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The Real Estate News Brief: Fed's Rate Hike Plan, 2022 Investor Concerns, Home Buyer Timeline Feb 03, 2022

Show notes

In this Real Estate News Brief for the week ending January 28th, 2022... the Fed's rate hike plan, what investors are saying about 2022 challenges, and what buyers are doing to purchase a home more quickly.

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. All eyes were on the Fed for changes in monetary policy after the central bank's two-day meeting. Worries about more aggressive action by the Fed to combat inflation didn't seem to be evident. Fed Chief Jerome Powell said that committee members are "of a mind to raise the federal funds rate at the March meeting" if economic conditions are appropriate for doing so.

Wall Street economists are expecting a rate hike in March, along with three others this year, to control inflation. It's now running at an annual rate of about 7%, but Fed officials still believe it will settle back down as the year progresses and supply chain issues are resolved. Powell also said that the Fed might begin reducing it's $9 trillion balance sheet later this year, but that timeline will depend on "the incoming data and evolving outlook." (1)

Meantime, the Commerce Department released a report on the GDP which shows the economy grew at an annual rate of 6.9% during the fourth quarter of last year. Much of that surge is due to businesses stocking up shelves for the holiday shopping season. That brings the full-year GDP up to 5.7%, which was also boosted by government stimulus. Prior to the pandemic, the GDP was only about 2.3%. MarketWatch says that economists expect strong growth to continue this year at an annual pace of at least 4%. (2)

Jobless claims dipped last week, by about 30,000. The Labor Department says initial state claims were down to a total of 260,000. They had hit a three-month high in January, thanks to a wave of Omicron infections, but that outbreak has started to recede. MarketWatch reports that not a single state reported a big increase in unemployment applications. (3)

Turning now to the housing market, new homes sales were up 12% in December to an annual rate of 811,000 homes. As buyers snatched up what they could, the supply was down 9%. The largest percentage of new homes was sold in the Midwest. That region alone was up 56%. (4)

Pending home sales were down in December. According to the National Association of Realtors, those sales were down 3.8%. The Northeast and Western regions saw the biggest declines. (5) Inventory levels are a primary obstacle for many buyers, but higher home prices and higher mortgage rates are also pushing marginal buyers out of the market.

Price growth did slow down a bit in December, according to the S&P CoreLogic Case-Shiller 20-city price index. It shows that prices were up 18.3% year-over-year in November compared to 18.5% in October. (6) As MarketWatch reports, price growth may be slowing, but it doesn't mean prices are coming back down, especially with the kind of demand we're seeing from buyers.

Consumers are feeling a bit less optimistic about the economy. Both the consumer confidence index and the University of Michigan consumer sentiment index were down in January. Consumers have been worried about high prices as well as Omicron, although it appears that Omicron cases are decreasing. (7) (8)

Mortgage Rates

Mortgage rates didn't move much last week. Freddie Mac says the 30-year fixed-rate mortgage was down one basis point to 3.55%. The 15-year was up one point to 2.8%. (9) Freddie Mac is forecasting slightly higher rates in 2022, but says it doesn't expect rates to go higher than 4%. (10)

In other news making headlines...

Investor Concerns

The lack of inventory is a top concern among investors. A survey by the National Association of Realtors shows that 63% of the real estate investors listed inventory as the number one challenge. They listed high home prices as the second biggest challenge. (11)

Those are the same two issues topping the previous two Investor Sentiment Surveys. NAR'S Rick Sharga says: "Together with supply chain disruptions which have caused product shortages and increased materials costs, it is not surprising that individual investors think that the market is not as healthy today as it was a year ago."

Investors believe they'll face the same challenges over the next six months, which also include higher costs for materials, and higher interest rates. Sharga says: "About 88% of the investors surveyed were concerned about inflation having an impact on their business."

Buy Now, Look Later

The lack of inventory is forcing many buyers to grab what they can without looking at a lot of homes, or to skip the in-person tour altogether, and make an offer. NAR says the magic number is eight, for home tours, and that three of those tours are being done virtually. That's a median number. (12)

Between 2009 and 2011, buyers were looking at a median of 12 homes before they made a decision. During the pre-crisis meltdown, they were looking at nine homes.

Technology is making it easier for buyers to do their research, of course. In 2006, 80% of buyers were using technology to find homes. In 2021, 95% of buyers were doing so.

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:

1 -https://www.marketwatch.com/story/fed-expects-it-will-soon-be-appropriate-to-raise-interest-rates-11643223873?mod=home-page

2 -https://www.marketwatch.com/story/coming-up-u-s-fourth-quarter-gdp-11643289488?mod=home-page

3 -https://www.marketwatch.com/story/u-s-jobless-claims-drop-30-000-to-260-000-as-omicron-wave-fades-11643290867?mod=economic-report

4 -https://www.marketwatch.com/story/coming-up-u-s-new-home-sales-11643208406?mod=economic-report

5 -https://www.marketwatch.com/story/pending-home-sales-slump-as-housing-supply-dwindles-11643296659?mod=economic-report

6 -https://www.marketwatch.com/story/coming-up-s-p-corelogic-case-shiller-and-fhfa-home-price-indices-11643118805?mod=economy-politics

7 -https://www.marketwatch.com/story/consumer-confidence-slips-in-january-and-points-to-softer-economy-11643123353?mod=economy-politics

8 -https://www.marketwatch.com/story/u-s-consumer-sentiment-slumps-to-a-new-ten-year-low-as-inflation-concerns-mount-11643382412?mod=economy-politics

9 -http://www.freddiemac.com/pmms/

10 -https://www.mortgagenewsdaily.com/news/01242022-freddie-mac-forecast

11 -https://magazine.realtor/daily-news/2022/01/25/investors-reveal-top-concerns-challenges

12 -https://www.housingwire.com/articles/buyers-viewed-just-eight-homes-before-making-their-purchase/

Banner Year for Build-to-Rent Feb 01, 2022

Show notes

Build-to-rent communities are one of the hottest trends in rental real estate right now! Many people who can't own their own homes still want to live the single-family lifestyle. Demand is so hot, almost 80% of the renters participating in a RentCafe survey said they were "interested in living in a community of single-family homes." (1) And with such a tight supply of existing homes, newly constructed rental homes are getting the attention of investors.

