National Economic Outlook
By Ingo WinzerJune, 2023
Data from the first quarter confirm that the surge in home prices is over in most places and that we will see lower prices during the next year. Some markets are an exception – mainly in the Southeast and especially Florida – but in Western markets like Austin, Denver, Phoenix, Seattle, Portland, Las Vegas, Salt Lake City, Boise, and most places in California, home prices are already down at least 4 percent from their peak last summer. We can expect a similar drop during the next 12 months and maybe more.
Prices in the Southeast markets are buoyed by strong population growth over the last two years, 3 percent in Florida and South Carolina; but that was true in the western markets too, before prices peaked there. Population growth can’t make up for the imbalance between home prices and income. I expect lower prices in all markets by the end of the year.
Meanwhile, the national economy is adding jobs at what seems to be a good pace but in many sectors is just a restocking of jobs that existed before the pandemic, such as at restaurants and nursing homes. It’s good that these jobs are being filled again but the stats give the wrong impression of how strong the economy actually is.
The sustainable rate of job growth is probably no better than the 1.5 percent rate from before the pandemic, and the economy could easily dip into a serious slowdown if energy prices rise again or the war in Ukraine deteriorates dramatically.
Overall, jobs in May were up 2.7 percent from last year, including gains of 2.5 percent in construction, 1.5 percent in manufacturing, 0.6 percent in retail, 1 percent in finance, 2.5 percent in business services, 3.9 percent in healthcare, 5.4 percent (!) at restaurants, and 2.4 percent in government.Have questions that you would like to have answered in the next NEO presentation? Please submit questions here.