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The Real Estate News Brief: Inflation Frustration, Mortgage Rate Surprise, New Checklist for Homebuyers
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In this Real Estate News Brief for the week ending October 2nd, 2021... we’ll look at inflation frustration for the Fed, a mortgage rate surprise, and a new checklist for today’s homebuyers.
Hi, I'm Kathy Fettke and this is Real Estate News for Investors. If you like our podcast, please subscribe and leave us a review.
Economic News
We begin with economic news from this past week, and new predictions about inflation. Fed Chief Jerome Powell says that inflation has been worse than expected because of supply-chain bottlenecks, but he still expects prices to settle back down next year, once those supply-chain issues are resolved. He said during a forum with central bank leaders: “It’s frustrating to see the supply chain problems not getting better, in fact they are probably getting worse.” (1)
The annual rate of inflation is about 4.2% right now, according to the Fed’s preferred PCE index. The more popular CPI is about the same. It is currently at 4.3%. When you remove energy and food, the CPI is about 3%. The Fed likes to see the inflation rate at around 2%. (2)
New jobless claims hit a two-month high this last week thanks to a surge in California and Michigan. The government says new state claims were up 11,000 to 362,000. The California numbers are due to the processing of a claims backlog while the Michigan case load is likely due to a surge in delta infections. (3)
Housing is one segment of the economy that hasn’t slowed down. The National Association of Realtors reports that pending sales surged unexpectedly in August. NAR says pending home sales were up 8.1% compared with July. Economists had expected an increase of less than half a percent. NAR’S chief economist, Lawrence Yun, says: “Rising inventory and moderating price conditions are bringing buyers back to the market.” (4)
Builders continue to run into headwinds because of expensive building materials, and a shortage of labor and land. The Commerce Department says that overall construction spending was flat in August. It says that an increase in public spending was offset by a decline in residential spending. It was down .7% for single-family construction and .8% for multi-families. (5)
Meanwhile, home prices continue their march skyward. The S&P CoreLogic Case-Shiller Home Price Index shows a year-over-year increase of 19.7% in July. That represents the fourth month in a row for record home price growth. The 20-city index is even higher with a 19.9% year-over-year reading. (6)
There are mixed reports from consumers on the state of the economy. The consumer confidence index dropped several points, to a seven-month low while the University of Michigan Consumer Sentiment Survey rose slightly. (7) (8)
Mortgage Rates
Mortgage rates for all kinds of loans have risen due to a jump in the 10-year Treasury yield. Freddie Mac says the average 30-year fixed-rate loan rose 13 basis points to 3.1%. The 15-year was also up 13 basis points to 2.28%. (9)
In other news making headlines…
New Homes Are Bigger with More Bedrooms
Homes are getting larger with more bedrooms, thanks to a demand for more space. The National Association of Homebuilders says the share of single-family homes with four or more bedrooms rose from 42% in 2018 to 45% in 2020. (10)
A desire for multigenerational homes is also driving the increase. The NAHB says about 16% of buyers expressed a desire for that kind of home last year, compared to just 11% the year before.
Homebuyers Consider Disaster Risk
Another important consideration for homebuyers is the risk of a natural disaster. According to a survey conducted by realtor.com, three in four homebuyers say they assess the risk of a disaster when choosing a location. (11)
Tornadoes have created the most concern, with severe cold or winter storms close behind. Floods come next, followed by hurricanes, earthquakes, wildfires, droughts, and sinkholes. While 39% said they are worried about tornadoes, only 8% said they are worried about sinkholes.
Home With More Light Are Healthier
Homebuyers may want to consider how much natural light they get in a home, and the benefit of “smart windows.” A new study shows that people who live in a home with smart windows experience less stress and anxiety, and sleep better at night. (12)
Smart windows have technology that allows them to automatically adjust the tint, to allow for a maximum amount of light throughout the day. The study was done by the International Journal of Environmental Research and Public Health which tracked people with smart windows, and compared the result to people with standard windows.
The result shows a delay in the production of melatonin for people with standard windows. That kept them from falling asleep as quickly, and from getting as much sleep overall. Researchers say the people with smart windows not only slept better, but experienced less stress and anxiety.
That’s it for today. Check the show notes for links. And please remember to hit the subscribe button, and leave a review!
You can also join RealWealth for free at newsforinvestors.com. As a member, you have access to the Investor Portal where you can view sample property pro-formas and connect with our network of resources, including experienced investment counselors, property teams, lenders, 1031 exchange facilitators, attorneys, CPAs and more.
Thanks for listening. I'm Kathy Fettke.
Links:
5 -https://www.reuters.com/world/us/us-construction-spending-flat-august-2021-10-01/
9 -http://www.freddiemac.com/pmms/
10 -https://magazine.realtor/daily-news/2021/09/30/more-new-homes-are-being-built-with-4-plus-bedrooms
11 -https://magazine.realtor/daily-news/2021/09/28/buyers-consider-disaster-risk-in-purchase-decisions
12 -https://magazine.realtor/daily-news/2021/09/24/homes-with-more-daylight-may-improve-moods
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