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Why Are So Many People Complaining About Airbnb? Nov 22, 2022

Show notes

What's happening with Airbnb? A Palm Springs superhost recently Tweeted about an unusual drop in bookings which opened a floodgate of complaints from guests. Although Airbnb is more successful than ever, there's growing discontent in at least some markets and the conversation is bubbling over online with comments like (dramatic voice Kathy!) "The Airbnbust is upon us."

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.

The Tweet about a drop in bookings was quickly picked up by Buzzfeed. It published an article with the title: "Couple Says An Airbnb Host Expected Them to Strip the Beds, Vacuum, And Do Chores, Plus More Stories from People Who No Longer Use the Service."

Viral Tweet: Big Drop in Bookings

The article posted the tweet from the Palm Springs host who said he's seen a drop in bookings for three to four months. He said his rental went from about 50% occupancy to literally 0%, and wanted to know if other people were experiencing the same thing. He got more than 2,000 replies from people who are no longer enchanted by the Airbnb experience. (1)

Buzzfeed listed several of the complaints. They included complaints about additional or hidden fees that jack up the price, the sterile look and feel of cookie cutter Airbnbs, hosts that have a litany of house rules and chores, and a lack of concern for the safety and/or privacy of the guests.

One former Airbnb guest said: "It was hard to enjoy our Airbnb cabin in the woods when the host was watching us on his outdoor cameras and reporting on things he didn't like us doing."

Another said: "I used to love Airbnb because I'd get a kitchen and I love to cook. But now the cost to stay has gone up so much, and I don't feel as safe in them."

One person said she refuses to book with Airbnb saying: "It's disgusting to see empty apartments, condos, and cottages waiting for bookings while people are living in tents."

The Washington Post just published an article with the title: "Airbnb is more successful than ever. Why is everyone so mad at it?" In addition to high prices, hidden fees, and a lack of service compared to hotels, Airbnb rentals have often saturated the market with too much supply. (2)

Airbnb Is Doing Quite Well Overall

But despite the complaints and a booking slowdown in some areas, Airbnb is doing quite well. The Post reports total revenue of $2.9 billion for the third quarter and a 46% increase in profit to $1.2 billion. Total number of bookings increased to 99.7 million which is the highest ever for the third quarter. Guest arrivals also set a new record for more than 90 million worldwide.

Boston University associate professor of hospitality Makarand Mody says: "It's ironic the Airbnbust hashtag is going around, given they had their best quarter ever in the company's history. It's a little hard to reconcile the two."

Airbnb is also paying attention to that hashtag. CEO Brian Chesky announced changes that would increase pricing transparency. He said that Airbnb would let users see the price totals up front, including nightly rates and all the fees. He's also asking hosts to avoid "unreasonable" requests as part of the rental agreement – things like stripping beds and doing the laundry.

Mody says the changes are a step in the right direction, but he says: "They don't solve the underlying problem, which is exorbitant fees in the first place." Cleaning fees are one of the things that add a lot to the price tag, and Airbnb has encouraged hosts to keep them low or not charge a cleaning fee at all. The company says that 45% of listings around the world do not charge cleaning fees.

But a spokeswoman for hosts told the Post that cleaning fees have gone up since Covid because of more stringent cleaning protocols. Many hosts are also hiring professional cleaners because of this. Those cleaning fees will now be more visible at the time a guest books the accommodation but it doesn't necessarily mean they will go down.

Are There Too Many Airbnbs?

Another problem is the sheer number of Airbnbs in some areas. The year-over-year increase in U.S. Airbnbs is 29% from about 850,000 to more than 1.2 million. AirDNA's Jamie Lane says: "There are more listings and more demand, but less demand per listing."

And now, Airbnb is also rolling out an easy way for new hosts to list their homes with help from a Superhost. The new hosts will be coached by the more experienced ones, along with extra support from the company. So this will likely result in even more supply, especially if the economy continues to slow down, and people look for a side hustle.

The Post says that Chesky responded to a question about booking slowdown complaints by saying the overall situation remains positive. He says the stories about a booking slowdown are anecdotal, and could be due to a variety of factors including changes in the way people travel.

He also says that the Airbnb algorithm that produces search results will prioritize them by all-in pricing and the best value. Airbnb plans to help hosts with tools to determine more competitive pricing. If there are issues, Chesky says they need to be looked at on a case-by-case basis.

Airbnbs vs. Hotels

In some cases, travelers are discovering that it's currently easier and less expensive to rent a hotel room. If you turn back the clocks to 2008 when Airbnb first launched, the opposite was true. While some people feel that Airbnb has turned into too much of a good thing, it's not all negative. There are plenty of great Airbnb's out there waiting to provide a great Airbnb experience. It just might take a little more work to find them, like anything else in life that is worth the effort.

It's also a good idea to do a deep dive into specific markets if you are thinking about setting up an Airbnb. You'll find lots of data at our website. You can join for free at newsforinvestors.com. And please remember to subscribe to our podcast and leave a review!

Thank you! And thanks for listening. I'm Kathy Fettke.

Links:

1 -https://www.buzzfeed.com/alexalisitza/airbnb-bookings-down-twitter-reacts-buzzfeed

2 -https://www.washingtonpost.com/travel/2022/11/14/airbnb-airbnbust-hosts-fees-chores/

The Real Estate News Brief: Inflation Report Optimism, Housing Affordability, 10 Fastest Growing Cities Nov 16, 2022

Show notes

In this Real Estate News Brief for the week ending November 12th, 2022… what's next after a really good report on inflation, the NAHB's latest report on housing affordability, and the ten fastest growing U.S. cities.

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 a report on inflation that shows the Fed is making progress with its rate hikes. The U.S. Bureau of Labor Statistics reported a lower-than-expected .4% increase in the October Consumer Price Index which brought the annual rate down to 7.7%. It was 8.2% in September. Stock market investors were pleased that inflation appears to be subsiding, and the Dow closed up more than 1,000 points. But that doesn't mean that the fight is over. Although Fed officials are expressing some amount of optimism, several spoke out about the danger of pausing too soon on the rate hikes. (1)

Richmond Fed president Thomas Barkin told CNBC that the Fed had its foot on the gas and is now ready to "pump the brakes." He explained that likely means the Fed will call for "a slower pace of increases, a longer pace of increase and a potentially higher point." He sees the Federal Funds rate going as high as 5%, or higher, in smaller increments, before the Fed gets inflation back down to the 2% level. (2)

San Francisco Fed president Mary Daly said the CPI report was "indeed good news," but that 7.7% inflation is still far too high. She said: "It's better than over 8% but it's not close enough to 2 in any way for me to be comfortable. So it's far from a victory." (3)

Dallas Fed President Lorie Logan had similar comments saying the CPI report was "a welcome relief" but that more rate increases are probably needed. She said: "I believe it may soon be appropriate to slow the pace of rate increase so we can better assess how financial and economic conditions are evolving."

