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In this Real Estate News Brief for the week ending January 28th, 2022... the Fed\u2019s 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\u2019s two-day meeting. Worries about more aggressive action by the Fed to combat inflation didn\u2019t seem to be evident. Fed Chief Jerome Powell said that committee members are \u201cof a mind to raise the federal funds rate at the March meeting\u201d 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\u2019s 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\u2019s $9 trillion balance sheet later this year, but that timeline will depend on \u201cthe incoming data and evolving outlook.\u201d (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\u2019t mean prices are coming back down, especially with the kind of demand we\u2019re 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\u2019t 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\u2019t 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\u2019S Rick Sharga says: \u201cTogether 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.\u201d

Investors believe they\u2019ll face the same challenges over the next six months, which also include higher costs for materials, and higher interest rates. Sharga says: \u201cAbout 88% of the investors surveyed were concerned about inflation having an impact on their business.\u201d

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\u2019s 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\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.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 \u200b\u200b-https://www.marketwatch.com/story/coming-up-u-s-new-home-sales-11643208406?mod=economic-report

\u200b\u200b5 -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/