In this Real Estate News Brief for the week ending September 19th, 2020… the Federal Reserve offers an improved 2020 forecast for U.S. economic growth, empty nesters are getting their adult kids back, and the Detroit rental market has gotten “wacky.”
We begin with economic news from this past week, and an update on economic policy from the Federal Reserve. The Fed said in a statement, it expects to keep short-term bank rates near zero until the end of 2023, and that inflation would have to rise above 2% for “some time” before rates are increased. (1)
The Fed issued a new forecast for economic growth saying, it expects the full-year to show a GDP of 3.7%. That’s much better than a previous forecast of -6.5%, but it lowered its outlook for 2021 from 5% to 4%. It also lowered 2022 from 3.5% to 3% with a 2.5% GDP expected in 2023. The Fed also said, “The path of the economy will depend significantly on the course of the virus.”
The World Bank’s chief economist issued a forecast that says the global economic recovery will take five years. Carmen Reinhart said that recessions caused by the pandemic will last longer in some countries, and that poorer countries will be hit harder than richer countries. Global poverty rates are expected to rise for the first time in 20 years.
The number of people who applied for unemployment benefits was down for the first time in five weeks. The Labor Department says, it received applications from 860,000 people compared to 893,000 the week before. The total number of people receiving benefits from eight state and federal programs is almost 30 million. Less than 2 million people were getting unemployment checks before the pandemic began.
The pace of new home construction slowed down a bit in August. The Census Bureau says it was down 5% from July but was still 3% higher than a year ago. The slowdown in housing starts was due to a 23% pullback for multi-family construction while single-family activity rose 4%.
Confidence among single-family builders also hit a record high in September, but builders are concerned about higher costs for things like lumber and delivery delays. Lumber prices have risen more than 170% since April. (2)
Consumers are also feeling more confident about the economy. The University of Michigan Consumer Sentiment Index rose to 78.9. That’s the highest it’s been since March.
Mortgage rates rose just one basis point above an all-time low. Freddie Mac says the average 30-year fixed-rate mortgage is 2.87% and the average 15-year is 2.35%. That’s driving a lot of buyers to the market. Freddie Mac says first-time homebuyer activity was up 19% in August, compared to July.
In other news making headlines…
NAR Brings Eviction Ban Message to D.C.
The president of the National Association of Realtors met with members of the Trump administration to talk about the federal eviction ban. Vince Malta says, NAR supports efforts to help Americans who can’t pay their rent, but he says the solution must also address the financial needs of housing providers. He says, we need a more sustainable solution to avoid what he calls “chaos” for the nation’s rental housing sector.
As it stands now, renters who are allowed to skip their rent payments through the end of the year will owe everything they haven’t paid in January. Malta says, the eviction ban is only kicking the can down the road. He wants Congress to pass legislation that would create emergency assistance programs for landlords that are not getting their rent payments.
Majority of Young Adults Living with Parents
Many parents who thought they had become “empty nesters” are getting their adult kids back home. The Pew Research Center says that a majority of young adults from 18 to 29 years old are now living with Mom and Dad. The percentage was 52% in July compared with 47% in February at the beginning of the pandemic. Pew says that brings the number of young adults living with their parents to around 26.6 million.
Pew researchers say, “Young adults have been particularly hard-hit by this year’s pandemic and economic downturn.” About 23% moved back home from college campuses that had closed. Some 18% moved back for financial reasons such as job losses. And 9% say they went home because of the virus outbreak.
Detroit Housing, Rental Market Called “Wacky” (in a good way)
Demand for housing is so strong in Detroit, that both buyers and renters have to act quickly to get what they want. The managing editor of Rent.com described the situation as “kind of wacky right now.” Brian Carberry says, “The weirdest thing about Detroit.. Is that it’s following a normal trajectory (like) we would expect in a non-pandemic year.” (3)
House hunters say, there are a lot of renters looking and not a lot of homes for rent. Realtor William Kaupas told a local TV station, “Single-family rentals are skyrocketing right now, and the opposite is happening with our multi-families.” He’s also noticed a lot of people moving from the city into the suburbs. At RealWealth, we’ve found that Detroit offers some of the best rental returns in the country. You can find out more about Detroit in Detroit Real Estate Market 2020.
(3) Detroit Housing Market: Click on Detroit