.S. unemployment rate rising to over 4 percent and an additional 1 million people unemployed compared to two years ago, the Fed is prioritizing job stability. This focus implies a continued easing of rates, with longer-term benefits for consumer spending and housing demand.Bear in mind that it will take time — six to 12 months — for the economy and jobs numbers to see the effects of the rate cut. 5. Global divergence in economic policy and market stabilityWhile the U.S. has moved to cut rates, other global economies, such as Japan and Brazil, are raising rates to combat inflation. The world is no longer synchronized in monetary policy, with regional economies responding to local issues.Geopolitical tensions, such as those in the Middle East, have not spiked oil prices as expected, indicating a shift in how global events impact financial markets.As LeadingRE’s chief economist, Dr. Marci Rossell explores how global economies, policies and politics affect the real estate industry and our everyday lives, either directly or indirectly. Dr. Rossell has a proven track record for analyzing the economic market as the former chief economist at CNBC and corporate economist at OppenheimerFunds.The post Economic insights: September/October 2024 appeared first on Luxury Portfolio International.