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 RentCafe survey includes responses from 3,300 renters, and 78% of them confirmed that interest is growing in single-family rentals. Rentcafe.com says that last year, in 2021, there were three times the number of searches for rental homes as there were the year before, in 2020.

Demand Grows for Single-Family Rentals

Single-family rentals have been a hot investment choice for more than a decade, so it's not a new concept. The first big surge happened after the 2008 housing crisis when millions of homes were foreclosed but the former owners still wanted to live in detached homes. Investors bought the foreclosed homes and turned them into rentals. The pandemic has accelerated this demand once again because people want more privacy and more space, but there aren't enough existing properties to meet the demand so many investors and developers are building new rental homes.

Last year, builders pumped 6,740 new build-to-rent homes into the market. This year, that number is expected to double to almost 14,000 newly constructed single-family rentals. These figures refer to rental homes that are built within communities, which some people are calling horizontal apartment communities. But the rental units are stand-alone homes, with yards.

According to Shannon Hersker at Walker a Dunlop: "The pandemic just increased demand at a faster pace. People want to live in areas that are less dense, in communities that offer more space." And, it isn't just Millennials who are attracted to this kind of rental. Hersker says: "In reality, you have everyone – including college students, empty nesters, families with kids, pet owners, and those wanting to downsize."

Urban vs. Suburban SFR Locations

So where are all these built-to-rent homes located? RentCafe says that 61% of them are in suburban areas, and 39% are in urban areas. The website's analysis shows that most of the communities in the Southwest are in urban areas while those in the Midwest and Northeast are in suburban areas.

RentCafe has come up with two lists. One is for new single-family rentals in the suburbs of larger metro areas. The other is for cities that have the room for build-to-rent communities within city limits.

Phoenix tops the list for metros with a total of 6,420 new single-family rentals in communities that are dedicated to rentals. It's also a top metro for new apartment buildings, so there's a big demand in Phoenix for rentals of all types.

RentCafe used data from its sister company, Yardi Matrix for this analysis. There are 20 metros on the list with Columbus, Dallas, and Houston in second, third and fourth positions.

On the list of cities, Las Vegas is number one with 2,520 new single-family rentals. Houston, Tucson, and Phoenix are in second, third, and fourth place on that list. We'll have a link to the report in the show notes so you can check all the cities on both lists.

RentCafe also identifies the largest built-to-rent communities. And, it has state maps showing which cities have the most single-family rentals. The report says there are currently about 90,000 single-family homes in the U.S. within about 720 communities. That includes all kinds of detached homes as well as townhomes and buildings with up to four units that also have yards and garages.

Strong demand and higher home prices are also pushing rents higher, which is increasing investment value. CoreLogic says that single-family rents were up 11.5% year-over-year in November.

And, landlords are having no trouble finding tenants. RentCafe says the occupancy rate was 97% for single-family rentals last year. That's 2% higher than it was for apartments.

Check the show notes for links to the full report at newsforinvestors.com.

You can also find out more about investing in newly constructed rental homes at our website. It's free to join, and free to access hundreds of webinars and articles on real estate investing. You'll also have access to the Investor Portal where you can view sample property pro-formas for new and existing rental homes, and connect with our network of resources. That includes experienced investment counselors, property teams, lenders, 1031 exchange facilitators, attorneys, CPAs and more.

Please remember to hit the subscribe button, and leave a review!

Thanks for listening. I'm Kathy Fettke.

Links:

1 -https://www.rentcafe.com/blog/rental-market/market-snapshots/built-to-rent-single-family-homes-double-in-2022/

Are Credit Report Errors Almost Impossible to Fix? Jan 29, 2022

Show notes

The three top credit bureaus that have a strangle-hold on your credit score are getting a very poor performance report. A new analysis by the Consumer Financial Protection Bureau says that Equifax, Experian, and TransUnion are "routinely" failing to respond to consumer complaints about errors. Their performance is allegedly so bad that the CFPB says only "two percent" of complaints were addressed last year. (1)

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, a good credit score is extremely important for things like getting a credit card or buying a home. In the case of a home purchase, a higher credit score means you'll get a lower interest rate, and save tons of money over the life of the loan.

Credit scores can also play an important role in other kinds of decisions, such as the hiring of a new employee, the approval of a rental applicant, or the issuing of a new insurance policy. Whatever the game plan, the higher the credit score, the better the outcome for the consumer. And that means you don't want any errors that will bring that score lower.

The Right to Dispute Errors

When those errors occur, consumers have the right to dispute that information, and to have it fixed. According to the CFPB, most of the complaints sent to the bureaus qualify for a mandatory response, but they apparently "changed" the process for responding to complaints in 2020. According to the CFPB's report, that has resulted in a faster process for closing complaints and a much lower rate of resolution, from 25% in 2019 to just 2% last year.

The CFPB director Rohit Chopra told realtor.com: "America's credit reporting oligopoly has little incentive to treat consumers fairly when their credit reports have errors." He says the CFPB report is "further evidence of the serious harms stemming from their faulty financial surveillance business model." (2)

The CFPB typically includes information on consumer complaints in its Consumer Response Annual Report. This report is a stand-alone analysis because of the huge number of complaints it received from consumers who aren't getting their credit reports fixed.

The report says that between January of 2020 and September of 2021, the CFPB received more than 800,000 complaints. More than 700,000 of them were directed at Equifax, Experian, or TransUnion. Consumers are obviously frustrated about the situation. Among the issues, they say:

1 - They were caught in an automated response system that did not result in a solution to their problems.

