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Ilyce Glink's Love, Money & Real Estate #21
New Year, New Predictions, New Plans and an Old Pandemic
It’s a new year. Time for a fresh start. What goals have you set for this year? what plans have you made?
January has always been one of my favorite months. And, not just because we’re in an era of climate change, so winters in Chicago aren’t what they used to be.
I like January because as the owner of several companies, I know that a new year means new beginnings. It means that anything can happen - I just have to set it in motion. When the phone rings (or my email dings), I often have no idea what I’ll find: A new opportunity is just as likely as someone saying “Thank you!” for something that happened last year.
But as I look back on the year that was, I also know that any plans I make for this new year only have a 50/50 chance of happening. As I get older, I’ve realized that I need to be more specific, more “niche,” about my goals and dreams if I want them to happen.
So, I can’t just say “I want to grow my business.” I have to be clear, explicit even, about landing a certain deal with a specific client. And, I have to be laser focused on the end result, whether that’s raising revenue, landing bigger deals, moving the chessboard.
Nothing happens in a vacuum. And, nothing happens if you’re so general about the goal that you can’t reverse engineer what needs to be done to get there.
So, what are your plans for 2023? And, how can I help you get there?
End of the Pandemic?
We’re finishing the third year of the pandemic, but we’re not out of the woods yet. The CDC is already tracking the rise of a new variant, XBB.1.5, that accounts for 41% of new cases. It also seems immune to the latest booster. Several fully vaxxed and boosted people I know recently contracted Covid again, for the third time. But because of those vaccines and boosters, their cases were relatively mild.
While Covid is clearly going to be with us for awhile, the world is moving on, particularly the business world. As I see it, employers have experienced three phases of Covid:
Phase I: Go home. Stay alive. There’s a lot of finger pointing in the rear-view mirror, but in March, 2020, no one knew what Covid-19 was and how quickly it would kill people. I remember frequently (frantically) checking the Johns Hopkins Covid website, to see how quickly the virus was spreading around the world. It was frightening to watch the infection/death numbers explode.
So, everything shut down. For two months. The ramifications of which continue.
From a business perspective, most businesses either had a “great” pandemic or a terrible one. As it turns out, many businesses didn’t survive, even with government assistance.
Phase II: Come back to the office/Great Resignation. Fast forward a year, and companies started requiring employees to come back to the office. CEOs were eager to show investors and customers that everything was “back to normal.”
But, it wasn’t and most employees refused. Schools in many areas were still closed, or operating on a hybrid schedule. That meant someone had to stay at home with the kids, watching them and making sure they attended zoom school.
As the calls for corporate “nomalization” increased, many employees started voting with their feet, hence the Great Resignation. If you could find a different job, one that either paid better, had better hours, more flexibility, perhaps better benefits, you left. Employers began offering hybrid work, pleading with employees not to quit.
Still nearly one-third of Americans changed jobs during the pandemic, according to an NPR/PBS NewsHour/Marist national poll. Productivity began to suffer.
Phase III: Employees demand more: promotions, wage increases, even more flexibility and better benefits. Lots of folks are still thinking about changing jobs. With more than 10 million job openings and just 6.1 million people looking to get hired, employers have realized they have to invest in talent acquisition. That means giving existing employees significant raises in order to keep them and paying more for new hires. While this has contributed to inflation, there are signs that the pandemic-induced inflation mania is subsiding.
As we finish year 3 of the pandemic, so many people are just over it. Schools are open. Businesses are open (some now permanently hybrid or completely WFH - as my companies are) and employers are cracking down on employees holding two full-time jobs concurrently. People who are fully vaxxed and boosted are still getting Covid, but the panic is subsiding, mostly. We’ve figured out that we’re going to live through this, so it’s time to move forward.
What will 2023 bring for your business?
News of the week
I know it’s just the first week in January, but already there’s a lot of money and real estate news to set things off.
2023 Predictions and Forecasts
We are expecting a recession in the first half of 2023, which will result in the unemployment rate increasing from 3.7% as of November 2022 to 5.5% by the end of 2023.
The Federal Reserve will continue to increase short-term rates to fight inflation. They will ultimately be successful, but it will be early 2024 before inflation reaches their 2% target.
Although short-term rates will continue to increase as the Fed pushes them up the next few meetings, long-term rates have already peaked. We expect that 30-year mortgage rates will end 2023 at 5.2%.
While we would still characterize the path for the national home price index as “flat”, we are now forecasting several quarters of year-over-year declines in the level of national home prices. We had already been expecting some pretty significant declines in the West and Mountain regions of the country.
Our new forecast has mortgage origination volume dropping about 15% in 2023 compared to 2022 to about $1.9 trillion. Incoming application activity remains quite low even though mortgage rates have dropped almost a percentage point recently, so we scaled back our forecast for the first half of 2023. We are forecasting $1.45 trillion in purchase originations, $449 billion in refinances for 2023.
