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The Real Estate News Brief: CDC Eviction Moratorium Lawsuit, Remote Worker Plan, and Pets on Home Tours Jun 08, 2021

Show notes

In this Real Estate News Brief for the week ending June 5th, 2021… a lawsuit over the CDC eviction moratorium is heating up, what remote workers are saying about going back to the office, and the important role that pets are playing in the homebuying process.

Economic News

We begin with economic news from this past week, and a job market that continues to improve. The weekly jobless report shows another pandemic low for initial jobless claims. They were down to 385,000, according to the Labor Department. That's down from 405,000 for the previous week. More than 15.4 million Americans are still receiving unemployment benefits. (1)

The latest home price report from CoreLogic shows that prices were up 13% year-over-year in April. That's the highest annual gain since February of 2006. It's been driven mostly by competition among buyers for a tight inventory of homes as well as the low mortgage rates. Economists say we might see slower price growth as more homes come on the market from builders and existing home owners who are no longer afraid to list because of the pandemic. (2)

Builders have been busy. According to the Census bureau, construction spending was up 5.8% during the first four months of this year, compared to last year. For April, the monthly increase was 1.3% and the year-over-year increase was 9.8%. Private construction accounts for most of the increase. The building of new single-family homes tops that list. The Census Bureau shows a 39.5% year-over-year increase for single-family construction. (3)

A record number of builders are also reporting material shortages which is driving up the cost of construction. The National Association of Home Builders says that appliances, lumber, engineered wood, and plywood are all topping the list. Many of the builders surveyed say they are seeing a serious shortage in those four categories. Windows and doors are also hard to come by along with trusses, copper wiring, plumbing fixtures, and vinyl siding. Actually, there's some amount of shortage for all the things you need to build a home, but the ones I mentioned are the worst. (4)

Mortgage Rates

Average mortgage rates are still under 3% but they are 4 basis points higher than the week before. Freddie Mac says the average 30-year fixed-rate mortgage is 2.99%. The 15-year is 2.27%. (5)

In other news making headlines...

CDC Eviction Ban Heads to Supreme Court

The plaintiffs in a lawsuit against the CDC Eviction Moratorium are taking their case to the Supreme Court. The moratorium is set to expire at the end of this month, if it isn't extended before then.

Realtor Associations in Georgia and Alabama along with two landlords and two property management companies lost an appeal this last week, and have now asked the U.S. Supreme Court to step in. They claim that landlords across the nation have lost more than $13 billion in unpaid rent because of the moratorium. They want the high court to block the CDC mandate, on an emergency basis.

Many Workers Reject Office Return

Many workers are telling their bosses they don't plan to return to the office. According to a new survey commissioned by Bloomberg, 39% say they'd rather quit than go back to an in-person office situation. It was a nationwide survey of 1,000 people. And surprisingly, younger workers were the most likely to say they'd rather quit than go back to work at the office. About half of the millennial and Gen Z participants said no to office work. There's been some talk that younger workers might prefer the camaraderie of an office environment.

The results are similar to a recent survey by realtor.com that shows 60% of new homeowners are working from home. And about the same percentage prefer to continue their remote work positions. A lot of them said they will be looking for a new job if they are forced to go back to the office full-time.

Buyers Want Feedback from Pets

Pets are becoming an important part of the homebuying process. In a recent survey by Ally Home, 20% of the participants have brought their pets with them to look at homes. Almost 25% of women say they've done that while 15% of the men say they've gone house-hunting with Fido. Ally Home president, Glenn Brunker, says it makes sense because people want their pets to feel comfortable in the home.

Millennials were the biggest group that said pets will influence their home-buying decisions. Many want a dedicated space for the pet, or maybe a bedroom that's large enough for a bed that will accommodate their pet.

In a survey last year by the National Association of Realtors, 81% of its members said they were animal lovers. And 43% wais they would consider moving to a more pet-friendly home.

You'll find links to our sources in the notes for this episode at NewsForInvestors.com.

Click here to join RealWealth now, it's free and only takes a minute!

Thanks for listening. I'm Kathy Fettke.

Links:

1 - https://www.cnbc.com/2021/06/03/weekly-jobless-claims.html

2 - https://www.corelogic.com/blog/2021/5/home-prices-post-third-consecutive-double-digit-gain-in-april.aspx

3 - https://www.census.gov/construction/c30/pdf/release.pdf

4 - https://eyeonhousing.org/2021/05/record-numbers-of-builders-report-material-shortages/

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

6 - https://www.cnn.com/2021/06/03/politics/supreme-court-realtors-eviction-moratorium/index.html

7 - https://magazine.realtor/daily-news/2021/06/02/39-of-workers-say-they-ll-quit-if-remote-work-is-not-permitted

9 - https://magazine.realtor/daily-news/2021/06/02/expect-buyers-pets-on-home-tours

Short-Term Rentals: Airbnb Announces Big Upgrade and New Research on Travel Jun 04, 2021

Show notes

Airbnb just unveiled a big upgrade to its platform as the company gears up for a post-pandemic travel surge. (1) The upgrade includes more than a hundred changes with a focus on flexibility. Airbnb says that people need more flexible options because they are traveling more often, searching for new destinations, and are staying for longer periods of time.

Airbnb says the changes it made to its platform were inspired by a comprehensive analysis of its booking data and travel has changed because of the pandemic. According to the Airbnb Report on "Travel & Living": "We are shifting from traveling at all the same times to all the same old places, to many of us living anywhere, at any time, for however long." Airbnb describes this as "a world in which living and traveling are one and the same." (2)

Airbnb's Report on Travel & Living

The report says the number of people who see traveling as more of a lifestyle today is almost the same as the number of people who see traveling as a series of individual trips. People in five countries and three U.S. states answered the question.

