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In this Real Estate News Brief for the week ending June 11th, 2022... inflation hits a 40-year high, demand grows for single family rentals, and a popular TV show inspires a Montana migration.

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, and a report that shows the highest rate of inflation since 1981. The Consumer Price Index was up 1% in May to an annual rate of 8.6%. It was 8.3% last month. The increase is mostly due to rising gas and food prices. If you strip those out, the core rate was up .6% to an annual rate of 6%, which was actually down slightly from 6.2%. (1)

The report is setting off alarm bells. Financial experts are now anticipating a 75 basis point rate hike at the next Fed meeting in June, and further hikes in July and September. The talk so far has been more along the lines of two 50 basis point hikes in June and July, but as one wealth advisor told CNBC, this report was a \u201cdoozy.\u201d Tom Graff of Facet Wealth says: \u201cThe most concerning part of this report was its breadth. The monthly number wasn\u2019t driven by a few items. Most of the major categories actually accelerated price increases month-over-month.\u201d (2)

As inflation fears grow, so do worries about recession. Now the Atlanta Fed is lowering its forecast for the second quarter from 1.3% to a gain of just .9%. (3)

It\u2019s interesting to note that real estate accounted for almost 17% of the GDP last year. The National Association of Realtors says it was 16.9% of the GDP or about $3.9 billion. That\u2019s about $113,000 in total economic impact for each home sale. (4)

The Memorial Day weekend may have contributed to a jump in jobless claims. MarketWatch says they were up 27,000 to a five-month high of 229,000. It calls them seasonal \u201cquirks\u201d due to the holiday and not layoffs. (5)

Mortgage Rates

After idling for a few weeks, the mortgage rate seesaw continues. Freddie Mac says the average 30-year fixed-rate mortgage was 14 basis points higher last week to 5.23%. The 15-year was up 6 points to 4.38%. (6)

The average contracted rate of interest was higher. The Mortgage Bankers Association says the 30-year went from 5.33% to 5.40%. That corresponded to a 7% drop in purchase applications. Refinance loans were also down 6%. The MBA says mortgage demand dropped to its lowest level in 22 years. (7)

Freddie Mac\u2019s deputy chief economist Len Kiefer said in a tweet that the \u201cU.S. housing market is at the beginning stages of the most significant contraction in activity since 2006.\u201d He said: \u201cIt hasn\u2019t shown up in many data series yet, but mortgage applications are pointing to a large decline over the summer.\u201d He also clarified that he expects home sales to slow down quite a bit over the summer, but doesn\u2019t expect them to \u201cgrind to a complete halt.\u201d (8)

In other news making headlines...

Pessimism Among Would-Be Homebuyers

A new survey supports the idea of slower sales this summer. Fannie Mae\u2019s Home Purchasing Sentiment Index shows that almost 80% of the participants feel it\u2019s a bad time to buy a home right now. Almost as many people feel that mortgage rates will continue to march higher over the next year. (9)

Fannie Mae expects a mild recession next year, but the agency says that inflation and rapidly rising short term interest rates could push us into a recession much sooner.

Demand for Single-Family Rentals

Big landlords are responding to a demand for single-family rentals. The National Association of Home Builders says that builders broke ground on 13,000 single-family rentals in the first quarter. That\u2019s a 63% increase from the first quarter of last year. (10)

American Homes 4 Rent CEO, David Singelyn, told CNBC: \u201cThere are not enough quality homes for the number of American families.\u201d He says the quantity of inquiries, showings, and applications for new rental homes is \u201ctwo to three times greater today than it was two years ago before the pandemic.\u201d

TV Shows Drives Newcomers to Montana

Montana is getting a lot of attention as a great place to live, thanks to Kevin Costner\u2019s TV show \u201cYellowstone.\u201d The show features the Dutton family and ranch-style living on large stretches of land with sweeping views of mountains and prairies. (11)

Beartooth investment Group founder, Robert Keith, says his company has received influx of inquiries from all sorts of wealthy families who want to buy a ranch. He says: \u201cThey are looking to own really amazing large properties\u201d like you see in the TV show.

The show debuted in 2018 and has already pumped tens of millions of dollars into the Montana economy, but long-time Montana residents are worried it\u2019s attracting too many new residents and driving up home prices. The median home price was $500,000 before the pandemic. It\u2019s now almost $750,000.

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

If you\u2019re worried about inflation, real estate is a good way to safeguard your money. Real estate values don\u2019t fluctuate as wildly as stocks, and your rental income will carry you through any sort of a downturn. You can find out more about single-family rental investing at newsforinvestors.com. Join for free, and get access to experienced investment counselors, property teams, lenders, and more.

Thanks for listening. I'm Kathy Fettke.

Links:

1 -https://www.marketwatch.com/story/coming-up-consumer-price-index-for-may-11654862886?mod=home-page

2 -https://www.marketwatch.com/story/catastrophically-bad-inflation-report-is-boosting-chances-of-a-75-basis-point-hike-in-june-or-july-11654876860?mod=MW_article_top_stories

3 -https://www.cnbc.com/2022/06/07/fed-gdp-tracker-shows-the-economy-could-be-on-the-brink-of-a-recession.html

4 -https://cdn.nar.realtor/sites/default/files/documents/2022-state-economic-impact-report-us-04-28-2022.pdf

5 -https://www.marketwatch.com/story/u-s-unemployment-claims-jump-27-000-to-five-month-high-of-229-000-11654778599?mod=economic-report

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

7 -https://www.cnbc.com/2022/06/08/mortgage-demand-falls-to-the-lowest-level-in-22-years.html?__source=realestate%7cnews%7c&par=realestate

8 -https://www.realtor.com/news/trends/the-u-s-housing-market-is-at-the-beginning-stages-of-the-most-significant-contraction-in-activity-since-2006/

9 -https://www.housingwire.com/articles/almost-80-believe-its-a-bad-time-to-buy-property/

10 -https://www.cnbc.com/2022/06/10/big-landlords-jump-into-the-homebuilding-as-demand-for-single-family-rentals-surges.html?__source=realestate%7cnews%7c&par=realestate

11 -https://magazine.realtor/daily-news/2022/06/08/hit-tv-show-yellowstone-prompts-more-moves-to-montana