We have also reduced our forecast for both new and existing home sales in line with the ongoing weakness in purchase application volume. The new home sales are expected to average a 616,000 unit annual pace in 2023, a 4% decrease from 2022, while we expect 4.5 million existing home sales, a decline of almost 13%.
Delinquencies and foreclosures remain quite low, but we do expect them to increase next year as the unemployment rate rises.
Industry employment has declined, but we expect it will decrease further in 2023.
LendingTree’s 2023 predictions include:
Average interest rates on 30-year fixed mortgages will be between 5.5% and 6.5% when 2023 ends
Home prices will fall between 5% and 10% nationally year over year
The unemployment rate will finish 2023 by rising above 4%
Year-over-year inflation growth will fall to between 3% and 4% by the end of 2023
The federal funds target rate will end up around 5%
How accurate are these predictions? I was going to see how well LendingTree did on their 2022 predictions, but they’ve updated the page with the 2023 predictions, so I’m late to the party on that.
But, it’s easy to guess that no one would have predicted a year of “Never Befores,” as I put it.
This Just In…
Doug Duncan, Chief Economist at Fannie Mae had this to say about the latest Refinance Application-Level Index (RALI) results:
Refinance applications decreased almost 30 percent as a result of the Christmas holiday-shortened week. With mortgage rates having moved sharply higher over the year, refinance activity ended 2022 down 86 percent compared with the end of the prior year.
Best/Worst States for Retirement
Thinking of leaving the U.S.? Global Residence Index, a company which helps individuals obtain a “golden” visa or “citizenship by investment” in another country, recently ranked the best and worst states in which to retire:
Best states (top down): Washington, Minnesota, Massachusetts, Hawaii, Oregon, New York, California, Vermont, Connecticut and New Hampshire
Worst states (bottom up): Alabama, Tennessee, Oklahoma, West Virginia, Wyoming
Washington ranked in the top ten for five out of seven key factors: air quality, life expectancy, violent crime reports, environment quality, Medicaid spending and 65+ population.
But, clearly, there are other reasons to move to a state, including: taxes and overall cost of living, cultural opportunities, recreational opportunities, population diversity, opportunities to pursue activities and ongoing learning, and being close to your children, grandchildren, friends, house of worship, etc.
I’ll publish other lists as the year goes on, but like all things, where, when and how you retire is a highly personal decision. Not to be taken lightly.
Finally, get ready to see more about boomerang sellers, those sellers who were unable to offload their properties as quickly as they had hoped for as much money as they wanted. They’ll be coming back to the market this spring. Will they lower their price for a quick sale? We’ll have to see.
Medigap insurance - nightmare decision
One of my goals in 2023 is to include more healthcare coverage and resources in this newsletter. That includes resources for Medicare, Medigap Insurance, and Long-Term Care Insurance.
According to new information from the American Association for Medicare Supplement Insurance (because there is a trade association for nearly everything, I think), Medigap Plan G is the most popular choice among men and women turning 65. Just over half (51%) chose Plan G, while 38% chose Plan N.
Price points are all over the place, which makes is difficult to decide which plan is best. The monthly cost for Plan G ranges from $78.65 (Iowa) to $476.04 (New York city). Beyond that, there are price differences inside a single zip code. For example, the range for 50061 is $78.65 to $192.09.
All of which is to say, which Medigap Insurance to buy is a complicated decision. Don’t wait to do your research the week before a decision is due. Start planning months in advance.
Here’s some information that might help you get started, along with a link to the best prices for Medigap Insurance from the American Association for Medicare Supplemental Insurance:
Rates (premiums) are based on where you live.
There can be as many as 20 different insurers offering coverage
No one insurance company always has lowest cost
Neither is one insurer consistently the most expensive
Insurers can offer discounts (up to 14% or more)
They can charge added premium fees
Insurance agents may represent only 1 or 2 plans, not everything that’s available in your area
Some agents (brokers) will represent more insurance companies
Asking about the history of rate increases is important
Hot Reads from ThinkGlink.com, LawProblems.com and BestMoneyMoves.com
On a personal note…
January is normally the coldest month of the year in Chicago. Yet, on January 3rd it was 45F in Chicago and raining. Then, as a warm front passed through, we got fog almost to the ground.
I’m not saying I miss the snow, but the odd weather patterns experienced all over the globe are beginning to affect business. For example, if you’re a skier and had planned to spend your winter break skiing in Europe you might want to change those plans (since Europe is in a heat wave, and many ski resorts are now snow-free) and head to Lake Tahoe instead, where the atmospheric river is dumping snow measured in feet rather than inches.
And, then there’s the storm that disrupted Christmas, particularly if you were flying Southwest (which had a software issue on top of a weather event).
I find myself wondering when the U.S. is going to take climate change even more seriously. What kind of business interruption will it take? If you’ve got any thoughts on this, please let me know.
Until next time,