2 - They were left without options when the source of the incorrect data argued against them… and…

3 - They wasted a lot of time, energy, and money trying to get errors fixed, but were unsuccessful.

Consumers At a Disadvantage

If you haven't dealt with this issue yet, the Washington Post published an article that paints a very clear picture. In one example, it says a creditor incorrectly reports that you were horribly late on a payment. As a result, your credit score drops substantially. The consumer then files a complaint with the credit bureaus and provides proof that the late payment never happened. (3)

The credit bureaus contact the creditor who gave the wrong information. They are called 'data furnishers" by industry insiders. The creditor allegedly checks the data and sends the same bogus data back to the credit bureaus, which then tell the consumer that the creditor has "verified" that the information is correct. As the Post article says: "This back and forth goes on for months, or for the truly unfortunate, years."

As if that's not bad enough, the Post article says that even for consumers who get the errors fixed, those same errors could suddenly find their way back to your credit report during computer updates that might pull old information from a large database.

Obligated to Address Complaints

Ed Mierzwinsky of the U.S. Public Interest Research Group says the credit bureaus "have never considered consumers as their customers. They've always considered consumers as a nuisance." They are obligated by law, however, to correct any errors, and they are supposed to do this within 30 days.

In the CFPB report, it says: "The (credit bureau) responses to these complaints raise serious questions about whether they are unable–or unwilling–to comply with the law." This stand-alone report was submitted to Congress and could be used for debate on how to address the problems that consumers are having with the credit bureaus.

As the report states: "More than 200 million Americans have credit files and nearly 15,000 providers furnish information about consumers to the (credit bureaus). Thus, the actions, and inactions, (by the credit bureaus) have large implications for consumers' financial well-being and the economy more broadly."

You can read more the CFPB report by following the a link in the show notes at newsforinvestors.com.

You're listening to the News For Investors podcast, which is produced by the real estate investing network, RealWealth. It's free to join, and free to access hundreds of webinars and articles on real estate investing. As a member, you also have access to the Investor Portal where you can view sample property pro-formas and connect with our network of resources. That includes experienced investment counselors, property teams, lenders, 1031 exchange facilitators, attorneys, CPAs and more. Click here to join now!

Please remember to hit the subscribe button, and leave a review!

Thanks for listening. I'm Kathy Fettke.

Links:

1 -https://www.consumerfinance.gov/data-research/research-reports/annual-report-consumer-credit-reporting-complaints-analysis-of-complaint-responses-equifax-experian-transunion/

2 -https://magazine.realtor/daily-news/2022/01/07/cfpb-credit-bureaus-fail-to-fix-errors-in-consumer-profiles

3 -https://www.washingtonpost.com/business/2022/01/07/fixing-credit-report-errors/

The Real Estate News Brief: Moving Higher: Mortgage Rates, Home Prices, Single-Family Rents Jan 28, 2022

Show notes

In this Real Estate News Brief for the week ending January 22nd, 2022… higher mortgage rates, home prices, and single-family rents.

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. The weekly unemployment report shows a surge in the number of applications. They were up 55,000 to a three-month high of 286,000. As MarketWatch reports, it's a sign that the current wave of covid cases is impacting businesses and triggering some layoffs. Economists say that some layoffs may also be due to the end of the holiday season. (1)

On the home-building front, December was a busy month for construction activity. The U.S. Census Bureau says home starts were up 1% compared to November, and 2.5% compared to the previous December. Permits were also up, by a lot. They were up 9% in December but much of the increase happened in the Northeast as builders rushed to get permits before new rules kicked in. Most of the permits were for multi-family projects. Single-family permits were only up 2%. (2)

Builders are not very happy about ongoing challenges like inflation and supply-chain disruptions. Rising mortgage rates and home prices are also a concern, along with the labor shortage. The National Association of Home Builders says its builder confidence index dropped slightly. (3)

Existing home sales were down last month. The National Association of Realtors says they dropped 4.6% between November and December. That's mostly due to inventory levels which NAR says were at their lowest level ever. The Association says while sales dropped nearly 5%, inventory was down 18%. (4)

Mortgage Rates

Mortgage rates moved higher again last week. Freddie Mac says the average 30-year fixed-rate mortgage rose 11 basis points to 3.56%. The 15-year rose 17 basis points to 2.79%. Mortgage rates are moving higher as Treasury yields rise and the Federal Reserve works on a plan to fight inflation. (5) On a positive note, lenders have loosened their purse strings and made funds more available for house hunters. The MBA'S Mortgage Credit Availability Index rose in December to its highest level since May of 2021. But, it's still down 30% from pre-pandemic levels. (6)

In other news making headlines...

Existing vs. New Home Price Growth

Existing home prices rose more than new home prices in 2021. But CoreLogic research shows price growth for new homes rose more over the last decade. (7)

The report offers an important perspective on home price growth by differentiating between two methods for calculating that growth. One method is from Case-Shiller which compares the latest sales price to the previous sales price. The other method is the tracking of the median price.

It points out that the median price can show trends but can also be skewed by the sale of homes at different price levels. For example, if 90% of the homes in one area are entry level homes, but 10% are luxury homes at double the price, the median will be skewed higher for all the homes. CoreLogic says the Case-Shiller method is more accurate because it compares current sales data to previous sales data, but it also has one big flaw. It can't determine new home price growth which accounts for 10% of all sales, because there are no previous sales.

It took a deeper dive into home price growth by combining the Case-Shiller Index for existing homes and a different metric for new homes which includes data for structural details of the homes and their locations.

It concluded that appreciation has been about the same for both categories over the last year, although existing home price growth was slightly higher. It was up 19.8% compared to 16.6% for new homes.

Over the last ten years, new home prices rose the most. They were up 127.9% compared to 93.2% for existing homes.