The Fed's next meeting in December happens right after the November report on the CPI, so that data will surely impact any rate hike decisions made at that meeting.

Mortgage Rates

Meanwhile, mortgage rates fell sharply right after the release of the CPI. According to Mortgage News Daily, the average rate on the 30-year fixed-rate loan fell 60 basis points from 7.22% to 6.62%. The Daily's chief operating officer Matthew Graham says: "This is the best argument to date that rates are done rising, but confirmation requires next month's CPI to tell the same story." (4)

Jobless Claims

The number of people applying for unemployment was up 7,000 last week to a total of 225,000 initial claims. That's the highest it's been in a month but it's still a low number, although some big companies are announcing layoffs. Jefferies economist Tom Simons says that "Layoff announcements from larger companies have become more frequent. So we are likely to see this number rise in the weeks and months ahead." Continuing claims were up 6,000 to a total of 1.49 million. (5)

In other news making headlines...

NAHB: Housing Affordability

More Americans are finding it's too expensive to buy a home of their own. The National Association of Home Builders released its third quarter report on housing affordability and it shows that affordability has fallen to its lowest point since the Great Recession. According to the NAHB, just 42.2% of new and existing homes that were sold in Q3 were affordable for families making a median income of $90,000. That percentage was 42.8% in the second quarter. (6)

That data includes a drop in the national median home price from $390,000 to $380,000 and an increase in the average mortgage interest rate from 5.33% to 5.72%.

Home Equity Falls

Lower home prices mean that homeowners are also losing some of their equity. According to Black Knight, about $2.5 trillion in home equity has disappeared since May, with the average borrower losing $30,000. Although home equity could fall further, Black Knight's president of data and analytics, Ben Graboske, says that "homeowner positions remain broadly strong." (7)

The report shows that the number of people who are underwater on their loans is only .85%. That's fewer than 500,000 borrowers out of about 53 million U.S. mortgage holders. That's double what it was in May, but it's still considered quite low.

Fastest Growing Cities

Some U.S. cities are doing much better than others when it comes to economic growth. The Kenan Institute of Private Enterprise issued a list of the ten fastest growing cities in the nation, and New York is not one of them. (8)

It may not surprise you however, that the San Francisco/Bay Area is number one on the list with a 2022 GDP of $1.4 trillion and a GDP growth rate of 4.8%. Austin, Seattle, Raleigh/Durham, and Dallas round out the top five. Denver, Salt Lake City, Charlotte, New Orleans, and Orlando are in the fifth through tenth positions.

A few markets that we like for residential investment include the Dallas and Orlando metro areas. The 2022 GDP for Dallas is $682 billion with a 3.1% growth rate. And for Orlando, the GDP is $246 billion with a growth rate of 2.4%.

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 to find out more about real estate investing. As a member, you have access to our Learning Center as well as our market data, our experienced investment counselors, and our list of top-notch real estate professionals that can help get you going, or keep you on track, with your investment goals.

Thanks for listening. I'm Kathy Fettke.

Links:

1 -https://www.marketwatch.com/story/coming-up-consumer-price-index-for-october-11668086355?mod=economy-politics

2 -https://www.cnbc.com/2022/11/04/fed-officials-barkin-and-collins-see-possibility-for-slower-rate-hikes-ahead.html

3 -https://www.cnbc.com/2022/11/10/fed-officials-welcome-inflation-news-but-still-see-tighter-policy-ahead.html

4 -https://www.cnbc.com/2022/11/10/mortgage-rates-fall-sharply-to-under-7percent-after-inflation-eases.html

5 -https://www.marketwatch.com/story/jobless-claims-tick-higher-in-latest-week-11668087725

6 -https://eyeonhousing.org/2022/11/unsurprisingly-housing-affordability-continues-to-fall/

7 -https://www.cnbc.com/2022/11/07/homeowners-lost-1point5-trillion-in-equity-since-may-as-home-prices-drop.html

8 - https://www.cnbc.com/2022/11/09/fastest-growing-us-cities-kenan-institute.html

Protect Yourself from Roller Coaster Inflation Worries! Nov 14, 2022

Show notes

Is inflation pulling back or blowing up into a worldwide financial disaster? The latest CPI report shows that U.S. inflation has come down substantially, but just a week before that, the Fed hiked short-term interest rates by three-quarters of a percent in its battle against high prices. The CPI report is now changing what some economists believe the Fed will or should do next. But inflation is also a worldwide problem and some doom and gloom economists are worried about the possibility of "global hyperinflation." Let's take a look at a hedge fund warning and how real estate can protect you from this kind of uncertainty.

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.

First, the October CPI shows a lower-than-expected .4% increase in consumer prices. That brings the annual rate down from 8.2% in September to 7.7% in October. (1) It's still too high but as economist Andrew Hunter at Capital Economics said in a CNBC report: "At least it's a move in the right direction." The report triggered a huge stock market rally right after that report, with the Dow closing up more than 1,000 points. There's also a lot of talk about how inflation is much lower than it appears, because the inflation reports use lagging data.

After the CPI report, Wharton Professor Jeremy Siegel told CNBC that "inflation is basically over" and the Fed is getting it wrong because it's not using up-to-date information, including data on the housing market. (2) He says there's already a decline in both home and rent prices and believes the Fed isn't taking that into consideration. When asked when the Fed should have stopped implementing aggressive rate hikes, Siegel says like "yesterday."

He says the Fed still has time to take its foot off the brake at the December meeting. Any decisions at that meeting will also be influenced by the "next" CPI report for November, which will be released just ahead of that meeting.

Is the World on the Verge of Hyperinflation?

Meantime, one of the world's largest hedge funds recently sent letters to clients, warning them that the world could be on the verge of hyperinflation. That's when the value of your money disappears rapidly and the cost of goods changes so quickly that stores want you to ask for the price. As reported by the Financial Times, the Florida-based Ellio Fund says we are in an "extremely challenging" situation and possibly the worst since World War II. Ellio was founded by billionaire Paul Singer and manages more than $50 billion in assets. (3)

In the letter it sent to clients, the firm said that "investors should not assume they have seen everything" because they have experienced other financial crises, like the dotcom bust or the 2008 financial crisis. It says that today's situation is the culmination of an extreme set of financial scenarios at the end of a long period of cheap money, and that hyperinflation is a very real possibility that could cause a "global societal collapse and civil or international strife." There's no guarantee this will happen, but the hedge fund says that we are currently headed in that direction.

Elliot suggests that the stock markets will fall further, possibly as much as 50% from their peak. According to the Financial Times, the hedge fund is currently up 6.4% this year, and has only lost money in two calendar years since its launch in 1977. Fund managers named a few of the bigger financial risks it sees in the road ahead. They include potential bank losses on bridge financing, potential markdowns on collateralized loan obligations, and losses from leveraged private equity.