The five countries included the United States, the United Kingdom, Mexico, France, and Australia. The overall percentage was 39% for travel as a lifestyle and 43% for one-off trips. Florida had similar results but the survey participants in California and New York leaned even more heavily toward "travel as a lifestyle."

Airbnb calls this kind of travel shift a "blurring of traveling and living" with three key trends. The first one is that "people are less tethered and more flexible on when they can travel." Researchers say the number one response from people surveyed in those five countries is that they would travel more often because they can -- thanks to the ability to work and study remotely.

Second, people are traveling to a wider range of destinations. They are shifting toward the road less traveled and trying out new locations. For example, Airbnb says there was a big jump in the number of people searching for natural settings such as mountain, coastal, and rural destinations. But they are also looking for places within 300 miles of home, just not the usual places.

And third, people are staying for longer periods of time at their destinations. Airbnb says the average length of stay has grown from 3.5 nights in 2019 to more than 4 nights in April of this year. It also found that long-term stays of at least 28 nights have almost doubled. Those accounted for 14% of the bookings in 2019 compared to 24% of the bookings in the first quarter of 2021. More than half of those long-term guests said they were also working or studying during their stay.

The New "Live Anywhere" Trend

This "live anywhere" trend appears to be growing, as well. 74% of the people surveyed said they would like to live someplace other than where their employer is based. 11% of those surveyed described their lifestyle as "nomadic." And 5% said they plan on giving up their homes to live full-time in Airbnbs.

In support of this new trend, Airbnb is offering three new ways to search on Airbnb. The new tools are called: Flexible Dates, Flexible Matching, and Flexible Destinations.

Flexible Dates allow a person to search for a weekend getaway, a week-long vacation, or a month-long stay, for example. That opens up the possibility for getting a place that might not show up if you specify dates because of a reservation overlap with someone else.

Flexible Matching will show results that might be slightly outside your search area, or slightly higher than the price you specified.

And Flexible Destinations offers a way to find unique places that you wouldn't know to search for. These are one-of-a-kind properties that have apparently grown in number just recently. Airbnb says: "From adobe houses to wagons, Airbnb has over 170,000 one-of-a-kind properties to choose from and the number of searches for these unique listings has grown 94% so far in 2021 compared to the same period in 2019.

Airbnb has also added new filters to help people fine-tune their search results. That might include locations near certain points of interest such as a national park, and properties with specific attributes like an ocean view or a wood-burning fireplace.

Other changes make it easier for people to become a Host. The process has been whittled down to just 10-steps. The program is smart enough to help arrange photos, and will auto-fill some of the details with public real estate data.

Changes for guests include a faster checkout process, an easy-access arrival guide, a more robust review process, and easier-to-understand cancellation policies.

Airbnb is expecting a travel rebound "like no other" as more and more people feel safe enough from COVID-19 to travel. CEO Brian Chsky also shared another interesting tidbit with CNBC. He said Covid was sort of a reset button for Airbnb's relationship with cities. He says: "A lot of cities that had too much tourism before... now have under-tourism. And they are reaching out to us." He says: "We had over a hundred destination marketing organizations reach out to us asking us for help to drive demand towards them." (3)

There's lots more data in this report. If you'd like to learn more, you'll find a link to the report in the notes for this episode at NewsForInvestors.com

Click here to join RealWealth now, it's free and only takes a minute!

Links:

1 - https://news.airbnb.com/2021-release/

2 - https://news.airbnb.com/wp-content/uploads/sites/4/2021/05/Airbnb-Report-on-Travel-Living.pdf

3 - https://www.cnbc.com/2021/05/24/airbnbs-big-new-update-is-focused-on-flexibility-heres-whats-new.html

The Real Estate News Brief: GDP Rise Expected, Rent Growth Speeds Up, Demand for Off-the-Grid Homes Jun 02, 2021

Show notes

In this Real Estate News Brief for the week ending May 29th, 2021... what the GDP is expected to do in the second quarter, how much single-family rents have shot up, and what developers are saying about off-the-grid homes.

Economic News

We begin with economic news from this past week. The latest update on the GDP shows the first quarter holding at 6.4%. Economists had expected a revision to 6.6% but stronger imports apparently offset an increase in consumer spending. (1) Looking ahead to the second quarter, economists are expecting an annualized growth rate of 8.2%. And JP Morgan Chase CEO, Jamie Dimon, thinks we'll continue to see this kind of growth for the next few years.

Inflation hit a 13-year high in April. According to the PCE index, it jumped to 3.6%. (2) That's the strongest reading of the personal consumption expenditure index since 2008. It's also well above the Federal Reserve's 2% goal.

Great news on the job market. The government reports just 408,000 new unemployment claims for last week. (3) That's the lowest number we've seen since the pandemic began. The biggest declines in new claims happened in the states of Washington, Florida, New Jersey, Texas, and Ohio. Oklahoma was the only state with a big increase.

Both new home sales and pending home sales for existing homes were down in April. The Census Bureau says new home sales fell 6% on a seasonally-adjusted annual basis. (4) The National Association of Realtors reports that pending home sales were down 4.4%. (5) Both are much higher than they were in April of 2020 however, but the pullback likely reflects higher prices and inventory issues.

Prices have been soaring across the country. The latest S&P CoreLogic Case-Shiller 20-city home price index shows a 1.6% increase from February to March. (6) On an annualized basis, prices are up 13.3%. Phoenix, San Diego, and Seattle prices have been rising the fastest. Phoenix prices are up 20% while the other two cities are close to that.

Consumers are apparently worried about inflation. Consumer confidence dipped slightly in May. It's the first time in six months that the Conference Board reported a down month. (7) The University of Michigan had similar results for its consumer sentiment index. (8) Both reports say consumers are feeling less secure about the economy because they are paying higher prices for almost everything.

