Linz’s Musings – What the U.S. market looks like for 2024
G’day all
One tenth of the year gone already, and I hope you are all off to a fantastic start! If not, don’t panic, plenty of time yet, but how quickly is this year moving already?
I was listening to a great podcast last week from a very experienced Economist in the U.S. – Rick Sharga. If you have not heard of him, Rick is the Founder & CEO of CJ Patrick Company, a market intelligence and business advisory firm that operates in the real estate, financial services, and technology space.
Rick is of the country’s most frequently quoted sources on real estate, mortgage and foreclosure trends, and has appeared regularly over the past 20 years on CNBC, the CBS Evening News, NBC Nightly News, CNN, ABC World News, FOX, Bloomberg and many others.
He is regularly my ‘go-to’ for all things U.S. economy and I follow him where I can to help cut through the media smoke screen.
I wanted to give a quick recap of his market predictions for 2024, a quick synopsis if you will, but if you want to listen to the full episode, email us and we can provide links.
So, firstly some market stats…
For the Q4 drivers announced early Feb, the GDP for the U.S. came in at 3.3% which was up 1% on forecast. For reference for the same period, our GDP here in Australia came in at 0.2% (interesting from a population perspective, with immigration accounting for 0.6% this shows a negative GDP per capita for the past 3 quarters)
U.S. unemployment rate was steady at 3.8%, another interesting stat, given that in the States, full employment is deemed to be around 5%. There are currently 8.8 million jobs available with 6 million workers looking for work, so very tight job market.
Wage growth is also strong at 5% and average hourly rate up to $29 now, as a national average.
These are the main drivers we look for, and particularly with the U.S. being such a highly capitalist society, GDP, unemployment and wages growth are key indications to show economic strength and unemployment numbers can often directly impact the housing market (more so that interest rates in the U.S.)
Predictions for 2024 is it seems to be quite a resilient economy with the doom and gloom of recession that has been forecast in media still not in sight. Lots of fear, uncertainty and doubt (FUD) being forecast via media outlets though, with no hard data to back up any of that.
Still very low inventory on market for residential, with numbers approximately 1.3 million homes on market, still way down from 2019 numbers of almost 2.5 million (healthy market can be as high as 1% or approximately 3 million). This low inventory market is predicted to hold until interest rates come down to sub 5% levels.
Home foreclosure activity is still over 30% down on 2019 numbers. Predicted to possibly rise a little (between 5-10%) but still way down on pre pandemic numbers. This may though, lead to great opportunities for buyers at a pre-foreclosure level.
So all in all, we are looking at a steady, if not, quite resilient market for this coming year, with interest rates still predicted to see some cuts towards the 2nd or 3rd quarters. Some excellent opportunities though for investors, and particularly for us as foreign investors, I think it will still be a good year for diversifying with our AU economy here looking quite sluggish.
For those that follow the RBA, it was interesting this month (Feb 2024) to see the RBA board still quite hawkish on rates, and while the decision was made to hold, the press conference and minutes showed that another rise was on the table…
This is quite the opposite of what economists thought, with quite a dovish sentiment, with expected rate cuts to come in the next medium term.
The RBA is now aligning its meetings to more imitate what the U.S. Fed does, with meetings now each 7-8 weeks instead of previously monthly. The meetings will be longer (around 2 days) with press conference and minutes release afterwards.
For us, this means only around 7 meetings per year for the RBA now, rather than the previous 10-11 per year.
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