Global Rates of Inflation

So how does U.S. inflation compare to other countries?

The Consumer Price Index topped 9% in June, which is the highest it's been in 40 years, but it has fallen slightly since then, to 8.5% in July and 8.2% in September. For comparison, let's take a look at a list of countries and their rates of inflation on the Trading Economics website. (4) The September/October reading on inflation ranges from -2.5% in South Sudan to 269% in Zimbabwe. Only three countries have a negative reading, and most countries are in the single to lower double digits, but we already know that it doesn't take much of an increase to cause a lot of financial pain.

In the U.S., inflation has subsided a bit from 9.1% in June to 8.2% in September. Our neighbor to the north, in Canada, the inflation rate is 6.9%. To the south, in Mexico, the inflation rate is 8.7%. The United Kingdom is battling an inflation rate of 10.1%, and in Italy, it's 11.9%. France and Spain are lower at 6.2% and 7.3% respectively. Russian inflation is quite high at 13.7%. But there are many countries experiencing an inflation rate of 20% or higher, and even some with triple digit inflation. In August inflation hit 117% in Sudan and 139% in Syria. Last month, in October, Venezuela had an inflation rate of 156%. Lebanon is up to around 162% and then there's Zimbabwe, which I previously mentioned with a rate of 269%.

Definition of "Hyperinflation"

Those are annual rates of inflation, so none of them meet the definition of "hyperinflation." According to USNews.com, hyperinflation is "a phenomenon in which the prices of goods and services in an economy rise uncontrollably in a short period." It is "typically considered hyperinflation if prices rise by 50% or more in a month, which is an annualized inflation rate of at least 14,000%." (5)

Not all financial experts agree with the idea that hyperinflation will cause havoc around the world. The International Monetary Fund's Managing Director, Kristalina Georgieva, believes that U.S. inflation is reaching its peak, which sounds very dovish. She told Bloomberg: "I'm not going to jump ahead of data, but it is very possible that we are peaking." She says: "We now see central banks very united on fighting inflation as a top priority and rightly so." (6)

Protect Yourself with Real Estate

But the future is not certain, and it's wise to protect the value of your assets, even if worldwide hyperinflation doesn't manifest. I believe we can protect ourselves with income producing residential real estate because people will always need a place to live, and there's a huge shortage of homes in the U.S. Even if your portfolio values dip, the assets will not fade into nothing, the way currency can during periods of hyperinflation. It's something you can count on and history shows that property values typically recover and appreciate.

It does cost more to buy property with a loan right now, but even at 7%, it's much lower than it has been historically. According to an article in Mynd, 7% still qualifies as a low rate. Back in October of 1981, the interest rate for a 30-year fixed-rate loan spiked to almost 19%. (7)

Mynd Vice President Dennis Bron supports the idea of real estate as a hedge against inflation. He says: "Even in this crazy environment, property is still a relatively safe investment." In this article, he refers to single-family rental homes which produce rental income along with tax write-offs for expenses and depreciation. Although some housing markets are seeing a home price correction, housing experts don't expect a dramatic downturn because housing demand is so strong.

Mynd's Senior Vice President of Investment Management, Don Gangula, says: "Rental housing demand is going to continue. Some percentage of people are going to work out of their houses for some period of time. A lot of these people may not want to buy, so you are going to have a spillover from the apartment rental cohort who are looking for a home in the rental market." While it might be harder to find good investment opportunities, many experts believe they are there, if you look for them.

You'll find links to the articles I mentioned in the show notes for this episode. You can also find out more about how to find investment opportunities by joining RealWealth at newsforinvestors.com. Just click on the Join for Free link for complete access to our market data, our experienced investment counselors, and our curated list of real estate professionals.

And please remember to subscribe to this podcast if you haven't already, and leave us a review!

Thanks for listening. I'm Kathy Fettke.

Links:

1 -https://www.cnbc.com/2022/11/10/heres-the-inflation-breakdown-for-october-2022-in-one-chart.html

2 -https://markets.businessinsider.com/news/stocks/jeremy-siegel-stock-market-rally-fed-cpi-inflation-basically-over-2022-11

3 -https://www.ft.com/content/f3bb0f96-1816-4481-8318-4f7583326a4a

4 -https://tradingeconomics.com/country-list/inflation-rate

5 -https://money.usnews.com/investing/term/hyperinflation#:~:text=Cons%20of%20Hyperinflation-,What%20Is%20Hyperinflation%3F,rate%20of%20at%20least%2014%2C000%25.

6 -https://finance.yahoo.com/news/global-inflation-may-nearing-peak-090322699.html

7 -https://www.mynd.co/knowledge-center/what-happens-to-real-estate-during-inflation

The Burbs Overtake Cities for Square Foot Value! Nov 11, 2022

Show notes

For the first time ever, it now costs more per square foot for a home in the suburbs than it does for a home in the city. Redfin has been tracking this data since 2018, and says that the pandemic-inspired migration to the suburbs is still going strong, and that a typical suburban home now costs a dollar more per square foot than its urban counterpart.

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.

As you know, homes in the suburbs were in high demand during the pandemic because people wanted space to work remotely and a place for their kids to play outside. While demand grew for the suburbs, it weakened for the cities, along with home prices. Although home prices in the city rebounded during the pandemic's aftermath, demand continues for suburban homes, especially among millennials who can work from home and want to raise families in areas with good school systems.

One Dollar More Per Square Foot

The Redfin analysis on the cost of a square foot covers the four weeks ending September 25th in 91 markets. It shows that the cost of a square foot in a typical suburban home was $206 compared to $205 in the city. In more rural areas, it was $180 a square foot. (1)

Those square foot prices reflect year-over-year increases of 9.5% in the suburbs, 3.5% in the city, and 8.4% increase in more rural areas. Overall home prices reflect a similar relationship, with the typical suburban home price up 6.6% to $385,000 and the typical urban home up 2.7% to $310,000. In rural areas, home prices were up about 4% to $333,000.

Prioritizing Space Over Walkability

Demand for suburban homes skyrockets because of the remote work movement, but many people rediscovered the urban lifestyle during the pandemic recovery. Redfin economist Sheharyar Bokhari says many homebuyers were looking for the best of both worlds – a home with both space and walkability combined with low mortgage rates. But now with higher mortgage rates, she says: "Today's buyers can't afford everything on their wish list, so many are prioritizing space over walkability."

She expects urban prices to fall farther and faster because of that priority, but suggests that house hunters keep their eye on urban prices, because they might find a deal, if they are willing to sacrifice the space they get in the suburbs. But the housing market isn't easy to predict right now. Homebuyers need to examine individual markets to find what works best for them. And the Redfin data shows that suburban sales are down more than they are in the cities.

