Podcasts Business Investing Real Estate News: Real Estate Investing Podcast The Real Estate News Brief: Inflation Flip-Flop, Investor Purchase Activity, Big Landlords Gobbling Up SFRs

The Real Estate News Brief: Inflation Flip-Flop, Investor Purchase Activity, Big Landlords Gobbling Up SFRs

Published: March 1, 2023, 9:42 p.m.

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n this Real Estate News Brief for the week ending February 25th, 2023... the latest disappointing report on inflation, a Q4 report on investor home-buying activity, and a new prediction for institutional ownership of single-family rentals.
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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.
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Economic News
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We begin with economic news from this past week and a report that inflation remains stubbornly high. According to the Personal Consumption Expenditures index or PCE, the cost of goods and services rose .6% in January. That\\u2019s the largest increase since last summer, and raises the annual rate from 5.3% to 5.4%. The core rate, which excludes food and fuel, was also up .6% and raises the annual core rate of inflation from 4.6% to 4.7%. The disappointing results follow two other hot inflation reports for January. It\\u2019s not clear if this is just a blip in the battle against inflation or a change of course, but it does suggest that the Federal Reserve may keep its foot on the rate hike gas pedal. (1)
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The next meeting of the Federal Reserve Board is March 21st and 22nd, so a lot can happen between now and then. Fed officials raised the rate a quarter point during their February meeting to a range of 4.5 to 4.75%. The minutes show there\\u2019s unanimous support for continued rate hikes although some Fed officials believe the economic risks have become more balanced and not just focused on inflation. A few members suggested the need for a half point rate hike to speed up the Fed\\u2019s inflation-reducing strategy but it wasn\\u2019t written into the minutes as an effort supported by all members. (2) (3)
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Several of the regional Fed Presidents also spoke out last week, including Cleveland Federal Reserve President Loretta Mester. She said last Friday that interest rates may need to move higher to curb inflation but she\\u2019s still optimistic that it can be done without triggering a recession. (4)
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And it\\u2019s \\u201cso far so good\\u201d for the job market. U.S. jobless claims were lower last week by about 3,000 to a total of 192,000. That\\u2019s below the forecast and a sign of strength for the job market. (5)
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On to the housing market\\u2026
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New home sales were up 7.2% in January thanks to strong sales in the South. They were up 17.1% in the Southern region and down everywhere else. The Northeast had the biggest drop of 19.4%. U.S. year-over-year sales are still down 19.4%. (6)
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Existing home sales were also higher in the South and the West, but they were down overall by .7%. As reported by MarketWatch, the amount of sales activity was the lowest since October of 2010. Year-over-year, they were down 36.9%. (7)
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Mortgage Rates
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Mortgage rates floated higher last week. Freddie Mac says the average 30-year fixed rate mortgage was up 18 basis points to 6.5%. The 15-year was up 25 points to 5.76%. Freddie also said that as average rates rise, there may be a big difference in rates from lender to lender so it\\u2019s best to shop around. (8)
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In other news making headlines\\u2026
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Real Estate Investor Activity Down Almost 50% in Q4
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It isn\\u2019t just retail home buyers who are sitting on the housing market sidelines. Many investors are too. A new Redfin report shows that investor home purchases were down 46% year-over-year in the fourth quarter, but the share of homes bought by investors is about the same. It slid from 19% to 18% for the year. (9)
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Redfin says that investors had piled into the market in 2021 because of low mortgage rates and high demand for housing. But many are now waiting for rates and prices to come down. Florida agent Elena Fleck says: \\u201cA lot of investors are on hold because they still see home prices declining.\\u201d She says: \\u201cThe investors who are in the market are selective and aggressive. Many of them are only offering around 60% of the asking price since it\\u2019s so difficult to make a profit when flipping homes right now.\\u201d
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Investor activity varies from market to market. The report says investors activity is down the most in pandemic boomtowns like Phoenix and Las Vegas. But there are many markets where the investor share of purchased homes is higher, including Miami, Jacksonville, Atlanta, and Charlotte.\\xa0
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Will Institutional Investors Own 40% of Single-Family Rentals by 2030?
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The institutional ownership of single-family rentals could mushroom over the next several years. According to an analysis by MetLife Investment Management, their share was about 5% early last year, and by 2030, it could be more than 40%. That\\u2019s about 7.6 million homes controlled by rental portfolio giants like Tricon Residential, Progress Residential, American Homes 4 Rent, and Invitation Homes. (10)
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Representative Ro Khanna from California authored the \\u201cStop Wall Street Landlords Act of 2022.\\u201d If it passes, it would provide disincentives for institutional investors such as an excise tax on the sale or transfer of a single-family home that\\u2019s equal to the price of the home. It would also eliminate deductions for mortgage interest, insurance, and depreciation. (11)
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That\\u2019s it for today. Check the show notes for links, and join RealWealth if you\\u2019d like to know where it still makes sense to invest in single-family rentals. We\\u2019re offering several market tours over the next few months. You can join RealWealth and check out the tours at newsforinvestors.com.
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And please remember to hit the subscribe button, and leave a review!
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Thanks for listening. I\'m Kathy Fettke.
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