In this Real Estate News Brief for the week ending May 23rd, 2020… we have a new start to the economy, builder confidence, and markets where home prices are rising.
We begin with economic news from this past week, and the beginnings of an economic reopening for all 50 states. Although reopening guidelines are different from state to state, many are lifting restrictions on recreational activities for Memorial Day weekend, with the appropriate social safety measures. (1)
There’s been a decreasing number of COVID-19 cases and deaths across the nation and in Europe. Africa and other parts of the Americas are still seeing an increase. So the world is not out of the woods yet. But the holiday weekend may mark a turning point for the U.S.
We heard from Fed Chief Jerome Powell this last week. He says we are in the midst of an economic downturn without modern precedent. It was sudden, severe, and has left millions without work. He said much will depend on public confidence in returning to normal activities, but we may not see a full recovery until the end of next year.
The latest unemployment report shows that another 2.4 million people applied for benefits last week, but if you omit a seasonal adjustment that is normally included in the figure, there were 3.3 million jobless claims. Throughout the pandemic, a total of 35.5 million people have applied for benefits, but currently about 22.9 are receiving them.
As you might expect, home construction experienced a significant slowdown from March to April. The Commerce Department reported a 30% drop. According to MarketWatch, that’s the slowest pace of new home construction since February 2015. Housing permits were also down about 21%.
There is some good news about residential construction. Home-builder confidence is up this month. The National Association of Home Builders monthly confidence index rose seven points. One member of the association attributes the optimism to the fact that housing construction has been deemed an essential business, so that’s kept builders working during the shutdown. (2)
April was not a great month for existing home sales. Due to social distancing, and other COVID-19 safety measures, along with tight inventory, sales were down 18%. The National Association of Realtors says they were down to a seasonally-adjusted annual pace of 4.33 million. That’s the slowest pace since the summer of 2010.
Mortgage rates are still looking attractive. Freddie Mac says the 30-year fixed-rate mortgage dropped four basis points to 3.24%. As states reopen, these low rates are expected to drive more demand among buyers.
In other news making headlines…
Home Prices Rising in Affordable Markets
A new report highlights the difference between home prices during the Great Recession and what’s happening right now. Redfin says that home prices are up on a year-over-year basis in all but one of the 85 markets it tracks, and that prices are going up the most in more affordable markets. (3)
The top market for price gains is Detroit. Redfin says the median price is up almost 28%. Memphis and Philadelphia are second and third on the list for biggest price increases. The one market where home prices are down is San Francisco.
Two important reasons that help drive prices higher are the supply of homes for sale and the number of new listings. According to Redfin, the supply of for-sale homes fell 24% year-over-year in April. New listings were down 42%.
Eviction, Foreclosure Ban Extended
A moratorium on evictions and foreclosures for mortgages backed by Fannie Mae and Freddie Mac has been extended until at least June 30th. It was supposed to expire last week, on May 17th, but the nation is only just beginning to reopen the economy, and millions of people are still out of work. The director of the Federal Housing Finance Agency, Mark Calabria said that “no one should be forced from their home” in the middle of this national health emergency.
Meanwhile, the moratorium has brought the national foreclosure rate to the lowest on record. ATTOM Data Solutions says that foreclosures were down 75% in April, compared to a year earlier. Fannie and Freddie back about about 70% of all home loans.
Application Fraud Among Rental Applicants
There’s a warning out for landlords about fraud among rental applicants. A survey of property managers by real estate tech and fraud detection company Snappt shows that two thirds of them have experienced fraudulent rental applications. The primary issues are that applicants are inflating their income or misrepresenting their source of income. Snappt CEO, Daniel Berlind, says, “The increasing number of self-employed applicants, a move to online rental applications, and the increasing availability of tools to fraudulently alter financial documentation all make the problem more common.” (4)
Property managers say fraud has impacted them in several ways including the cost of eviction, property damage, criminal activity, loss of reputation, and a missed opportunity for good tenants.
PPP Loan Forgiveness Application Released
If you are a business owner with employees who applied for a PPP loan from the Small Business Administration, you now have access to an application to have that loan forgiven. The Paycheck Protection Program was created as part of the CARES Act to help keep employees on the payroll. You can get the application from the U.S. Treasury website. It should be filled out and submitted to your lender. (5)
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(1) BBC Article