Economic Growth and Consumer Dynamics
The US economy continues to show robust growth, with GDP expected to increase by 2.3% on a Q4/Q4 basis in 2024. This surpasses earlier forecasts, driven primarily by stronger job creation and personal income data revisions. Consumer spending remains a pivotal force behind this growth. In the second quarter of 2024, real personal consumption expenditure rose by 2.8%, fueled by strong consumer behavior and an uptick in private inventory investment.
While consumer resilience is indeed playing a crucial role, the labor market further sustains this economic vigor. Recent figures reveal that the economy added 254,000 jobs in September. Adjustments for previous months also show upward revisions, contributing an additional 72,000 jobs combined. A declining unemployment rate now stands at 4.1%, while wage growth keeps up the pace with a 4% year-over-year increase.
Interest Rates, Inflation, and Housing Trends
On the monetary policy front, the Federal Reserve has reduced the federal funds rate by 0.5 percentage points as of September. Anticipations are set for more cuts to bolster ongoing economic expansion and consumer expenditure. However, a strong labor market has put upward pressure on long-term rates, leading to a hike in mortgage rates.
The housing market shows improvement with mortgage rates witnessing a slight decrease, yet housing construction has surged with single-family housing starts increasing by 15.8% from July to August. Despite these positive indicators, first-time homebuyers continue to grapple with affordability challenges.
Future Projections and Affordability Challenges
Projection models suggest that by the end of 2024, mortgage rates will hover around 6.0% before tapering off to 5.7% by the close of 2025. Meanwhile, home prices are predicted to grow 5.8% in 2024 and 3.6% in 2025. This future growth will be tempered by affordability issues and increased home sale inventories.
Inflation appears to be manageable with the Consumer Price Index (CPI) on a downward trajectory. The Federal Reserve’s rate cuts align with efforts to maintain inflation under control without inciting a recession. Looking forward, the GDP is expected to grow at an average rate of 2.5% annually from 2024 through 2028.
Demographic Trends and Housing Demand
Affordable housing continues to be a hurdle, especially for first-time homebuyers. However, demographic trends remain favorable as Millennials and Generation Z reach prime home-buying ages, sustaining demand in the housing sector. The ongoing national housing stock shortage continues to pose significant challenges to affordability, necessitating strategic developments in the housing supply.
This overview highlights the dynamics at play within the US economy, underscoring areas of strength and potential obstacles that policymakers and businesses need to address.
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References
Source: [Economic Trends Data](#)