Housing Market Slowdown

Year-over-year, sales have declined about 25% in the suburbs, 23% in the cities, and 19% in rural areas. Average sale to list price is just under 100% for suburban neighborhoods, and a little lower than that for cities and rural homes. The share of homes with price reductions ranges from 6.4% in cities to 7.5% in suburban areas.

The biggest price drops in the nation are happening in the San Francisco Bay Area. The price per square foot is down about 6.2% in San Francisco. New Orleans is second on that list, followed by Philadelphia, New York, and Oakland, California. It's very interesting to note that several Florida cities are among those where prices are still rising by double digit percentages including Tampa and Orlando. It's also interesting to note that of all the 91 markets that Redfin analyzed, only about 10% of them show declines in the price of a square foot.

You can see the complete list by following a link in the show notes for this episode at newsforinvestors.com. We also invite you to become a member of RealWealth if you'd like to learn about markets that still make sense for investors. Just click on the Join for Free button at our website.

And please remember to subscribe to our podcast and leave a review!

Thank you! And thanks for listening. I'm Kathy Fettke.

Subscribe Link:

https://podcasts.apple.com/us/podcast/real-estate-news-real-estate-investing-podcast/id1079952715

1 -https://fortune.com/2022/10/31/housing-market-redfin-ceo-explains-why-home-prices-are-falling-faster-in-2022/

The Real Estate News Brief: Another Big Rate Hike, Housing Inventory Surge, New Rent Payment System Nov 08, 2022

Show notes

In this Real Estate News Brief for the week ending November 5th, 2022... the Fed's latest rate hike, why the housing inventory is surging, and what one big bank is doing to help landlords collect rent.

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 another jumbo rate hike by the Fed. For the fourth time in a row, the central bank raised the Federal Funds rate by three-quarters of a point. That brings the short-term rate to a range of 3.75 to 4%, which is the highest it's been in 15 years. And the Fed says that rate hikes aren't over. They will continue until inflation comes back down to about 2%. Fed Chief Jerome Powell suggested that smaller hikes of a half or quarter point "are coming" and that at some point "it will be appropriate to slow the pace of increases" but they are now expected to top out around 5% before the Fed accomplishes its goal. (1) (2)

Economists are keeping an eye on the job market as the economy slows, but initial jobless claims were down slightly this last week, to 217,000. Some economists had expected a higher number, but the job market remains strong. The number of continuing claims also remains near a 50-year low, but they were up 47,000 to 1.49 million. Job creation numbers were a little slower, but not slow enough to help control inflation. Meanwhile, the unemployment rate rose from 3.5% to 3.7% which shows that the labor market has gotten a wee bit smaller. Powell says it's still out of balance with too many job openings and not enough people to fill them. (3)

Construction spending rebounded in September. The Commerce Department says it rose .2% after a .6% decline in August. Those figures include a .3% gain for multi-family construction and a 2.6% decline for single-family projects. Homebuilders are pulling back on single-family homes as higher mortgage rates scare buyers away. The year-over-year rate for construction spending is 10.9%. (4)

Mortgage Rates

After topping the 7% level, Freddie Mac says the average 30-year fixed-rate mortgage was down 13 basis points, to 6.95%. The 15-year was down 7 points to 6.29%. (5)

In other news making headlines...

Housing Inventory Hits Two-Year High

The nation's inventory of for-sale homes is now the highest it's been in more than two years. Realtor.com says that new listings are down more than 15%, but that active listings are up 33.5% because homes are sitting on the market longer. Realtor.com's chief economist Danielle Hale says homes spent a median of 51 days on the market in October which is six days more than October of last year. (6)

Unfortunately for buyers, it's not making it any easier to afford the high price of purchasing a home. The median price of a home is up 13.3% year-over-year along with higher loan costs. Hale says: "Home shoppers are looking at a monthly mortgage payment that is roughly $1,000 higher than at this time last year."

Global Construction to Rise 60% in 15 Years

While the U.S. housing market has slowed down substantially, there's a new report estimating a 60% increase in global construction over the next 15 years. The Global Construction and Infrastructure Group says that climate change will drive a lot of that construction, creating new industries and job opportunities. (7)

Construction economist Graham Robinson told Strategic Risk: "With the built environment accounting for almost 40% of all greenhouse gas emissions globally, the transition to clean energy and new resilient infrastructure will boost growth for construction."

Various reports show that the climate crisis has put an enormous number of homes at risk. Climate Central says an estimated $34 billion of coastal real estate could be flooded on a regular basis sometime in the next three decades. A Redfin analysis claims that more than half of all homes in the last decade are at risk of wildfires, and almost half of all homes are at risk of drought.

Ditching the Rent Checks

JP Morgan Chase wants to be your property manager. The banking giant launched a new property management platform for multi-family landlords. The software will send out invoices and accept rent payments from tenants. (8)

Although some landlords are using digital payment systems right now, the bank says that more than three-quarters of all rent checks are still being paid by check. Many tenants reportedly say the only reason they still have a checkbook is to pay their rent.

The software also provides tools for tenant screening and determining how much rent you should charge.

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. We provide hundreds of webinars, podcasts, and articles to help get you started on your real estate journey. Members also have access to our market data, our experienced investment counselors, and our curated list of real estate professionals. Just click on the "Join for Free" button at the top of the page.

Thanks for listening. I'm Kathy Fettke.

Links:

1 -https://www.marketwatch.com/story/fed-approves-another-jumbo-interest-rate-hike-adds-dovish-language-on-way-forward-11667412237?mod=mw_latestnews

2 -https://www.marketwatch.com/livecoverage/stock-market-today-11-02/card/powell-plays-both-hawk-and-dove-SPP7tK0ARPzG8z8nFngw?mod=article_inline

3 -https://www.marketwatch.com/story/jobless-dip-to-217-000-and-stay-near-pandemic-lows-11667479161?mod=economic-report

4 -https://www.reuters.com/markets/us/us-construction-spending-unexpectedly-rebounds-september-2022-11-01/#:~:text=The%20Commerce%20Department%20said%20on,on%2Dyear%20basis%20in%20September.

5 -https://www.freddiemac.com/pmms

6 -https://www.mansionglobal.com/articles/u-s-housing-inventory-surpassed-hits-a-two-year-high-as-demand-cools-01667473524

7 -https://www.bisnow.com/national/news/construction-development/global-construction-set-to-grow-by-60-over-next-decade-and-a-half-report-116018

8 - https://therealdeal.com/national/2022/10/31/jpmorgan-wants-you-to-rip-up-your-rent-checks/

The Real Estate News Brief: GDP Turnaround, Mortgage Rate High Point, Faltering Rent Growth Nov 04, 2022

Show notes

In this Real Estate News Brief for the week ending October 29th, 2022... a turnaround for the U.S. GDP, a new high point for mortgage rates, and faltering rent growth.