Mortgage Rates

Mortgage rates are still below 3% for a second week in a row. Freddie Mac says the 30-year fixed-rate mortgage was down 5 basis points to 2.95%. The 15-year was down 2 points to 2.27%. (9)

In other news making headlines…

Lenders Speeding Up Days to Close

Lenders are shortening the time it takes to close after a pandemic rush on loan applications that increased their workload. A report from ICE Mortgage Technology shows that the average number of days to close on a purchase was just 51 days in April. (10) For refinancing, it was 53 days. A year ago, it took 42 days for a purchase and 39 days to refinance.

ICE president, Joe Tyrrell, says that lenders are able to get the job done more quickly because of digital mortgage technologies.

Lenders Ready to Resume Foreclosures

Lenders are preparing for the end of the foreclosure moratorium. It's set to expire on June 30th, and realtor.com says that some lenders are planning to move forward with foreclosures, but some banks plan to hold back. (11)

Bank of America says that most clients are now current and it plans to work with the remaining few who need help. JP Morgan also says that about 90% of the people seeking forbearance have now exited those programs.

Wells Fargo recently said that it plans to extend the moratorium on its loans until the end of the year. That's in line with a proposed rule by the Consumer Financial Protection Bureau which would prevent foreclosures from happening until 2022.

Rent Growth is Picking Up Speed

Rent growth has been picking up speed. CoreLogic says that single-family rents were up 4.3% in March compared to a year ago. Back then, the year-over-year increase was 3%. Rents are rising faster because demand is so strong for single-family rentals.

They are also rising much faster than apartment rents. According to Real Page, apartment rents were up 1.3% year-over-year.

Demand Grows for Off-Grid Homes

Demand is growing for off-the-grid homes, as climate change and natural disasters result in more and more power failures. CNBC reports that major blackout events are up about 60% from 2015. These have been caused by hurricanes along the Atlantic coast, a freak ice storm in Texas, a horrendous number of wildfires in California, and other events. That includes rolling blackouts that have become somewhat common on very hot days.

Grid shutdown in the midst of wildfires inspired one California developer to produce self-powered homes. Dvele homes have solar, battery back-ups, better insulation, and smart technology that use much less energy, and can operate without the grid, if there's an emergency.

Off-the-grid living isn't just for remote extremists anymore. The CEO of home improvement website Rise, Matthew Daigle, says: "I think you're going to see more and more people looking for ways in which they can protect themselves as there are increased risks from storms, more utility disruptions, and more need for resiliency."

You'll find links to all these stories in the show notes at NewsForInvestors.com.

Click here to join RealWealth now, it's free and only takes a minute!

Links:

1 - https://www.marketwatch.com/story/u-s-gdp-expanded-at-unrevised-6-4-rate-in-first-quarter-11622119270?mod=economy-politics

2 - https://www.marketwatch.com/story/another-key-u-s-inflation-gauge-surges-in-april-and-hits-13-year-high-11622205893?mod=economic-report

3 - https://www.marketwatch.com/story/unemployment-claims-fall-to-new-pandemic-low-of-406-000-11622119426?mod=economic-report

4 - https://www.marketwatch.com/story/new-home-sales-slump-as-rising-construction-costs-give-buyers-and-builders-pause-11621952602?mod=economic-report

5 - https://www.marketwatch.com/story/pending-home-sales-sink-as-the-housing-market-returns-back-to-earth-11622125381?mod=economic-report

6 - https://www.marketwatch.com/story/home-prices-rise-at-fastest-pace-since-2005-as-housing-grows-more-expensive-in-every-part-of-the-country-11621948739?mod=economic-report

7 - https://www.marketwatch.com/story/consumer-confidence-slips-in-may-for-first-time-in-six-months-on-worries-about-jobs-and-inflation-11621952096?mod=economy-politics

8 - https://www.marketwatch.com/story/consumers-are-feeling-the-pinch-from-higher-inflation-sentiment-survey-shows-and-they-dont-like-it-11622211423?mod=economic-report

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

10 - https://magazine.realtor/daily-news/2021/05/27/lenders-are-shortening-closing-times

11 - https://magazine.realtor/daily-news/2021/05/28/some-lenders-set-to-resume-foreclosures-in-july

12 - https://www.cnbc.com/2021/05/25/get-ready-rents-are-rising-fast-again-even-in-san-francisco.html

13 - https://www.cnbc.com/2021/05/21/climate-change-creates-demand-for-off-the-grid-homes-.html

Affordable Housing: Bi-Partisan Legislation Addresses Housing Shortage with the YIMBY Act May 29, 2021

Show notes

The U.S. Senate is taking a close look at the YIMBY Act. The Yes in My Backyard legislation was first introduced in 2019, but was put on hold because of the pandemic. It addresses the national housing shortage by encouraging local policies that will increase affordable housing, including changes to zoning restrictions in single-family neighborhoods.

Republican Senator Todd Young of Indiana and Democratic Senator Brian Schatz of Hawaii reintroduced the YIMBY Act a few weeks ago. (1) YIMBY is a reaction to the well-known NIMBY concept for Not in My Backyard. Inside the YIMBY bill is a list of 20 policies that local governments or states could adopt to increase housing affordability and availability.

HUD Block Grant Funding

Although the bill doesn't mandate the adoption of these policies, it requires the elimination of discriminatory land use policies and affordable housing barriers before jurisdictions receive HUD block grant funding. To qualify for the annual grants, jurisdictions would have to submit reports to the U.S. Housing and Urban Development at least once every five years.

The reports would identify which policies a jurisdiction has implemented or is in the process of implementing and how they are being implemented. For the policies that are not being adopted, the jurisdictions must explain why that can't happen.

A similar bi-partisan bill was passed in the House about one year ago, in March 2020. That legislation also included a policy list that is basically the same as the one in the Senate bill.

Policies in the YIMBY Act

At the top of the list are policies that would increase housing density in single- and multifamily neighborhoods. One policy also targets single-family neighborhoods exclusively by proposing they be zoned to allow duplexes, triplexes and fourplexes. Another one encourages zoning that allows the subdividing of single-family homes into duplexes. The bill also proposes that zoning rules include manufactured homes and prefabricated structures.

