INDUSTRY INSIGHTS Navigating the Shift Leading market insights from PLACE professionals to help you navigate an uncertain market
2023 will be a year of waiting and holding.
Change, while natural to economic cycles, prompts significant unease among buyers, sellers, and the agents who represent them. As real estate professionals, it’s our responsibility to combat extreme uncertainties that are often driven by a lack of consumer education. Having knowledge of what’s going on in the market – and why – allows you to be a better fiduciary to your clients during changing economic cycles. BIG PICTURE: CHALLENGING AFFORDABILITY As of October 2022, the consumer price index has increased 7.7% year over year. Despite this falling above economists’ expectations and being the lowest inflation reading since January, Federal Reserve Chair Jerome Powell said they still have “some ways to go.”
During the pandemic, the Federal Reserve kept interest rates near zero in hopes of minimizing damage to the economy. However, inflation persisted thanks to a variety of issues both global and local that constrained the supply chain despite stable consumer demand. We know inflation’s a major issue when we see prices rise across a variety of industries while our spending power decreases. In an effort to curb inflation earlier this year, the Fed approved its first rate hike since December 2018. Since March, we’ve seen six consecutive rate increases, four of which have jumped by 75 basis points. Today, borrowing costs across all sectors are at their highest rates since 2008. With the current economic headwinds expected to persist into 2023, rising rates will have a lingering effect on the economy overall.
Buyers will be reluctant to move until they see rates drop, and sellers are looking to hold on to their low-rate loans. Market insight and client service will be critical.
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