In this week’s Real Estate News in Brief… a decision on interest rates, the best tech cities, and a growing retirement savings gap.
We begin with economic news from this past week, and a Federal Reserve decision to leave short-term interest rates unchanged. It said in a statement that the economy continues to expand at a moderate pace and the labor market remains strong. There are signs the economy is faltering, however, including lower inflation rates. But, Fed Chief Jerome Powell doesn’t feel that monetary policy should be based on any one data point so he’s content to monitor the situation. The Federal Reserve Board is divided on the need for a rate cut. According to MarketWatch, nine Fed officials don’t see a rate cut this year. Eight others see one or two.
President Trump is probably not happy about the Fed’s decision. He’s been pressuring the central bank to lower the benchmark Federal Funds rate for several months, and has chastised Powell for not doing so. He’s even asked his staffers to investigate whether he has the power to remove the Fed Chief. Powell says he fully intends to serve his 4-year term.
The sale of existing homes bounced back in May. The National Association of Realtors says they were 2.5% higher than the month before, although they were slightly lower than they were a year ago. Chief economist for the Mortgage Bankers Association, Mike Fratantoni, says the data for May shows “a number of positive trends” including an increase in inventory.
Home construction pulled back a little. The Commerce Department says the pace of housing starts was slower, although there was a slight rise in permit applications. The National Home Builders Association also says that home builder confidence dropped a few points in June, to 64, although anything over 50 is positive.
Long-term mortgage rates are still idling along below the 4% mark. Freddie Mac says the average 30-year fixed-rate mortgage is 3.84%. That’s just 2 basis points above the level it’s been for the previous two weeks. It’s also good news for home sales.
In other news making headlines…
Average National Rent Climbs
The latest reading on rent levels by RentCafe show a national average of $1,442 for the month of May. (1) That’s up 2.5% year-over-year from the previous monthly report, or 0.3% month-over-month. But the May report also says that 64% of the nation’s 260 largest cities fall below the national average, making them more affordable.
RentCafe says that cities in the Midwest and South continue to be relatively affordable. The most budget-friendly big cities are Indianapolis, Columbus, San Antonio, Phoenix, and Las Vegas. At the other end of that spectrum are New York City, Los Angeles, Seattle, Chicago, and Denver.
Best Tech Cities in 2019
Highly-paid tech workers help drive a strong job market, which in turn, helps create a strong housing market. And many of the top-rated cities for tech workers are also great for investors. SmartAssets published the result of a sixth annual report on the best tech cities in the U.S. (2)
Some of the cities in the top 25 list are cities that our Real Wealth Investors are quite fond of. Columbus, Ohio is in the top spot with Dallas, Texas close behind. Huntsville, Alabama is in the 8th position. Atlanta, Houston, Tampa, and St. Louis are also top cities for tech workers.
The analysis includes 172 cities and five different metrics including: average salary, average cost of living, amount of tech jobs, unemployment numbers, and average pay to tech pay.
Retirement Savings Gap
A new warning from the World Economic Forum says the retirement savings gap is growing, as people live longer. It published a report saying that workers around the globe could outlive their savings by ten years or more. In the U.S., the forum calculated that many 65-year-old retirees only have 9.7 years of retirement income. That leaves an 8.3-year gap for men, and a 10.9-year gap for women.
The Forum says the worldwide retirement savings gap could hit $400 trillion by the year 2050. That’s up from $70 trillion in 2015. The report estimates that the U.S. will have the largest savings gap at $137 trillion.
Social Security Cuts in 15 Years
Many Americans also face the possibility of cuts to Social Security paychecks. As the New York Times reports, Social Security trust funds are expected to run dry in about 15 years, in 2035. (3) If that happens, benefit checks would need to be reduced by about 20%.
The only thing that would keep that from happening is intervention from Congress. House Democrats are currently pushing for a fix that raises taxes. It’s called the Social Security 2100 Act. It’s expected to pass in the House, but could have a tougher time in the Republican-controlled Senate, although it is getting some bipartisan support.
Amazon Drone Patrols
Amazon’s future army of drones may do more than package deliveries. The Daily Mail reports that the tech giant may launch a neighborhood drone patrol service. According to a patent, homeowners would subscribe to the service and allow delivery drones to keep an eye out for trouble. The drones may even be able to call police if something is amiss.
The drones would also record images, which is prompting concerns about privacy. But the patent states that any footage would be limited to a homeowner’s property and that any neighboring homes that are not part of the service would be cropped off or obscured somehow. Among the things the drones would look for are open doors, broken windows, signs of graffiti, and fires.
(1) RentCafe Article