Global Economic Insights from Dr. Marci Rossell: December 2024/January 2025 Edition

At Michael Saunders & Company, our deep connections with international markets and long-standing relationships with industry experts position us to provide unparalleled insights into the economic forces shaping the real estate landscape.

One such valued relationship is with Dr. Marci Rossell, chief economist for Leading Real Estate Companies of the World. Her expertise, coupled with our global network through Luxury Portfolio International, allows us to stay ahead of trends that impact not only real estate but also the broader economic environment.

In her latest update, Dr. Rossell shares her top five economic insights from the past month, offering a lens through which to understand the shifting dynamics of the global economy.

1. Jobs Report Offers Mixed Signals

The November jobs report revealed stronger-than-anticipated growth, with over 200,000 new positions added. October's initially weaker numbers were revised upward-a common occurrence in employment data.

Despite this growth, the unemployment rate stands at 4.2%, suggesting that more individuals are returning to the workforce. As the Federal Reserve evaluates these fluctuations, its focus will remain on long-term interest rates and inflation, particularly with a key meeting scheduled for mid-December.

2. U.S. Economy: A Year in Review

The U.S. economy demonstrated robust growth in 2024, expanding by $1.4 trillion across various sectors.

Unemployment rose from 3.7% to 4.2%, prompting the Federal Reserve to adjust interest rates to support job creation and economic stability. Meanwhile, the federal budget deficit grew from 6.2% to 6.4% of GDP, highlighting persistent fiscal challenges.

In the housing sector, mortgage rates, which had been declining, began to climb post-election due to anticipated inflation and rate hikes. Home sales also experienced a slight dip, falling from 4 million last year to 3.96 million. Despite this, the stock market flourished, with the S&P 500 jumping from 4804 to 6075, showcasing strong investor confidence.

3. What Lies Ahead in 2025

Looking forward, potential policy shifts-including corporate tax cuts and deregulation-could benefit luxury buyers and high-income earners. Expanding the 2017 tax cuts and further reducing corporate tax rates are expected to fuel stock market gains and bolster the luxury real estate market.

However, larger tariffs on key trading partners like China, Mexico, and Canada could result in fewer Federal Reserve rate cuts and higher long-term interest rates. These changes may pose challenges for first-time and low-income homebuyers, who are especially sensitive to rate fluctuations.

Additionally, stricter immigration policies could tighten the labor pool for construction, exacerbating inventory shortages in the housing market.

4. Global Economic Ripples

China is grappling with an economic slowdown and a major real estate crisis, compounded by tariffs that strain both U.S. consumers and Chinese exports. This dynamic is likely to reduce Chinese investment in global markets, adding further pressure to their economy.

Production shifts away from high-tariff regions like China to lower-tariff zones may occur over time, but the transition will be gradual. Similarly, tariffs on Mexico and Canada could incentivize some production to return to the U.S., reshaping global trade patterns and potentially driving up consumer costs.

As the saying goes, "When the U.S. sneezes, the world catches a cold." The interconnectedness of global economies means U.S. policy changes have far-reaching effects.

5. Artificial Intelligence: A Double-Edged Sword

Artificial Intelligence (AI) is set to reshape the economic landscape. On the positive side, AI could alleviate labor shortages without causing widespread job losses. By enhancing worker skills, AI has the potential to transform low-skilled roles into high-skilled ones, leading to higher wages and increased tax revenue.

However, there are concerns about the societal impact of AI. As this technology evolves, it is essential for democratic societies to guide its development to ensure it serves the greater good.

Through our partnership with Dr. Marci Rossell and our global reach via Luxury Portfolio International, Michael Saunders & Company remains committed to providing the most relevant insights to inform your real estate decisions.

Dr. Rossell's expertise, as the former chief economist for CNBC and OppenheimerFunds, underscores the importance of understanding how global economics shape our industry and daily lives. Stay connected with us for more updates on the trends influencing the market.

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