Market Predictions

Market Predictions

The last few years we’ve seen the market do some crazy things. Cash seemed to flood the market as prices for real estate reached new heights. Offers would typically go over asking price and some buyers would pay the gap between the appraised value and their purchase price. But what does 2022 have in store for us and what is causing it?

The Job Market and Personal Wealth

The great news is that there are 11 million jobs open in the U.S. right now, according to the Bureau of Labor Statistics. As of February 2022, approximately 19% of small businesses said they planned to hire in the next three months as well. Approximately 51% of large corporations planned to hire compared to only 13% that planned to downsize. Just in the last 24 months, the policies of the Federal Reserve have helped create some of the biggest wealth and lowest debt that we have ever seen as a country. According to the Federal Reserve Bank of St. Louis, household net worth increased from $110 trillion to $150 trillion while debt fell to a record low. There have never been fewer refinance opportunities for households in the U.S.

Interest Rates and Inflation

A combination of things are driving inflation. To balance the impact that Covid19 would have on our economy, the Federal Reserve lowered interest rates in order to keep consumers purchasing. During this time the government also announced more stimulus and big spending bills; when the US dollar falls in times like these, consumers tend to withdraw savings and began to put their money in hard assets. Covid19 also highlighted the impact that globalization has on the U.S economy. Labor shortages began to push wages higher as the U.S began to pull production back from countries like China. While gaining production independence as a country, this does increase the demand for labor, manufacturing facilities, logistics in the flow of goods throughout our country, and warehouse distribution needs. This combination of factors has lead to a steep increase in inflation that has caused the Federal Reserve to announce rate hikes in the last few weeks. Historically, when we see rate hikes by the Federal Reserve, we expect to see the DOW fall. We do expect the Federal Reserve to continue raising rates in order to curb inflation.

What’s expected?

Leading economists are expecting the land values for farmland to continue to increase. In 2021, farmland was up 22% according to the Federal Reserve Bank of Chicago. There is also a strong demand for commercial real estate. Properties along highways from Texas to the Northeast are being purchased for industrial and commercial uses due to the changing manufacturing and logistics in our country. Office space is beginning to make a comeback but Covid19 brought a work-from-home atmosphere that many businesses have decided to adopt permanently. Pension funds are expected to lower their return percentage again in late summer 2022. We will likely continue to have a housing shortage in 2022 as population soars and materials available remain the same.

While we can’t know exactly how this market will act, we can control our responses. Our focus will continue to be on solutions and relationships.  When you are ready to discuss a land loan, contact our team to get answers to your questions.

*Information in this blog is the opinion of the writer based on information made public by the Federal Reserve, leading U.S economists and the Bureau of Labor Statistics. This information is not intended to be used for personal planning decisions.