Record Growth for Single-Family Rents

CoreLogic also released the latest report on rent growth for single-family homes. It shows that rent growth was up 11.5% in November as demand soars. That's a new year-over-year record. It says that annual rent growth has doubled in some locations in just the last several months. In some areas, rents have tripled. (8)

Miami has seen the highest rate of increase at 33%. Phoenix was second at 19.4%. Las Vegas was third, at 16.7%. A few of the rental markets that we track include Orlando with an increase of 15.9%, Dallas with an increase of 14.8%, and Atlanta with an increase 14.8%. Charlotte is also on the top 20 list with a year-over-year increase of 12.2%. You can see the entire list by following a link in the show notes at newsforinvestors.com.

That's it for today. Please remember to hit the subscribe button, and leave a review!

Thanks for listening. I'm Kathy Fettke.

Links:

1 -https://www.marketwatch.com/story/u-s-jobless-claims-jump-55-000-to-three-month-high-of-286-000-as-omicron-bites-11642685869?mod=economic-report

2 -https://www.marketwatch.com/story/coming-up-u-s-housing-starts-report-for-december-11642598355?mod=economic-report

3 -https://www.marketwatch.com/story/u-s-home-builders-less-optimistic-due-to-high-inflation-and-supply-woes-11642518358?mod=economy-politics

4 -https://www.marketwatch.com/story/coming-up-u-s-existing-home-sales-11642690518?mod=economic-report

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

6 -https://magazine.realtor/daily-news/2022/01/18/buyers-may-find-opening-with-mortgage-credit

7 -https://www.corelogic.com/intelligence/which-increased-more-new-or-existing-home-prices/

8 - https://magazine.realtor/daily-news/2022/01/19/single-family-rents-post-record-growth

Where Is the Eviction Tsunami? Jan 19, 2022

Show notes

Warnings about an "eviction tsunami" have yet to materialize. Extended moratoriums and rental assistance programs have delayed evictions in some areas, some housing experts had predicted 40 million evictions last fall. As reported by the news blog, fivethirtyeight.com, those experts are "still waiting."

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.

Some renter protections are still in place or just now expiring in some states and jurisdictions, so an eviction surge could be looming in those areas. But housing experts had expected a U.S. eviction tsunami in September, after the national eviction moratorium was lifted. Although there's been an increase in evictions, it hasn't resulted in a tsunami, so far.

Evictions at Low Levels

The fivethirtyeight article cites information from a website called "Eviction Lab" which tracks eviction data that's been made public. That data doesn't cover the entire nation, but it shows that, as of October of last year, evictions in most parts of the country were 40% lower than an historical average, and have not returned to pre-pandemic levels.

So what's going on? It's difficult to know for sure, but there are various theories. Some housing experts think that some renters are still enjoying the benefits of the stimulus payments, extended unemployment insurance, and rental assistance programs, along with the moratoriums. There's also a theory that many "mom-and-pop landlords" have worked out deals with renters to avoid evictions. And there are some who feel that the eviction data just hasn't been very accurate.

The fivethirtyeight authors believe it's probably a combination of those three, but there is no nationwide database to track that data. They say as many as one-third of U.S. counties don't publish an annual report on the number of evictions that make their way through courts. And then there are the so-called "informal evictions," which are not tracked at all. That happens when landlords refuse to make repairs or abruptly change the locks on rental units. The blog suggests that informal evictions could be five times more common than the formal ones.

Predictions Were Likely Exaggerated

Despite the lack of solid figures for the current status of U.S. evictions, the warning about a tsunami of 40 million evictions was very likely exaggerated, by a lot. That figure was largely based on something called the U.S. Census Bureau's Household Pulse Survey which asks Americans how confident they are in paying their rent, on a weekly basis. And then week-after-week, between 25 and 33% didn't think they'd make rent.

That survey was used by the Aspen Institute and the COVID-19 Eviction Defense Project to come up with projections about how many households were at risk. The figure was between 12.6 million and 17.3 million households or 30 to 40 million renters. That made for some big headlines and the passage of legislation for almost $50 billion dollars in rent assistance.

The government hand-out probably protected a lot of renters. But as the fivethirtyeight blog points out, the legislation was probably "based on an overestimate" that was determined by renter confidence levels, and not facts. The Aspen researchers included responses from people with no confidence, a slight amount of confidence, and a moderate amount of confidence in being able to pay rent. Plus, they included not just the people who were already behind on the rent, but those who were up to date and just feeling worried.

As the blog points out, while a third of the renters said they were not feeling very confident about paying rent, only 13.9 percent were both low on confidence AND behind on their rent. So how many renters were truly at risk? Fivethirtyeight calculated that number at 6 million households and 14 million renters. That's less than half of what Aspen had predicted, at the low end.

The Aspen research grabbed the most headlines, but there were other estimates that came out a lot lower. The Urban Institute crunched the numbers from the Census Bureau's Household Pulse Survey but only included people who were already behind on their rent. That report determined that 10 million renters were at risk of eviction. The National Multifamily Housing Council estimates were also showing lower numbers, although that organization only covers multi-family.

Single-Family Ecosphere

But the single-family ecosphere also fared well. We were reporting on how well our affiliates were doing with rent collection during the pandemic. Our affiliate in Jacksonville, who renovates and manages a large number of single-family rentals, says he hasn't noticed a big surge in evictions. He attributes that to Florida's landlord and business-friendly environment.

He says: "Since the outbreak of Covid, we have remained in one of the strongest rental markets I have experienced in 25 years as a professional landlord. Businesses, families, homeowners, and renters are moving to Florida because of these fundamentals which allows our state and real estate markets to continue to grow both on the equity and rental side of the business."

You can read more about this topic by following the links in the show notes at newsforinvestors.com.

