November 2021 Economic Update

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So it’s always fun to look back at predictions and see how one did. Usually, we’ll sweep our losses under the rug and promote our successes from the Twitter or Instagram mountain tops.  In an effort to be unbiased, I thought it would be fun to take a look at my predictions for 2021.  Luckily, I’m not an economist, so it really doesn’t matter much if I get them all wrong, or maybe that makes me better poised to get it right since I expect people to act irrationally. If you want to read what I wrote a year ago here you go: 2021 Housing Market And Economic Forecast, Unfiltered.

Alright, let’s see how Crazy Uncle Keith did on his predictions. 

Rates will go up: Although a LOT of folks were saying they thought interest rates would go DOWN in 2021 because the economy needed it, I had a countervailing thought. It was as complex as, “how much lower can they go” with a healthy dash of, “isn’t the fed going to want to raise them in case we have some other problems we aren’t aware of?” 

The chart above shows what I was thinking. You can see going into January I was looking like an idiot as they dropped further. However, you can see the 30-year fixed rate for 2021 indeed went up. Score one for the good guys in this 12-month look back. 

Low Inventory Will Persist but Inventory Will Rise: I smushed two of my calls together on this one. I forecasted that inventory would both stay low and be on the rise. These two things could exist and be right at the same time. 

My thinking here was basically pretty simple, similar to the interest rates thinking, yes inventory will rise (see chart below), but it will still be historically low based on the factors that had contributed to the massive downward pressure on inventory. 

To test the theory I did a three-year look back, and you can see in January of 2021 existing single-family home inventory bottomed out and was on the rise. Up to 1.09 million at the time of this writing, which is up, but not anywhere near pre-pandemic levels of 1.7 million in June of 2019.  

The flight of the urbanites: This one was direct thinking around the massive exodus that had happened in the more densely populated areas like San Francisco and New York. I forecasted that the things that made these cities special would persist and we would see people start to come back into those markets in 2021.   

I dug around a few spots to try to check. I figured New York City and San Francisco would be good places to look to see how I did. New York’s net migration is trending up and San Francisco is flat to slightly up. I found a pretty good Forbes article on the macro trend which can be read here

Also, a Curbed article on New York City which is here, and also a San Francisco Chronicle article here, but basically I got this one sorta kinda right. It’s taken longer than I thought, but we’ve seen the net migration out of the urban areas come back and turn positive. So the hypothesis was right, but my timing was wrong. I thought people would come back to the urban areas more quickly than they did. Probably because of some of the various variant fears. I probably should have seen that coming, but this is my first pandemic so bear with me. 

Lets call my predictions three and a half out of four stars which is pretty good for an Amazon review, and candidly with all the sheer craziness in the world, I am pretty happy getting it this right. Stay tuned next month where I will be willing to make a fool of myself again and make my predictions for 2022.  

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