Other entries on the list encourage multifamily development in retail, office and light manufacturing areas, single-room occupancy development within multifamily housing, smaller lots, and fewer buildings that are protected by historic preservation codes.

The legislation also wants to see easier and faster permitting for affordable housing projects, the elimination of off-street parking requirements, and the conversion of empty office space to apartments. (There may be plenty of empty office space for that last one, if companies don't bring all their employees back from their remote work positions.)

Both lists include the lifting of restrictions on accessory dwelling units for single-family properties. And the Senate bill trades the last four policies on the House bill for two others which include the legalization of short-term home rentals and the legalization of home-based businesses.

The four House policies include bonuses for housing density, fewer height restrictions on buildings, tax abatement for higher density developments, and the donation of land for affordable housing development.

YIMBY Support from Housing Groups

More than a hundred affordable housing groups just sent a letter to Senate lawmakers in support of the YIMBY Act. (2) It says in part: "The YIMBY Act is vital for encouraging communities to build more affordable and market-rate housing. This need will only grow as the country recovers from the economic and public health impacts of COVID-19." It says the legislation is: "An essential first step in decreasing barriers to new housing at all price levels."

All the big real estate and mortgage groups signed on to the letter, along with many smaller state and local organizations. The Washington D.C.-based National Housing Conference was one of them. President David Dworkin told HousingWire that local governments are often given money for affordable housing but don't end up putting it to its best use because of NIMBY opposition. (3) He says, instead, local officials may sign off on something that is easier to swallow for the NIMBYs.

As HousingWire reports: "The politics of the YIMBY Act is tricky. There is no organized opposition in Washington to the bill. You won't find a national NIMBY group." The article basically says the issue will blow up at the local level when community members become concerned about a proposed project. Advocates might say that this legislation is a way to mandate more of a YIMBY attitude toward housing.

You'll find links to the legislation and the letter in the show notes for this episode at: NewsForInvestors.com

Click here to join RealWealth now, it's free and only takes a minute!

Links:

1 - https://www.young.senate.gov/imo/media/doc/YIMBY%20Act.pdf

2 - https://www.housingwire.com/articles/housing-groups-organize-against-nimbys/

3 - https://www.young.senate.gov/imo/media/doc/YIMBY_Coalition_Support_Letter_2021-05-13.pdf

Investing in Real Estate: Warren Buffett is Putting His Money on Modular May 27, 2021

Show notes

Warren Buffett is launching a new business venture that could shake things up in the building industry. A Berkshire Hathaway-owned construction company has teamed up with a New York City architect on a new way to make modular mainstream. The plan is based on a way to make the modules more transportable and keep local contractors and workers involved.

First reported by the Wall Street Journal, the initiative launched last week between tech-construction company MiTek and Architect Danny Forster. (1) They started working on this initiative about a year ago with backing from Berkshire Hathaway. The investment is reportedly worth millions of dollars.

Modular Units Would be Collapsible

The modular units would be made of steel boxes that can be attached to and stacked onto other units. But unlike the bulky building blocks of other modular construction projects, these will be made to "fold" so they can be transported more easily. As reported by Fast Company: "Instead of large steel boxes that have to be carefully routed under bridges and overpasses on the back of a truck, MiTek's collapsible modules fold flat, easing transportation to job sites." (2)

The folded shells will then be shipped to warehouses close to the building sites. The rest of the "pre-assembly" can take place at those locations before they are moved to the jobsite. That one change is significant because it means these collapsible modules can be shipped more economically at a much greater distance from the factory. Transportation costs are something that have apparently held other modular companies from growing.

Pre-Assembly Finished at Local Level

Also, by doing much of the assembly at the local warehouse, with local employees, there's less chance of a push back from labor unions and local officials who can say yay or nay to a project. Forster told Fast Company he's run smack into a solid steel wall when it comes to getting approval for a project that sidesteps the labor unions. He says: "The unions have told us very clearly there's no way in hell you're shipping in a building from offshore or even from out of state. They've said if it's not 40 miles from the job site and local labor's not participating, it's not happening in downtown San Francisco."

That project is still in the process of getting city approval, but it appears that it may be in line for MiTek's new collapsible modules. They will be initially built at a 250,000-square foot factory in Lebanon, Pennsylvania, and shipped from there to construction sites. General contractors will be hired to get them fully built at the local level. But the modules will be designed to make it faster and easier to do the finish work from pipes and electrical wiring to windows and doors.

Two Prototypes Already Built

The MiTek team has already built two prototype "rooms" that could be used for a hotel project. MiTek's Todd Ullom says: "We took the plumbing process from 16 labor hours down to 4 hours and 10 minutes. We're trying to create the NASCAR pit crew for construction."

Making the process more efficient is a challenge when it comes to negotiating with a contractor, because it means fewer hours for workers. Ullom feels it will take some time for this process to gain acceptance. He says the company will be spending the rest of the year fine-tuning the process, and hopes to begin module production in 2022.

But it isn't just the manufacturing process that needs tweaking. There's a lot of work to be done talking to contractors who need convincing, and local officials who control the permitting and inspecting of projects. MiTek is reportedly in high-level talks with two national builders, but there's no word on which ones.

A Better, More Efficient Process

The goal is to bring down construction costs and speed up the building process. Forster told Architectural Digest that there needs to be a "better, more efficient process" but so far, modular construction has only realized limited adoption. (3) The challenge is to get a large number of stakeholders on board including insurance companies, designers, developers, investors, lenders, materials testing people and others. He says: "I've spent a lot of years on this bumpy ride and right now we're trying to fix potholes before we start chasing business.

He says MiTek will build modular rooms for hotels and apartment buildings, including senior living and affordable housing. He rejects the idea that their modular concept will lead to cookie-cutter buildings. He says they are creating a "system for architecture" and not an "off-the-shelf box" that will appear all over America.

