[REN #784] Real Estate News Brief – Rate Cut Rancor, Mortgage Debt for Health, Airbnb for Your Things

Picture of stacked wooden boxes for Real Estate News for Investors Podcast Episode #784

In this week’s Real Estate News Brief… the rate cut tug-of-war continues, why mortgage debt is good for your health, and a new Airbnb-like website for your things.

Economic News

We begin with economic news from this past week. The government reported that sales of new homes fell 13% in July but that’s after a 12-year high in June. MarketWatch analysts say, the government figures are volatile and are often greatly revised. So far this year, sales have risen 4.1%, a sign that buyers are beginning to respond to lower mortgage rates.

Figures for existing home sales come from the National Association of Realtors. (1) They show a surge in sales to a seasonally-adjusted annual pace of 5.42 million homes in July. That’s up 2.5% from June. Prices are continuing to rise because of the tight inventory, but lower mortgage rates help offset those costs.

Mortgage Rates

And, those mortgage rates are looking very attractive. They dropped another five basis points this last week, according to Freddie Mac. The average 30-year fixed-rate mortgage is now 3.55%

In other news making headlines…

Pressure on Fed to Cut Short-Term Rates

President Trump continues his pressure on the Federal Reserve to cut short-term interest rates. He said in a tweet this last week, “The Fed rate, over a fairly short period of time, should be reduced by at least 100 basis points, with perhaps some quantitative easing as well.”

The rancor grew somewhat toward the end of the week, after Fed Chief Jerome Powell commented on the economy, saying the central bank was “carefully watching developments” and would “act appropriately” without promising a rate cut. President Trump let loose in a tweet, asking, “Who is our bigger enemy, Jay Powell or Chairman Xi?”

The Fed just recently cut rates by 25 basis points to a target range of 2.25% to 2.5%. It was the first rate cut in 11 years. Fed members have also suggested that more cuts may be on the way due to weakening economic conditions around the globe along with the volatile trade war with China.

Trump May Cut Capital Gains Tax

President Trump is considering the use of an executive order to cut capital gains tax. He said this last week that he can cut taxes by indexing capital gains to inflation, without congressional approval. That would reduce tax obligations for investors who owe taxes on the sale of an asset.

The original purchase price, or cost basis, would be adjusted for inflation and the gain would be reduced. That would certainly be good for stock and real estate investors, but the Tax Foundation says it will do little to encourage economic growth.

Rent Growth Strongest in the Southwest

Phoenix leads the country for rent growth. Last month, a Yardi study revealed that multi-family rents in Phoenix rose 6.8% during the prior 12 months. This month, CoreLogic says, single-family rents are also increasing the fastest in the Southwest region. The year-over-year rent growth was up 7.1% in Phoenix, 6.8% in Tucson, and 5.8% in Las Vegas. (2)

The nation’s overall year-over-year increase was 2.9%. CoreLogic says that rents have increased the most for lower-priced homes. They are up 3.6% nationally.

Green Homes Sprouting Worldwide

There’s been a big increase in the number of green homes since 2017. The U.S. Green Building Council reports a 19% increase, to a world-wide record high of about 500,000 housing units. About 400,000 of them are located in the U.S.

These homes are LEED-certified properties, which is a widely accepted green building standard. As reported by Realtor.com, LEED-certified homes typically use 20% to 30% less energy than traditional homes. That percentage can vary, as some are even more efficient with up to 60% in energy savings.

Some studies have found that green homes have a higher resale value. One study on green homes in Austin, Texas, found that LEED-certified homes are worth an average of $25,000 more than conventional homes.

Mortgage Debt and Life Expectancy

There’s some evidence that people with a mortgage will live longer. That’s the result of a study from LendingTree that found that higher mortgage debt corresponded to a longer lifespan. Researchers say the results suggest that mortgage debt can be good for your health.

They offered an explanation, saying, “That trend reaffirms the idea that homeownership is ultimately a good thing.” They also found that debt from auto loans and credit cards did “not” have the same effect.

Airbnb for Your Personal Belongings

If you just can’t part with your belongings but need a place to store them, you might want to check Neighbor.com. It’s a website with listings for storage space in private homes. The company says its service is like “Airbnb for your stuff.”

The business is apparently growing fast. CEO Joseph Woodbery told CNBC, the company has experienced 500% year-over-year growth in two years. He says, “It’s not just garages and basements and driveways. We’ll have people list barns, for storing classic cars. Even small spaces, university students will advertise their closets.” (3)

Hosts can inspect things that are stored, and are insured through Neighbor.com. Spaces are also cheaper than a typical self-storage place for those renting.

Links:

(1) MarketWatch Report

(2) Strong Housing Market in Southwest: HousingWire

(3) CNBC Report

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