You can also join RealWealth, for free, to learn more about residential real estate investing in landlord and business-friendly markets. 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. That includes experienced investment counselors, property teams, lenders, 1031 exchange facilitators, attorneys, CPAs and more.

And please remember to hit the subscribe button, and leave a review!

Thanks for listening. I'm Kathy Fettke.

Links:

1 - https://fivethirtyeight.com/features/what-happened-to-the-eviction-tsunami/

The Real Estate News Brief: Monetary Policy Tightens, Inflation Hits New High, Mortgage Rates Increase Jan 19, 2022

Show notes

In this Real Estate News Brief for the week ending January 14th, 2022... what the Fed is saying about tighter monetary policy, the latest rise in consumer prices, and where mortgage rates are right now.

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 confirmation hearings for Fed Chief Jerome Powell. President Biden nominated him to continue in his role as the central bank's Chairman. Powell told the Senate Banking Committee that super low interest rates are no longer needed to prop up the economy, and that short-term rates should go higher to control inflation.

The Fed has penciled in three rate hikes this year, but Powell says the central bank is prepared to do more, if necessary. It's a balancing act because hiking rates too much and too fast, could lead us into a recession, and job losses. But Powell believes that rates can go higher without hurting the job market. MarketWatch described his characterization of the process as a "soft landing" for the economy, and not a recession.

Powell says that "if things develop as expected, we'll be normalizing policy, meaning we're going to end our asset purchases in March, meaning we'll be raising rates over the course of the year." (1) (2)

As it stands, consumer prices rose again in December. The government says they were up .5% in December to a 40-year high of almost 7%. When you strip out food and energy, the inflation rate was up .6% in December to 5.5%. As reported by MarketWatch, that figure is a 31-year high. (3)

Those high prices contributed to a drop in consumer spending, along with the spread of the Omicron variant and the supply chain disruptions that are leaving some store shelves bare. The government says that retail sales figures were down 1.9% in December. Internet retailers, like Amazon, experienced the biggest declines. Those figures were down almost 9%. Sales fell about 7% for department stores, 5.5% at furniture stores, and almost 3% at places that sell electronics, like Best Buy. (4)

The unemployment report surprised economists with an increase in initial state claims. They were up 23,000 to a total of 230,000. Continuing claims dropped significantly however. Almost 200,000 people stopped collecting checks last week, leaving just 1.56 million people on the unemployment list. (5)

Consumers are feeling more pessimistic about the economy because of inflation and Covid. The University of Michigan reports that its consumer sentiment index fell a few points in January, to 68.8. That's the second-lowest reading in a decade. The lowest was a few months ago when it dropped to 67.4 in November. (6)

Mortgage Rates

Mortgage rates rose by almost a quarter point last week. Freddie Mac says the average 30-year fixed-rate mortgage was up 23 basis points to 3.45%. The 15-year was up 19 points to 2.62%. Freddie Mac says the rate increase was "driven by the prospect of a faster than expected tightening of monetary policy" by the Federal Reserve in response to inflation, supply chain disruptions, and labor shortages. (7)

In other news making headlines…

Mortgage Delinquency Rates

The mortgage delinquency rate has returned to pre-pandemic levels. CoreLogic's Loan Performance Report shows that 3.8% of mortgages were delinquent by at least 30 days in October. That's only one-tenth of a percent higher than October of 2019. And the trend is expected to continue. (8)

The report shows CoreLogic's chief economist, Frank Nothaft, says that loan modifications have helped lower the number of loans that are seriously delinquent. But he says they were still half a million higher in October than they were at the start of the pandemic in March.

The drop in mortgage delinquencies has lowered the foreclosure inventory rate to its lowest level since 1999. CoreLogic says foreclosures are down in all 50 states, and expects them to drop further throughout the course of this year.

Second-Home Demand

Demand for vacation homes continues to rise. Redfin says it was 77% higher in December than it was before the pandemic due to new work flexibility and low mortgage rates. The second-home market is expected to remain strong, although higher interest rates could impact demand along with new second-home fees from Fannie Mae and Freddie Mac. Those will take effect on April 1st. (9)

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

Thanks for listening. I'm Kathy Fettke.

Links:

1 - https://www.marketwatch.com/story/powell-says-fed-can-cool-inflation-without-damaging-labor-market-11641918399?mod=economy-politics

2 - https://www.cnbc.com/2022/01/11/powell-says-rate-hikes-tighter-policy-will-be-needed-to-control-inflation.html

3 - https://www.marketwatch.com/story/coming-up-consumer-price-index-11641993303?mod=economy-politics

4 - https://www.marketwatch.com/story/coming-up-u-s-retail-sales-11642166291?mod=economy-politics

5 - https://www.marketwatch.com/story/jobless-claims-jump-to-highest-level-since-mid-november-11642081065?mod=economy-politics

6 - https://www.marketwatch.com/story/consumer-sentiment-falls-in-january-due-to-omicron-and-inflation-worries-11642172660?mod=economic-report

7 - http://www.freddiemac.com/pmms/

8 - https://www.housingwire.com/articles/mortgage-delinquency-rate-reaches-prepandemic-levels/

9 - https://magazine.realtor/daily-news/2022/01/07/second-home-demand-up-77-from-pre-pandemic-levels

The Lumber Price Roller Coaster Jan 14, 2022

Show notes

Lumber prices are surging once more. You might remember when they hit a staggering level last spring. They aren't back up to that level yet, but this new surge is, again, adding thousands of dollars onto the price of a new home and making homes that much less affordable.

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 National Association of Home Builders reports that lumber prices have almost tripled over the last four months. That's adding more than $18,600 to the price of an average new single-family home, and about $7,300 to the market value of a multi-family home. The multi-family price hike translates into about $67 dollars a month more that tenants have to pay in rent for a new apartment. (1)

Lumber Price Look-Back

The lumber price roller coaster began at the start of the pandemic when sawmills shut down in step with the Covid lockdown. Back then, most people thought that the housing market would suffer as COVID spread, and that home construction would grind to a halt. But it was just the opposite.