He says they are working on getting this right, and are not in a rush to get this to market. He says: "This probably comes from Mr. Buffett. Not a lot of companies can say I'm taking a 10-year look at this."

If you'd like to read more about the MiTek Modular Initiative, you'll find links in the show notes at NewsForInvestors.com

Click here to join RealWealth. It's free and only takes a minute.

Links:

https://www.wsj.com/articles/warren-buffett-to-offer-a-new-spin-on-modular-construction-11621339201

https://www.fastcompany.com/90637837/how-a-berkshire-hathaway-company-is-quietly-planning-to-disrupt-the-construction-industry

https://www.architecturaldigest.com/story/warren-buffett-offer-fresh-approach-modular-construction

Passive Income: Renewed Confidence Inspires Surge in Single-Family Rental Investing May 25, 2021

Show notes

Investor interest in single-family rentals is making a post-COVID comeback. A new report by Redfin shows an increase in the purchase of single-family homes by investors after three straight quarters of declines during the pandemic.

Redfin says there was a 2.7% increase in the number of homes bought by investors during the first quarter of this year. That's about 1 in every 7 homes compared to about 1 in every 10 homes during the previous three quarters.

Cautious Approach During Pandemic

Redfin says that investors held back at the beginning of the pandemic and were slow to jump back in. Even though the housing market recovered quickly, many investors took a more cautious approach because of job losses, unpaid rents, and the eviction moratorium.

Redfin's senior economist, Sheharyar Bokhari says: "Investors are likely starting to feel more comfortable because the economy is in recovery mode." And, they may also see the declining inventory of homes as an opportunity because a lot of families who'd like to buy a home will end up renting. He says many investors have the cash and can easily add these homes to their portfolios.

Real Estate More of a Safe Haven

Redfin's chief economist, Daryl Fairweather, calls it "a relatively safe bet right now." If you've been following the stock market, you know that it's been extremely volatile. Even with home prices rising as fast as they have, real estate has been more of a safe haven than the stock market. And the higher-priced homes are getting a lot of that attention.

Redfin says that the purchase of expensive homes by investors was up almost 20% year-over-year in the first quarter, while the purchase of mid-priced homes was only up 12.7%. Low-priced homes were up 9.2%. That last number may have something to do with the lack of inventory at the lower price levels. Home prices for those three tiers average about $429,000 for expensive, $272,000 for mid-priced, and $184,000 for affordable.

Bidding Wars for Luxury Homes

Getting an even bigger piece of the pie are luxury homes. Redfin says there was a 41% increase in the purchase of luxury homes by investors year-over-year in quarter one. Those are homes selling for an average of almost a million dollars. The National Association of Realtors' chief economist, Lawrence Yun, says there's more activity at the upper end because there's less of an inventory problem. But it's also very competitive. A recent article in SFGate talks about bidding wars in the San Francisco East Bay and said that homes are often selling for $1 million over asking.

Investors Buy 1 in 5 Affordable Homes

But Redfin says while the biggest jump in purchase activity among investors occurred at the upper end, the largest share of homes purchased by investors was at the lower end. In just that part of the market, 1 in 5 single-family homes sold in the U.S. was bought by an investor.

Miami topped the list of cities with the largest market share of single-family homes purchased by investors. Atlanta was next, followed by Jacksonville, Charlotte, Las Vegas, and Phoenix.

Interest in Smaller Markets Growing

The report confirms investor interest in smaller markets is growing. It says: "In recent years, investors and individual homebuyers alike have crowded into mid-sized cities that are more affordable than major hubs like San Francisco and New York. This trend has been accelerated by the pandemic, with so many Americans suddenly able to work from anywhere. These markets have become increasingly competitive for buyers."

You'll find links to those reports in the notes for this episode at NewsForInvestors.com

Links

1 - https://www.prnewswire.com/news-releases/investor-home-purchases-rise-for-first-time-in-a-year-as-us-economy-bounces-back-301294921.html

2 - https://www.housingwire.com/articles/investors-are-buying-up-single-family-homes-across-the-us/

The Real Estate News Brief: Rental Assistance Helps Landlords, Rent Growth Speeds Up, Housing Boom for Opportunity Zones May 24, 2021

Show notes

In this Real Estate News Brief for the week ending May 22nd, 2021... the government's rental assistance program is helping landlords, rent growth speeds up, and the housing boom is adding value to opportunity zones.

Economic News

We begin with economic news from this past week, and a Treasury Department announcement that it has distributed $6 billion in rental assistance in the last two weeks. And more money is on the way. (1) A total of $21.6 billion was allocated to the program as part of a stimulus package approved in March. Another $25 billion had been approved in December. The funding is important to help pay off tenant debt to landlords as eviction moratoriums expire.

More Americans are heading back to work. The latest unemployment report shows that initial jobless claims were down 34,000 last week, to 444,000. (2) That's the lowest number we've seen in more than a year. More than 16 million people are still getting unemployment checks, but that number is also decreasing.

Several states say they plan to stop offering the additional $300 a week in federal benefits, to encourage people to get back to work. That program is supposed to end on September 6th. CNBC reports that a few states are also offering a one-time bonus for people who start working again. Those states include Arizona, Montana, New Hampshire and Oklahoma with bonuses ranging from 500 to $2,000. (3)

The latest round of housing data shows another drop for existing home sales. The National Association of Realtors says they fell 2.7% in April to a seasonally adjusted annual rate of 5.85 million homes. (4) It's the third month in a row that sales fell as the inventory crunch continues. NAR's chief economist, Lawrence Yun, expects to see more inventory "as further COVID-19 vaccinations are administered and potential home sellers become more comfortable listing and showing their homes."

