In this Real Estate News Brief for the week ending January 11th, 2020… rental rates in 2019, renting vs. owning, and why you shouldn’t abbreviate 2020.
We begin with economic news from this past week. The government reported that the trade deficit shrank 8% in November and hit a 3-year low. Economists expect the full year to show a decline when the December numbers come out. That would be the first such decline since 2013, mostly due to the trade war and a shrinking deficit with China.
Service-oriented companies helped propel the U.S. economy in December. A survey by the Institute for Supply Management boosted the service sector index to a four-month high of 55%. Anything over 50% is considered a big “positive” for the economy, but the number is still lower than a pre-recession peak of almost 61%.
To provide all those services, companies needed employees which also boosted service sector jobs in December. A report by ADP shows that businesses added 173,000 private-sector service-oriented jobs. That’s higher than an Econoday poll of economists who expected just 157,000 additional jobs. (1)
The latest unemployment numbers also came out showing that the U.S. jobless rate remains at a 50-year low of 3.5%, but overall job creation slumped. While service-oriented jobs were higher, jobs in other sectors like manufacturing and energy, were down. As MarketWatch reports, some companies are finding it difficult to fill positions because the labor market is so tight.
Mortgage rates are looking more attractive after last week’s drop. According to Freddie Mac, the average 30-year fixed-rate mortgage is down 8 basis points, to 3.64%. That’s the lowest they’ve been in 13 weeks.
In other news making headlines…
Rent Prices End 2019 on a High Note
Multi-family rent rates ended 2019 on a high note. According to a report from Abodo, the median rent for a one-bedroom apartment rose 4.1% to an average of $1,078 a month. The rent for a two-bedroom unit was up 5.5% to $1,343 a month.
Rental demand was high throughout the year and reached an occupancy peak of 96.3%. Rents rose the most in Utah as people moved there for jobs. Massachusetts has the highest rents overall, but rents in the cities of San Francisco and New York are the highest in the nation. Percentage wise, rents in Detroit surged the most because it’s affordable and the city is making a big comeback. Rents were up 7.48% in Detroit with an average monthly rent of $886 for a one-bedroom apartment. (2)
Owning Better Than Renting in Many Markets
With rents and home prices rising across the country, it’s sometimes a toss-up as to which is more affordable – to rent or to buy. And the latest report from ATTOM Data Solutions breaks that down with half of the country going one way, and half the other way. To be precise, it’s more affordable to buy a median-priced, three-bedroom home in 53% percent of the U.S.
But you shouldn’t expect to find the best deals in the big cities. The places where you’ll find it’s better to buy than to rent is in less populated areas. In fact, ATTOM researchers say that renting is more affordable than buying a home in 85% of the counties they analyzed with a population of one million or more. For slightly smaller urban areas with a population of half a million to one million, that percentage is 69% in favor of renting. (3)
Price Per Square Foot
Sometimes it’s easier to get an idea about home prices when you compare price per square foot and that varies by a huge amount across the nation. The average is $123 but in some cities, you’ll pay much more than that. For example, the average in Boston, New York, and San Francisco is more than $1,000 a square foot. Compare that to Detroit where you’ll pay an average of $42 a square foot.
Convert those numbers into a home that costs $305,000 and you get a home that’s tinier than a typical tiny home in Boston with about 263 square feet. In Detroit, that home will be a mansion with 7,252 square feet. Yes, you can get some GREAT deals in Detroit. Those homes also make good single-family rentals.
The Equifax Money You Won’t Be Getting
Remember that big Equifax data breach and the promise of a $125 payout? Victims were given a choice last July to sign up for free credit monitoring (and trust the same company that exposed their data), or accept a $125 payout as a settlement.
The $125 was supposed to come out of a $700 million settlement, but due to an overwhelming number of people who opted for the payout, and another $77.5 million in attorney fees, that $125 has been whittled down to about $6 or $7. That’s according to the man directing the litigation, Ted Frank of Hamilton Lincoln and a report by CNBC. So much for getting something in return for a data breach at a company that has ALL your personal financial data.
Don’t Abbreviate 2020!
There’s a hot tip I’d like to share with you about how to write the year 2020. Police are trying to get the word out that you should not abbreviate the year as you would in years past because it will leave you open to fraud. For example, if you write 1/1/20, someone could change that to 1/1/2000 or 1/1/2021. An auditor in Ohio told a local newspaper that writing out the full date “could possibly protect you and prevent legal issues on paperwork.” (4)
(2) Rising Rents: HousingWire
(3) Renting vs Buying: HousingWire