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In this Real Estate News Brief for the week ending September 3rd, 2022... why rate hikes might backfire, why economists are seeing a sharp increase in the housing supply, and what Elon Musk is saying about owning a tiny home in Texas.

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. A paper released at the Jackson Hole Summit argues that the central bank cannot control inflation by rate hikes alone. Researchers from Johns Hopkins University and the Chicago Fed authored the report, and say rate hikes could make matters worse without a reduction in government spending. The federal debt is currently at 123% of GDP which is down slightly from early 2020 during the beginning of the pandemic, but it\u2019s much higher than it has been since the mid-1940\u2019s. As interest rates rise, so does the cost of that debt. (1)

The latest reports on the job market, and manufacturing, both show that the economy is still in good shape. It\u2019s still growing, but at a slower pace. A report from the Institute for Supply Management shows that new orders and employment increased, and that inflation was down slightly. It says there\u2019s one red flag \u2013 that some companies have bloated inventories which could put them in a tough spot if the economy slows down any more. (2)

Meantime, initial jobless claims dropped to a nine-week low of 232,000 which means there\u2019s no sign of any big layoffs. Economists say this is one of the best barometers for economic health. (3) Job openings also expanded to 11.2 million in July. That\u2019s up from 11 million in June. The unemployment rate is currently at 3.5%. (4)

Home price growth was down in July. The S&P CoreLogic Case-Shiller 20-city index deceased from 20.5% in May to 18.6% in June. The national index was up a seasonally adjusted .3%, but that\u2019s the smallest increase in two years. (5)

Money spent on residential construction was down .4% in July. Economists expected it to fall because builders have been cutting back on their plans. Year-over-year, construction spending is still up 8.5%. (6)

Consumers are feeling much better about the economy, now that gas prices have gone down. The consumer confidence index jumped from 95.7 to 103.2 in August. That\u2019s the first time it\u2019s gone up in four months. (7)

Mortgage Rates

Mortgage rates are getting closer to the 6% level. Freddie Mac says the 30-year fixed-rate mortgage was up 11 basis points to an average of 5.66%. The 15-year was up 13 points to 3.98%. (8) Mortgage News Daily reports that the numbers from Freddie are way too low. It says the average is more like 6.23%. (9)

In other news making headlines\u2026

Housing Supply to Increase Sharply

Some economists expect to see a big increase in housing completions in the coming months. The Calculated Risk blog says that even while housing starts slow down, builders will be finishing up many of the homes currently in the pipeline. That includes single-family and multi-family homes. (10)

Bill McBride at Calculated Risk is estimating a 10% increase in completions this year to almost 1.6 million. That\u2019s because there\u2019s an unusually high number of housing units under construction due to supply chain issues.

FSBO Is Not Very Popular Right Now

A high number of home sellers have decided to go with an agent, instead of doing the deal on their own. The National Association of Realtors says that FSBOs, which stands for \u201cfor sale by owner,\u201d typically rise during hot markets, but the latest Profile of Home Buyers and Sellers shows the opposite. FSBOs were just 7% of home sales last year. That\u2019s the lowest percentage in about 30 years. 15 years ago, 12% of sellers decided to go it alone. (11)

The report says that sellers are finding value in the hiring of real estate professionals. Among the benefits is the competitive pricing of a home, help with marketing to potential buyers, and negotiating the deal.

Elon Musk Does, In Fact, Own a Boxabl Casita

There\u2019s been much speculation as to whether Tesla and SpaceX founder, Elon Musk, had downsized into a Boxabl Casita. We did a news story on this modular home several months ago, and there were rumors about Musk living in one near his SpaceX facility in Texas. In a recent interview, he confirmed the purchase of one of these homes, but said he uses it as a guest house, and not as his primary residence.

The basic model is 375 square feet in size and folds up for delivery. It only takes a few hours to set up and costs about $50,000.

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 haven\u2019t yet joined RealWealth, just hit the \u201cjoin for free\u201d button on our website. You\u2019ll get access to our rental market data, our investor portal, and our network of real estate professionals including investment counselors, market specific property teams, lenders for investors, 1031 exchange facilitators, and more.

Thanks for listening. I'm Kathy Fettke.

Links:

1 -https://www.cnbc.com/2022/08/29/fed-rate-hikes-wont-curb-inflation-if-spending-stays-high-paper-says.html

2 -https://www.marketwatch.com/story/u-s-factories-expand-again-ism-finds-in-sign-economy-is-still-growing-11662041369?mod=economic-report

3 -https://www.marketwatch.com/story/jobless-claims-tumbled-to-nine-week-low-of-232-000-layoffs-still-historically-low-11662035886?mod=economic-report

4 -https://www.marketwatch.com/story/job-openings-climb-to-11-2-million-and-show-labor-market-still-going-strong-11661869076?mod=economic-report

5 -https://www.marketwatch.com/story/u-s-home-price-growth-continues-to-decelerate-in-june-case-shiller-11661864864?mod=economic-report

6 -https://www.marketwatch.com/story/construction-spending-softens-in-july-11662041467?mod=bnbh_mwarticle

7 -https://www.marketwatch.com/story/consumer-confidence-rises-for-first-time-in-four-months-on-falling-gas-prices-and-slower-inflation-11661868411?mod=newsviewer_click

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

9 -https://www.mortgagenewsdaily.com/markets/mortgage-rates-09012022

10 -https://calculatedrisk.substack.com/p/update-housing-completions-will-increase

11 -https://magazine.realtor/daily-news/2022/08/30/fsbos-usually-soar-in-a-hot-market-not-this-time

12 -https://www.autoevolution.com/news/elon-musk-confirms-he-owns-a-50000-boxabl-casita-tiny-home-prototype-195285.html