[REN #799] Real Estate News Brief: Black Friday for Homebuyers, Overdue Home Construction, and Rent Savings for Millennials

Picture of painter inside building for Real Estate News for Investors Podcast Episode #799

In this week’s Real Estate News Brief… why fall is the season to buy a home, where new home construction lags the most, and what millennials are saving on rent.

Economic News

We begin with economic news from this past week in the midst of the impeachment controversy in Washington, D.C.. The stock market has been extremely volatile, but it’s not clear how the impeachment of a sitting president would impact different aspects of the economy throughout this process. President Trump has said, if he’s impeached the markets will crash. As Bloomberg reports, “The impeachment inquiry has the potential to move the price of everything from soybeans to stocks, bonds and the U.S. dollar. The only problem? Figuring out in which direction all those prices will move.”

Meantime, new home sales surged 7.1% in August, thanks to low mortgage rates. They rose to a seasonally-adjusted annual rate of 713,000 — up from 666,000 in July. The current rate of sales is close to a 12-year high. The vast majority of those sales took place in the South and the West while they were lower in the Midwest and the Northeast.

Pending home sales were also higher. The National Association of Realtors reported a 1.6% increase in August after a dip in July. If you compare the figures to a year ago, MarketWatch says they were 2.5% higher this year.

This is also a great time of year to buy a home. The last week of September is considered “Black Friday” for homebuyers, which is now behind us, but Realtor.com senior economist, George Ratiu, suggests those good homebuying conditions will continue. He says, “As seasonal inventory builds up and restores itself to more buyer-friendly levels, fall buyers will be in a better position to take advantage of today’s low mortgage rates and increased purchasing power.” (1)

The Case-Shiller 20-city home price index shows that home price appreciation is close to an idle. On a monthly basis, prices didn’t budget from June to July. On an annual basis they were only up 2% from July of last year. MarketWatch says it’s the slowest rate of appreciation since 2012. Some of the cities that have seen higher price growth are Phoenix, Las Vegas, Charlotte, Tampa, Detroit and Minneapolis. (2)

The latest government report on second quarter GDP shows the economy grew at a rate of 2%. That’s the same reading as the previous government update. It shows that spending was down for business investment, but that consumers were spending plenty of money this last spring. The shopping spree among consumers was slower in August but inflation levels were stable.

There are mixed reports on how consumers are feeling about the economy. The Conference Board says, consumer confidence fell to a three-month low in September, while the University of Michigan’s consumer sentiment survey moved higher. MarketWatch analysts say that the impeachment inquiry will probably add more anxiety to the consumer outlook.

Mortgage Rates

Mortgage rates did a u-turn this last week. After a 17-point rise the week before, the average 30-year fixed-rate mortgage dropped 9 basis points to 3.64%. So the low mortgage rate party continues.

In other news making headlines…

Homebuilding Less than Half of Historic Levels

New home construction in the top ten U.S. markets is less than half of what it was in 2005. A report by John Burns Real Estate Consulting shows that Dallas and Houston are the only big markets approaching 2005 levels, but the others remain at a level of 50% or less, despite the high demand for housing.

The average construction level for all ten markets is just 46%. The metros with the worst construction recovery rates are Chicago, Riverside-San Bernardino, and Las Vegas. Those levels are down 18%, 21%, and 29% respectively. Burns Consulting says, there’s plenty of demand for new housing, but at much lower price points than new home prices today.

The report points out that in 2003, half of the new homes sold for less than $191,000. Now, half of new homes sell for more than $313,000. What most homebuyers are able to pay in places they want to live is more like $250,000 or less.

Income Gap at Highest Level in 50 Years

The income gap is also growing in the United States, making it more difficult for many Americans to keep up with rising prices. Census Bureau figures show the income gap between the wealthy and the not-so-wealthy has grown to its highest level in more than 50 years.

The L.A. Times reports, the Gini Index shows a steady rise in the gap between the rich and the poor over the past five decades. The Gini Index is based on a scale of 0 to 1 with 0 representing perfect equality and 1 showing that all the income is on one side. From 2017 to 2018, the index grew closer to a 50% gap — from .482 to .485.

Lower Rent for Millennials than Previous Generations

With all the talk about rents rising to sky-high levels, a new analysis shows that Millennials are actually paying less rent than previous generations compared to their income. According to HireAHelper, which analyzed Census Bureau data, Millennials are spending about 35.7% of their income on rent, while Gen-Xers spent 35.9% and Boomers spent 38.1%. (3)

The data shows, Millennials have a tougher time when trying to buy a home. Due to higher prices and lagging income levels, they would have to save 6.4 years of their total annual pay for a down payment. GenXers and Boomers only needed to save about 5.6 years worth of their yearly paycheck to buy a home. That means that millennials need to save about 15% more than previous generations if they want to become homeowners, which the experts say is a good idea to build wealth.


(1) The Black Friday of Homebuying: HousingWire

(2) Homeprice Growth Slows: MarketWatch

(3) Rent Lower for Millennials

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