Market Trends October 2022
Housing Market Trends
The median home sale price hit $433,100 at the beginning of 2022, up from $329,000 at the start of 2020. Just 43% of the homes sold in the second quarter of 2022 were within the budget of a family earning the median income of $90,000 per year, according to the National Association of Home Builders. The median down payment was $35,000 in the second quarter of 2022, up almost 35% from the previous quarter, according to ATTOM, a real estate market data firm.
Zillow says that’s it’s practically impossible to predict where home prices will be ten years from now, but they believe that going forward home price growth will be much closer to historical norms of 3% to 5% annually rather than the record pandemic-induced pace we’ve seen over the past two years. No one believes we’re going to see a big decline in home prices.
Home values leveled off over the summer as buyers pulled back, rebelling at higher prices and rising mortgage rates. Analysts caution that pent-up demand will keep prices from falling to anywhere near pre-pandemic levels as people have come to acknowledge the new normal. Price drops are likely to be short-lived and minimal unless there is a big increase in inventory.
Home builders are unlikely to adopt a “build it and they will buy it” mentality; that attitude and loose lending standards were partially behind the big housing crash in 2008. Mortgage lenders now have much higher standards for loaning money. Nevertheless, the housing shortage is a real issue that is going to take a long time to fix.
Buyers are beginning to get a bit more bargaining power and are now able to come in under ask in some markets and negotiate prices and concessions. However, with higher mortgage rates, the median mortgage payment is nearly 40% higher than it was just a year ago. Rates have risen from 3% at the end of 2021 to pushing 6% at the end of September and there is no real end to the rate hikes in sight for the immediate future.
Housing analysts do not anticipate a market crash; at most, a correction that will bring price appreciation more closely in line with historic standards.
The average cost to build a home is just over $282,000, according to HomeAdvisor, but volatile supply costs have made predicting the cost of building a home especially challenging over the past two years. That’s just the house; people need to buy the land and account for infrastructure needs as well. The average house took 8.2 months to finish in 2021, according to the Census Bureau.
The average rate of inflation over the last 10 years is 2.53%, according to the Consumer Price Index. In the past two years, though, inflation has soared at a rate of 4.7% in 2021 and 8.6% percent so far in 2022.
Boomerang Employees Come Back
The Great Resignation is turning into the Great Return. More than 400,000 people quit their jobs over the past two years, hoping for a better job, more flexibility, better pay and hours and more satisfaction. But a recent survey shows that more than half of them report that their new path has not met their expectations. Job jumpers moved to new careers that may have paid more but the jobs turned out to be less fulfilling or more demanding. Now one-third of all new hires are boomerangers who have decided the grass was pretty green where they were formerly planted. Some companies are luring employees back with better benefits, more pay and perks. Employees and employers may have both learned lessons from the very tight job market and high mobility created by the pandemic.
White House Economic Forecast
The White House recently released an updated forecast for the US economy that foresees slower economic growth and significantly higher inflation than previously forecast. Consumer prices are expected to rise 6.6% this year, 2.8% in 2023 and 2.3% in 2024. Real US GDP growth will be 1.4% in 2022, 1.8% in 2023 and 2.0% in 2024.Unemployment will average 3.7% in 2022, 3.7% in 2023, and 3.8% in 2024.
Product Packaging Under Scrutiny
Product packaging has been under the microscope for almost a decade as people search for greener and more recyclable options with smaller footprints. Greg Fornasiero, Director of Packaging Engineering at The Home Depot, recently discussed what they are doing to improve packaging and make it more sustainable.
The Home Depot focuses on performance, value and sustainability. The bulk of their focus is on making sure packaging performs as expected. They test all new product packaging to make sure it can get safely through the supply chain to a customer's home or work site and send the packaging through ISTA (International Safe Transit Association) testing, drop testing, vibration testing and compression testing.
They question every aspect of packaging with an eye to how it performs and meets expectations, and how it can be improved. The right packaging does a better job of protecting products, cutting down on shipping space and costs and reducing the supply chain’s carbon footprint.
The Home Depot has pledged to exclude expanded polystyrene (EPS) foam and polyvinyl chloride (PVC) film from private label packaging by the end of 2023. Fornasiero team is responsible for ensuring that pledge is met by securing alternative materials that perform as well and don’t cost more. Sometimes they can find ways to make packages smaller in ways shoppers don’t even notice but make an enormous impact overall.
CHIPS Act Provides $39 Billion for Construction and Supports US Chipmakers
President Biden recently signed the CHIPS act into law. The legislation will provide $39 billion towards the construction of plants in the US that manufacture the microchips that are vital component to everything from automobiles to smart phones. There are also tax breaks for chipmakers and billions of dollars more for research. The bill was widely supported by various industry groups.
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