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Economic and Real Estate Outlook for March 2023

By Ernesto Rostoker and Michael J. Seiler

With a two consecutive quarter increase in real GDP1 and what appears to be an effective monetary policy of steadily increasing interest rates in an attempt to quell inflationary pressures, we have a tempered confidence in the economy. Inflation remains at too high a level, currently 6.4 percent year-over-year, but this number has steadily decreased from its 9.1 percent 40-year high just seven months ago, and we expect it to continue to do so, albeit over the next year or two. While our uptick in confidence is not universally shared by the general public, we are emboldened by a 3.4 percent unemployment rate and slightly improved business conditions.2 Personal income moderately increased during the last quarter, led by the western and south western parts of the country. Interestingly, personal income increases slightly favor rural areas over more metropolitan locales. Recent job growth has been experienced more in non-farm and the private sector and favors the service industry over manufacturing. Personal saving rates are slightly up, which bodes well for personal economic safety nets, but also can signal a hesitancy to spend based on a less than favorable personal economic outlook. Taken together, we generally are more bullish on the economy than other market pundits.

FLORIDA REAL ESTATE MARKET

While rising mortgage rates have drastically reduced housing affordability, the correlation between the number of home sale transactions and home prices has changed. This is true particularly in the more metropolitan areas such as Miami Dade County, Broward County and Palm Beach County where sales have dropped more than 30 percent (year-over-year observed)while at the same time prices in the area have not decreased; on the contrary, prices have modestly risen.3In 2022, the Census Bureau ranked Florida as the fastest growing state in the country. Recent rankings put Florida among the top 10 states with regards to a favorable Business Environment and Fiscal Stability. These data are consistent with the state’s growing economy and with an inflow of young working people.4 Remote hiring is also making the Florida housing market more attractive. Recently proposed legislation is gaining attention among real estate developers, for which major tax breaks and additional funding are to be included in the bill. With an eye on affordable housing, the bill could be made effective as soon as July of this year. The bill also will support expediting permits and would further restore funds to the Sadowski Fund. This legislative approach to resolve the current low housing supply could prove helpful. The Sunshine State’s economy has also been gaining traction as more than 60,000 new businesses were incorporated last year. Moreover, the median income grew by more than 21 percent since 2015. Finally, unemployment in December 2022 was at the lowest level in more than a decade (FRED).

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