I had the opportunity to hear Mark Sprague, State Director of Information Capital, at Independence Title Austin on November 19, 2024. Mark is well known locally and throughout the United States. I would like to share some of the highlights of his presentation:
Where have we been (2020)?
- Federal funds rate cut to near 0% during the COVID-19 pandemic shut down the globe economy and caused the largest dip and rise in GDP in history.
- Supply chain disruptions and retail shortages are still effecting all industries.
- Values will remain strong and continue to grow in 2024/2025
- Inventory will continue to be challenging for the next 3 to 5 years.
U.S. Economic Concerns in 2025:
- US economy facing challenges with slow recovery from 2009 recession and supercharged economy through 2023.
- Only 3 of top 50 US metropolitan areas fully recovered since 2009 in terms of GDP, real estate values, and employment as of 2024.
- Lack of qualified applicants, and immigration policies not helping situation, exasperating labor costs.
- Declining population and falling labor participation also contribute factors globally as well as locally.
2025 U. S. Economic Outlook:
- Rate hikes have already delivered their biggest hits in GDP growth
- Don’t expect the low rates of the previous 10+ years (low rates equate to ailing economy)
- The global and our national economy fared better than many economies expected in 2024 and will continue to improve in 2025.
- Unemployment is historically low.
Texas Economic Outlook:
- Texas is the 8th largest economy in the world.
- The Lone Star State is home to 55 Fortune 500 Company Headquarters more than any other state.
- Texas has no personal or corporate income tax
- Texas is the largest energy producing state in the nation
Final Thoughts:
- Is the Fed Done raising rates? Tariffs, tax cuts without cutting spending will cause higher inflation and rates.
- Mortgage rates will bounce around between 6 to 7.5% for the next 12 months
- Residential will likely cost more in the Austin area – up 1-2-3% – each quarter of 2025
- Quit comparing to the last 3 exceptional years and one down year. The prior were outliers / once in a lifetime events. The latter happens every 7 to 10 years when inflation gets out of control.
- Prices will slow, but not crash. A return to normalcy.