In this week’s Real Estate News in Brief… home price appreciation slows while rent growth surges, senior equity hits a new high, and cities where residents find happiness.
We begin with economic news from this past week, that includes the latest report on inflation. The government reported a 0.2% increase in the Consumer Price Index last month after four months of no change. It says consumers paid more for food, energy, housing, and clothes, but the total increase for the last year is only 1.5%. The Core CPI eliminates food and gas. That was up 0.1% in February and 2.1% for the year.
New home sales got off to a sluggish start this year. The Census Bureau reported a 6.9% drop in new home sales to a seasonally adjusted annual rate of 607,000 homes. The median sales price in January was $317,000, but the average sales price was $373,000.
Builders made up for December’s drop in construction spending, with an unexpected 1.3% increase in January. Economists polled by Reuters had anticipated a 0.4% increase. Most of that spending is for public construction projects. Spending for private residential construction was down 0.3%.
Consumer are feeling more confident about the economy for a second month in a row, following the partial government shutdown. The University of Michigan’s consumer sentiment index shows a five-point increase to 97.8 in March. MarketWatch economists say the increase is due to higher wages among low to middle-income households.
Homebuyers are getting good news from lenders. Freddie Mac says the average rate for a 30-year fixed-rate mortgage dropped 10 basis points this last week, to 4.31%. That’s the lowest it’s been since February of last year.
In other news making headlines…
GDP Growth is Slowing
The Federal Reserve for Atlanta trimmed its prediction for GDP growth to almost zero. It anticipates a 0.2% annualized rate of growth in the first quarter. That’s based on data for retail sales in January. It’s the weakest reading since April of 2016 when growth sank to 0.1%.
Economists at Barclays also reduced their GDP estimate although it was more generous to begin with. That estimate fell from 2.5% to 2% for the first quarter.
Confused Taxpayers May Get Penalty Break
The Trump Administration may waive more penalties for the underpayment of 2018 taxes. The Treasury department already reduced the amount of paid taxes that would trigger a penalty from 90% to 85%. Treasury Secretary Steven Mnuchin says they are now considering another threshold adjustment to 80%.
That’s to help people who underpaid their taxes because of confusion over the new tax law. Representative Kenny Marchant of Texas said of tax payment shortfall, “We believe that there is some confusion, some genuine confusion out there, and I think it would be a good-faith effort on the part of us to our hard-working constituents.” (1)
Housing Market Slowdown
The slowdown in home price appreciation is now in its tenth month, according to a new report from Black Knight. As reported by HousingWire, home prices are still moving higher on an annual basis, but the data indicates that a market slowdown is just around the corner.
Black Knight’s Ben Graboske says, “The average home has lost more than $2,400 in value since the summer of 2018.” (2) But the good news is that lower prices could lead to more home sales, especially with lower long-term interest rates for home loans.
Rent Growth Continues
The housing market slowdown isn’t affecting rent growth. Zillow researchers are reporting a 2.4% year-over-year increase in February to $1,475 per month. That’s after a slight pullback toward the end of last year. Orlando posted the largest increase with year-over-year gains of 7.4% in January and 7% in February. Phoenix and Riverside, California were also over 6%.
Zillow Economist Jeff Tucker doesn’t expect this kind of rent growth to continue however. He says, “The rental market spent part of last year catching its breath after several years of breakneck growth. Landlords are now coming to terms with the fact that rent cannot grow faster than income forever.”
Tucker expects a much more “vanilla, slow-growth market” in the months ahead. He also expects demand for rentals to fall as millennial renters buy homes.
New Record for Senior Equity
Home equity for people 62 and older hit a new record in the fourth quarter of 2018. The National Reverse Mortgage Lenders Association says that equity mushroomed another $98 billion dollars. The NRMLA’s Executive Vice President, Steve Irwin, says, “There are now 23.9 million senior homeowners — the highest number ever — and these homeowners hold a record $7.05 trillion in home equity.” He says, “Despite slower home price appreciation, we ended 2018 on a high note.” (3)
Happiest U.S. Cities
There’s a new study that quantifies the amount of happiness you might find in various cities. The WalletHub analysis based its findings on 31 key indicators for happiness. Without naming all of them, they included things like depression rates, sports participation, income growth, job satisfaction, unemployment, commute time, leisure time, divorce rates, and weather.
The city that earned the number one spot was Plano, Texas. That’s northeast of Dallas-Fort Worth. Irvine, California came in second and is one of five California cities in the top ten. Other California cities include Fremont, Huntington Beach, San Jose, and San Francisco. (4)
(1) The Hill Article