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 an encouraging report on the U.S. GDP. The government reported a 2.6% growth rate in the third quarter. It was better than the Dow Jones forecast of 2.3%, but is also thought to be a rebound from two quarters of negative growth. According to CNBC, the upside came from a decline in the trade deficit, along with stable consumer spending, higher government spending, and a rise in nonresidential fixed investment. (1)

A positive GDP isn't eliminating concerns about a recession, especially if the Fed continues to aggressively raise interest rates to fight inflation. The PCE, which is the Fed's preferred inflation gauge shows a .5% increase in September, to an annual rate of 5.1%. That's for the core rate, which eliminates food and gas. The core rate for the well-publicized CPI, shows an annual rate of 6.6%. (2)(3)

Initial jobless claims rose slightly last week. The Labor Department says they were up 3,000 to 217,000. The number of people already collecting benefits was up 55,000 to 1.44 million. (4) Economists are expecting a gradual increase in jobless numbers as the Fed continues to hike the Federal Funds rate.

The housing market is feeling the impact of the slowdown. The Case-Shiller index shows that home prices were down for a second straight month. The 20-city index dropped 1.3% in August, while the national index was down 1.1%. The biggest price drops are happening along the West Coast, but the index shows they've gone down for every one of the 20 cities in the index. Year-over-year gains are still in the double digits however, at 13.1%, with Miami, Tampa and Charlotte topping the list for annual gains. (5)

Sales are also down for both new and existing homes. The Commerce Department reports that new home sales were down 10.9% in September to a seasonally-adjusted annual rate of 603,000 homes. The drop follows a surprise surge in home sales the month before. Year-over-year, home sales are down 17.6%. (6) For existing homes, the National Association of Realtors says they were down 10.2% in September. MarketWatch says that buyers have become hesitant because of high home prices and interest rates. Sellers are also less likely to list, because they want to hold on to their low-interest loans. (7)

Mortgage Rates

Although some lenders hit the 7% mark weeks ago, Freddie Mac says the average rate for a 30-year fixed-rate loan is now 7.08%. For the 15-year, it's 6.36%. (8)

In other news making headlines...

Big Drop in Mortgage Deman

Lenders are taking a big hit because of high rates. The Mortgage Bankers Association says that home loan demand is close to half of what it was a year ago, and has fallen to its lowest level since 1997. Demand was down 2% last week, and was 42% lower than the same week last year. (9)

There was a slight increase in demand for FHA loans thanks to lower rates and lower down payment requirements. Many borrowers are also choosing a riskier adjustable-rate loans because payments are lower at first. There are about four times the number of those loans right now compared to the start of the year.

The National Association of Homebuilders also reports a jump in the number of people paying all cash for new homes. That number has been increasing for the last three quarters, and hit a 20-year high of 9.5%, or 14,000 sales, for the current quarter. (10)

Rent Growth at a Standstill in Some Markets

Rent growth has stalled for a second straight month, and has even declined slightly in some areas. The Real Deal reports that any drops are minimal, but after the rip-roaring growth we saw during the pandemic, the pullback might feel severe for people. (11)

Data from Zumper shows that apartment prices were flat, or fell slightly, in nine of the 10 most expensive U.S. cities. Zumper's CEO, Anthemos Georgiades, described the decline as a "correction to prices that had become overinflated." He says renter migration is slowing down as renters try to cut costs by living with friends or family. He says that could push rents lower if landlords are competing with each other for renters.

RentCafe says we'll see 420,000 new apartments coming on line this year. That's a 50-year high for multi-family construction. But the Zumper report also warns tenants that they should not expect any drastic price drops until supply and demand are more closely matched.

Rental Demand Slows

Data from RealPage also shows that high rents have pushed apartment demand to a 13-year low. It dipped over the summer in the big cities like New York, Los Angeles, Houston, Dallas, and Chicago when it usually goes higher. Vacancies are also higher according to CoStar. That data shows an apartment vacancy rate that rose from 5.1% in the second quarter to 5.5% in the third. (12)

UBS analyst Michael Goldsmith says: "It's a signal that rent can't continue at the same level it has sustained over the last couple of years. We've reached a point where renters are maybe willing to pull out of the market."

The market for single-family rentals is a whole different niche, which is cooling down slightly in some areas. For example, one real estate broker told the Phoenix Business Journal: "It's cooling down a bit, but only from a level of insanity. Now it's just a hot market." (13)

That's it for today. Check the show notes for links. And please remember to hit the subscribe button, and leave a review!

If you'd like to find out more about single-family rentals, please join RealWealth for free at newsforinvestors.com. As a member, you have access to our market data, our experienced investment counselors, and our curated list of real estate professionals that can help you create a portfolio of income-producing rental homes.

Thanks for listening. I'm Kathy Fettke.

Links:

1 -https://www.cnbc.com/2022/10/27/us-gdp-accelerated-at-2point6percent-pace-in-q3-better-than-expected-as-growth-turns-positive.html

2 -https://www.cnbc.com/2022/10/28/pce-inflation-september-2022-.html

3 -https://www.cnbc.com/2022/10/13/consumer-price-index-september-2022-.html

4 -https://www.marketwatch.com/story/u-s-jobless-claims-tick-up-in-latest-week-11666874248?mod=economic-report

5 -https://www.marketwatch.com/story/u-s-home-prices-fall-for-second-straight-month-in-august-case-shiller-11666703999?mod=economic-report

6 -https://www.marketwatch.com/story/u-s-new-home-sales-retreat-in-september-partially-reversing-surprising-gain-in-prior-month-11666794303?mod=economic-report

7 -https://www.marketwatch.com/story/decline-in-u-s-pending-home-sales-gathers-steam-in-september-11666965739?mod=economic-report

8 -https://www.freddiemac.com/pmms

9 - https://www.cnbc.com/2022/10/26/mortgage-demand-from-homebuyers-is-nearly-half-what-it-was-in-2021.html

10 -https://eyeonhousing.org/2022/10/all-cash-new-home-sales-outnumber-fha-backed-for-the-first-time-since-2007/

11 -https://therealdeal.com/national/2022/10/25/rents-slide-or-stagnate-in-4-out-of-5-us-cities/

12 -https://therealdeal.com/national/2022/10/25/soaring-rents-sink-apartment-demand-to-13-year-low/

13 -https://www.bizjournals.com/phoenix/news/2022/10/18/corelogic-single-family-rental-market-cooling.htm

The Chip-Making Real Estate Boom in North Texas Oct 31, 2022

Show notes

While the Federal Reserve is trying to slow down the economy and basically kill a few million jobs, some areas are just not cooperating. Dallas, Fort Worth, Houston, and San Antonio have been gold mines for investors in recent years, and now that gold mine is moving north into the suburbs of North Texas. It's not only attracting remote workers who want a lower cost of living, but the area is turning into the next big American technology hub that will create thousands of new jobs. That's why I started a single family rental fund that is buying properties near those jobs. If you want to find out more about our Texas Single Family Rental Fund, got to GrowDevelopments.com.