Residential construction was also down in April. The U.S. Census Bureau reports a 13% decline in month-to-month single-family home starts. Permits were also down by 4%. (5) Economists had expected better numbers. Senior economist, Andrew Grantham, at CIBC Capital Markets told MarketWatch that the decline is probably the result of material shortages such as lumber, and possibly labor as well.

That decline didn't hurt builder confidence. The National Association of Homebuilders reports that the monthly index held steady in May. (6) Although builders face challenges, the NAHB says that builders remain confident about the strength of the housing market.

Mortgage Rates

Mortgage rates returned to that 3% level this last week. Freddie Mac says the average 30-year fixed-rate mortgage was up 6 basis points to exactly 3%. The 15-year was up 3 basis points to 2.29%. (7)

In other news making headlines...

Rent Growth Speeds Up

Rent growth sped up in March to its fastest pace since the beginning of the pandemic. Realtor.com says the median rent in the 50 biggest metros was up 2.7% year-over-year. Before COVID-19, the annual rate was 3.2%. (8)

Realtor.com says that two-bedroom units are seeing the most growth. They were up 5.2% annually. The website's chief economist, Danielle Hale says: "If the trend continues, renters could expect to be paying pre-pandemic rates by as early as this fall."

Tech hubs still have a ways to go because rents were high, and they fell the most as employees worked remotely from less expensive areas. But tech companies are announcing return-to-office plans, so rents in the tech hubs are starting to turn around.

Median Home Price Hits New High

Redfin is reporting a new high for the median home price. According to its researchers, the national median home price hit $370,528 in April. That's a 22% increase from a year earlier. (9)

That percentage may be somewhat skewed because people weren't buying many homes in April of last year, but Redfin's chief economist, Daryl Fairweather says that the tight inventory will keep those prices climbing. She says it's going to take years for builders to catch up and the housing boom is far from over.

In April, for-sale homes only spent an average of 19 days on the market. Redfin says that 49% of them sold for more than the asking price. Both are new records.

California Home Prices

The national home price numbers pale in comparison to California. NAR says the median there has flown past $800,000 for the very first time. (10) The new median home price for California is $813,980.

That's up 7.2% from March and it's up 34% from the previous year. Again, that year-over-year percentage is probably skewed because of the pandemic lockdown.

Prices Rise in Opportunity Zones

The housing boom is also adding value to opportunity zones. Those are federally designated areas that need the help of investors. In exchange for long-term opportunity zone investment, they will get tax breaks. The program was approved as part of the Tax Cuts and Jobs Act of 2017.

According to ATTOM Data Solutions, two-thirds of those areas have seen home price growth of at least 10% in the first quarter of this year. (11) Prices are still much lower than the rest of the nation. Researchers say that about 43% of the zones have median home prices that are less than $150,000. But the percentage is going down. A year ago it was 50%.

You'll find links to the stories and reports I've referenced in this podcast at www.NewsForInvestors.com

Links:

1 - https://home.treasury.gov/news/press-releases/jy0193

2 - https://www.marketwatch.com/story/u-s-unemployment-claims-continue-to-set-pandemic-lows-11621514795?mod=economy-politics

3 - https://www.cnbc.com/2021/05/21/states-ending-unemployment-offering-a-return-to-work-bonus-up-to-2000.html

4 - https://www.marketwatch.com/story/existing-home-sales-fall-for-third-straight-month-as-inventory-constrain-hamper-the-housing-market-11621606928

5 - https://www.marketwatch.com/story/construction-on-new-homes-retreats-as-builders-grapple-with-supply-chain-headaches-11621342845?mod=economic-report

6 - https://www.marketwatch.com/story/home-builder-confidence-remains-strong-but-buyers-should-expect-rising-prices-11621260739?mod=economic-report

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

8 - https://magazine.realtor/daily-news/2021/05/20/rents-post-largest-uptick-since-covid-19-onset

9 - https://www.housingwire.com/articles/home-prices-rapidly-climbing-toward-375000/

10 - https://www.wealthmanagement.com/sfr/california-home-prices-shoot-past-800000-first-time

11 - https://magazine.realtor/daily-news/2021/05/20/prices-surge-in-opportunity-zones

12 - https://magazine.realtor/daily-news/2021/05/20/buyers-go-to-crazy-extremes-to-win-a-home

Housing Market: Higher Rents Could Push Long-Term Inflation Permanently Over 2% May 21, 2021

Show notes

We've been hearing a lot about the risk of inflation lately. With government money flooding into the market and the economic recovery in high gear, we've already seen some price jumps. The Federal Reserve has tried to calm fears by telling us that prices will settle back down, but rent prices are probably not among them, and higher rents, or what's known as shelter inflation, is a big part of the Consumer Price Index.

A recent Business Insider blog makes a case for rent growth as a catalyst for inflation -- that rents are starting to go up after a decline during the pandemic, and are not likely to "settle back down." (1) The blog cites Morgan Stanley economists who say that rent prices are "flashing signs of more persistent inflationary pressures" and Goldman Sachs economists who say "special factors that suppressed inflation during the pandemic" have eased up. They feel that as other prices rise and pull back because of the reopening, that rents will continue to accelerate and will likely bring permanent inflation above 2%.

The central bank expects to see inflation rise above 2%, but not forever. The Fed likes that 2% mark, but is willing to let it run above 2% because it had run below 2% for such a long time. If inflation runs past the Fed's sweet spot and stays there for too long, we may see some changes in the Fed's strategy, such as short-term interest rate hikes. But what economists are all trying to predict is exactly where inflation will go from here. What I found interesting about the current situation is the role that higher rents would play in this scenario, and that shelter inflation may not be an accurate measurement.

Primer on Shelter Inflation

To understand this kind of impact, it's important to understand what policymakers are looking at. In this case, it's shelter inflation which tracks housing costs based on rent levels, and it's a major part of the CPI basket. Home prices don't figure into this calculation however. It's based on rent that tenants are paying, which is based on real numbers, and the "implicit rent" that owner occupants would pay if they were paying rent on their homes, which is hypothetical.

