📉 Prices dropped for the first time in over a year, 🏠housing affordability worsened, 🇬🇧 UK's economy shrank, but 📉 recession may be avoided in 2023 according to the Congressional Budget Office.
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How has housing affordability worsened?
How has housing affordability worsened?
Housing affordability has worsened due to several factors.
Home prices soared after the pandemic began, as people moved out of cities quickly, remote work increased, and home construction slowed.
Mortgage rates have spiked since March 2022 as the Federal Reserve raised interest rates.
Affordability hit all-time lows in late 2023, with the average monthly mortgage payment in the U.S. doubling in the last three years.
Black and Latino buyers have been disproportionately affected, with a lower percentage of affordable homes for their households compared to white buyers.
However, there have been recent improvements in affordability.
Mortgage rates have decreased, leading to slightly more affordable homes in recent months.
The increase in supply due to more buyers putting their homes up for sale has put downward pressure on sale prices for older homes.
Construction of new homes is on the rise, which should boost affordability to some extent.
Interest rates and mortgage rates are expected to decrease further in the years ahead, although overall home prices are unlikely to return to their pre-pandemic levels.
What factors contributed to the UK's shrinking economy?
What factors contributed to the UK's shrinking economy?
Revised official data shows that the UK's economy shrank by 0.1% in the third quarter of this year, compared to an initial estimate of no change.
Output in the dominant services sector fell by 0.2% in the third quarter, offsetting increases in construction and manufacturing.
Consumer spending dropped by 0.5% in the same period, slightly more than initially estimated.
Some analysts believe that the UK's high inflation and elevated borrowing costs are weighing down the economy and could be pushing it towards a recession.
The impact of previous interest rate hikes has yet to fully feed through to the economy, with around 1.6 million fixed-rate mortgages due to end in 2024, potentially affecting households' disposable incomes.
Why is the recession expected to be avoided in 2023 according to the Congressional Budget Office?
Why is the recession expected to be avoided in 2023 according to the Congressional Budget Office?
The Congressional Budget Office (CBO) predicts that the US economy will avoid a recession in 2023 and continue to grow, albeit at a slower pace.
The CBO attributes the slower growth to weaker consumer spending and commercial construction.
Unemployment is expected to increase slightly but remain at healthy levels, with the workforce growing moderately due to new immigrants.
The CBO's projections show that the economy will be adding only 45,000 new jobs per month by the end of 2024, which is a concern for President Biden as voters cast their ballots.
The softer labor market is expected to slow inflation, with the CBO projecting it to be at 2.1% in 2024, close to the Federal Reserve's target of 2%.
Bloomberg economists had previously predicted a 100% probability of a recession in 2023, making the US economy's ability to avoid a recession remarkable.
The US economy is currently experiencing real GDP growth of 2.5% in 2023, up from 0.7% in 2022.
The CBO still anticipates some slowing, with real GDP growth at 0.8% in the current quarter and projected to be 1.3% in the first quarter of 2024 before rising to 1.7% by the end of 2024.
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