[REN #916] Real Estate News Brief: Bidding Wars, Mortgage Rates, & Tenant Finances

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Real Estate News Brief: Bidding Wars, Mortgage Rates, & Tenant Finances, Real Estate News For Investors Podcast Episode #916

In this Real Estate News Brief for the week ending June 20th, 2020… competition heats up among home buyers, mortgage rates hit a new low, and what tenants are doing to manage their finances.

Economic News

We begin with economic news from this past week, and testimony from Fed Chief Jerome Powell on the state of the economy. He told members of Congress that some economic data points to a modest rebound right now, but he also warned of significant uncertainty about how the recovery may take place. The nation is still at the mercy of COVID-19 as cases rise in some states and new safety measures are put in place. Several states and cities have ordered that masks are worn in public, including California. AMC Theaters says it will also require masks when it reopens. That’s after a backlash when it said they’d be optional. Concern about coronavirus hot spots is also forcing Apple to re-close stores in four states. 

On the other hand, a retail sales report shows that sales surged an eye-popping 17.7% in May. The nation also regained 2.7 million jobs in May, with unemployment at 13.3%. The jobless rate varies significantly from state to state. It’s highest in Nevada at 25.3% and lowest in Nebraska at 5.2%.

The real estate market is taking off like a rocket right now. Housing starts were up 4.3% in May while permits jumped 14.4%, indicating a much higher rate of residential construction in the coming months. (1) Home builder confidence is also following suit. The National Association of Home Builders says its monthly index rose 21 points in June to a reading of 58. That’s after it fell in April to its lowest level since June of 2012.

Redfin says that housing is so hot right now, that demand for single-family homes during the first week of June was 25% higher than it was before the pandemic. (2) Redfin CEO Glenn Kelmann says homes are going quickly in the midst of bidding wars. He says offers were accepted within 14 days for 42% of the sales in May and 47% of sales in June. Sale prices are also 3.1% higher year-over-year. A lack of inventory is driving some of the demand. Kelmann says, “Last week’s new listings were 15% below last year’s level.” 

Mortgage Rates

Low mortgage rates are also contributing to demand. Freddie Mac says they hit another record low this last week. (3) The 30-year fixed-rate mortgage dropped 8 basis points to 3.13%. Mortgage applications were also surging to an 11-year high. The Mortgage Bankers Association says purchase applications were up 21% last week, compared to last year. They were up 4%, week-over-week.

In other news making headlines…

FHFA Extends Eviction, Foreclosure Moratorium

The FHFA has extended foreclosure moratoriums for people at risk of losing their homes. The Federal Housing Finance Agency extended the moratorium until at least August 31st on single-family homes with mortgages backed by Fannie Mae and Freddie Mac. The moratorium had been set to expire at the end of this month.

The mortgage industry is celebrating a big victory in California, after the failure of legislation that would have prevented foreclosures for an extended length of time. (4) The COVID-19 Homeowner, Tenant, and Consumer Relief law of 2020 would have prohibited mortgage servicers from taking action against borrowers for an initial period of six months, and up to another six months if borrowers request an extension. The bill also included an eviction moratorium for tenants in both single- and multi-family rentals as a condition of forbearance on those properties. AB 2501 failed to get enough votes in the State Assembly, and is considered dead at this point.

Potential Surge in Home Sales Due to Financial Distress

Unemployed homeowners will face a difficult situation when forbearance programs end, and one survey shows that many are thinking about selling their homes. The National Association of Realtors conducted a survey that shows 81% of homeowners have experienced financial distress because of the pandemic, 52% are worried about making their mortgage payments, and 35% feel they may lose their homes, despite relief options. As a way to solve the problem, the survey shows that 47% have thought about putting their homes on the market. 

Tenants Managing Their Debts Well

Landlords can take heart in a study by TransUnion on how tenants are handling their finances. (5) It shows that 25% of renters entered into some kind of relief program in the months of March and April. That has given them a way to fulfill their rent obligations, and protect their financial standing. The study also shows that fewer renters are opening new forms of credit, and that more renters are paying down their credit card balances. TransUnion says the results show that “renters have been managing their debt responsibly and rent payments have not yet been materially impacted.”

Links:

(1) MarketWatch Article

(2) HousingWire Article

(3) Freddie Mac Article

(4) Lexology Article

(5) Realtor Magazine Article

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