In this week’s Real Estate News Brief… which metros will outperform in the next few years, why Cleveland is the new rent growth leader, and who is getting a $10 million Christmas bonus.
We begin with economic news from this past week, and a spike in consumer prices. The government reported a 0.3% increase in the consumer price index last month. That boosts the annual rate of inflation to 2.1%, slightly above the Fed’s 2% target. It was previously at 1.8%. The biggest price spikes were for rent and health care, but energy prices also show an increase along with food, clothing, education, and used vehicles.
The Federal Reserve offered good news about interest rates. It announced, after a meeting last week, that it would leave short-term rates unchanged at 1.5 to 1.75%. It also said it plans to leave rates where they are for all of next year, unless there’s a persistent and significant increase in inflation.
Black Friday sales were apparently not as good as analysts expected. U.S. retailers reported a 0.2% increase in November sales. MarketWatch economists had forecast more than double that amount. (1) Amazon had the best performance with a 0.8% increase. Stores like Best Buy that sell big ticket items and auto dealers also did well. Economists say retail sales will probably be stronger overall than last year, but according to MarketWatch, they “probably won’t be enough to give the U.S. economy a huge boost in the fourth quarter.”
Mortgage rates rose slightly this last week. Freddie Mac says the average 30-year fixed-rate mortgage rose 5 basis points to 3.74%. The mortgage guarantee company says that rates have been rising since a low of 3.49% earlier this year because the recession risk is lower. The nation also continues to have a very strong job market.
In other news making headlines…
NAR: Forecast for Top Real Estate Metros
There’s a new top ten forecast for outperforming metros over the next three to five years. The National Association of Realtors based its analysis on population growth, generational population, job growth, housing affordability, and home price appreciation, among other factors. (2)
The Carolinas occupy the top two spots with Charleston, South Carolina in the number one position, and Charlotte, North Carolina in the number two spot. Colorado Springs, is third followed by Columbus, Ohio. Dallas is fifth. Fort Collins, sixth. Las Vegas; Ogden, Utah; Raleigh, North Carolina, and Tampa, Florida round out the top ten. Several of those metros are also on our list of hot markets for single-family rentals.
First-Time Homebuyers Are Back
Housing affordability has gotten a little better, and it’s bringing first-time homebuyers back into the market. According to a report from Genworth Financial, 39% of the people buying single-family homes during the third quarter were first-time buyers. (3) That’s higher than an historical average of 35%. They also accounted for 55% of all mortgages which is higher than the historical average of 46%.
A slowdown in home price growth along with lower mortgage rates have contributed to housing affordability. Genworth’s chief economist, Tian Liu, says first-time homebuyers have been able to make up some lost ground. He says, “The first-time homebuyer market rebounded this quarter and although the rebound was modest compared with the number of first-time homebuyers a year ago, and a quarter behind the broad rebound, it was a strong rebound from the previous quarter.”
Highest Year-Over-Year Rent Growth
The rental market in Cleveland, Ohio, is getting some recognition. According to Zumper’s December rent report, it had the fastest growing rent since this time last year. Rents were up an average of 16% for a one-bedroom unit, and 14.9% for a two-bedroom unit. (4) Those increases pushed Cleveland into the 57th position on a rent growth list of 100 metros. It was 74th last year.
Zumper’s data analyst, Crystal Chen, told Cleveland.com, “Since Cleveland’s rent prices are still cheaper than the national medians for both bedroom types, people who are looking for affordability are heading to this city,” She said, “Until more apartments are built to meet this growing demand, rent prices will continue to keep growing in the double digits.”
Other cities with the highest rate of rent growth include Lincoln, Nebraska; Bakersfield, California; Milwaukee, Wisconsin; and Chattanooga, Tennessee.
$10 Million Christmas Bonus for Real Estate Employees
It’s a very merry Christmas for employees at a real estate company in Maryland. St. John Properties announced at a holiday party, that the company’s 198 employees would be splitting a $10 million bonus. (5) The split would be based on the length of time each employee has worked there. Bonuses ranged from $100 for a brand new employee to as much as $270,000 for someone who has been there for 44 years. The average bonus was about $50,000.
The announcement was a huge surprise. Company president, Larry Maykrantz, says, “I heard screaming, crying, laughing, hugging, and then within 10 to 15 minutes, everyone came forward to the front podium where (founder) Ed St. John and I were standing and started forming lines to shake our hands, to kiss us, to hug us, to thank us.”
So what prompted such a HUGE bonus? The company had set a goal in 2005 to double the size of its 10 million square foot portfolio. That happened this year, so the company and its employees are celebrating. Wow!!! Merry Christmas to St. John Properties!