Mortgage rate lock-in will continue to be a major challenge for the housing market in the remainder of 2023, according to the Realtor.com^® 2023 Forecast Update. While prices have eased slightly, higher mortgage rates are hurting affordability, and many of those who already own a home are not incentivized to list. As a result, the total number of homes for sale (projected to be down 15.8% to 4.2 million) is likely to be at its lowest point since 2012. On the rental side, prices are expected to drop slightly on the year (-0.9%), as strong multi-family construction is improving inventory.

“High inflation and the Fed’s actions to curb it have had a significant impact on the housing market this year. And while inflation has begun to ease, the sustained spike in mortgage rates was enough to stifle the housing market after several years of low rates and strong activity,” said Realtor.com^® Chief Economist Danielle Hale. “The housing market has really seen a double whammy in 2023, with a retrenchment in the number of homes for sale coupled with still-high prices and mortgage rates that have kept both first-time and repeat buyers on the sidelines.” 

Revised 2023 Housing Forecast

Affordability improving, but still a long way to go

Home prices have been supported by persistent underbuilding relative to household growth over the last decade, but low affordability has had an outsized impact on demand. As a result, Realtor.com^® now expects a modest decline in home prices of 0.6% for the year. The expectation is that mortgage rates will also be slightly lower than originally anticipated, but not low enough to bring down buying costs until the end of the year. As inflation is expected to cool gradually, we expect that mortgage rates will start to do the same beginning mid-year and nearing 6% by the end of the year. For the year as a whole, the cost of a mortgage is expected to be up 10.5% compared to 2022.

Mortgage rate lock-in effect impacting inventory

Realtor.com^® expects home sales to decline 15.8% in 2023 for a total of about 4.2 million sales for the year, the smallest annual total since 2012. Mortgage rate lock-in has been a stronger factor than initially expected, and the number of homes for sale has not met initial projections. As a result, the expectation now is for inventory levels to slip 5% for the year, and not the growth projected in the initial forecast.

“The vast majority of homeowners locked in low rates during the pandemic and aren’t particularly excited to give them up in order to buy a new home, unless they really need to move for personal reasons,” said Hale.

Rental prices pull back

Challenging conditions in the housing market will lead many to continue renting, driving ongoing demand for rentals through the second half of 2023. However, the strong uptick in new multi-family construction and people choosing to stay in their unit in order to save money is likely to decrease competition for new units and lead to a slight annual decline in rental prices (-0.9%). However, despite this pull-back, rental prices are still historically high with the average rent about $350 more than it was pre-pandemic.

Other economic factors to consider

Despite the Fed’s tightening, the economy and labor markets have shown resilience. And while paychecks haven’t kept pace with inflation, Americans have dipped into pandemic savings and continued to spend money. While this is boosting the current economy, it could have an impact in the future if consumers burn through savings and need to rely on high-interest debt.

The manufacturing industry plays a crucial role in producing components for automobiles, electronics, medical devices, machinery, and other systems. These components bring ideas to life, transforming them into tangible products. Consider the device you are using to read this article – it likely contains both internal and external manufactured components. The manufacturing industry is continuously evolving at an exponential pace.

In the past, I have extensively researched and written about a remarkable technological advancement that is causing significant disruptions across multiple industries. Today, I want to remind all the forward-thinking leaders that this application is accelerating even faster now and will continue to do so in the future: Artificial Intelligence (AI).

Assuming that AI won’t affect your business or organization simply because it hasn’t directly impacted you yet is a critical mistake. AI, autonomous machinery, and AI-enabled software and hardware are here to stay. They are certainties for the future, known as Hard Trends.

However, the manufacturing industry’s technological changes encompass numerous other Hard Trends that offer valuable insights for adapting and anticipating their strategic impact on your business. I have compiled a collection of 12 such Hard Trend future certainties that are already reshaping the manufacturing landscape.

Here is an updated look into each one:

1. 1. The integration of AI is growing at an exponential rate.

AI is a type of machine intelligence that encompasses machine learning, deep learning, and cognitive computing. It is now more commonly available as a service, which reduces the initial investment required and saves both time and money when it comes to mundane tasks. It is crucial to remember that these processes are meant to collaborate with humans in groundbreaking ways, rather than working against them or attempting to replace them.

2. 2. The progress in AI propels the development of augmented thinking and augmented movement.

Augmented thinking leverages AI-enabled analytics to deliver immediate and practical human insights, while augmented movement enhances human capabilities. This is the realm where the human aspect of collaborating with AI and different forms of autonomous technology becomes significant. Tasks that were once arduous or unattainable for humans alone can now be accomplished with the assistance of AI applications.

