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Real Estate News Brief - Week Ending April 2, 2022

Prices Move Higher, Fed Misstep Worries, Biden\\u2019s Housing Budget

In this Real Estate News Brief for the week ending April 2nd, 2022... consumer prices march higher, Wall Street worries about how the Fed will handle inflation, and Biden\\u2019s budget proposal for housing.

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 more concerns about inflation. The core personal consumption expenditures price index increased 5.4% from a year ago. That\\u2019s the largest year-over-year increase in 40 years. The PCE is considered more accurate than the consumer price index or CPI, and is the Fed\\u2019s preferred inflation gauge. The core rate excludes prices for gas and food. If you include those, the PCE is 6.4%. (1)

Consumers are spending a larger share of their paychecks because of those higher prices, but they are also splurging on things like hotels, restaurants, and vacations. Government data shows that consumer spending was up .2% in February. People are spending less on things that are harder to get, like new cars and trucks. (2)

The unemployment rate dropped to 3.6% in March. That\\u2019s close to a 50-year low of 3.5% which the U.S. hit right before the pandemic. The economy also added 431,000 jobs and wages moved higher as companies compete for too few workers. (3)

Initial unemployment claims rose slightly last week, but continuing claims fell to their lowest level since 1969. The Labor Department reported that applications were up 14,000 to 202,000 for the week ending March 26th. The total number of claims dropped to 188,000, which is a 27,000 drop from the week before. (4)

A lot of Americans are also quitting their jobs for better ones. The data shows that some 4.35 million workers quit in February. Before the pandemic, the average number of people quitting per month was less than three million. A labor shortage has given workers an advantage. Job openings were down slightly in February, but are still near a record high, at 11.27 million. (5)

Builders are among those wrestling with the labor shortage. The National Association of Home Builders says construction hiring was up 5.2% but the industry still has about 381,000 open positions. That\\u2019s significantly higher than a year ago, when the industry had 257,000 available jobs. The labor gap is making it tough to meet the current demand for housing. (6)

The latest report on home prices from Case-Shiller shows a year-over-year increase of 19.1% for the 20-city index. The national index is slightly higher at 19.2%. The FHFA shows a slightly lower rate of home price growth at 18.2%. Homes are appreciating the fastest in Phoenix. The Case-Shiller index shows those prices are up 32.6%. (7)

Construction spending was higher in February, but some of that increase is due to inflation. The Census Bureau reported a .8% increase in private sector spending while the producer price index for construction was up .7% in February. On an annual basis, spending has increased the most for single-family construction. It\\u2019s up 20% while spending for multi-family construction is up 7.8%. (8)

Mortgage Rates

Mortgage rates moved higher again this last week. Freddie Mac says the average 30-year fixed-rate mortgage rose 25 basis points to 4.67%. The 15-year was up 20 points to 3.83%. (9)

In other news making headlines...

CNBC Poll on Economic Risks

A new poll shows that Wall Street investors are more concerned about the Fed than they are about inflation. Investors told CNBC that the biggest threat to the economy is a misstep by central bank policymakers. (1)

Forty-five percent of those polled listed that as their top concern. Another 33% listed inflation. Russian aggression was listed by 11%. Relations with China got 6% of worries. A new wave of Covid infections was last on the list, at just 4%.

CNBC reports that \\u201cmany notable investors are skeptical that the central bank will be able to engineer a soft landing even with a stronger economy.\\u201d

Biden Budget & Housing

President Biden is asking for a huge increase in funding to increase the supply of affordable housing. His proposal includes a 34% increase in spending to a total of about $50 billion dollars. That total includes $32 billion for the Housing Choice Voucher Program, which is also known as Section 8 subsidized housing for low-income, elderly, and disabled Americans. The rest of the funding would be distributed among several other programs that contribute to affordable housing. (11)

The National Association of Realtor\\u2019s chief advocacy officer, Shannon McGahn, says that NAR has been working with lawmakers on this proposal over this past year. She says: \\u201cMany changes will be made to this plan, but it is good news that the White House sees this issue for what it is\\u2014a crisis\\u2014and many in Congress on both sides of the aisle agree.\\u201d

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.cnbc.com/2022/03/31/the-feds-preferred-inflation-gauge-rose-5point4percent-in-february-the-highest-since-1983.html

2 - https://www.marketwatch.com/story/consumer-spending-rises-slightly-but-high-inflation-is-the-reason-why-11648730714?mod=economy-politics

3 - https://www.marketwatch.com/story/coming-up-u-s-jobs-report-for-march-11648815349?mod=home-page

4 - https://www.marketwatch.com/story/u-s-jobless-claims-rise-reversing-some-of-last-weeks-big-drop-11648730591?mod=economic-report

5 - https://www.marketwatch.com/story/another-4-35-million-workers-quit-most-for-better-jobs-11648565695?mod=economic-report

6 - https://eyeonhousing.org/2022/03/steady-number-of-open-construction-jobs/

7 - https://www.marketwatch.com/story/home-prices-increase-at-one-of-the-fastest-rates-on-record-but-higher-mortgage-rates-should-slow-future-growth-11648559497?mod=economic-report

8 - https://www.mortgagenewsdaily.com/news/04012022-construction-spending

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

10 - https://www.cnbc.com/2022/03/30/investors-believe-the-biggest-threat-to-the-markets-now-is-a-fed-misstep-cnbc-survey-shows.html

11 - https://magazine.realtor/daily-news/2022/03/29/big-ask-for-housing-in-biden-budget