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Real Estate News Brief - Week Ending April 23rd, 2022

Top Investor Concerns, Foreclosure Activity, 40-Year Loan Option

In this Real Estate News Brief for the week ending April 23rd, 2022... the top concerns for investors, what\u2019s happening with foreclosures, and a new 40-year loan option for some borrowers.

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 growing concerns about inflation. Fed Chief Jerome Powell says: \u201cIt\u2019s absolutely essential to restore price stability.\u201d He feels it\u2019s appropriate to move more quickly with interest rate hikes and says that a 50-basis point rate hike is on the table for the Fed\u2019s May meeting. He says: \u201cOur goal is to use our tools to get demand and supply back in sync, so that inflation moves down and does so without a slowdown that amounts to a recession.\u201d But he also warns that it will be a challenging process. Consumer inflation hit an annual rate of 8.5% in March. That\u2019s well above the central bank\u2019s 2% target. (1)

Fannie Mae is predicting a recession by next year, due to the need for aggressive monetary policies to control inflation. But it says it will probably be a \u201cmoderate recession\u201d and not like the Great Recession of 2008. It expects the strength of the housing market to help cushion the blow although the mortgage financing giant also expects the housing market to slow down somewhat due to high home prices and mortgage rates. The National Association of Realtors is predicting a 10% decrease in home sales for this year. (2)

Unemployment claims remain near a 40-year low. They were down 2,000 from the week before to 184,000. The low numbers are the result of a strong labor market that has more job openings than unemployed workers to fill them. Continuing claims were also down. They dropped 58,000 to 1.42 million. That\u2019s the lowest they\u2019ve been since 1970. (3)

Home builders are increasing the number of homes they are starting despite rising inflation, higher mortgage rates and the labor shortage. But they are shifting their focus because of those issues, from single-family homes to multi-families. The Census Bureau says that home starts were up .3% in March to an annual rate of about 1.79 million. Permits were also .4% higher to an annual rate of about 1.87 million. (4)

Home builder confidence is lower however because of rising mortgage rates and all the other things making new homes so much more expensive. The National Association of Home Builders says its monthly confidence index was down two points in April to a reading of 77. Even though it is hovering near its lowest level since last September, anything over 50 is considered positive. (5)

Existing home sales were lower for a second month in a row. The National Association of Realtors says they were down 2.7% in March to a seasonally-adjusted annual rate of 5.77 million. If you compare sales to March of 2021, they were down 4.5%. (6)

Mortgage Rates

Mortgage rates are now over 5%. Freddie Mac says the average 30-year fixed-rate mortgage was up 11 points last week, to 5.11%. The 15-year was up 21 points to 4.38%. (7)

In other news making headlines\u2026

Top Concern for Investors

Investors are more concerned about inflation than they are about rising mortgage rates and access to capital. Real estate investor financing firm Kiavi conducted a survey which shows that 65% of the participants were concerned about inflation, 63% were concerned about higher interest rates, and 58% were concerned about access to capital. But that said, Kiavi says these worries are not keeping investors from moving forward on their investment plans. (8)

CEO Michael Bourque says: \u201cWe\u2019re seeing our customers continue to identify smart investments and make good decisions. With over two-thirds of U.S. homes 30 years old or more real estate investors will continue to play an important role as they revitalize aged homes and make them move-in ready for millions of families across the country.\u201d

Foreclosure Activity on the Rise

Foreclosure activity is rising now that most of the pandemic-related moratoriums have been lifted. There was a 39% increase in foreclosure filings during the first quarter of this year. Compared to a year ago, they are up 139%. That\u2019s according to ATTOM Data Solutions. (9)

The states with the highest level of foreclosure activity are California, Florida, Texas, Illinois, and Ohio. The metros where you\u2019ll find the greatest number of foreclosure starts are Chicago, New York, Los Angeles, Houston, and Philadelphia.

FHA 40-Year Covid Loan Modification Option

The Federal Housing Administration introduced a 40-year loan modification option for borrowers impacted by Covid. Loan servicers can offer this option immediately to help homeowners avoid foreclosure. In 90 days, it will be a requirement to offer the 40-year modification to help people lower their payments. (10)

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...

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Links:

1 - https://www.cnbc.com/2022/04/21/powell-says-taming-inflation-absolutely-essential-and-50-basis-point-hike-on-the-table-for-may.html

2 - https://magazine.realtor/daily-news/2022/04/21/fannie-mae-predicts-moderate-recession

3 - https://www.marketwatch.com/story/u-s-unemployment-claims-dip-to-184-000-and-stay-near-53-year-low-11650544616?mod=economy-politics

4 - https://www.marketwatch.com/story/new-home-construction-improves-despite-high-inflation-and-rising-mortgage-rates-11650372876?mod=economic-report

5 - https://www.marketwatch.com/story/home-builder-confidence-declines-in-the-face-of-rising-interest-rates-11650290417?mod=economy-politics

6 - https://www.marketwatch.com/story/existing-home-sales-fall-for-second-consecutive-month-amid-rising-mortgage-rates-2022-04-20?mod=economy-politics

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

8 - https://www.prnewswire.com/news-releases/kiavi-real-estate-investor-survey-reveals-inflation-pains-renovation-gains-and-need-for-technology-301525483.html

9 - https://magazine.realtor/daily-news/2022/04/21/foreclosure-activity-at-new-high-since-the-pandemic-began

10 - https://www.housingwire.com/articles/fha-adds-40-year-loan-term-to-covid-19-arsenal/