In this week’s Real Estate News Brief… a big jump in existing home sales, higher mortgage rates, and something called a “sleep divorce.”
We begin with economic news from this past week and a month of very active home sales. The latest report on the sale of existing homes shows a 17-year high in August. The National Association of Realtors says they were up 1.3%, mostly due to lower mortgage rates. NAR chief economist, Lawrence Yun, says those mortgage rates are enticing buyers back into the market. (1)
The Commerce Department reported a 12% jump in housing starts for August. According to MarketWatch, that’s the fastest pace for housing starts since 2007. There was also an 8% jump in building permits which exceeded economists’ expectations. Much of this increased activity is due to multifamily construction, but the data shows that single-family construction was the strongest it’s been since January.
The National Association of Homebuilders also shows a strong confidence level among builders. The association’s index rose 1 point to 68 in September. Anything over 50 shows that builder confidence is on an upswing. As MarketWatch reports, the index can be a sign of future home-construction activity. (2)
Unfortunately, mortgage rates also jumped this last week. Freddie Mac says the average 30-year fixed-rate mortgage rose 17 basis points to 3.73%. That’s still almost a whole percentage point lower than it was a year ago. Freddie Mac’s chief economist, Sam Khater, says of the mortgage activity, “Homebuyers flocked to lenders with purchase applications, which were up 15% from a year ago.” He says it’s “clear that the housing market is finally improving due to the strong labor market and low mortgage rates.” (3)
In other news making headlines…
FICO Scores Hit Record High
The average FICO credit score has hit a record high. Data shows that the average is now 706. Before the Great Recession, in 2006, the average was 690. Scores between 670 and 739 are considered “good.” Those between 740 and 799 are considered “very good.” (4)
FICO’s Ethan Dornhelm says the improvements are “reflective of improving consumer financial health.” A lot of the negative information from the Great Recession has also dropped off credit reports which helps improve FICO scores.
Dornhelm says there’s also more consumer awareness of FICO scores and what people have to do to protect their credit rating. He says more borrowers are paying their mortgage payments on time. In the last two years, just 2.8% of borrowers were late by 90 days or more, according to FICO. In 2009, 7.2% of borrowers were late.
Apartment Rents, Occupancy Hit Highs
Average apartment rents hit a 19-year high in August of $1,472. RentCafe says that rental rates were 0.1% higher than the month before, and 3.3% higher than the previous year. That amounts to a $47 year-over-year increase.
Rent Cafe compares rents in 20 of the largest renter mega-hubs. Rents in six of those metros are above average. The metro with the highest average rent is Manhattan at more than $4,000 a month. Indianapolis is the least expensive with average rents under $900 a month.
Another sign of a bustling rental market is the occupancy rate, which hit a 19-year high in August. According to data from RealPage, it was 97.1%. That’s up from 96.2% in July. RealPage data shows that occupancy has been rising for seven straight months.
Airbnb is putting its IPO plans in order. The home rental giant issued a statement saying it will become a publicly-traded company in 2020. Business Insider reports that the company was privately valued in 2017 at $31 billion.
Many investors expected the IPO to happen this year but co-founder Nathan Blecharczyk had also cast doubt on that actually happening. He said the company had taken “steps to be ready to go public in 2019. That doesn’t mean we will go public in 2019.”
The company reported more than $1 billion in revenue during the second quarter, although it didn’t say how much of that was profit. It also announced that hosts have earned more than $80 billion by sharing their homes on Airbnb.
It’s becoming a new norm for couples who want to get a good night’s sleep. According to the National Sleep Foundation, about a quarter of married couples sleep in different beds. Ten percent say they also have separate bedrooms. Realtor.com reports that this trend is affectionately nicknamed a “sleep divorce.” (5)
The Foundation conducted a survey and found that almost half of the people who responded would prefer that kind of sleeping arrangement because of something related to their partner that that keeps them awake. In the past, many couples have felt pressured to sleep in the same room by cultural norms. That’s apparently changing as more people strive to improve their health and well-being. Couples counselor Corrin Voeller told Realtor.com, “Separate bedrooms can be the perfect solution.”
(1) CNBC Article