Economic insights: April/May 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. Inflation and consumer activity

Hope for a June rate cut by the Federal Reserve has now been dashed, as consumer spending continues to fuel inflation despite the Fed’s multiple 2023 rate hikes.

Why? In the current era, consumers prioritize job security over interest rates when making spending decisions. With robust stock portfolios, elevated home values and strong job prospects, consumers are maintaining robust spending habits, leading to persistent inflation.

As of late April, consumer prices overall had increased 2.7 percent year-over-year, as gauged by the core PCE inflation rate. 

2. Federal Reserve and Treasury bonds

Any cuts by the Feds are likely to be postponed until at least September.

Mid- April tensions in the Middle East caused oil prices to surge above $90 a barrel, exacerbating inflation, and the escalating conflict between Iran and Israel prompted a “flight to safety” effect among investors seeking to lower risk by moving funds into the 10-year Treasury.

As of late April, investors are bracing for Treasury yields to breach the 5 percent reached last October – a number that has not been seen for over 16 years. 

3. Housing market

Mortgage rates have once again surpassed 7 percent and, tied as they are to the 10- year Treasury yield, are unlikely to dip back down significantly until the latter decreases.

According to April data from the National Association of Realtors, existing home prices saw a 4.8 percent increase year-over-year in March, while home sales decreased by 3.7 percent over the same period. 

4. Home prices and antitrust litigation

Recent headlines have misconstrued the role of real estate agents’ compensation in driving up home prices.

In fact, an April study by Bright MLS shows a modest but measurable correlation between compensation percentage and list price, suggesting that higher buyer compensation offers are actually associated with lower list prices for comparable homes.

Home prices are primarily influenced by factors such as property attributes, neighborhood quality, inventory levels, mortgage rates, demographics and labor market conditions. 

5. Strength of the U.S. dollar

Initially weakened by expectations of federal rate cuts earlier in the year, the U.S. dollar is now gaining strength as rate cuts are postponed.

Consequently, purchasing power for Americans abroad is enhanced, while U.S. real estate has become pricier for foreign buyers. U.S. buyers seeking to purchase property overseas have a measurable advantage currently, and agents transacting business globally should lean into opportunities for those clients seeking real estate investments abroad. 

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.