In this week’s Real Estate News in Brief… the word “transitory” is capturing headlines, the state that’s giving tenants an eviction break, and the hotel giant that’s taking on Airbnb.
We begin with economic news from this past week, and another Federal Reserve meeting with no interest rate hikes. The Fed left the overnight lending rate unchanged at 2.25% to 2.50%. But Fed Chief Jerome Powell’s comments about inflation, or the lack of it, has caused some concern. The yearly rate dipped to just 1.6%, which is well below the central bank’s 2% target.
Powell called the situation “transitory” however. He expects inflation will return to normal in the coming months. Those comments also dashed hopes for a rate cut, which stock traders were hoping for. President Trump also wanted a rate cut and had publicly called for one ahead of the Fed meeting.
Unemployment fell to a 49-year low. Companies have been hiring. They added 263,000 new jobs and brought the jobless rate to just 3.6%. The Labor Department says that it’s the lowest since 1969.
Home price growth is now at a 6-and-a-half-year low, according to the S&P CoreLogic Case-Shiller 20-city index. It shows that prices rose a seasonally adjusted .2% in February. That brings the yearly increase down to just 3%. The top three metros for price growth were Las Vegas, Phoenix, and Tampa. (1)
It appears that spring buyers are busy, and that existing home sales may be about to rally. The National Association of Realtors reported that pending sales in March were up 3.9%. That should give the next existing home sales report a good bump.
The consumer confidence index also reflects this exuberance. The Conference Board says, it bounced back in April and rose 5 points to 129.2. MarketWatch economists had expected a lower reading.
Another dip in mortgage rates is helping the market. Freddie Mac says, the 30-year fixed-rate mortgage was down six points in the last week to an average rate of 4.14%. It says that summer buyers will likely find rates that are about a quarter to a half percentage lower than they were last year.
In other news making headlines…
Tenant-Friendly Eviction Law in Washington State
Washington State adopted more tenant-friendly rules on eviction and rent increase notices. Lawmakers increased the amount of notice tenants are given before they are evicted. The current law requires a three-day notice. The new law will expand that to 14 days. It also shields tenants from attorney fees if the tenant owes less than two months rent or as much as $1,200. And, it limits the amount of late fees that landlords can charge for a tenant to remain in the unit. The Governor also signed another bill into law that will double the amount of notice for a rent increase from 30 days to 60 days. (2)
Bay Area Median Home Prices
For the first time since the housing market crashed seven years ago, the median price of a home in the San Francisco Bay Area went “down” instead of “up.” CoreLogic says, it dipped .1% in March compared to a year earlier, for a median price of $830,000. Prices have been rising steadily in the Bay Area since April of 2012.
CoreLogic analyst, Andrew LePage, told CNBC, “It reflects a trend that began in mid-2018 when home sales slowed and inventory grew, forcing sellers to be more competitive.” He says, “The year-over-year increase in the region’s median sale price was 16.2% in March last year. But after that, the gains in the median gradually decreased each month and fell to the 2% to 3% range early this year and then disappeared this March.” (3)
Bay Area Construction Costs
With such high home prices in the Bay Area, it may come as no surprise that the Bay Area is the number one of the most expensive place for commercial construction. The Mercury News reports, it costs more to build apartment buildings, office towers, hospitals, warehouses, and schools than any other place in the world.
A report by a company based in the United Kingdom says, the Bay Area is 13% more expensive than New York, which is in second place. The average cost per square foot is $417 in the Bay Area. For New York, it’s $368. Other cities near the top for commercial construction costs are London, Zurich, and Hong Kong.
According to the report by Turner & Townsend, commercial development costs were up 5% in 2018. The firm expects those costs to rise another 6% this year. It blames the skyrocketing costs on rapid economic growth, a labor shortage, and tariffs.
Airbnb Has Powerful New Competition
The homeshare space is getting a powerful new player. Marriott International has announced the launch of its Homes and Villas platform for short-term rentals. The service begins with 2,000 luxury homes in the United States, Europe, the Caribbean, and Latin America. Members of Marriott Bonvoy can also earn and redeem points with these rentals.
The program began as a pilot last year in just a few European cities. Marriott says that most of the guests were leisure travelers who stayed about three times as long as the typical hotel guest.
These rentals include the cream of the crop such as a four-bedroom cottage on six private acres in California wine country, a six-bedroom village in Sorrento, Italy with an infinity pool that overlooks the Mediterranean, and an oceanfront village in Anguilla with a private beach and a personal butler.
The New York Times says they range from a one-bedroom home for $200 a night to a castle in Ireland for $10,000 a night.
(1) Home Price Growth Slows Down: MarketWatch
(2) Eviction Laws in Washington: Curbed Article
(3) Bay Area Home Prices: CNBC