The Labor Department collects this data from its Consumer Expenditure Survey. One of the questions posed to homeowners is what their home would rent for, in their opinion. The answer is called the "owner's equivalent rent" and it's up to the owner to provide that information. A recent Bloomberg opinion piece shows why this could spell trouble for calculating real inflation, because homeowners don't adjust as quickly as the market does to pricing pressures. (2)

Owners' Equivalent Rent

According to that blog, the owners' equivalent rent increased 2% this last April compared to a year earlier, while the National Association of Realtors reported a 16.2% increase in year-over-year home prices during the first quarter of this year. Bloomberg's author, Brian Chappatta, says: "This kind of wide discrepancy, unseen since the mid-2000s housing bubble, could have significant consequences for reported inflation statistics and monetary policy in the world's largest economy."

Goldman economists are expecting shelter inflation to push overall inflation permanently higher. As reported by Business Insider, they expect shelter prices to increase 3.8% year-over-year by the end of next year, and rise above 4% in 2023. And they don't expect it will be temporary. This isn't a direct correlation to higher home prices, but economists say that home price growth does eventually impact shelter inflation. It just takes a while.

Data Discrepancy

Chappatta said in his Bloomberg piece that the owners' equivalent rent "understates the price appreciation in the housing market relative to the S&P CoreLogic Case-Shiller U.S. National Home Price Index. He says the owners' equivalent rent has gone up 31.5% over the past decade while home prices have risen more than 73%. That's a big difference.

He said that he doesn't believe this kind of measure is completely bogus, but that it doesn't do a good job as an economic indicator, mostly because homeowners aren't well-enough informed to provide market-based rent hypotheticals. It doesn't help that the pandemic is also skewing the current set of data points.

Rent Hypothetical Needs Scrutiny

Chappatta says there will always be questions concerning inflation but he says: "The Labor Department's rent hypothetical should receive extra scrutiny." And that's especially important right now, as the nation navigates an economic recovery unlike any other in our history.

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Links:

1 - https://www.businessinsider.com/inflation-outlook-shelter-rent-prices-price-growth-permanent-economist-forecasts-2021-5

2 - https://www.bloomberg.com/opinion/articles/2021-05-13/april-cpi-housing-may-be-inflation-s-hidden-danger

The Real Estate News Brief: Inflation Scare, Looser Credit Standards, and the Impact of Government Regs on Home Prices May 18, 2021

Show notes

In this Real Estate News Brief for the week ending May 15th, 2021... a surprise jump in consumer prices, a looser lending environment, and how government regulations impact home prices.

Economic News

We begin with economic news from this past week that includes a few good reports on the job market. Unemployment claims fell again, to a new pandemic low. Initial state claims are now down to 473,000. That's the fifth week in a row they have dropped, and reflects a huge hiring effort by U.S. companies as the economy continues to recover.

The March report on job openings shows 8.1 million unfilled positions. That's up from 7.5 million in February. They had dipped to as low as 4.6 million soon after the start of the pandemic. But the problem now is finding enough qualified employees to fill all those jobs. Some people blame generous unemployment benefits, while others argue that many parents have kids at home and no childcare, or that COVID-19 may still be a threat for some people, especially those who are not vaccinated.

New evidence of inflation caused some panic on Wall Street this last week. There was a sharp stock sell-off after the government reported the steepest rise in consumer prices since 2009. The Labor Department says the index was up .8% in April which is almost a half point higher than economists had predicted. Year-over-year, the rate of inflation has gone from 2.6% in April of last year to 4.2% this year.

The Federal Reserve believes that this is temporary because the economy is recovering so quickly. The central bank believes that prices will settle back down with inflation numbers falling back to a long-term goal of 2%. Some economists also say that the current rate of inflation is exactly where it would be if the pandemic had never happened.

The stock market did bounce back on Friday, but inflation concerns will likely persist. The University of Michigan blames those kinds of worries for a decline in consumer confidence. The index fell six points in May from around 88 to 82.

Mortgage Rates

Inflation hasn't done much with mortgage rates, so far, which is great for home buyers. The thirty-year fixed-rate mortgage is still under 3%. It was down 2 basis points this last week to 2.94%. The 15-year was down 4 points to 2.26%. It's been ticking lower for the last month but rates are expected to climb somewhat higher by the end of this year.

In other news making headlines...

Lenders Making It Easier to Get a Loan

Homebuyers may find it a little easier to get a loan as lenders compete for their business. The Mortgage Bankers Association says that the Mortgage Credit Availability Index was up 5% last month for conventional loans, 7% for jumbo loans, and 13% for conforming loans. That suggests a loosening of credit standards as the economy recovers and the housing market continues on an upward trajectory.

First-time home buyers are also flooding into the market. According to data from the National Association of Home Builders and Wells Fargo, 43% of the new homes are going to first-time home buyers so far this year. That's up from 32% in 2018.

The High Cost of Government Regulation

We've heard a lot about the high cost of lumber and how that's impacting new home prices, but that's chump change next to the cost of government regulations. The National Association of Home Builders say that 23.8% of the average sales price on new single-family homes is due to regulations during construction. If your average sales price is $397,000, you are paying about $94,000 in fees.

NAHB chairman, Chuck Fowke, told the World Property Journal: "This study illustrates how overregulation is exacerbating the nation's housing affordability crisis and that policymakers need to take bold steps to reduce or eliminate unnecessary regulations that will help builders increase the production of quality, affordable housing."

Rising lumber prices have added another $36,000 to the price of a new home. Those costs were not part of this study.

Existing Homes Now More Pricey Than New Ones

The median price for existing homes is now higher than the median price for a new home. The National Association of Realtors says the price for an existing single-family home is now $334,500, while the Census Bureau says the median for a new home is $330,800.

