The Full Measure with Kevin Hecht: Economic Recap October 2023

The Full Measure with Kevin Hecht: Economic Recap October 2023


The real estate market is constantly evolving, and staying current with trends and shifts is essential. The housing market, in particular, is witnessing remarkable dynamism, with limited housing stocks and escalating mortgage rates reshaping the paradigms for buyers and builders alike.

As professionals trusted with valuing properties in a fluctuating market, it’s essential for appraisers to understand and anticipate these changes. In this economic recap for October 2023, we’ll unravel the intricacies of the present-day real estate scene, offering insights and analyses to arm you with the needed knowledge.

Subscribe to our newsletter to get valuable economic insights, career tips, and industry news straight to your inbox.

Economic recap October 2023

The quest for additional housing: A deep dive into current real estate dynamics

Recent statistics from the National Association of REALTORS® (NAR) indicate a 2% decline in Existing Home Sales from August to September. This weakening places sales at an annualized rate of 3.96 million units, a point not encountered in the past 13 years. When juxtaposed against the data from the same period last year, there’s a marked reduction of 15.4%.

A distinct shortage of homes on the market lies at the heart of this challenge. As we closed September, a mere 1.13 million homes were listed—a stark contrast to the 1.23 million during the same period last year. To lend further context, the figures from 2019 were nearly double. The lack of inventory is further accentuated when one acknowledges that a significant number of homes labeled as ‘available’ are, in fact, already under contract—the actual count of homes available: a scant 702,000.

An uptick in housing initiations: Is it sustainable?

September housing starts rebounded 7% after a two-year slump. Upon closer inspection, multifamily units fueled this spike. Single-family dwelling starts increased by 3.2%. Nonetheless, there’s an undercurrent of uncertainty. Alicia Huey, the Chair of NAHB, voiced her surprise at the uptick in single-family construction. She pointed out that elevated mortgage rates have cast a shadow on builder optimism.

The projection? We might be bracing for a potential decline in housing starts in the foreseeable future. Even after discounting annual replacements due to natural deterioration, the number of completed homes scheduled to hit the market falls short of new household demand. The inference? The current supply and demand imbalance will raise home values further.

Builder confidence falters: The ripple effects of escalating mortgage rates

In October, the Housing Market Index, as presented by the National Association of Home Builders (NAHB), experienced a noticeable deterioration, plummeting to a score of 40. This is a significant ten-point decline below the pivotal 50 threshold. The chief instigator? Skyrocketing mortgage rates have deterred prospective buyers and escalated expenses for the building community.

Navigating rate decisions amidst global economic interplay

There’s anticipation surrounding the Federal Reserve’s next move. A number of its members are leaning towards maintaining the current rate at their next meeting. The objective? Ensuring sustained economic growth and effective inflation control. Fed Chair Jerome Powell has dropped hints of potential rate increases contingent upon interpreting forthcoming economic cues.

The Fed’s stance can be likened to a delicate balancing act. Their ongoing challenge is to counterbalance the demands of an expanding U.S. economy against the looming specter of inflation. Equipped with current information, their decision-making embodies a proactive stance, aiming to maintain economic stability.

However, the U.S. housing market does not exist in isolation; broader global developments influence it. Factors such as geopolitical realignments, especially evident in regions like the Middle East, can create domino effects felt closer to home. For instance, variations in the oil and energy markets can instigate changes in domestic prices. This, in turn, can influence disposable incomes, reshaping housing affordability dynamics.

Mortgage markets navigate through a storm

This year, mortgage markets have been stirred by significant volatility. October witnessed Treasury yields reaching a 16-year high, a shift that directly impacted mortgage rates, catapulting them to figures reminiscent of 23 years ago. Freddie Mac’s insights confirmed this, noting that the U.S. average 30-year fixed-rate mortgage had risen to an imposing 7.49% earlier in October.

