In this Real Estate News Brief for the week ending September 12th, 2020… mortgage rates dipped into record territory once again, apartment rent collection numbers, and a housing market that is on a “sugar high.”
We begin with economic news from this past week, and a mixed report on the job market. The number of people applying for jobless benefits rose slightly last week. Continuing claims were also slightly higher than they were the week before. But, the government reported a 1.4 million increase in newly created jobs, and an unemployment rate that fell from 10.2% to 8.4%.
That’s a big improvement in the jobless rate, but some economists say the “true” unemployment rate is probably more like 11%. They say some people are being misclassified as “absent” from work when they are really laid off. The official unemployment rate also excludes people who have gotten discouraged and dropped out of the labor force. (1)
Consumers had money to spend in July. They pulled out their credit cards for big ticket items like cars and college. The Federal Reserve says, the use of credit rose 3.6%. That’s up from 3.3% in June, and a big improvement from April when the use of credit sank 20% in the midst of layoffs and lockdowns.
Consumers are also paying more for some things. The Consumer Price Index rose .4% last month, but most of that increase is due to higher prices for cars and trucks. Food prices were actually down a bit after three months of an uptick. Inflation is still low overall. The rate of increase has only moved from 1% to 1.3% in the last 12 months.
Mortgage rates are moving in the opposite direction. They hit a new all-time low last week. Freddie Mac says, the average 30-year fixed-rate mortgage was down 7 basis points to 2.86%. The 15-year mortgage sank to 2.37%. Low rates have contributed to a 25% increase in loan activity, compared to last year.
In other news making headlines…
Refi Boom Ready to Blast Off
The current boom in refinance applications may be a small sampling of what’s to come. According to analytics firm Black Knight, more than 19 million homeowners could benefit from a refi. That’s more than 43% of all the existing 30-year home loans. That’s up from just 11.7 million eligible homeowners last year. (2)
Black Knight says, if all 19 million people were to refinance, they’d save an average $300 a month. 2.5 million of those people could save even more — about $500 a month. Demand is already running so high, that it’s taking 45 days from lock to close. It typically takes about 30 days. CEO of Freedom Mortgage, Stan Middleman says, “I think it’s going to be busy well into next year, if not longer.”
Tracking Rents Paid in September
The share of apartment renters that made full or partial rent payments by September 6th, slipped somewhat. The National Multifamily Housing Council tracks apartment rent payments in a survey of 11.4 million units. It found that 76.4 percent of the households had paid their rent by the 6th. That’s 4.8% lower than it was last month on the 6th. (3)
Council president, Doug Bibby, says, “The initial rent payment figures from September have begun to demonstrate the increasing challenges apartment residents are facing.” He says, “The NMHC strongly urges Members of Congress and Administration leaders to come back to the table and pass meaningful legislation to protect, support and assist America’s tens of millions of apartment residents.” At RealWealth, we’ve found that rent collection results are stronger for single-family rentals than they are for apartments.
Bidding Wars Increase as Buyers Compete
People looking to buy a home are likely to face some stiff competition due to a lack of inventory. Redfin says, almost 55% of the offers submitted by its agents have been engaged in bidding wars. The National Association of Realtors says more than two-thirds of the homes sold in July were gone in less than a month. And Auction.com’s Daren Blomquist says, “The housing market is on a sugar high brought on by government stimulus and a pandemic-fueled rush” toward housing.
Some of the markets with the highest percentage of bidding wars are the typical pricey big cities, like San Francisco. But the top ten list also includes Tampa and Detroit, which are two of our best markets for single-family rentals.
(2) Refinancing Boom: HousingWire
(3) September Rent Tracking: National Multifamily Housing Council