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.

As real estate investors, you know that population growth and job growth are essential for a good real estate market. Texas has both of those.

Texas Population Growth

Census Bureau data shows the Dallas-Fort Worth as the top population growth region in the U.S. Three other Texas metros were also on the top ten list. From July of 2020 to July of 2021, 97,000 new residents moved into Dallas-Fort Worth. Another 69,000 moved into Houston, 53,000 into Austin, and 35,000 into San Antonio. (1)

Texas Job Growth

The Lone Star state also grabbed the top spot for U.S. job growth. According to the Texas Economic Development Corp., Texas created a total of 736,700 new positions since July of last year. More than 400,000 of them were created since January of this year. TWC Chairman Bryan Daniel says it's a record amount of new jobs for Texas within that short time frame. (2)

Growth in North Texas

But while some of the big metro growth is softening, there's another Texas hot spot that is just taking off. It's happening north of Dallas, along a 30-mile stretch of Highway 75 between the cities of McKinney and Sherman, and surrounding areas. The highway runs north from Dallas and is known as the new Silicon Alley or even Silicon Prairie by some people because it's attracting big players in the chip-making industry.

The New Silicon Alley

Sherman appears to be ground zero for much of this big tech growth. Just a few months ago, in May, Texas Instruments broke ground on a $30-billion semiconductor manufacturing campus in the city of Sherman. The TI project will be a huge 4.7-million square-foot campus consisting of four chip-manufacturing factories and an estimated 3,000 new good-paying jobs. According to an article in Axios, TI hopes to be producing tens of thousands of 300mm wafer chips a day by 2025.

Governor Greg Abbott also announced several months ago that GlobiTech will expand its chip-making operations in Sherman with an additional state-of-the-art $5 billion dollar chip-making plant. The factory is expected to employ another 1,500 people and produce 2.4 million wafers a month when it's up and running. GlobiTech is the subsidiary of Taiwan-based GlobalWafers.

A chip supplier for Apple's iPhone is also operating a factory in Sherman. It opened in 2018 as Finisar but has since changed its name to Coherent.

The Mayor of Sherman says: "Sherman has spent years building a business-friendly climate and laying the groundwork to support large employers. Now for the second time in less than a year, that investment has paid huge dividends." (3)

President of the Sherman Economic Development Corp. Kent Sharp says the two new chip-making projects are "once-in-a-lifetime" opportunities for the region. He says: "You work your entire career in economic development with the hopes of being part of a deal that has a "B" in front of it – and we've landed two in the past year." I think he's referring to the multi-billion dollar price tags.

New Boomtown Darlings

But Sherman isn't the only boomtown darling along the Highway 75 corridor. Some of the other cities getting the attention of new residents, developers, and investors include Denison, Gainesville, Plano, McKinney, and a sleepy town called Anna.

The Real Deal writes about Anna, saying that developers weren't interested in Anna prior to the pandemic because it was considered too far north of Dallas. But things started changing when Covid hit the nation. Thanks to remote work, people began migrating into the Texas suburbs from the bigger metros and other parts of the country. For reference, Anna is about 45 miles north of Dallas.

Anna's Mayor Nate Pike works in Sherman as a financial advisor, and is seeing first-hand how the area is changing. She says: "The amount of momentum that (local leaders are) going to put into the U.S. 75 corridor, all the way to the Oklahoma border, Anna is certainly going to feel a lot of positive impact from that." (4)

The Real Deal says the city is expecting its population to more than double by 2030. That's prompting the city to invest in things like road improvements and to simplify the permitting process for developers. New rules have reportedly shortened the permitting process from a few weeks to just a few days.

The Mayor says: "We have truly created a culture of wanting to be the most developer-friendly city in all of North Texas." And homebuilders are responding with new development projects in various cities along the Highway 75 corridor. According to DMagazine, construction permits have more than doubled in Sherman since June of last year. They are up 15% in Anna and 2% in the city of Melissa, for example.

Anna's Economic Development Director Joey Grisham says: "My phone has been ringing off the hook with interest. It's definitely an exciting time for the Dallas-Fort Worth region as a whole."

RealWealth has been helping members acquire rental properties in North Texas for over a decade now, and the growth has not slowed down. If you want to build your portfolio with the team we've been working with, just go to RealWealth.com and click on the invest tab. You'll see the drop down for Dallas, Texas, where you'll get more information on the area and contract details for the acquisitions team and property manager.

If you are looking for a more passive investment, and are accredited, which means you either earn $200k as an individual or $300k as a couple, or have a million dollar net worth, check out our Single Family Rental Fund at GrowDevelopments.com.

You'll find links to articles with more info in the show notes at newsforinvestors.com. Please remember to subscribe to our podcast and leave a review!

Thanks for listening! I'm Kathy Fettke.

Links:

1 -https://www.axios.com/local/dallas/2022/06/06/north-texas-population-growth

2 -https://businessintexas.com/news/with-72800-new-jobs-in-july-texas-hits-monthly-employment-high-for-2022/

3 -https://gov.texas.gov/news/post/governor-abbott-announces-globitech-semiconductor-facility-expansion-in-sherman

4 -https://therealdeal.com/texas/2022/10/19/is-this-sleepy-village-the-next-north-texas-boomtown/

5 -https://www.dmagazine.com/publications/d-ceo/2022/september/north-texas-is-the-countrys-new-semiconductor-manufacturing-capital/

The Real Estate News Brief: Fed's Next Meeting, Urban Office Decline, Hybrid Workplace Challenge Oct 26, 2022

Show notes

In this Real Estate News Brief for the week ending October 22nd, 2022... what's ahead with the Fed's next meeting, the decline of the urban office, and the hybrid workplace challenge.

