Local Market Monitor, a National REIA preferred vendor, recently released their monthly National Economic Outlook where they share their thoughts on developments taking place in the U.S. economy.
National Economic Outlook
By Ingo WInzerMarch, 2024
Newly available data from the fourth quarter of 2023 don’t make the home price situation any clearer. On average, home prices increased about 5 percent in the past year, pretty much as they had in the previous two quarters. This means that the surge of the last few years is over but provides little guidance about when and what kind of price readjustment will follow.
Typically after a home price boom, there’s either a long period of flat prices or an actual decrease until they eventually realign with local incomes. And in the last 50 years such a realignment process has always happened. In almost all local markets home prices are now 20 to 30 percent higher than the corresponding incomes, so it’s difficult to imagine that this won’t happen again.
The real estate market is closely intertwined with the health of the economy in general, on the upside and the downside. A strong economy boosts home buying and home prices; but falling home prices cause consumers to spend less money, which can nudge a weak economy into a recession.
It’s not clear how strong the economy is right now. Jobs are growing at a 2 percent annual rate, but a lot of the new jobs are just due to restocking for jobs that were lost during the recession. Once that process is complete the actual growth of jobs may be no more than 1 percent, which isn’t very much.
In February, overall job growth was 1.8 percent, including 2.8 percent in construction, 0.2 percent in manufacturing, 0.4 percent in retail, 0.9 percent in finance, 0.7 percent in business services, 4.3 percent in healthcare, 1.8 percent at restaurants and 2.8 percent in government.
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