FORECAST 2023
decline by 2.6 percent. While afford- ability has sunk to its lowest level since late 2007, the 30-year fixed mortgage rate is within striking dis- tance of its highest level in over a decade, leading to a decline in pur- chase applications. Tight housing supply is only adding
to upward pricing pressure. The inven- tory of for-sale homes remains histori- cally low, and new ones will be scarce on the ground. “We expect housing starts to fall by 1.8 percent and two percent in 2022 and 2023, respec- tively,” says Yaros. “This compares with a 15.1 percent increase in 2021.” There’s only so much the industry
can do to bolster housing supply—one big reason being the aforementioned labor shortage. “The unemployment rate for experienced construction workers is about as low as it’s ever been,” says Yaros. “Capacity limits have delayed housing completions and
contributed to a record number of housing units in the pipeline.” One bright spot in the housing pic-
ture: Mortgage credit quality has never been better. “The percent of loans delinquent and in foreclosure is at a record low,” says Yaros. “This goes to the stellar underwriting standards since the financial crisis, and borrowers’ credit scores are much higher.” While lending standards for mortgage loans are now tightening, the credit spigot is unlikely to seize up as it did during the financial crisis of 2008.
Looking Ahead Given the above concerns, it’s little wonder corporate confidence is taking a hit. As the calendar turns to a new year, companies are responding to soaring interest rates and inflation by scaling back the capital investments that help fuel the economy. “Up until the second half of 2022, most
“Inflation is the
driver of near- and medium-term
economic outlooks.” - ANIRBAN BASU
companies were taking advantage of low rates to plan ahead for equipment purchases and expansion opportuni- ties,” says Palisin. “Now, though, many are taking second looks at anything planned for 2023.” Businesses are also taking steps
to increase their liquidity to cushion against tough times. “We are all going to need to watch our cash flow,” says Palisin. “Most of our mem- bers anticipate a slowdown in orders, and as a result they are holding off on some future investments and pull- ing back in hiring.” Uncertainty is the name of the
game, and that makes planning diffi- cult. “We are faced with a kind of a two-sided coin,” says Palisin. “The positive side represents strong current orders and a continuing need for more workers, while the negative side rep- resents inflationary pressures and global headwinds.” Which side of the coin will show its
face in 2023? Economists advise watching a few key indicators. “In the early part of the year companies should keep an eye on what is hap- pening with the cost of money,” says Basu of Sage Policy Group. “Inflation is the driver of near- and medium-term economic outlooks.” A second vital element, he said, is the employment picture. “Employers should watch for any emerging weakness in the labor market.” Finally, what about consum- ers? “Any softening of spending would point to a looming recession.”
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20 Self-Storage NOW! FIRST QUARTER 2023
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