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 forward-looking news about the Fed's next meeting. Federal Reserve officials are set to hold their meeting on November first and second, and will likely approve a .75 rate hike. They will also be discussing the size of a potential rate hike in December that many economists foresee as a smaller increase. Fed Governor Christopher Waller said in a recent speech: "We will have a very thoughtful discussion about the pace of tightening at our next meeting." (1)

The jobless rate went down by 12,000 applications last week as the effects of Hurricane Ian disappeared. Initial claims dropped to a three-week low of 214,000 which indicates that layoffs are still very low. Despite all the turbulence going on economically, the low numbers mean that the job market is still very strong. (2)

U.S. housing starts did a big reversal in September. They were up 13.7% in August, and dropped to a seasonally adjusted 8.1% last month. On an annual basis, they were down 7.7% in September. When you separate single-family homes from apartments, new single-family starts were down 4.7% and a big 13.1% for multi-families. Residential building permits were up 1.4% to 1.56 million which beat some analysts expectations. The numbers reflect weakening demand in the midst of high prices and shortages. (3)

Home builder sentiment is also suffering. The National Association of Home Builders' monthly confidence report shows the index dropped eight points in October, to just 38. Anything under 50 is considered negative. It's the tenth month in a row that the index has fallen and it's now the lowest it's been since August of 2012. Just one year ago, the index was at 80. (4)

Existing home sales continue to drop further, as the housing slowdown continues. According to the National Association of Realtors, they were down a seasonally adjusted 1.5% in September, to an annual rate of 4.71 million homes. It's the eighth month in a row that existing home sales have declined. If you exclude pandemic interference with the market, sales haven't been this low since September of 2012. Looking back one year, sales are off 23.8%. (5)

Buyers are being cautious as the market changes. The median price for an existing home was down in September from $389,500 to $384,800. Inventory is also dropping. It was down 2.3% to 1.25 million homes last month because many people are staying put, and not selling. Homes are typically staying on the market for 19 days, which is up from 16 days a month ago. Before the pandemic, homes were averaging one month on the market.

Mortgage Rates

Mortgage rates have topped 7% for some lenders, but Freddie Mac says the average rate for a 30-year fixed-rate mortgage is 6.94%. That's up 2 basis points from the week before. The 15-year was up 15 basis points to 6.23%. (6)

In other news making headlines...

Urban vs. Suburban Office Space

Vacancies are rising for urban office space as leases expire, and companies change their workplace strategies. A report by Marcus & Millichap shows that urban office vacancies rose 550 basis points from the beginning of the pandemic until June of last year. They've risen more slowly since then, but they are still up 30 basis points since June to 18.6%. Meanwhile, suburban office vacancies have gone "down" 30 basis points, and rents are up 2.9%. (7)

The report in GlobeSt.com says that "suburban properties continue to be more resilient than their urban counterparts." They are also much cheaper to rent at about two-thirds the price. This reversal is working well for some companies with employees who now prefer the suburbs, although decisions on return-to-work policies are still very much in transition.

The Workplace Transition

A recent survey by the Building Owners and Managers International says that 86% of the respondees feel that the office environment is still vital for a successful business, but 71% say they will continue on a plan to facilitate some amount of remote work even if Covid disappears entirely. Only 15% of both employers and employees support full-time remote work. (8)

One of the big questions is "how hybrid" should an office space be? Although each company will be unique in what works best, finding that sweet spot is difficult. Sociologist and author Tracy Brower says that some younger employees may want to spend more days at the office, but many employees want more emphasis on remote work.

Brower says: "People need plenty of choices about where, when and how they work" and that "a continuing conversation" is needed to answer questions concerning engagement, performance, and other workforce behavior. At this point, there's no putting the genie back in the bottle.

That's it for today. Check the show notes for links. And please remember to hit the subscribe button, and leave a review!

If you'd like to find out more about real estate investing, please join RealWealth for free at newsforinvestors.com. As a member, you have access to our market data, and a Learning Center filled with articles that can help you get started.

Thanks for listening. I'm Kathy Fettke.

Links:

1 -https://www.wsj.com/articles/fed-set-to-raise-rates-by-0-75-point-and-debate-size-of-future-hikes-11666356757?mod=pls_whats_news_us_business_f

2 -https://www.marketwatch.com/story/jobless-claims-drop-to-three-week-low-of-214-000-as-hurricane-ian-effects-fade-11666269576?mod=bnbh_mwarticle

3 -https://www.marketwatch.com/story/u-s-housing-starts-retreat-in-september-dragging-down-u-s-growth-11666184699?mod=economic-report

4 -https://www.marketwatch.com/story/builder-sentiment-drops-to-the-lowest-level-since-2012-home-builders-say-the-situation-is-unhealthy-and-unsustainable-11666102293?mod=economic-report

5 -https://www.marketwatch.com/story/u-s-existing-home-sales-fall-again-as-housing-downturn-gathers-steam-11666274678?mod=economic-report

6 -https://www.freddiemac.com/pmms

The Real Estate News Brief: Inflation Overload, Home Loan Double Whammy, Super-Sized Social Security COLA Oct 17, 2022

Show notes

In this Real Estate News Brief for the week ending October 14, 2022... another round of inflation overload, a double whammy for home loans, and the big news from Social Security.

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. Federal Reserve officials released the minutes of their last meeting which show they are more worried about inflation than they are about going overboard with rate hikes. They feel that inflation is "unacceptably high" and is not falling as fast as they anticipated. They raised the short-term rate three-quarters of a point at the last meeting to a range of 3 to 3.25%. It was the third super-sized rate hike in a row, and many economists are expecting another three-quarter point rate hike at the next meeting. (1)

There were two inflation reports last week that will fan the flames for additional rate hikes. First, it was the producer price index which was up .4% in September. That was double what Wall Street economists had forecasted. The index had been down in July and August because gas prices were lower, but the latest number shows that overall inflation is still raging. The annual rate is down slightly from 8.7% to 8.5%. If you remove gas and food from the equation, the annual rate is 5.6%. (2)

The monthly consumer price index was also released with a similar .4% gain in September. Economists had predicted a .3% gain. The yearly rate did slip down a bit – from 8.3% to 8.2%. It had peaked in June with an annual rate of 9.1%. The core rate shows a .6% monthly gain and a yearly "core" rate of 6.6%. As reported by MarketWatch, lower gas prices kept inflation in check toward the end of the summer, but economists don't expect them to go any lower, especially since the OPEC oil cartel is cutting production. Prices were higher for things like rent, medical care, education, furniture, new cars, and auto insurance. They were down for used cars, clothes and communication. (3)

Jobless claims are still low, but they did rise for a third week in a row to their highest level since August. The Labor Department reported that initial claims were 9,000 applications higher to a total of about 228,000. Many of those claims were in Florida, however, where people are dealing with the aftermath of Hurricane Ian. Continuing claims were also up slightly to 1.368 million. (4)

Consumers appear to be feeling a little more confident about the economy despite the latest inflation reports. The University of Michigan's consumer sentiment survey shows it was up about a point, to a reading of 59.8. but that's only 9.8 points higher than an all-time low of 50 in June. (5)

Mortgage Rates

Mortgage rates continue to move higher. It is breaking through the 7% level for some loan programs, but Freddie Mac says the average 30-year fixed-rate mortgage was 6.92%. The 15-year also moved higher to an average of 6.09%. (6)

In other news making headlines...

