We are now over one-quarter of the way through the year. We will soon have the first measure of economic growth for the first quarter of the year – just in time for the Federal Reserve to meet again and decide whether to raise short-term rates again. Thus, we feel that it is about time that we revisit the predictions we reviewed at the end of 2022. Spoiler alert – most predictions were off the mark. For example, Fannie Mae predicted a recession to start in the first quarter of this year. After the economy produced 800,000 jobs in the first two months of the year, they have shifted the forecast of a slight recession during the second half of the year.
Since the economy is stronger than predicted, mortgage rates should have risen higher than forecasted. Yet, the Realtor.com housing forecast predicted average mortgage rates of 7.4% in 2023, with a peak during the first half of the year. In reality, mortgage rates have not risen to these levels, so unless they spike from here, we are not likely to reach these heights. In addition, we went back and did a review, but did not see many predictions of a banking crisis and certainly did not see a specific warning about the largest bank that went down. Silicon Valley Bank was the second largest banking failure in history.
Some are now predicting that the concerns in the banking sector are what may finally tip the economy into recession. Time and time again we have indicated that predicting the future is futile. If any of these high paid prognosticators could actually predict the future with some accuracy, they would be investing in financial futures and making a fortune. As for us, we like an economy that has defied expectations on the plus side and hope it continues while inflation continues to ease. Probably not as fast as the Fed would like, but that is another story.