In this week’s Real Estate News Brief… we look at a surge in single-family rents, millennials who think they’ll be lifelong renters, and retirees who are more interested in “upsizing.”
We begin with economic news from this past week, and an estimated GDP that drops to almost zero for the third quarter. The Atlanta Fed’s GDPNow is estimating that economic growth crawled along at .3%. The New York Fed’s GDP Nowcast is estimating .4%. That’s a big drop from first quarter growth of 3.1% and second quarter growth of 2%. The yearly rate should still come in at a decent rate between an estimated 1.7 and 2%.
Existing home sales rose almost 2% in October, thanks to low mortgage rates. Most of that increase was for higher-priced homes. Sales were slower in the lower price range because there hasn’t been enough inventory. The median sales price for an existing home is $270,000. That’s 6.2% higher than it was at the same time last year.
In the residential construction sector, housing starts were up 3.8% in October, while building permits rose 5%. MarketWatch says the permitting rate was the fastest since 2007. October was also the second-best month this year for housing starts. Both of these readings show that builders are optimistic about the market. The National Association of Home Builders monthly confidence index hit a 20-month high last month, in October. It remains close to that mark but is down slightly for the month of November.
Consumers are feeling a bit more confident about the economy than they were last month. The University of Michigan consumer-sentiment index for November is 96.8. That’s up from 95.5 in October. Marketwatch reports that economists and the Federal Reserve both feel that we will avoid a recession due to the strength of consumer economics, but they say we will experience a test of this theory with the holiday shopping season. (1)
Mortgage rates settled back down this last week. Freddie Mac says the average 30-year fixed-rate mortgage is down nine basis points to 3.66%. The low rates are contributing to homebuyer enthusiasm and economic growth. Residential real estate is an important economic driver. Freddie Mac says it accounts for one sixth of the U.S. economy.
In other news making headlines…
Single Family Rental Prices
Single-family rentals are commanding higher rents as demand outpaces available homes. Real estate data firm CoreLogic says, rents on single-family homes rose 3% nationally, in September. Metros with the strongest rent growth are those with strong economies and job growth, fewer rental vacancies, and limited construction for new single-family homes.
At the top of the list for rent growth is Phoenix with a 6.7% year-over-year rent increase. That kind of rent growth is fed by a strong job market and a low supply of single-family rentals. Phoenix has an annual job growth rate of 2.4% compared to a national average of 1.4%. Vacancy rates also dropped the most in Phoenix to just 2.6%. Las Vegas was second on the rent growth list followed by Seattle.
Millennials as Lifelong Renters
An increasing number of millennials believe they’ll be lifelong renters. Apartment List surveyed more than 10,000 millennials across the country for a 2019 report on millennial homeownership, and it found that 12.3% believe they will “always rent.” (2) That’s up from 10.7% in 2018. Some feel that renting is the best option for their lifestyles, but most of them say they can’t afford to buy a home.
The biggest challenge to millennial homeownership is the down payment. Apartment List says, many have not saved anything for a down payment. Down payment help from families is also dwindling and many are wallowing in student debt.
This report says, just 25% of millennial renters will be able to put 10% down on a median-priced home over the next five years. That figure would increase to 38% if student debt were eliminated. That’s not good news for millennials. It also indicates a strong demand for rental housing going forward.
Not All Retirees Are Downsizing
Contrary to a popular trend to downsize in retirement, many baby boomers would prefer to “upsize.” MarketWatch says, it isn’t the norm. (3) A survey by Del Webb shows that four out of five retirees plan to downsize in the future, but a good one in five boomers say they want their next home to be bigger. And MarketWatch says, they are motivated by all kinds of reasons.
Real estate agent, Cara Ameer, told MarketWatch, “People who choose to upsize in retirement often do so when relocating to a more climate-friendly area, such as Florida or Arizona.” Some may be selling a home in a more expensive area, and using those funds to buy a larger home in a more affordable area. Many also want space for visiting kids, grandchildren and other relatives or guests. One retiree said that many boomers are taking their elderly parents with them instead of putting them into retirement homes.
(1) Consumer Sentiment: MarketWatch
(2) Millenials and Homebuying: Apartment List
(3) Retirees Upsizing: MarketWatch