In this Real Estate News Brief for the week ending September 26th, 2020… home sales hit new highs, remote workers head south, and a new color-of-the-year for your wall.
We begin with economic news from this past week, and testimony from Fed Chief Jerome Powell that rattled stock investors. As you know, Wall Street doesn’t like uncertainty, and that’s what Powell dished up for members of Congress last Tuesday. He said the economy has shown “marked improvement” but he said that “significant uncertainty remains.” The stock market responded on the downside, but also rebounded by the end of the week.
Uncertainty is the name of the game for stock investors, but for real estate investors, there isn’t anywhere near as much volatility. In fact, the housing market has been quite strong with some eye-popping reports this last week. The Census Bureau says, new home sales surged to their highest level since 2006, before the Great Recession. (1) August sales were up 4.8% from July, and topped an annual rate of one million homes sold. If you compare sales figures to last August, they are up 43%. That also brought the supply of new homes down to just 3.3 months. A 6-month supply is the norm for a balanced housing market.
The National Association of Realtors had a similar report for existing home sales. It says they were up for a third month in a row, but jumped in August to their fastest sales pace in more than 10 years. They were up 2.4% from July to August, and 10.5% from August of last year. That also wiped out a lot of inventory which is now down to just 3 months for existing homes.
The ultra-low mortgage rates are just one of the reasons that homebuyers are so motivated right now. Freddie Mac says, the average 30-year fixed-rate mortgage is still below 3%, but it did rise three basis points this last week. It’s now 2.9%, while the 15-year is 2.4%.
In other news making headlines…
Remote Workers Shop for Retirement Homes
The shift to remote work is giving some people an opportunity to make an early move to their retirement destination. Many companies are offering employees the option to work from home permanently, and that’s making it possible to live just about anywhere.
NAR’S chief economist, Lawrence Yun, says, “The pandemic was unexpected, working from home was unexpected, but nonetheless many companies realized that workers can be just as productive working from home.” And now the floodgates are open, with demand rising for homes in vacation resort areas. Sunny, warm weather markets are also popular. And, of course, interest rates are ideal. (2)
Online Classes Impacting Rents in College Towns
There’s another pandemic-related shift that is impacting landlords. Many college students have moved home and are attending classes online. That has reduced demand for rentals in college neighborhoods, and forced landlords to lower their rents. Zillow says, they were down .5% in August when students typically return from summer vacation. In non-college areas, August rents were up 2.6% year-over-year.
Zillow says that in May, the average rent for college neighborhoods was down $19 a month compared to non-college areas. By August, it was down $63 a month. (3)
Many Delinquent Homeowners Haven’t Requested Forbearance
More than one million homeowners are at risk of losing their homes to foreclosure because they haven’t asked for forbearance. Almost 700,000 of them have mortgages that are guaranteed by the federal government which means they are eligible for mortgage relief under the CARES Act. Other lenders are also offering forbearance options, but borrowers must initiate the conversation.
A survey by the National Housing Resource Center shows that borrowers may not understand how a forbearance program works. Almost 70% believe they would have to make a large lump-sum payment at the end of the forbearance period. That’s not the way it works. The missed payments are added back into the loan. (4)
Sherwin-Williams Color of the Year
Sherwin-Williams announced its 2021 color of the year. The paint company has given that honor to a dark bronze color called “Urbane Bronze.” It’s described as a color that inspires calmness and a link with the outdoors.
The paint company’s Sue Wadden says, “The home is now the ultimate retreat from the world, and color is an easy and effective way to create a personal haven.” She says, “Urbane Bronze encourages you to create a sanctuary space for mindful reflection and renewal.”
That’s it for today. If you haven’t subscribed to our podcast, I encourage you to add us to your list. We also love and appreciate positive reviews, especially those that come with five stars. Thank you!
(1) New Home Sales Surge: MarketWatch
(4) National Association of Realtors: Forbearance