In this Real Estate News Brief for the week ending September 5th, 2020… upbeat reports on new jobs and unemployment, another nationwide eviction moratorium, and a pandemic-inspired boom in the purchase of second homes.
We have the latest economic news from this past week, and some good news about the job market and residential construction. But, overshadowing those headlines is an announcement from the federal government for a new nationwide eviction moratorium.
Federal Eviction Moratorium
The government announced a four-month eviction moratorium that runs through the end of the year. This new mandate will prevent landlords from evicting tenants if they meet certain criteria. That includes the filing of a form stating they have lost a substantial amount of income due to the pandemic, that they cannot pay the rent, and that they will make their best effort to pay what they can each month. They must also state that without this protection they are at risk of homelessness or the sharing of a home with others that would put them at risk of the virus. (1)
The mandate does not relieve them of their rent obligations, so they will owe back-rent when the moratorium is over, but it doesn’t provide much financial help for landlords in the meantime. And, there’s no guarantee that tenants will be able to pay their back-rent. This has already stirred up a response from landlord groups who are deeply concerned that property owners will fall behind on their own financial obligations. Doug Bibby, of the National Multifamily Housing Council, says the mandate “does nothing to address the financial pressures and obligations of rental property owners.”
We will be sending out a survey this week to 50,000 RealWealth members to find out if they have been affected by these moratoriums. So far we have only heard from two landlords who have late-paying tenants. It’s important for property managers to communicate with tenants about the repercussions of not paying rent. They will have to pay it at a later date, and if they don’t, they may have trouble finding a place to live. Many property managers have worked out payment plans to help tenants who remain unemployed.
And speaking of the job market, the latest report shows a gain of 1.4 million jobs in August. Wall Street economists had forecast 1.2 million. The unemployment rate also dropped almost 2% from 10.2% in July to 8.4% in August. The unemployment rate is probably more like 9% because of a reporting glitch in the survey about employment status, but that’s still a big drop from July.
Weekly jobless claims were also better than expected. They hit a new pandemic low of 881,000, but MarketWatch reports that the drop is also tied to a change in the way that seasonally-adjusted data is reported. If you take that away, the results are flat compared to the previous week.
A rise in U.S. manufacturing activity is also a positive sign for the economy. The Institute for Supply Management says, new factory orders surged to their highest level in more than 16 years. Economists say, consumers are driving that increase as demand increases for things they can use at home, like appliances and electronic devices.
Residential construction is also providing momentum for the economy. Although overall construction spending was flat in July, the Census Bureau says, residential spending showed “significant growth.” It was up 2.1% compared to June, and half a percent compared to June of last year. That’s for both multi- and single-family construction. Spending for single-family alone was up 3.1% in July. (2)
One of the things driving the increase in residential construction is the lack of existing homes. Consumers are turning to new construction, and builders are trying to keep up with that demand. According to the Commerce Department, new single-family home sales popped almost 14% month-over-month in July.
Mortgage rates are still hovering at record lows. Freddie Mac says the average 30-year fixed-rate mortgage rose just two basis points to 2.93%. The average 15-year mortgage went in the other direction. It was down 4 basis points to 2.42%. (3)
In other news making headlines…
Fannie, Freddie Refi Fee Delayed
The Federal Housing Finance Authority buckled under pressure to eliminate a refinance fee that would add an average $1,400 to a loan. It didn’t eliminate the so-called “adverse market fee,” but announced that its implementation would be delayed until December 1st.
That’s good for consumers, but lenders are also now faced with the task of removing that fee from thousands of loans already in the pipeline. Home Point Financial says, staffers will have to manually remove that fee from each loan.
Wells Fargo Lawsuit
Wells Fargo faces a class-action lawsuit for allegedly placing homeowners into forbearance without their consent. Homeowners say, they called the bank to ask about their options, but never gave the bank permission to put them into forbearance. This has impacted their credit reports, and made it difficult for them to do things, like refinance their mortgage to a lower monthly payment.
Wells Fargo says, it wanted to make sure customers who needed help got it without any delays, but it has apologized and says it is “actively working to assist each customer who may have been negatively affected.” (4)
Second Home Boom
There’s been a boom in the purchase of second homes since the start of the pandemic. John Burns Real Estate Consulting says, several second home markets are showing a big increase in sales. These are destinations that are within driving distance from primary home, and provide families with a safer way to go on vacation than traveling by plane to a place that may pose a higher health risk.
According to the Burns article, “The psychology of ‘you only live once,’ or YOLO, is driving the surge in second-home sales.”
(3) Mortgage Rates