Housing demand began to soar and sawmills couldn't ramp back up fast enough. According to the NAHB: "The slow reaction by sawmills, combined with a massive uptick in demand from do-it-yourselfers and big box retailers during the pandemic resulted in lumber prices peaking at a record-shattering $1,500 per thousand board feet in May 2021, before beginning a gradual decline through late August."

The NAHB says lumber prices have gone back up 167% since August, to more than $1,000 per thousand board feet. But it isn't just a matter of saw mill response. The NAHB lists several reasons including supply chain disruptions, a doubling of tariffs on Canadian lumber imports, and an unusually damaging wildfire season in the Western U.S. and Canada.

NAHB Response

The NAHB says it is working with the White House, Congress, and lumber producers to help resolve those issues, and bring prices back down to earth. NAHB actions include a letter to Commerce Secretary Gina Raimondo last month about the doubling of Canadian lumber tariffs. It was signed by 84 members of Congress, and asked that the U.S. resume negotiations with Canada on a new trade agreement for lumber.

It says the association leaders also met with Canadian officials at the embassy in Washington, D.C. to emphasize the need to restart negotiations. In early December, the NAHB sent a letter to President Biden in support of a new trade agreement. The NAHB would like to see immediate action in three areas. Those include:

The removal of tariffs for lumber and other building materials such as steel and aluminum from China.

The elimination of bottlenecks at seaports that are preventing the free flow of goods and materials.

And, solutions to delays in transportation by trucks and trains.

The NAHB says it's important to address the price issue for all construction materials, and not just lumber. It says the average price growth for home construction materials was about three times the rate of inflation in 2021.

The situation isn't hurting builders. As the Wall Street Journal points out, they have no trouble raising prices to cover their costs. Layman's Lumber Guide analyst, Matt Layman, says: "They know they can pay $1,500 for two-by-fours. They didn't like it, but it didn't hurt them." (2)

Without the kind of intervention that the NAHB is advocating, analysts expect to see prices climbing higher through the winter as builders ramp up for the spring season. Many are loading up on as much lumber as they can for fear that prices will climb even further.

If you want to learn more about what the NAHB is doing, and how you can express your opinion on what needs to be done, look for a link in the show notes at newsforinvestors.com.

You can also join RealWealth, for free. 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. That includes experienced investment counselors, property teams, lenders, 1031 exchange facilitators, attorneys, CPAs and more.

And please remember to hit the subscribe button, and leave a review!

Thanks for listening. I'm Kathy Fettke.

Links:

1 -https://nahbnow.com/2022/01/latest-wave-of-rising-lumber-prices-adds-more-than-18600-to-the-price-of-a-new-home/

2 -https://www.wsj.com/articles/sky-high-lumber-prices-are-back-11639842879

The Real Estate News Brief: Buying vs. Renting, New Upfront FHFA Fees, WeWork Founder's New Focus Jan 12, 2022

Show notes

In this Real Estate News Brief for the week ending January 8th, 2022... we'll look at the cost of buying vs. renting, new FHFA fees for jumbo loans and second homes, and the WeWork/WeLive founder's new focus on apartments.

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. The Federal Reserve released the minutes of its December meeting with details about a more aggressive tapering plan and interest rate hikes. Fed officials plan to begin the tapering process after the first rate hike, which is generally expected to be in March. They are predicting the need for "three" quarter-percent rate hikes this year and another three next year. Possibly, two more after that. That would be a total of 2% if all eight rate hikes go into effect. (1)

The number of people applying for state unemployment benefits rose last week, but it's still extremely low. The Labor Department says there were 207,000 initial claims. Continuing claims were also slightly higher. They rose 36,000 to 1.75 million which is still below pre-pandemic levels. (2)

The U.S. unemployment rate is now "close" to pre-pandemic levels. It dropped to 3.9% in December from 4.2%. Before Covid struck the U.S., it was 3.5%. This is largely due to businesses offering incentives like signing bonuses, higher wages, and better benefits, to attract workers to a surplus of open positions. (3)

The worker shortage has also given Americans more confidence in quitting jobs they don't like and finding better ones. This trend is showing up in the "quits rate" which represents the number of Americans quitting their jobs. The quits rate rose from 2.8% to 3% in November. That represents a 370,000 increase to a record 4.5 million. (4)

Turning now to real estate, new numbers on construction spending show an increase. The Commerce Department says they are up .4% for November, at a seasonally adjusted annual rate of $1.63 trillion. When you break that down into sub-sectors, residential construction was up .4% while non-residential construction was flat and office construction was down 32.1%. (5)

Mortgage Rates

Mortgage rates moved higher for the start of the new year. Freddie Mac says the average 30-year fixed-rate mortgage rose 11 basis points to 3.22%. The 15-year was up 10 points to 2.43%. Freddie Mac's chief economist, Sam Khater says these rates are the highest since May of 2020. He says: "With higher inflation, promising economic growth and a tight labor market, we expect rates will continue to rise." (6)

In other news making headlines…

Fees Rise for Larger Second-Home Loans

The FHFA is raising up front fees for second-home loans, and those that exceed conforming loan limits. Those fees could add close to another 4% onto the cost of a loan for a second home, and as much as .75% to the cost of a jumbo loan, if they are bought by Fannie Mae or Freddie Mac. (7)

The National Association of Home Builders has come out against the fee. It says that a second-home loan of about $300,000 with a loan-to-value of 65% will cost an additional $4,875 because of that fee. NAHB chairman, Chuck Fowke, says: "With the nation in the midst of a housing affordability crisis and many more workers electing to telework, this is exactly the wrong time for federal regulators to be raising fees on homeownership and second homes."

The new fees take effect on April 1st.

