In this Real Estate News Brief for the week ending August 22nd, 2020… home sales are soaring, rent collection is near normal, and Airbnb bans party homes.
We begin with economic news from this past week, and lawmakers that are still battling it out over a new stimulus package. An agreement could be reached soon that includes another $1,200 stimulus check, but the two sides are still about $1 trillion apart on the total amount of a deal. Still being debated are the unemployment bonus, the extension of eviction moratoriums, and new funding for schools and local governments. The Republicans are calling their proposal the Heals Act while the Democrats are calling theirs the Heroes Act. (1)
In the meantime, the Federal Reserve offers a less optimistic forecast because of the delay on a stimulus deal, and the continued spread of COVID-19 which is keeping many businesses from re-opening. The Federal Open Market Committee had based the previous forecast on a stimulus agreement and a slowdown in the pandemic. But that hasn’t happened yet. As for interest rates, Fed Chief Jerome Powell says the Committee isn’t even thinking of raising the short-term rate. (2)
Weekly jobless claims support that rather dreary view of the economy. New claims rose last week for the first time in six weeks, and topped one million as they have before. There are different ways of measuring unemployment however, and some economists say it’s not as bad as the Labor Department report. But they do say it’s extremely high no matter which numbers you look at, especially when you compare them to the beginning of the year when they were at a 50-year low. (3)
Not all parts of the economy are stumbling, however. Home-building activity had suffered a slowdown at the beginning of the pandemic, but has come roaring back. The government says home-starts were up 22.6% month-over-month in July. Permits for both single-family and multi-family were also up 18.8%. Both figures were higher than they were a year ago. (4)
Existing home sales were also substantially higher from June to July. The National Association of Realtors says they rose a record 24.7%. That’s the second month in a row they hit a new high. Compared to a year ago, they were up 8.7%. NAR’s chief economist Lawrence Yun says, “The housing market is well past the recovery phase and is now booming with higher home sales compared to the pre-pandemic days.” Holding it back from a bigger boom, is the unemployment situation and inventory. (5)
Low mortgage rates have contributed to the surge in home sales. Freddie Mac says the average is still under 3%, at 2.99% with a 0.8 lender fee, but they have gone higher two weeks in a row. (6) The Mortgage Bankers Association says that applications were down 3.3% because of the slightly higher rates. That includes refinancing loans which were also hit with a new half-point fee by Fannie Mae and Freddie Mac. (7)
In other news making headlines…
Rent Collection Near Normal
Most of the nation’s renters are keeping up with their rent payments. The National Multifamily Housing Council says that 86.9% of the tenants had paid rent by mid-August. That’s up from 79.3% on August 6th, so some tenants were a little late, but the number of people who paid is just 2% less than it was at the same time last year. (8)
Property management software company RealPage says a gradual increase over the course of the month is normal, but that many tenants don’t know where their next rent check will come from because of reduced unemployment benefits. Missed payments are more frequent for Class C properties. The collection rate for those properties is 82.6% compared to 88.2% for Class A and B properties.
Federal Reserve Shift in Monetary Policy
We should hear more soon from the Federal Reserve on how it plans to change its monetary policy. Fed Chief Powell said last week that the Committee is preparing to adopt a policy that would allow periods of higher inflation to make up for periods of lower inflation. The Fed’s goal is to maintain inflation at 2% but it’s been running below that at an average of 1.4%. During the pandemic, it sunk even lower, hitting 0.47% in March. It is currently at 1.6%, which is still below the Fed’s target. (9)
The Fed typically raises interest rates to keep inflation at bay. A policy that allows for higher inflation is expected to provide positive momentum for the economy. It will also keep interest rates low until higher inflation rates and employment conditions require an increase.
Airbnb Party Ban
Airbnb announced a new global ban on large-scale parties. Under the new rules, Airbnb guests can only have a total of 16 people at a larger Airbnb property. Airbnb says that unauthorized parties have always been prohibited, and that almost three-quarters of the hosts ban parties in their house rules, but the new rule will target what have become known as “party homes.” (10)
Airbnb had already tightened the rules at the beginning of the pandemic by removing any mention of events or parties from search filters and house rules. They also adopted a new policy requiring that hosts and users follow local COVID-19 health mandates.
Airbnb says that 16 is “not a magic number” and that problems can arise with groups of any size. People in the U.S. and Canada can report violators by calling a new hotline. Airbnb has plans to expand that hotline to other countries.
(1) CNET Article
(4) Newsmax Article