In this Real Estate News Brief for the week ending March 7th, 2020… we have an emergency interest rate cut, all-time low mortgage rates, and a virus-inspired surge in real estate investing.
We begin with economic news from this past week, and a quarter percent rate cut by the Fed. The central bank cut rates to help protect the economy from the effects of the coronavirus. (1) The overnight lending rate is now from 1 to 1.25%. Fed Chief Jerome Powell offered reassurance that the U.S. economy is still strong, but he says the spread of the virus will likely affect economic growth. But, he says “we will get to the other side” and “return to solid growth and a solid labor market as well.”
The labor market is doing quite well, so far. The Labor Department’s February report shows the creation of 273,000 jobs and a drop in the unemployment rate. (2) The jobless rate has returned to a 50-year low of 3.5%. That’s also before the coronavirus spread intensified.
Construction spending was surprisingly strong in January. The Commerce Department says it was up 1.8% or double what MarketWatch economists expected. (3) Money spent for residential projects was even higher, at 2%. Warmer weather and low interest rates helped boost those numbers.
Another drop in mortgage rates has brought them down to an all-time low. Freddie Mac says the average 30-year fixed-rate mortgage fell 13 basis points this last week, to 3.29%. (4) The mortgage guarantor says mortgage applications are up 10% compared to a year ago with “no signs of slowing down.”
In other news making headlines…
Real Estate as Coronavirus “Safe Haven”
The coronavirus is shaking up the stock market, and pushing many investors into real estate as a “safe haven.” CNBC reports that foreign investors are pouring their money into residential real estate, especially single-family rentals. (5) It says do-it-yourself investing websites have seen a huge increase in traffic from other countries as a direct result of the coronavirus.
Technology is giving investors a way to buy rental properties remotely. Although it’s best to visit a property and talk to the people who will be managing it, it’s not absolutely necessary.
At times like this, it’s especially important to protect your portfolio. If you have too much invested in stocks, you are probably losing a lot of money. Real estate provides more stability, because the value of a hard asset doesn’t fluctuate as quickly or as dramatically as stocks.
Event Cancellations Because of Virus
As the risk of the virus spreads, big events are being cancelled and/or rescheduled. Some of the ones affecting the real estate world include two events hosted by the National Association of Realtors. The Joint AE Institute in San Diego was called off along with the Realtor Broker Summit in Los Angeles. NAR is expected to reschedule those events. Realogy hopes to turn three events at the end of this month into virtual events. Inman postponed its Disconnect event in Palm Springs. (6)
USA Today published a long list of other events that are being canceled, rescheduled, or turned into virtual events. Tech conferences, concerts, and sporting events, are among those taken off the calendar. You’ll find a link to that list on our website. It’s interesting to note that the dates for these events stretch into May.
Possible Internet Overload
As people turn to the internet to telecommute or host a big event, we could see a cyberspace slowdown. (7) Bloomberg reports that the internet probably won’t buckle with an increased data stream. It already handles traffic from many more people than the ones telecommuting. But experts say the patterns of use will change, and that could create delays for some local networks — especially in neighborhoods where there’s a lower bandwidth.
Households with more than the usual number of people using the internet all at once might also experience delays. Currently, about 29% of the U.S. workforce or 42 million people are able to work from home.
The Growth of Remote Work
The telecommuting option is gaining greater acceptance in general, and helping many people move to more affordable markets without changing their jobs.
A new Redfin study shows that before a move, 56% of the survey participants either never worked remotely or rarely did so. (8) After they moved, that number dropped to about 49%. And for people who always worked remotely, or did so on occasion, that number jumps from 44% before the move to 51% after the move.
Redfin chief economist Daryl Fairweather says, “The job market is very tight and employers want to hold on to people, so companies are much more willing now to allow workers to move” and telecommute.
(3) CNBC Article
(5) Redfin Study