In this week’s Real Estate News in Brief… why the government shutdown is bad for the housing market, Redfin’s 2019 market predictions, and a new home decor trend that encourages cuddling.
We begin with economic news from this past week, and a partial government shutdown over border wall funding. President Trump is demanding $5 billion to build the wall and is refusing to sign a spending bill that would keep the government operating unless he gets that funding. (1)
The shutdown was holding up thousands of home sales because the government stopped issuing new flood insurance policies. Lawmakers had passed an extension of the National Flood Insurance Program on December 21st, making it possible for the program to continue, but then FEMA ruled that lawmakers could not extend the program during the shutdown. That decision has been reversed, and new policies are being issued, after a strong backlash from members of Congress and the housing industry. As many as 40,000 home sales a month require flood insurance to complete the sales transaction. (2)
Federal employees are also impacted by the shutdown. Many are on furlough while others in more critical positions such as law enforcement and airport security, are working without a paycheck.
Data on new home sales has also been delayed because of the shutdown, but NAR released its latest report on pending home sales which fell .7% in November. The association’s chief economist Lawrence Yun says it’s nothing to be overly concerned about since the sales figures don’t take into account the latest drop in mortgage rates, but he expects the government shutdown will create a drag on the economy.
Home prices are still heading higher, overall, but those price gains are slowing down, and in some areas, going a bit lower. Case-Shiller reports that its home price index shows a month-over-month gain of .5% in October and a 5.5% annual increase nationwide. The biggest price gains are currently in Las Vegas where prices have gained 12.8% over the last year.
Consumer confidence fell for a second month in a row over concerns about economic growth next year. The stock market volatility is also rattling a few nerves. The Conference Board says its home price index fell from 136 in November to 128 in December. The reading is still at a strong level, but economists say, worries are growing.
Homebuyers are getting another reprieve from higher interest rates. Freddie Mac says, the average 30-year fixed-rate mortgage was 4.55% this last week. That’s down 7 basis points from last week’s average, and continues a slide that began a few months ago.
In other news making headlines…
Redfin: 2019 Housing Market Predictions
Redfin is wrapping up the year with its own set of housing market predictions. Redfin analysts expect the market slowdown to continue with even slower price gains. They are predicting a 3% gain in prices by mid-year, but they say there’s a real chance prices could fall below 2018 levels in more expensive markets. They say smaller inland markets that are just heating up could still see strong price growth. (3)
They expect to see fewer house flippers, and more people buying homes to live in them. They say buyers will also pay more for their loans, but they will be more accessible. Home builders won’t be building as many luxury homes. Instead, we’ll see more of a focus on starter homes.
The cool-down could dampen economic growth but, according to Redfin analysts, only slightly. The new iBuying trend faces its first serious test. iBuyers like Opendoor and Redfin now make instant offers to buy homes. They also sell many of their homes to institutional buyers who may want lower prices during any market uncertainty. It remains to be seen whether the iBuyers can strike a price balance as the middleman between home sellers and institutional buyers.
Last but not least, Redfin analysts are expecting the tech industry and local governments to expand on this love-hate relationship that’s growing between them. Cities love the prosperity that the high tech workforce creates, but along with that prosperity comes housing problems. Amazon’s plan to expand its headquarters operation into two east coast cities is sure to be one of the big housing dramas of the year.
Web Search Spikes for “Recession”
There will be plenty of worries about recession in the upcoming year, although many prognosticators don’t expect that to happen until 2020. But, Google says, people are doing more web searches for the word “recession.” It says the search rate is about the same as it was in 2009, right after the Great Recession — or about one third of the peak rate in January 2008.
Crazy about Cwtch
The latest trend in home design is all about being cozy. It’s a style called “cwtch” that is filled with fuzzy throws, fluffy pillows, and comfy places to relax. It means “to cuddle.” Spelling that word may be a challenge. According to Realtor Magazine, it’s spelled C-W-T-C-H, with no vowels. When I tried to find it on dictionary.com it wasn’t there, so maybe it’ll be one of those new entries. We all need a little of that “cwtch” in our lives, from both pillows and people!
This is our last News Brief for 2018. I look forward to keeping you up-to-date in 2019.
(2) Government Shutdown and the Housing Market: HousingWire
(3) Redfin Housing Market Predictions