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. Global inflation
We are at the cusp of a global easing cycle, with central banks considering their own best approach as inflation cools at varying degrees in nations around the world.
According to Eurostat, the European Union’s statistical office, inflation in the EU was down to 2.5 percent in June, a 0.1 percent decrease month-over-month.
Despite modest signs of inflationary cooling, the European Central Bank is holding off on any near-term rate cuts prior to receiving additional confirmatory data that inflation will continue to move in the right direction. In contrast, the Swiss Bank is taking a lead position in the easing cycle, making a second rate cut in mid-June.
Japan is holding steady for the time being in light of its weakening economy, as is the United Kingdom.
2. Global trade
The threat to global democracy posed by Russia and China was a hot topic at the June G7 meetings in Italy, with discussions focused on tariffs, economic restrictions and subsidies to combat geopolitical risks from the two giants. If carried out, these responses will inevitably raise prices across the board at a time when inflation is already elevated.
Dr. Rossell notes that discussions at the G7 meetings reinforce the fact that we are entering a new era of global economic unraveling, with lines divided roughly between West and East.
3. U.S. federal activity and inflation
According to data published June 12 by the U.S. Department of Labor, inflation is at 3.3 percent, with housing continuing to be a major contributor. Month over month, housing costs rose 0.4 percent in June.
Expectations of a September Federal Reserve rate cut have cooled in light not only of ongoing sticky inflation, but also due to the November presidential elections.
Per Dr. Rossell, the Feds go to great pains to avoid appearing politically aligned, and may err on the side of stasis immediately prior to the elections in order to maintain their politically neutral optics.
4. U.S. housing inventory and affordability
According to late-June research published by realtor.com, housing inventory continues to loosen, with on-market homes up 38.1 percent year-over-year.
While any increase in inventory is great news for buyers, affordability challenges persist, as home prices continue to rise nationally and mortgage rates on 30-year fixed products continue to hover stubbornly at and above 7 percent.
5. U.S. homeowners insurance
The cost of homeowners insurance is on the rise across the U.S., exacerbating affordability challenges for prospective homeowners. According to data from the National Association of Realtors, insurance premiums are expected to rise 6 percent by the end of the year.
Nonetheless, Dr. Rossell emphasizes that homeowners insurance affordability varies widely by region and state, and that homebuyers should continue to recognize the importance of having a skilled real estate professional by their side in order to navigate these – and other – tricky waters posed by the current housing ecosystem.
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.