This surge had a domino effect on mortgage demands, with a striking reduction in total mortgage applications — they plummeted by 25% year-over-year during September’s third week. Despite these fluctuations, most homeowners continue to meet their repayment commitments. However, August 2023 did register a marginal uptick in mortgage delinquencies.

Yet, the narrative doesn’t end here. While August and September both saw rates breaching the 7% mark, the possibility of increasing rates may be propelling potential homeowners to hasten their buying decisions. The intent? To lock in at a more favorable rate before they climb even higher. A survey conducted in September underscored this sentiment: almost half of the respondents anticipate further increases in mortgage rates over the next twelve months.

A deep dive into the resilient U.S. employment landscape

September 2023 unveiled an encouraging picture for the U.S. labor market. An impressive 336,000 jobs were infused into the economy, significantly outstripping the preceding year’s monthly average. Sectors like leisure, health care, and government led the charge in this expansion.

This strength was not confined to a few states; nonfarm payroll employment reported growth in 40 states, along with the District of Columbia. Noteworthy contributors to this surge included Texas, New York, and Florida. Yet, it’s crucial to highlight that nine states, led by Michigan, did witness employment contractions.

The construction industry mirrored this positive sentiment, boasting an addition of 11,000 jobs in September alone. When viewed year-over-year, construction employment nationwide increased by 2.8%, capturing an addition of 217,000 roles. However, it wasn’t solely rosy; a cloud looms on the horizon: a recent influx of WARN notices, indicators of possible layoffs, suggests this positive trend may face challenges shortly.

Inflation and consumer sentiment: A mixed economic picture

Inflationary pressures, although showing hints of abating, have been complicated by skyrocketing energy prices, potentially laying the groundwork for future inflationary challenges. While broader inflation indicators suggest a downturn, core inflation — which strategically omits unpredictable variables like food and energy — has registered a slight uptick.

The consumer mood has dropped to its lowest in the past five months. This downturn can be traced to intensifying inflationary pressures and looming uncertainties. Yet, despite this clouded consumer outlook, household financial confidence remains resilient. Bolstering this optimism is the fact that the economy currently enjoys a surplus savings buffer approximating $400 billion, hinting at sustained economic buoyancy at least through the first quarter of 2024.

Commercial real estate

As the year concludes, uncertainty permeates the market due to the Federal Reserve’s tightening monetary policies. This uncertainty reverberates in the commercial real estate market, manifesting as increasing vacancies and decelerated rent growth.

Despite these challenges, the Multifamily Properties sector has seen a resurgence in demand thanks to high mortgage rates, evidenced by a 33% year-on-year boost in net absorption. In contrast, the Office Property sector grapples with a high 13.3% vacancy rate, even as AI-driven companies seek more space.

The Industrial & Warehouse sector stands out with a robust 7.5% rent growth, the most significant among its peers. The Retail Properties sector, buoyed by a low 4.1% vacancy rate and resilient consumer spending, is outshining its pre-COVID benchmarks. Lastly, the Hotel/Motel Properties sector displays promising signs of recovery, with revenues climbing 13% from pre-pandemic levels.


For real estate appraisers, understanding the current housing market complexities is paramount. Our valuation strategies must evolve with factors ranging from housing shortages and fluctuating mortgage rates to broader economic indicators. While some trends, like robust demand and a resilient labor market, hint at opportunities, others, such as rising inflation and global uncertainties, advise caution.

It’s more than just numbers; it’s about gauging the narratives behind them. In these dynamic times, staying updated and adaptable ensures our appraisals remain accurate and relevant in a rapidly changing market landscape.

Thank you for reading “The Full Measure with Kevin Hecht: Economic Recap October 2023.” Subscribe to our newsletter to get valuable economic insights, career tips, and industry news right to your inbox.


Written by Kevin Hecht. Kevin has been a real estate appraiser since 1987, and currently holds a Certified Residential appraiser license in Missouri. As a McKissock Learning instructor, Kevin specializes in market analysis, USPAP, and real estate economics. In addition to being an appraiser, Kevin is an Adjunct Professor of Economics at Maryville University.