Buying vs. Renting

Is it cheaper to rent or to buy? According to ATTOM Data Solutions, homeownership is still the better choice in most of the country. A new study shows that it's more affordable in 58% of the counties that were tracked by researchers. (8)

The study compared median-priced homes to the average rent for a three-bedroom rental property in more than 1,000 counties. Researchers also looked at wages which have been rising slower than home prices but faster than rents. But that dynamic is changing.

ATTOM's chief product officer, Todd Teta says: "The trend is slowly shifting toward renters, which could be a major force in easing price increases in 2022. Prices can only go up by so much more before renting becomes financially easier."

WeWork Founder Buying Up Apartments

The man who wanted to transform the work world when he co-founded "WeWork, is now working on a plan to "shake up the rental housing industry." According to the Wall Street Journal and realtor.com, Adam Neumann has purchased more than 4,000 apartments in desirable real estate markets across the country. (9)

He told the Journal: "Since the spring of 2020, we have been excited about multifamily apartment living in vibrant cities where a new generation of young people increasingly are choosing to live, the kind of cities that are redefining the future of living."

Neuman left WeWork in 2019, after raising more than $10 billion for the company. He also launched a shared-living network of buildings with rentable rooms called WeLive, but that was shut down when he left the company. The cities where he's purchased apartments include: Miami, Atlanta, Nashville, and Fort Lauderdale, among others.

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

Thanks for listening. I'm Kathy Fettke.

Links:

1 -https://www.cnbc.com/2022/01/05/fed-minutes-december-2021.html

2 -https://www.marketwatch.com/story/u-s-unemployment-claims-rise-slightly-to-207-000-but-still-near-52-week-low-11641476186?mod=economy-politics

3 -https://www.marketwatch.com/story/coming-up-u-s-jobs-report-for-december-11641561153?mod=bnbh_mwarticle

4 -https://www.marketwatch.com/story/job-openings-tick-lower-in-november-11641309446?mod=economy-politics

5 -https://www.marketwatch.com/story/construction-spending-has-solid-gain-in-november-led-by-residential-building-11641222772?mod=economic-report

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

7 -https://nahbnow.com/2022/01/fhfa-to-impose-hefty-upfront-fees-on-second-home-purchases/

8 -https://magazine.realtor/daily-news/2022/01/06/homeownership-still-more-affordable-than-renting

9 -https://magazine.realtor/daily-news/2022/01/06/wework-co-founder-seeks-apartment-empire

The Real Estate News Brief: Single-Family Investor Hot Spots, Insurance Price Hikes, Top Searches on Zillow Jan 09, 2022

Show notes

In this Real Estate News Brief for the week ending January 1st, 2022... investor hot spots for single-family homes, insurance premium price hikes, and Zillow's list of most popular search areas.

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 the last week of 2021. The year closed with fewer people asking for unemployment benefits. Initial jobless claims were down to 198,000, which is close to a 50-year low. Continuing claims also dropped. Government figures show they were down by about 140,000 to 1.72 million people. The numbers reflect a labor shortage and companies that are not eager to lay anyone off because it might be difficult to replace them. According to MarketWatch, economists are predicting the labor shortage will continue in 2022, but will not be so pronounced. (1)

Pending home sales for November were down for a third month in a row. The National Association of Realtors says they were down 2.2% from October. That's more than the .8% drop in pending home sales that MarketWatch had forecast. On a year-over-year basis, they were down 2.7%. NAR'S chief economist, Lawrence Yun, blames the dip on a tight supply of homes which continues to push home prices higher. He also expects to see higher inventory levels in 2022 which will help slow the price growth. (2)

The latest report from the S&P CoreLogic Case-Shiller 20-city price index shows an 18.4% year-over-year gain in home prices for October. The national index shows a 19.1% annual gain. Both are slightly "lower" than they were in September. But some cities are showing extremely strong price growth, such as Phoenix. Year-over-year home price growth there is 32.3%. Tampa and Miami are also very high due to the strong housing market in Florida. (3)

Mortgage Rates

Mortgage rates moved slightly higher, but the average 30-year fixed-rate mortgage is still hovering slightly above the 3% level. Freddie Mac says it rose 6 basis points last week to 3.11%. The 15-year was up 3 points to 2.33%. (4) Freddie Mac's chief economist, Sam Khater, says: "Mortgage rates have been effectively moving sideways despite the increase in new Covid cases." (5)

In other news making headlines…

Investors Want Single-Family Homes

The buying spree continues among investors who are snapping up single-family homes, and it's not just the more affordable areas they are interested in. According to CoreLogic, California is experiencing a rebound in single-family homes that are purchased by investors. (6)

CoreLogic economist, Thomas Malone, says: "After a decade of moving away, investors are coming back to California." He says: "The California rise is likely due to large investors, who seem less deterred by the high prices found in the area."

Those California metros include the Silicon Valley region and San Francisco in the North, and the Los Angeles area and the counties of Riverside and San Bernardino in the South. Other metros attracting investors are Atlanta, Phoenix, and the McAllen-Edinburg-Mission region of Texas down near the Southern tip of the state. Las Vegas, El Paso, Memphis and Salt Lake City are also attracting a large share of investors.

Insurance Premiums Are Climbing

The cost of homebuilding materials and climate change risks are turning into higher insurance premiums, and that's giving some property owners sticker shock. The Insurance Information Institute says that premiums are up about 4%, with an average annual premium of $1,400. Realtor.com reports a warning from insurance companies, that premiums will be going even higher. (7)

Realtor.com says the cost of rebuilding a home is going up because of higher prices for building materials in general. But, it says, homeowners with the biggest increases are those in disaster-prone areas. Chief economist of the National Association of Home Builders, Robert Dietz, says that building material prices are pushed higher after a natural disaster for six to nine months, while people are, of course, scrambling to rebuild their homes.

