Economic Insights: January 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. Federal Reserve activity

The Federal Reserve indicated in December 2023 that it was likely to make at least three rate cuts in 2024. With CPI inflation at 3 percent mid-month, just shy of the Fed’s 2 percent target rate, Dr. Rossell anticipates that Fed cuts are likely to begin in the second quarter of 2024, if not sooner. The December markets rallied in response to the Fed’s announcement, with bank stocks hitting gains not seen since before the March 2023 banking crisis.

2. U.S. spring market predictions

In mid-December 2023 mortgage rates fell below 7 percent for the first time since August, and consumers responded accordingly, with refinances up 2 percent and year-over-year listings up 7 percent.

Dr. Rossell believes the market will continue to stabilize during 2024, with a notable inflection point for the better coinciding with the Fed’s first anticipated rate cut in the spring. Nonetheless, Dr. Rossell cautions against comparisons to past market patterns.

“Sellers may think it’s 2020, and buyers may think it’s 2008,” she said. “It’s a new year. This will be 2024, and it’s going to be its own thing.”

She also cautions to take economic news during the first quarter of 2024 with a grain of salt, as markets will likely be lurching through a “two steps forward, one step back” pattern through the end of March.

3. U.K. update

The overall outlook for the United Kingdom’s housing market improved in November 2023, with sales up for the first time since November 2022.

While market analysts were keeping a close eye on a steeper-than-usual decline in U.K. home prices in December, Dr. Rossell does not anticipate massive disruptions to their housing market in 2024. She notes that the country’s years-long adjustment to Brexit is coming to a close.

“We’re far enough into the new economic reality that the shockwaves are diminishing as long-term stability – both economic and political – sets in,” she said.

4. 2023 U.S. labor market in review

“The ongoing strength of labor markets,” Dr. Rossell said about what surprised her most in 2023.

“We raised rates from zero percent to over 5 percent and, while inflation came down accordingly, we saw no meaningful impact to the labor market. Folks not only kept their jobs, but we saw 200,000 new jobs created every month.”

She attributes the strength of the jobs market in 2023, in part, to online professional networks creating less lag time for individuals between jobs, as job seekers tap into their networks and avoid longer-term unemployment.

5. All eyes on AI in 2024

Per Dr. Rossell, AI regulation should be a priority for legislators in the coming year, as the technology’s impact on markets and the economy will continue to grow exponentially.

“I’m concerned we can’t seem to get it together enough to pass simple things like a farm bill,” she said.

Given the significant implications of AI, Dr. Rossell believes reasonable AI-focused lawmaking will be necessary to prevent potential unintended consequences for the economy in 2024.

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.