Happy 2023 friend! I hope your holiday season was magical!
We had an especially magical Christmas and welcomed our baby girl Catherine on December 19th. She is perfect in every way and we are loving being parents. We couldn’t be happier!
And now, it’s time to get down to the business of a new year! To kick it all off, I wanted to share a recap of 2022 with an outlook for 2023 that sums up the economic and housing markets, according to the data, and not the drama that’s so prevalent in so many of the media outlets.
The Fed and Interest Rates
In 2022, the Fed continued to raise its rate for Federal Funds to help curb inflation and reduce demand; however, interestingly the government’s fiscal policy is in direct opposition as it continues to borrow and spend to increase demand, which raises inflation. I’m not sure how this will all shake out, but Fed Chair Powell has announced that they will continue to raise the Fed Funds Rate until inflation returns to 2% or less.
Inflation & The Economy
Speaking of inflation, most recent reports have it clocking in at 7.1 percent (year over year), which sounds high but it’s actually down from 8.2 percent in September. A far cry from the Fed’s 2 percent target. The predictions I’ve seen by economists have it slowly moving lower in 2023 as we’re seeing prices fall in major categories like homes, energy, and cars. Inflation is notorious for rising quickly but retreating slowly.
Fortunately for Americans, the economy has continued to create jobs and pay has increased by 5.1 percent through 2022, with 4.3 million new jobs created through November (the latest data). However, there are 10 million job openings employers are looking to fill. The robust job market of ‘22 is expected to continue in ‘23.
GDP & Recession
According to the latest data, the gross domestic product (GDP) grew 3.2 percent in Q3 of 2022 revealing that the US economy grew at a 1.9 percent year-over-year rate. So in Q3 alone we made up for the contraction of quarters 1 and 2. Economists use negative GDP for 2 quarters as one indicator of recession but with Q3 busting that factor, recession fears are easing. However, we’ll have to see what Q4 numbers look like.
Consumer activity makes up two-thirds of our economy and as you know Q4 is a big quarter for consumer spending with holiday shopping. The season kicked off in high gear and puttered out some. However, for the year, Retail Sales rose 6.5 percent. Consumer confidence and sentiment indexes also showed increasing consumer optimism.
And one thing we love buying is homes…however at a slower pace in 2022. Both home sales and home prices fell in 2022 and expectations are that this trend will continue in Q1 of 2023. Demand for homes remains high and now with lumber prices back down to pre-pandemic levels, we’re looking forward to more inventory and choices coming online for buyers. Analysts are predicting a slower market in 2023, with lower prices, even though demand remains high.
So, if you’ve been considering buying, 2023 may be a great year for it. Let’s talk over your options and come up with some plans for you! Keep in mind, the winter months are a slower time in housing, which could be an advantage for savvy buyers! If you’d like to talk over your options, you can reply to this email or call/text me at 818.307.6072.