Most Searched for Real Estate in 2021

The rise of remote work has put a popular vacation area in the spotlight. According to page views on Zillow, South Lake Tahoe was the most popular city last year. Zillow says it catapulted into the number one position because of a high number of page views for each listing – about 5,500! (8)

Calabasas in the Los Angeles area ranked as the most popular small town. But it isn't your typical small town. Calabasas is known for having many celebrity residents with homes that are valued at an average of $1.5 million. California's Big Bear Lake also attracted a lot of page views, which Zillow ranked as the most popular vacation town.

Other hot spots include Newport, Oregon as the most popular beach town; Tempe, Arizona as the most popular college town; and Lavallette, New Jersey, as the most popular retirement community.

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:

1 -https://www.marketwatch.com/story/jobless-claims-drop-to-198-000-and-stick-near-52-year-low-amid-labor-shortage-11640871335?mod=economic-report

2 -https://www.marketwatch.com/story/pending-home-sales-slide-as-buyers-grow-more-cautious-11640790608?mod=economic-report

3 -https://www.marketwatch.com/story/the-pace-of-home-price-growth-is-slowing-but-buyers-arent-catching-a-break-11640700715?mod=economic-report

4 -http://www.freddiemac.com/pmms/

5 -https://magazine.realtor/daily-news/2021/12/30/year-end-mortgage-rates-at-311

6 -https://magazine.realtor/daily-news/2021/12/27/investors-continue-buying-sprees

7 -https://magazine.realtor/daily-news/2021/12/28/homeowners-experience-sticker-shock-on-insurance-premiums

8 -https://www.zillow.com/research/tahoe-zillow-most-popular-2021-30479/

A Record-Breaking Year for Housing! Jan 05, 2022

Show notes

2021 was a record-breaking year for housing and real estate. Redfin compiled a list of 10 housing records that we experienced last year. And some of these themes are expected to continue into 2022.

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.

It's been an unusual year to say the least. It was the second year of the pandemic and one where many Americans have changed where and how they live because of the COVID-19 and a surge in remote work. That has also changed the kind of homes they buy and rent.

Redfin Chief Economist, Daryl Fairweather, says: "The ongoing pandemic, including its seismic effect on the U.S. economy and the way Americans live and work, has made 2021's housing market anything but typical." He says: "Remote work, low mortgage rates, a shortage of building materials and wealth inequality that has allowed an influx of affluent Americans to buy vacation homes, to name just a few factors, have come together to create a historic year for real estate. Buyers paid more for homes, bought sooner than they planned, searched outside their hometowns or all of the above." (1)

Redfin's List of 2021 Housing Records

Let's take a look at Redfin's list:

1 - The national median home price hit an all-time high of $386,000 in June. That's a 24.4% year-over-year increase. Home prices have been going up all year, thanks to a lack of inventory and strong demand. Low mortgage rates have also helped fuel that price growth. Redfin says that home prices are higher than pre-pandemic levels in almost all parts of the nation.

2 - Inventory levels hit a record low in June when there were just 1.38 million homes for sale. That was 23% lower year-over-year. The problem has gotten worse because of high demand, homeowners deciding to refinance at low rates instead of selling, and new construction that isn't keeping up with the need for homes.

3 - Homes are selling more quickly than ever before. Redfin says the typical home spent just 15 days on the market in June and July. In June of 2020, the median number of days on the market was 39. Buyers have been snatching up homes as fast as they can. Many do so without seeing the homes in person.

4 - Sellers were also taking advantage of the situation. More than 60% of them accepted offers within two weeks, which is an all-time high.

5 - More than 56% of the sold homes went for more than the listing price. That's almost 30 percentage points higher than 2020, and a new record. Redfin says the average home sold for 2.6% over the list price. Almost three quarters of all Redfin agents say their buyers faced competition.

6 - The 30-year fixed-rate mortgage went as low as 2.65% in January. That's the lowest ever, and is one reason for the home-buying and refinancing frenzy that we've been seeing.

7 - Investors have been busy buying almost one out of every five homes on the market. That's 18.2% of the purchased homes and 11.2% more than the year before. Total dollars spent by investors was a record $63.6 billion in the third quarter compared to $35.7 billion during Q3 2020.

8 - Demand has almost doubled for second homes. It was up 91% in January, mostly due to a surge in remote work. Instead of working at home, employees have been enjoying their work hours at beach homes and mountain cabins.

9 - Almost a third of Americans wanted to move to a new city this last year, thanks to remote work and the ability to work from wherever. Many workers left expensive cities in search of more affordable areas.

10 - Luxury home prices hit new records. The median sale price for a top tier home was 25.8% higher year-over-year, or a little over a million dollars. Mid-priced home were up 16% and affordable homes were up 13.2%.

This data is food for thought as we head into the new year, and start mapping out our investing strategy. Mortgage rates are expected to move higher which will slow down price growth a bit. But home buyer demand is expected to remain high along with supply chain issues that are interfering with home construction. And for those who can't buy a home, they will very likely be looking for a single-family rental so they can live like a homeowner.

One economist, Logan Mohtashami, lead analyst for Housing Wire, actually believes rates could decrease in 2022. To find out why, I've invited him to be my guest on my 2022 Housing Forecast this Thursday. You can sign up for that at newsforinvestors.com. It's free to join and then you'll get access. I interviewed Logan on my other podcast last Spring, and based on the great reviews, I'd say you won't want to miss this webinar. He's been eerily accurate with his predictions, which have often been the exact opposite of what you see in headline news.

Again, you can sign up for the free webinar at newsforinvestors.com.

And please remember to hit the subscribe button, and leave a review!

Thanks for listening. I'm Kathy Fettke.

Links:

1 - https://www.worldpropertyjournal.com/real-estate-news/united-states/seattle/real-estate-news-top-10-housing-trends-of-2021-redfin-2021-housing-data-housing-records-set-in-2021-daryl-fairweather-12865.php