This flip-flop on value hasn't happened for more than 15 years, but economists say it doesn't mean that existing homes are truly more expensive. They say the lack of low-priced existing homes and the continued demand for high-priced homes has skewed those numbers higher, and that an increase in less expensive new homes has skewed those numbers lower.

NAHB chief economist, Robert Dietz, says that new homes are still more expensive on a per-square-foot basis.

The Quicken Loan Name to be Retired

Quicken Loans will officially change its name to Rocket Mortgage this July. Quicken founder, Dan Gilbert, introduced Rocket Mortgage five years ago as a digital mortgage service. The company now plans to put the entire mortgage process online under the Rocket Mortgage name, so Quicken Loans will be permanently retired on July 31st.

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Links:

www.NewsForInvestors.com

https://www.marketwatch.com/story/unemployment-claims-fall-to-pandemic-low-as-businesses-seek-to-hire-more-workers-11620910124?mod=economic-report

https://www.marketwatch.com/story/u-s-job-openings-soar-to-record-8-2-million-but-businesses-say-they-cant-find-enough-workers-to-hire-11620742194?mod=home-page

https://www.marketwatch.com/story/u-s-inflation-climbs-in-april-to-the-highest-level-in-13-years-cpi-shows-11620823628?mod=mw_latestnews

https://www.marketwatch.com/story/u-s-consumer-sentiment-index-slumps-unexpectedly-in-may-11621002642?mod=economic-report

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

https://www.housingwire.com/articles/volume-hungry-mortgage-lenders-loosen-credit-standards/

https://www.worldpropertyjournal.com/real-estate-news/united-states/washington-dc-real-estate-news/real-estate-news-national-association-of-home-builders-nahb-regulatory-costs-to-new-home-prices-in-2021-chuck-fowke-government-regulations-for-homebui-12511.php

https://magazine.realtor/daily-news/2021/05/06/are-existing-homes-really-more-pricey-than-new

https://www.housingwire.com/articles/quicken-brand-will-be-officially-retired-on-july-31/

Housing Market: Redfin Expects Home Sales Will Top GDP of France May 15, 2021

Show notes

The housing market is firing on all cylinders, and it's revving up for a home sale record. Redfin is forecasting $2.5 trillion in U.S. home sales this year. That's more than the GDP of France, and about equal to the combined value for Amazon.com and Facebook.

Redfin says home sales will probably rise about 17% year-over-year in 2021. That would be a bigger jump than we saw during the pandemic last year, when demand skyrocketed for single-family homes. It will also be the biggest jump in sales since 2013.

As we've been reporting, the housing market has gone through a huge transformation because of the pandemic. It brought mortgage rates to a record low and triggered a migration of people to new markets because of the remote work trend. In April, Redfin conducted a survey among remote workers and about 60% of those people expect to continue working from home at least part time.

That kind of shift is work habits and demand for work-at-home space has helped to push home sales higher. And that's despite a critically low inventory that is also pushing home prices higher. March has already set several new records in the housing industry including home values, sale price and number of days on the market.

If mortgage rates rise, home price growth may slow down a bit. Redfin Chief Economist Daryl Fairweather says that would give us a more balanced market and would also lead to MORE home sales. He says: "We expect 2021 to be an even more active year for the housing market than 2020 because homebuyers have a better sense of what the future looks like. Employers are providing clarity on permanent remote work policies, the economy is recovering and mortgage rates remain low. All of these factors mean that we'll likely see even more buyers enter the market this year and in 2022."

Where will we see most of these buyers? This forecast points to the South. Redfin expects $1.09 trillion worth of home sales in the South, $696.3 billion in the Westl $422.6 billion in the Midwest, and $322.8 billion in the Northeast. Although it's common to see the South in the top spot, Redfin says its lead has grown. Fairweather says: "A lot of the wealth from the coasts is shifting South." He says: "Affluent homebuyers from New York and San Francisco have moved to places like Florida and Texas during the pandemic." That has also driven sales, and prices, higher in those areas.

Redfin isn't the only one forecasting more than a trillion dollars in home sales. HousingWire reports that Freddie Mac and the Mortgage Bankers Association are also on board for record high sales. Freddie Mac is forecasting $1.7 trillion while the MBA is forecasting $1.67 trillion.

They both expect "favorable" conditions for the housing and mortgage markets to continue, although economists expect demand could slow down a bit if mortgage rates rise in the midst of a hot economic recovery. The MBA's chief economist Mike Fratantoni expects the 30-year fixed-rate mortgage to hit 3.7% by the end of the year while the GDP jumps to 6.5%.

Fannie Mae's chief economist, Doug Duncan, told HousingWire that we'll see more and more people entering the housing market as the COVID-19 vaccination program expands. Currently, a little more than a third of the U.S. population has been fully vaccinated, so we still have more than 200 million people who are not.

Duncan says that consumers are looking forward to life after the pandemic, which could mean a new home. And for many, it means a second home. Redfin says that demand for second homes is more than double what it was before the pandemic. It says the number of buyers who took out a mortgage for a second home was up 178% year-over-year this April. And the increase was the 11th month that the numbers were higher.

It also says that the record high increase is somewhat distorted because demand for second homes was down 24% in April 2020 when the economy had shut down. But Fairweather says demand for second homes has been elevated because the wealthy have become wealthier this last year, and the low mortgage rate environment has given them a perfect opportunity to buy vacation homes where they can also work, if they need to.

You'll find links to both reports on the podcast player page for this episode at: NewsForInvestors.com

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Links:

https://www.prnewswire.com/news-releases/us-home-sales-likely-to-hit-record-high-of-2-5-trillion-in-2021--301288413.html

https://www.prnewswire.com/news-releases/demand-for-second-homes-is-more-than-double-pre-pandemic-levels-301287673.html

https://www.housingwire.com/articles/south-poised-to-see-1-trillion-in-home-sales-in-2021/