In this week’s Real Estate News in Brief… we have a huge surge in new home sales, a new “mortgage merry-go-round” for Millennial home buyers, and a security system that puts Amazon eyes and ears in your home.
We begin with economic news from this past week, and a big surprise about the sale of new single family homes. Sales activity surged almost 19% in August to its strongest performance in the last ten years. The Commerce Department reported an annual rate of 667,000 sold homes. MarketWatch analysts had predicted only 555,000.
The results are much weaker for the sale of existing homes. The National Association of Realtors says that pending home sales were flat in August, at an index reading of 106. That’s mostly due to the limited supply of for-sale homes, but hurricanes in Texas and Florida may have contributed to the slow pace of contract signings. Inventory has been falling for more than two years.
The U.S. economy continued with a strong rate of growth in the third quarter. The Commerce Department reported a 3% annual pace despite those hurricanes. Economists had anticipated a rate of 2.7%. Hurricanes Harvey, in Texas, and Irma, in Florida, were factored into the calculations. The one that hit Puerto Rico was not because Puerto Rico is a U.S. territory and not a state.
Consumers are happy with the way things are going. The University of Michigan says consumer sentiment is hitting a 13-year high for this month. The index is now up to 100.7. It was closer to 55 during the height of the Great Recession. A booming stock market and strong job growth are both contributing to that feeling of optimism.
Mortgage rates are also surging higher. The 30-year fixed-rate mortgage jumped 6 basis points this last week to 3.94%. That’s in lock-step with a 12-point rise in the 10-year Treasury yield.
In other real estate news making headlines…
Millennials Buying Homes with Parents’ Home Equity
Millennials have a hot new strategy for leveraging themselves into the housing market. They are supposed to be the up-and-coming wave of new homebuyers but they’ve been up against several obstacles, and are now fighting back with the help of their parents.
The Wall Street Journal reports that parents are using their own home equity to help turn their kids into cash buyers. The Journal calls it a “mortgage merry-go-round.” The parents refinance their homes to pull the equity out in cash. That money is then given to the children so they can compete in bidding wars as all-cash buyers. When they win the home, they refinance that property to pay their parents back.
It isn’t always the parents offering to do the deal however. The Journal reports that loan agents may have to work with the home buyer and the parents on an acceptable deal. It also involves “two” loans — one for the refinancing of the parents’ home, and one for the kid’s new home. As the blog points out, mixing family and finances can be difficult but it is a solution that some are embracing.
New Zealand Says No to Foreign Investors
New Zealand is addressing a housing crisis there with a ban on foreign home buyers. The island nation in the southwest Pacific has been a hotspot for foreign investors, including those from the United States, but even more from China. That’s driven home prices higher and reduced inventory for affordable homes. One bank says the housing shortage is growing by 40 homes a day, and the nation is currently 60,000 homes short of what they need.
As a result, only residents will be allowed to buy homes. The government is also cutting immigration quotas. Like the U.S., New Zealand is facing a housing affordability crisis because of low interest rates, limited inventory, and a high number of immigrants.
The Race to Win Amazon’s HQ2
The race to win Amazon’s second headquarters now includes 238 metropolitan suitors. That’s how many proposals Amazon has received from cities wanting Amazon to build its new $5 billion dollar second headquarters in their metros. Amazon says it received proposals from 54 states, districts, and territories in the U.S. Some of the proposals also came from Canada and Mexico.
Cities are clamoring after what is expected to be a very lucrative partnership that includes the creation of some 50,000 high-paying jobs. There are no details yet on the size and scope of the incentives being offered and Amazon isn’t expected to make a decision until next year but there’s plenty of speculation on which city will be the winner.
A few weeks ago, Moody’s predicted that Austin, Texas would get the deal. This week, betting website Paddy Power is putting its money down on Atlanta. But in both cases, Austin and Atlanta were in the top two spots. Paddy Power’s list also includes Boston; Toronto; Pittsburgh, Pennsylvania; Dallas; Washington, D.C.; San Jose; Los Angeles; and Philadelphia.
Amazon’s New Eyes & Ears Inside Your Home
You might think this is the Amazon show. We have one more Amazon story for you but this one isn’t about HQ2. Amazon introduced a new in-home delivery service this last week that puts cameras inside your home.
It’s a kit called “Amazon Key” for prime members that includes Amazon’s indoor security camera and a compatible smart lock for your door. It operates as a security camera in general but also provides a way for Amazon to drop packages inside your home. When the delivery is authorized, the delivery person opens the door, the camera turns on, the package is dropped, and the whole transaction is recorded for later viewing by the homeowners.
That raising some privacy concerns because the files are saved and managed by Amazon. But, it’s not much different than Google recording and saving everything you say to Alexa. And of course, companies like Amazon and Google have been tracking everything you do on the web for years. So it looks like Big Brother is already in the house.