Economic insights: May/June 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. China housing crisis

In mid-May, Beijing authorities announced that the government would acquire $42 billion of unsold residential real estate from property developers and convert it into affordable housing.

This move comes in the wake of over two years of massive defaults by developers, such as Evergrande, leading to consumer mistrust and slowing overall growth in the nation’s economy.

As 70 percent of Chinese wealth is tied to residential real estate, the government’s recent announcement of a rescue was crucial to prevent a drawn out economic crisis, and has sparked optimism in both consumers and Chinese financial markets. 

2. Global growth

The United Nations recently forecast a 2.7 percent rise in global growth for 2024, a cautiously optimistic number, as pundits deem anything exceeding 2 percent as satisfactory for global living standards.

European central banks are expected to follow Switzerland’s mid-May lead in rate reductions, strengthening European exports which will, in turn, aid in U.S. inflation control during the second half of the year. 

3. Inflation and Fed activity

Inflation rose to 3.4 percent in mid-May, a 0.3 percent month-over-month increase.

While Dr. Rossell still views a September rate cut as a real possibility, ongoing strong consumer spending and a robust job market are sustaining current inflation rates, meaning the Feds will likely stay in “wait-and-see” mode through the summer months.

4. Mortgage and inventory

Nationally, the mortgage rate for a 30-year fixed product has hovered stubbornly around 7 percent, maintaining the “lock-in effect” for those homeowners who secured historically low rates during the pandemic era.

Nonetheless, with new construction up 5.6 percent in April month-over-month, a strong jobs market, and a September Fed rate cut still on the table, economists anticipate an uptick in housing market activity toward the tail end of the year. 

5. Financial markets outlook

In mid-May, the Dow closed above 40,000, setting a new record.

Financial markets are inherently unpredictable, and Dr. Rossell cautions that much of the current hot market activity is being spurred by early excitement in the realm of new AI-driven technologies.

Nonetheless, barring any significant unforeseen shocks, we can anticipate ongoing healthy earnings success carrying forward through Q3.

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.