3. 3. Accelerated Expansion of Semiautonomous and Fully Autonomous Technology

AI and networked motors, actuators, and sensors are already employed in various autonomous technologies to automate diverse functions. Semiautonomous technologies, on the other hand, combine human input with predefined parameters to grant autonomous functions a level of control. Similar to the progress in augmented thinking and augmented movement, individuals involved in manufacturing will evolve into troubleshooters and critical thinkers responsible for maintaining the operational efficiency of AI applications.

4. 4. The Rapid Advancement of Voice Commerce, Business Bots, and Voice-Enabled Products with AI and Wireless Broadband

The rising popularity of smart e-assistants and chatbots extends across professional industries. This familiar form of AI technology, exemplified by Siri and Alexa in our personal lives, is swiftly finding its way into the manufacturing sector through application bots. In the manufacturing workspace, one can observe the presence of Siri-like virtual assistants on various machinery, leveraging intelligent sensors to gather real-time data and anticipate mechanical issues. This integration enhances productivity by enabling proactive measures.

5. 5. An Increase in Datafication Further Drives AI-Enabled Analytics

Big Data is a phrase that encompasses technologies employed to capture and harness the exponentially growing data from diverse sources. Edge computing, a process that involves analyzing data in close proximity to its origin, facilitates fast and efficient data processing and implementation. In the manufacturing sector, where an immense volume of data is generated daily, AI applications leverage this data to provide enterprise-wide visibility and valuable insights. This empowers users to swiftly make crucial decisions based on accurate information.

6. 6. Cloud Computing Provides Integral Digital Transformations

Businesses are poised to adopt different forms of cloud computing applications, including public, private, hybrid, and personal clouds. This shift in software, hardware, and computing capacity acquisition and maintenance not only reduces costs but also expedites IT processes. The integration of innovative cloud computing platforms and services with AI applications enables rapid product creation, service development, and market exploration across diverse industries.

More Tech Trends Redefining Manufacturing

7. 7. Increasing Virtualization of Software and Hardware

Businesses are increasingly adopting the virtualization of software and hardware to enhance cybersecurity measures, leveraging Hardware as a Service (HaaS) and Software as a Service (SaaS) models to establish “IT as a Service” environments. With the ongoing growth of virtualized processing power, mobile devices are transforming into powerful supercomputers, fostering innovation within the manufacturing sector. Envision the remarkable advancements that will unfold when AI-enabled applications seamlessly integrate with these streamlined services!

8. 8. Increasing Virtualization for Everything as a Service (XaaS)

The rapid adoption of cloud-based platforms expedites the virtualization of processes, facilitating the efficient updating and deployment of new services. This trend has extended to diverse applications in various industries, such as Videoconferencing as a Service, Collaboration as a Service, and HR as a Service. Consider the possibilities when AI as a Service becomes accessible, lowering entry costs for manufacturers to integrate autonomous technology into their operations!

9. 9. Virtual Reality and Augmented Reality Take Hold

Augmented reality (AR) presents a distinct form of digital disruption, enabling users to utilize a digital camera to superimpose real-time information onto objects. On the other hand, virtual reality (VR) offers a complete immersion into virtual environments. In the manufacturing industry, AR glasses and VR headsets will increasingly become the standard, enabling wearers to troubleshoot machinery on-site or work remotely in a field traditionally dependent on on-site presence.

10. 10. The utilization of additive manufacturing enhances efficiency across industries

Additive manufacturing processes, commonly referred to as 3D printing, have become an essential component in numerous industries, particularly in light of existing and persistent challenges in the global supply chain. Initially intended for prototyping purposes, 3D printers now play a crucial role in producing various products such as automotive lighting components, medical equipment, smartphone cases, jet engines, buildings, and notably, prosthetic limbs. In essence, this technology enables companies to swiftly manufacture items while reducing overhead expenses and shortening lead times.

11. 11. Internet of Things and Edge Computing Increase, Forming the Internet of Everything

The expansion of the Internet of Things (IoT) will be propelled by machine-to-machine communications, facilitated by chips, microsensors, and wired or wireless networks. This integration of networked sensors will enable the sharing of real-time data and the execution of diagnostics and repairs with minimal human intervention. Consequently, the Internet of Everything (IoE) will gain further momentum. With this evolution, edge computing will also witness significant growth, consolidating the data generated by IoT and IoE. This, in turn, will deliver instant insights and enable on-the-spot actions at the point of use.

12. 12. Wireless broadband growth enhances global networking and device connectivity.

The rapid and responsive 5G connectivity, with the upcoming certainty of 6G networks, empowers manufacturers to establish secure and swift public or private 5G networks within their operations. The availability of connectivity worldwide continues to expand, reinforcing the trend of virtualizing the workplace and propelling us towards a more interconnected and efficient global society.