In this Real Estate News Brief for the week ending July 11th, 2020… new record-low mortgage rates, where rents are rising, and what to expect from home prices.
We begin with economic news for the past week, and some progress on getting back to work. The Labor Department reported that initial jobless claims hit a seasonally-adjusted four-month low of 1.31 million. That’s down from 1.41 million the week before last. Those figures don’t include benefits handed out through a temporary federal-relief program or state programs. If you include those figures, the total number of people receiving benefits is more like 31.5 million. (1)
The Labor Department also released a report on job openings and hiring for the month of May, and it shows a record 6.5 million people found new jobs or were rehired at their old jobs. But the number of job openings is still far from what’s needed. Economist Joe Brusuelas cites data that shows there are 3.89 job seekers for every job opening right now.
Mortgage rates hit a new all-time low last week. Freddie Mac says the average 30-year fixed-rate mortgage fell 4 basis points to 3.03%. That’s the lowest level in records that go back as far as 1971. For a 15-year loan, the average is 2.51% which is the lowest that it’s been in almost 30 years. (2)
In other news making headlines…
People Moving Because of the Pandemic
All those predictions about people moving because of the pandemic are coming true. A Pew Research survey shows that 22% of adults either moved or know someone who moved since the crisis began. Most of those people are young adults between the ages of 18 and 29 because dorms suddenly closed, or they couldn’t afford the monthly payment, or they didn’t feel safe where they were living. The reason that most of them gave was related to the last one — to move to a place where they felt more protected from the virus. (3)
Less common reasons included a person who was traveling when the pandemic hit and was blocked from returning home. Another person said they needed more space to work from home. And another said he was recalled to the military to help with the pandemic response.
The survey also asked the participants where they moved to. Almost two-thirds said they moved in with other family members, and most of those people moved back in with their parents or in-laws. A smaller portion moved to a second home, a friend, a hotel, or an apartment. Nine percent of them moved to single-family homes that they either bought or rented.
Rent Prices Show Signs of Demographic Shift
Rent prices are also showing signs of this demographic shift. Zumper’s National Rent Report for July shows that rents in the top 10 most expensive cities are trending downward, but as people move away, rents in less expensive neighboring areas are rising. The report offered an example saying that rents in Boston and San Francisco have been going down while rents in Providence, Rhode Island, and Sacramento, California, are higher. They were up about 5% last month. (4)
The national average continues to move higher despite some decline in big cities. It was up 1% for a one-bedroom unit to a median of $1,229. It rose 0.8% for a two-bedroom rental to $1,485.
New York Vacancy Rate Hits Record High
The vacancy rate in New York City is more evidence of an exodus from COVID-19 hotspot areas. A report in HousingWire says that New York’s vacancy rate is the highest it’s been in almost 14 years at 3.67%. The report says that Manhattan has also seen the lowest number of lease signings in 10 years. They dropped 35.6% in June. Listing inventory has also surged in Brooklyn.
New York landlords are hoping to fill vacancies with lower rents. The median rent is about 6.6% lower in Manhattan and 5.7% lower in Queens. Rent isn’t all to the down side, however. It was up 1% in Brooklyn.
Home Price Forecast Shows Weakening
CoreLogic’s May report on home prices shows they continued to move higher in May, but researchers don’t expect that to continue. They’ve been rising every month since they hit a low point during the Great Recession in March of 2011. This last May, they were up 4.8% year-over-year but by next May, researchers expect them to have moved 6.6% lower. (5)
This is an average for the nation so we’ll see prices moving in different directions from state to state and housing market to housing market. In May, Idaho had the biggest swing in home prices to the upside. They were up more than 12%. Alaska and South Dakota were at the other end of the spectrum, with a slight decrease in home prices. It’s reasonable to expect similar patterns over the next year. CoreLogic expects prices in Nevada to fall the most, with an average year-over-year price drop of 18.6%.
(5) Zumper Article