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In this Real Estate News Brief for the week ending January 22nd, 2022\u2026 higher mortgage rates, home prices, and 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. The weekly unemployment report shows a surge in the number of applications. They were up 55,000 to a three-month high of 286,000. As MarketWatch reports, it\u2019s a sign that the current wave of covid cases is impacting businesses and triggering some layoffs. Economists say that some layoffs may also be due to the end of the holiday season. (1)

On the home-building front, December was a busy month for construction activity. The U.S. Census Bureau says home starts were up 1% compared to November, and 2.5% compared to the previous December. Permits were also up, by a lot. They were up 9% in December but much of the increase happened in the Northeast as builders rushed to get permits before new rules kicked in. Most of the permits were for multi-family projects. Single-family permits were only up 2%. (2)

Builders are not very happy about ongoing challenges like inflation and supply-chain disruptions. Rising mortgage rates and home prices are also a concern, along with the labor shortage. The National Association of Home Builders says its builder confidence index dropped slightly. (3)

Existing home sales were down last month. The National Association of Realtors says they dropped 4.6% between November and December. That\u2019s mostly due to inventory levels which NAR says were at their lowest level ever. The Association says while sales dropped nearly 5%, inventory was down 18%. (4)

Mortgage Rates

Mortgage rates moved higher again last week. Freddie Mac says the average 30-year fixed-rate mortgage rose 11 basis points to 3.56%. The 15-year rose 17 basis points to 2.79%. Mortgage rates are moving higher as Treasury yields rise and the Federal Reserve works on a plan to fight inflation. (5) On a positive note, lenders have loosened their purse strings and made funds more available for house hunters. The MBA\u2019S Mortgage Credit Availability Index rose in December to its highest level since May of 2021. But, it\u2019s still down 30% from pre-pandemic levels. (6)

In other news making headlines...

Existing vs. New Home Price Growth

Existing home prices rose more than new home prices in 2021. But CoreLogic research shows price growth for new homes rose more over the last decade. (7)

The report offers an important perspective on home price growth by differentiating between two methods for calculating that growth. One method is from Case-Shiller which compares the latest sales price to the previous sales price. The other method is the tracking of the median price.

It points out that the median price can show trends but can also be skewed by the sale of homes at different price levels. For example, if 90% of the homes in one area are entry level homes, but 10% are luxury homes at double the price, the median will be skewed higher for all the homes. CoreLogic says the Case-Shiller method is more accurate because it compares current sales data to previous sales data, but it also has one big flaw. It can\u2019t determine new home price growth which accounts for 10% of all sales, because there are no previous sales.

It took a deeper dive into home price growth by combining the Case-Shiller Index for existing homes and a different metric for new homes which includes data for structural details of the homes and their locations.

It concluded that appreciation has been about the same for both categories over the last year, although existing home price growth was slightly higher. It was up 19.8% compared to 16.6% for new homes.

Over the last ten years, new home prices rose the most. They were up 127.9% compared to 93.2% for existing homes.

Record Growth for Single-Family Rents

CoreLogic also released the latest report on rent growth for single-family homes. It shows that rent growth was up 11.5% in November as demand soars. That\u2019s a new year-over-year record. It says that annual rent growth has doubled in some locations in just the last several months. In some areas, rents have tripled. (8)

Miami has seen the highest rate of increase at 33%. Phoenix was second at 19.4%. Las Vegas was third, at 16.7%. A few of the rental markets that we track include Orlando with an increase of 15.9%, Dallas with an increase of 14.8%, and Atlanta with an increase 14.8%. Charlotte is also on the top 20 list with a year-over-year increase of 12.2%. You can see the entire list by following a link in the show notes at newsforinvestors.com.

That\u2019s it for today. 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/u-s-jobless-claims-jump-55-000-to-three-month-high-of-286-000-as-omicron-bites-11642685869?mod=economic-report

2 -https://www.marketwatch.com/story/coming-up-u-s-housing-starts-report-for-december-11642598355?mod=economic-report

3 -https://www.marketwatch.com/story/u-s-home-builders-less-optimistic-due-to-high-inflation-and-supply-woes-11642518358?mod=economy-politics

4 -https://www.marketwatch.com/story/coming-up-u-s-existing-home-sales-11642690518?mod=economic-report

5 -http://www.freddiemac.com/pmms/

6 -https://magazine.realtor/daily-news/2022/01/18/buyers-may-find-opening-with-mortgage-credit

7 -https://www.corelogic.com/intelligence/which-increased-more-new-or-existing-home-prices/

8 - https://magazine.realtor/daily-news/2022/01/19/single-family-rents-post-record-growth