Double Whammy for Borrowers

Not only do borrowers have to contend with higher mortgage rates, they are now having a tougher time qualifying for a loan. According to the Mortgage Bankers Association, lenders are tightening their standards which resulted in a 5.4% decline in the Mortgage Credit Availability Index for the month of September. (7)

While lenders would like the business, they are more concerned about a weakening economy and the possibility of delinquencies. The MBA's Joel Kan says: "Credit availability fell to the lowest level since March 2013 – the seventh consecutive month of tightening." He says: "There's a smaller appetite for lower credit scores and high loan-to-value loan programs."

Home Flippers Are Getting Flipped

Rising mortgage rates are flipping profits to the downside for many home flippers. As reported by The Real Deal, flippers were wildly successful not that long ago. At the beginning of the year, home-flipping made up 10% of all transactions. That's according to Attom Data Solutions. It fell to 8.2% during the second quarter. (8)

Data from August shows that profit margins have slipped to 26% from about 31% a year ago. But they also now plummeting a lot more in some areas, like San Jose California. The report says flipping profits hit 45% in March and are now down to 6.5%. It also says that 42% of the homes sold on Opendoor are being sold for less than the iBuyer paid for them.

Hard-money lender Noah Brocious told The Real Deal that flippers need to lower their expectations. He says: "Price it to sell. Today is not the time to get greedy."

Social Security Will Be Giving Retirees a HUGE Raise

Retirees will be getting a big raise in their Social Security checks next year. Officials announced that the Cost of Living Adjustment or COLA for 2023 will be a whopping 8.7%. That's even higher than the giant 5.9% that recipients got last year. (9)

The increase will apply to about 70 million people who are on Social Security, and boost checks by an average of $140 per month. The cost of Medicare Part B will also get a little bit cheaper. It will be reduced from $170.10 to $164.90.

That's it for today. Check the show notes for links. And please remember to hit the subscribe button, and leave a review!

I also invite you to join RealWealth at newsforinvestors.com, if you haven't done so already. It's free to join and gives you complete access to all our education materials and market data, along with sample properties, and a list of recommended real estate professionals.

Thanks for listening. I'm Kathy Fettke.

Links:

1 -https://www.marketwatch.com/story/fed-saw-too-much-action-vs-high-inflation-as-less-risky-than-too-little-minutes-show-11665597813?mod=federal-reserve

2 -https://www.marketwatch.com/story/wholesale-prices-rise-for-first-time-in-three-months-and-show-inflation-still-raging-11665578458?mod=economic-report

3 -https://www.marketwatch.com/story/coming-up-consumer-price-index-for-september-11665662566?mod=economic-report

4 -https://www.marketwatch.com/story/jobless-claims-rise-to-highest-level-since-august-11665665081?mod=economic-report

5 -https://www.marketwatch.com/story/americans-inflation-expectations-rise-in-october-consumer-mood-stays-somber-11665756467?mod=economic-report

6 -https://www.freddiemac.com/pmms

7 -https://www.mba.org/news-and-research/newsroom/news/2022/10/11/mortgage-credit-availability-decreased-in-september

8 -https://therealdeal.com/national/2022/10/11/mortgage-rates-reverse-home-flippers-fortunes/

9 -https://www.cnbc.com/2022/10/13/social-security-cola-will-be-8point7percent-in-2023-highest-increase-in-40-years.html

Pressuring San Francisco Investors with a "Vacancy Tax" Oct 17, 2022

Show notes

San Francisco voters will be faced with a ballot measure next month on whether to impose a "vacancy tax" on multi-family units that sit empty for too long. Proposition M is targeting real estate investors who park their money in properties that remain unoccupied.

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.

Proponents of Prop M claim that the city's housing shortage is at least partially due to investor-owned properties that sit vacant for long periods of time. And that by imposing a progressive tax on the vacant units, investors will be motivated to rent them out or sell them to someone who wants to live in them.

Proposition M Exemptions

Owners of vacant single-family homes and duplexes would be exempt. Although some proponents feel the rule should be applied across the board, it would only apply to units that have sat empty for 182 days or more in buildings with three or more units. There would be other exemptions for non-profit organizations, government agencies, vacancies due to natural disasters, an owner's death, or for one year after the construction of a new building. (1)

The measure is based on a review by the city's Budget and Legislative Analyst's Office several months ago. It states that the city had more than 40,000 vacant housing units in 2019. That's just under 10% of the 406,000 units that exist in the city. An article in the San Francisco Public Press says that Census Data indicates that 15% of San Francisco's apartments, condos and homes are currently unoccupied. (2)

The issue has become a hot-button topic among housing advocates. According to Executive Director of the Housing Rights Committee, Fred Sherburn-Zimmers: "A home is a home, and we are going to tax the shit out of it until you rent it out to San Franciscans."

San Francisco's Vacancy Rate

It's not clear how many units this proposition will impact because the tax will only be imposed if the unit sits vacant for at least six months. And, an economic impact report by San Francisco's Chief Economist, Ted Egan, shows that the city's residential vacancy rate is not any higher than other Bay Area city for units that are vacant that long. That would indicate that San Francisco does not have a unique problem within the Bay Area cities. It also means that the bulk of the units would likely not trigger a "vacancy tax."

So it seems that long-term vacancies are not unusually high in San Francisco, and the measure would not have an impact on changing the number of shorter-term vacancies. What it would impact are units that are kept off the market for more than six months allegedly by investors who plan to flip them once they increase in value.

Tax Based on Unit Size & Length of Vacancy

Taxes would range from $2,500 to $5,000 a year, if it passes. The amount of the tax would correspond to the size of the unit and could go as high as $20,000 if the unit continues to sit empty.

According to Bisnow, a similar tax was adopted in Vancouver, Canada which returned 18,000 units to the housing inventory in 2019, and generated $21 million. The Real Deal reports that Oakland, California, also approved a vacancy tax in 2018 which raised around $7 million in 2020. And San Francisco already has a similar tax for some commercial buildings.

The SF Budget and Analyst's study suggests that a vacancy tax would restore about 4,500 residential units to the inventory and raise about $38 million. The money would go toward affordable housing and rent subsidies, but supporters say the primary goal is to get investors to return the units to the market.

Opposed to the measure is the San Francisco Apartment Association which says the city should be building more homes instead of pressuring investors. The Housing Action Coalition is also in favor of prioritizing the construction of new homes.

If voters approve the measure, it would go into effect in 2024.

Please visit our website for more real estate news and housing market data at newsforinvestors.com. And please remember to subscribe to our podcast and leave a review!

Thank you! And thanks for listening. I'm Kathy Fettke.

Links:

1 -https://www.bisnow.com/san-francisco/news/multifamily/residential-vacancy-tax-prop-m-115798

2 -https://www.sfpublicpress.org/would-tax-on-vacant-homes-push-owners-to-lease-empty-sf-units/

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