In this Real Estate News Brief for the week ending February 1st, 2020… the latest decision on interest rates, the cost of renting vs. buying, and the theft of $10.5 million from RealPage by hackers.
We begin with economic news from this past week.
The Federal Reserve delivered its latest decision on interest rates and decided to leave them where they are. Fed Chief Jerome Powell says the economy continues to grow at a “moderate rate” and that inflation remains subdued. But he also expressed concern about the potential impact of the coronavirus on the global economy. He said, “It’s a serious issue. There is likely to be some disruption of activity in China and probably globally.” It’s a wait-and-see situation however. Powell said the Fed will be monitoring the virus “very carefully,” while White House economic adviser Larry Kudlow predicts it will have a minimal impact on the U.S. At the writing of this podcast, the virus had spread to about 10,000 people in China, and more than 200 have died. Only about a hundred cases have been identified in other countries. (1)
The government reports a slight improvement in gross domestic product. The latest report shows the GDP at 2.1% at the start of the new year. That’s more than MarketWatch analysts had anticipated. They predicted a GDP of 1.9% for the last quarter of 2019. The uptick is attributed to consumer spending. Inflation also rose. It was up 0.03% in December, but the yearly rate of inflation is still only 1.6%.
Turning to the housing market, home sales dropped in December along with contract signings. The sale of new homes was down 0.4%. (2) Contract signings were down almost 5%. MarketWatch economists say that low mortgage rates have been encouraging home buyers, but that rising prices are keeping many out of the market. Sales activity is still 23% higher than December of 2018, however.
The S&P CoreLogic Case-Shiller 20-city index rose 2.6% in November compared with the previous November. Home prices were up 3.5% for the entire nation. Phoenix still has the fastest rate of home price appreciation. In November it was 5.9% for the year. The median sales price for new homes was $331,000 at the end of 2019. For existing homes, it was about $274,000.
Consumers are pleased with the economy despite those high home prices. The consumer confidence index is up to 131.6. That’s just 6 points lower than an 18-year high of 137.9 in October of 2018. The University of Michigan’s consumer sentiment reading also rose to a nine-month high for January. It’s now at 99.8. That’s only 2 points lower than it was at its last peak.
Mortgage rates dipped again this last week. Freddie Mac says the 30-year fixed-rate mortgage was down 9 basis points to 3.51%. That’s the second-lowest they’ve been in the last three years.
In other news making headlines…
Smaller Gap Between Buying & Renting
Lower mortgage rates are contributing to a smaller gap between the cost of buying and renting. Realtor.com says in its most recent Rent vs. Buy report that even with the smaller gap, it’s still more expensive to buy than to rent in most markets. (3)
In the last quarter of 2019, the median monthly cost of buying a home in the U.S. was $1,600. That’s almost $300 more than the median monthly rent. When you break the comparison down into markets, realtor.com says it’s cheaper to buy than to rent in just 16% of the counties that it tracked. That’s 26 counties where it’s more affordable to buy compared to 567 counties where it’s more affordable to rent.
Real Page Hacked
Property management software company, RealPage, lost $10.5 million to hackers. The Texas-based company told HousingWire that it has recovered $4.5 million of the stolen funds, and is working to reclaim the rest. (4) According to NBC 5 in Dallas, investigators have linked the stolen money to 88 accounts at 42 U.S. banks, and a network of money mules who were told to wire the money to an account in Nigeria. The hackers apparently gained access with the login credentials for an employee.
The company said in a statement, “An unauthorized party gained access to an external third-party system that was used by a subsidiary acquired by RealPage in 2017, resulting in the initial diversion of approximately $10.5 million.” RealPage says that insurance has helped cover company losses and there’s been no loss for clients.
Fed May Join Green Banks
Concern about climate change appears to be influencing a decision by the Federal Reserve to join a group of “green banks.” Published reports say Fed officials want a better understanding of the economic impact of climate change, and have attended meetings for the group “Network for Greening the Financial System.” It’s a group of about 50 central banks and other organizations.
Fed Chief Powell says the central bank hasn’t joined the group yet but “probably will do that at some point.” (5)
(5) Newsmax Article