[REN #919] Real Estate News Brief: New Home Sales Surge, Investor Optimism, Fast Internet

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Real Estate News Brief: New Home Sales Surge, Investor Optimism, Fast Internet, Real Estate News for Investors Podcast Episode #919

In this Real Estate News Brief for the week ending June 25th, 2020… new home sales are surging, real estate investors are feeling optimistic, and a home buyer priority that can make or break a sale.

Economic News

We begin with economic news from this past week, and some promising signs for the housing market. The government reported a big surge in the sale of new homes in May. They were up a seasonally-adjusted annual rate of 16.6%. In May of last year, they were up 12.7%. The Northeast experienced the biggest increase. Sales were up 45.5% in that region. The national median sales price for a new home is $317,900. It was $312,700 in May of last year.

Existing home sales dropped in May to their lowest level since July 2010. The National Association of Realtors says the number of sales in May fell 9.7% from April, and down a whopping 26.6% from May of 2019. This drop isn’t surprising since the numbers reflect sales contracts made during March and April, when most of the national economy was shut down. Buyers were dealing with strict COVID-19 safety measures and a tight inventory as fewer people wanted to move during that time or have strangers walk through their homes when so much was unknown about the virus. Supply was down 18%. However, NAR’s chief economist Lawrence Yun expects a big rebound this summer. He says, “home sales will surely rise in the upcoming months with the economy reopening, and could even surpass one-year-ago figures in the second half of the year.” (1) The median price for existing homes of all types was $284,600.

Home prices continue to rise, despite all the economic uncertainty. The Federal Housing Finance Agency’s home price index rose 0.2% on a monthly basis in April. That’s far below the price increase of 5.5% reported for the same time period last year. But the FHFA expects a return to normal for the housing market in the coming months.

The latest weekly report on jobless claims shows a slight dip in the numbers. The Labor Department reported 1.48 million new claims. Last week, there were 1.54 million. The total number of people receiving benefits right now is about 19.5 million, or about 700,000 less than last week. So that’s a slight improvement.

The Commerce Department released a final estimate on economic growth. The report shows a 5% decline in the first quarter, which is unchanged from the last report. Government officials say the revision included lower numbers for consumer spending combined with higher numbers for businesses investing in fixed assets. The pandemic is expecting the second quarter GDP will be the whopper. Economists are expecting the U.S. economic engine to slide almost 30%. That report comes out at the end of next month.

The International Monetary Fund is slashing its estimate for 2020 world growth. It is forecasting a 4.9% GDP for the year. That’s almost 2% less than a previous estimate of 3.3%. IMF’s chief economist, Gita Gopinath, said at a press briefing, “We are definitely not out of the woods. We have not escaped the great lockdown.” (2) 

Consumers are celebrating the reopening of stores with a surge in spending. The Commerce Department reported an 8.2% increase in spending in May, although MarketWatch economists had expected a higher number. They had forecast a 10% surge. Still, consumer spending helps drive the economy, and the 8.2% shows that Americans are satisfying a pent-up demand for goods and services.

Americans are feeling less optimistic about a speedy economic recovery, but the June numbers for the University of Michigan report are down less than one point. The survey shows the index dipped from 78.9 to 78.1. We are now at least four months into a recession. The speed and shape of a recovery will depend on whether we can control the virus outbreak. (3)

Mortgage Rates

Low mortgage rates continue at about the same level they were last week. Freddie Mac says the average 30-year fixed-rate mortgage is 3.13%. That’s a full 60 basis points lower than it was this time last year.

In other news making headlines…

Optimism Among Real Estate Investors

A new survey shows that real estate investors are feeling optimistic about the housing market, despite the health crisis. (4) The survey was conducted by LendingHome which provides loans to real estate investors. Survey participants included house flippers, single-family landlords, and real estate investment mortgage brokers. Eighty-percent of them thought the impact of COVID-19 on their businesses would be short-lived. Most of those people felt it would last between one and six months. Some are forecasting seven to 12 months. And some felt there would be no impact at all. 

LendingHome CEO, Matt Humphrey, said of the survey, “There was more optimism than we expected, and we were a bit surprised.” He offered a few quotes about how people are adjusting their business strategies during the pandemic. One said, “Having well-qualified tenants in place with a 3-month deposit ready.” Another said, “I am looking for properties that are quicker in and out, so smaller projects are my focus right now.” A third said, “We haven’t changed anything. We just continue to run the numbers and make sure everything works out.”

Higher-End Homes and the Need for Fast Internet

A fast internet connection has become a priority for higher-end home buyers. It was once a nice feature to have, but Inman News says it’s now become a priority for many buyers and can make or break a sale. The trend has grown in importance as families in hotspot areas move to more remote locations where they can work from a home office. And the internet connection isn’t just for breadwinners. The internet is being used for online shopping, kids school work, socializing, entertainment, and so much more.

Inman suggests that seller upgrades include a super-fast internet connection with a strong signal throughout the home. That will help prevent any buyer discount demands or contract delays that can result in a lost sale. Agents are predicting that a strong internet connection will be a priority among buyers for “years to come.” (5)


(1) Realtor Magazine Article

(2) MarketWatch Article 1

(3) MarketWatch Article 2

(4) Business Wire Article

(5) Inman Article

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