BROADCASTS.com

In this Real Estate News Brief for the week ending August 6th, 2022... the Fed\u2019s next move, a mortgage rate rollback for home buyers, and a new all-time high for 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. Federal Reserve policymakers say they are \u201cnowhere near\u201d the end of their fight against inflation. Four Fed Presidents spoke out on Tuesday, August 2nd, about their resolve to get inflation back down to 2%. San Francisco Fed Chief Mary Daly said that she is currently seeing a 50 basis point rate hike as appropriate in September, but she says: \u201cIf we just see inflation roaring ahead undauntedly, the labor market showing no signs of slowing, then we\u2019ll be in a different position where a 75-basis-point increase might be more appropriate.\u201d Comments from the other three Fed Presidents were similar. (1)

And then there was a screamingly strong jobs report a few days later. The Bureau of Labor Statistics reported on Friday that hiring in July exceeded expectations. Nonfarm payrolls were up 528,000, and the unemployment rate dipped lower, to 3.5%. To put this in perspective, in the years leading up to 2020 when the economy was robust, job creation was closer to 195,000 per month on average.

The unemployment rate is now back to its pre-pandemic level. As reported by MarketWatch, it\u2019s tied for the lowest level since 1969. (2) Some economists see the strong jobs report as signs that the Federal Reserve will lean toward a more aggressive rate hike in September. KPMG Chief Economist Diane Swonk said in a CNBC report: \u201cThis is hot. For the Fed, this is another 75 basis point hike.\u201d (3)

The unemployment report shows a slightly elevated level of new claims. During the last week of July, 260,000 people applied for benefits which is an increase of 6,000 from the week before. The number of continuing claims was also higher by about 48,000. That brings the total number of continuing claims up to about 1.42 million, which is the highest level since April. (4)

A new report on home price growth shows that year-over-year prices were up 18.2% in June. On a month-to-month basis, the CoreLogic report says they were up .6% for the 125th consecutive month of higher prices. This is more inflationary news that may convince the Fed to be more aggressive with rate future hikes. However, the report does shows that price growth is slowing down. CoreLogic expects it to drop to 4.3% by next June. (5)

Higher home prices also increase homeowner equity. CoreLogic says the average borrower had $280,000 in home equity at the end of the first quarter. That\u2019s a gain of about $64,000 over the past year, and a gain of about $125,000 over five years. (6) Those folks expecting a housing crash will have to consider why homeowners with so much equity and low fixed rate mortgage payments would suddenly abandon their homes.

Higher home prices are slowing sales, and that's driving up inventory levels, but they are still nowhere they need to be. According to Realtor.com, active listings are about 30% higher than they were a year ago but are less than half of what they were in June of 2019 and about two-thirds of where they were in June of 2020. The good news is that homebuyers have a few more homes to choose from and a little extra time to make a decision, but only a little extra time. The Realtor.com trends report says that homes are spending just ONE extra day on the market compared to last year.(7)

New home builders are also experiencing a sales slowdown and higher inventory levels. According to the Federal Reserve Bank of St. Louis, there are more than nine months supply of newly-built homes on the market. However, it can be difficult to gauge new home inventory because many of those homes are experiencing construction delays and not sales delays. (8)

Another sign of the housing market slowdown is a sharp drop in construction spending. The Commerce Department reported a 1.1% decrease in June. Private residential construction took the biggest hit. It was down 1.6%. (9) Ironically, the construction of new homes is what's needed to increase supply, yet builders are generally the first to get hit with higher interest rates. A slow down in new home construction could mean continued bidding wars on existing homes in growth markets.

Mortgage Rates

Home buyers are getting a break right now on their mortgage rates. Freddie Mac says the average 30-year fixed-rate mortgage dipped below 4% for the week ending August 4th. They dropped 31 basis points to an average of 4.99%. The 15-year dropped 32 points to 4.26%. Freddie Mac\u2019s Chief Economist, Sam Khater, says: \u201cMortgage rates remain volatile due to the tug of war between inflationary pressures and a clear slowdown in economic growth.\u201d (10)

You may be wondering why mortgage rates have gone down when the Fed fund rate is going up. Mortgage rates are generally tied to the 10-year Treasury as mortgage backed securities attract the same type of investor. With the Fed raising rates aggressively, big investors are worried it will create a recession, so they seek the safety of bonds and MBS's. These investors also may believe that we've hit a peak in inflation. Otherwise they would invest in inflationary stocks instead of bonds.

In other news making headlines...

Single-Family Rent Growth

Demand continues to grow for single-family rentals as more and more potential homebuyers are priced out of the market. And that\u2019s pushing rents higher. A new report from Yardi Matrix says the average single-family asking rent rose $23 in June, to an all-time high of $2,071. (11)

Rent growth is slowing for both single-family and multi-family rentals. The report says that year-over-year single-family rent growth has dropped 90 basis points, to an annual rate of 11.8%.

House Approves Remote Notarization

The U.S. House approved legislation that would make remote online notarizations possible in all 50 states. The bill will make it easier to close a deal without having the notary and the person signing the agreement in the same room. During the pandemic, agents in many states had to arrange for drive-by closings, with social distancing. (12)

The pandemic also inspired almost half the states to allow for remote notarizations. The National Association of Realtors pushed for a national bill to support the demand for virtual sales and closings in all 50 states, even though there\u2019s less concern now about pandemic-related safety measures. The bill is now pending consideration in the Senate.

That\u2019s it for today. Check the show notes for links at newsforinvestors.com.

I would also like to share some other exciting news. Within the last few weeks, we hit a big milestone for Real Estate News for Investors. It\u2019s been six-and-a-half years since our first news podcast, and we have now posted our 1200th show! We are currently posting two or three podcasts a week for real estate professionals. Set your podcast player to have them automatically downloaded, so you don\u2019t miss any!

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

Thanks for listening. I'm Kathy Fettke.

Links:

1 -https://www.bloomberg.com/news/articles/2022-08-02/daly-says-fed-nowhere-near-done-on-curbing-high-infation-rate

2 -https://www.reuters.com/markets/us/feds-daly-34-reasonable-place-get-by-year-end-rates-2022-08-03/

3 -https://www.cnbc.com/2022/08/05/jobs-report-july-2022-528000.html

4 -https://www.marketwatch.com/story/u-s-unemployment-claims-climb-to-260-000-and-stick-near-nine-month-high-11659616784?mod=economy-politics

5 -https://www.corelogic.com/intelligence/u-s-home-price-insights/

6 -https://www.corelogic.com/intelligence/podcast-vodcast/oce-monthly/homeowner-equity-reached-record-level-in-early-2022/

7 -https://www.realtor.com/research/weekly-housing-trends-view-data-week-july-30-2022/

8 -https://fred.stlouisfed.org/series/MSACSR

9 -https://www.marketwatch.com/story/construction-spending-fell-sharply-in-june-11659363237?mod=economic-report

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

11 -https://rentalhousingjournal.com/average-rents-rise-to-all-time-high-in-june/?utm_source=Master+Vendors&utm_campaign=a590da3d77-EMAIL_CAMPAIGN_2022_07_20_02_10&utm_medium=email&utm_term=0_4780df7d33-a590da3d77-113928773

12 -https://magazine.realtor/daily-news/2022/07/28/remote-online-notarization-is-one-step-closer