In this Real Estate News Brief for the week ending July 18th, 2020… home construction is booming for a second month in a row, mortgage rates are at a 50-year low, and drive-in theaters are popping up across the country.
We begin with economic news from this past week, and a housing market that is rebounding nicely from the pandemic. The Commerce Department reported that housing starts continued a surge that began in May. They were up 17.3% in June, after a 17% increase in May. The boom in construction follows a slowdown in March and April due to the coronavirus outbreak. Building permit applications were up 2.1% which is a leading indicator for future construction activity.
Homebuilders are also expressing their optimism in the latest survey by the National Association of Homebuilders. The Association’s monthly confidence index rose 14 points in July to a reading of 72. NAHB Chairman Chuck Fowke says, “Builders are seeing strong traffic and lots of interest in new construction as existing home inventory remains lean.” Index reading above 50 shows that confidence is improving. (1)
Consumers aren’t just buying homes. The June report on retail sales shows a 7.5% increase. That follows a record high increase in May of 18.2%. Consumers are playing catch-up with their shopping lists after the reopening of businesses. There’s concern that spikes in coronavirus cases may lead to a second round of shutdown, however, which is already happening in California. Governor Gavin Newsom ordered the shutdown of bars, indoor dining, movie theaters, museums, and in some higher risk areas, gyms, indoor malls, hair salons, barber shops, churches, and non-essential office space.
Inflation ticked up slightly in June, because of higher gas and food prices, but it’s only up 0.6% and still well below the Federal Reserve’s 2% target. MarketWatch says that overall rents were up 0.1% in June, which is the smallest increase in nine years. Prices were also higher for car insurance, clothing, and medical care.
The weekly report on jobless claims shows another 1.3 million new claims, but that’s the lowest pandemic-related number we’ve seen.Continuing claims also fell by 422,000 bringing the total number to 17.34 million. The unemployment rate has dropped from 14.7% in April to 11.1% in June.
The U.S. budget deficit has hit the $3 trillion mark through the month of June. The deficit for the month of June alone was $864 billion, according to the U.S. Treasury Department. To put that into perspective, the government’s budget for the previous fiscal year was $984 billion. Budget officials are predicting the full year 2020 deficit will hit $3.7 trillion. (2)
One of the more exciting real estate stories making headlines is about mortgage rates. Average rates for the 30-year fixed-rate mortgage hit another record low and fell below 3% for the first time in 50 years. Freddie Mac says they dropped 5 basis points in the last week to an average of 2.98%.
In other news making headlines…
Homebuyers Engage in Bidding Wars
More than half of the buyers making offers on Redfin in June ended up in a bidding war. Low mortgage rates are attracting buyers to the market, but with too few homes to meet demand, buyers are facing more competition. This is the second month in a row for the bidding war trend. (3)
Demand is also higher for single-family homes as people try to move away from apartments into homes that provide more stay-at-home space, both indoor and outdoor. The most competitive markets right now are Boston, where 72.4% of the offers ended up in a bidding war. San Diego and Salt Lake City are also seeing bidding wars in 63 to 65% of sales.
Some of the least competitive metros are Miami, Chicago, and Las Vegas. But even in those areas, buyers are competing with other buyers in 32 to 39% of the deals.
Airbnb Revives Its Plan for an IPO
Airbnb’s CEO says business is rebounding and plans for an IPO are back on the table. The company had planned to file for an IPO in March, but the arrival of the pandemic halted worldwide travel and put Airbnb IPO plans on hold. (4)
CEO Brian Chesky told employees that the company almost “lost everything” because of the health crisis. With a surge in new bookings, $1 billion in new funding, and other measures to cut costs, Chesky says, “When the market is ready, we will be ready.” He says, “We were down, but we’re not out.”
The San Francisco-based company was valued at $31 billion before the failed IPO in March and financial damage from the pandemic. There’s no word on whether Airbnb plans to try again this year, but Chesky says they haven’t ruled it out.
Malls Turned Empty Lots into Drive-In Theaters
Mall owners are earning some much-needed revenue by turning their empty parking lots into temporary drive-in theaters. The drive-in theater had lost its charm in recent years, but with the theater closures because of the pandemic, they’ve suddenly become an entertainment hotspot for families who want to have fun at a safe distance from other people. (5)
Michelle Snyder of the Brookfield Properties’ retail groups says:, “At the start of COVID, one of the things we talked about was… how do we leverage the rest of our real estate, which would include our parking lots.”
Brookfield struck a deal with a tenant, Kilburn Live, who handled the logistics including the movies and the ability to stream the sound via Bluetooth to each car. The company has opened drive-in theaters in several locations with plans to open as many as 32 in the near future.
Walmart is doing the same thing at 160 store parking lots starting next month.
You can get comprehensive real estate news and a wealth of information about real estate investing at www.realwealth.com. If you have enjoyed our podcast, we’d love to have your 5-star review on whatever podcast platform you are using! Thank you!
(2) NewsMax Article