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In this Real Estate News Brief for the week ending January 8th, 2022... we\\u2019ll look at the cost of buying vs. renting, new FHFA fees for jumbo loans and second homes, and the WeWork/WeLive founder\\u2019s 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 \\u201cthree\\u201d 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\\u2019s 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 \\u201cclose\\u201d 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\\u2019t like and finding better ones. This trend is showing up in the \\u201cquits rate\\u201d 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\\u2019s chief economist, Sam Khater says these rates are the highest since May of 2020. He says: \\u201cWith higher inflation, promising economic growth and a tight labor market, we expect rates will continue to rise.\\u201d (6)

In other news making headlines\\u2026

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: \\u201cWith 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.\\u201d

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\\u2019s 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\\u2019s chief product officer, Todd Teta says: \\u201cThe 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.\\u201d

WeWork Founder Buying Up Apartments

The man who wanted to transform the work world when he co-founded \\u201cWeWork, is now working on a plan to \\u201cshake up the rental housing industry.\\u201d 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: \\u201cSince 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.\\u201d

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\\u2019s purchased apartments include: Miami, Atlanta, Nashville, and Fort Lauderdale, among others.

That\\u2019s it for today. Check the show notes for links. And please remember to hit the subscribe button, and leave a review!

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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