In this Real Estate News Brief for the week ending May 30th, 2020… mortgage rates have hit a new record low, landlords are keeping tenants with shorter terms, and buyers want homes with outdoor features.
We begin with economic news from this past week, and signs of life in the housing market. New home sales were up .06% from March to April, although they were down more than 6% from April of last year. But the increase beat analyst expectations, with the biggest rise in the Northeast. Home sales were up almost 8% in that region. (1)
Although stay-at-home orders didn’t keep many people from closing on a home purchase, they did have an impact on pending sales for existing homes, along with the ongoing inventory shortage. The National Association of Realtors says they were down almost 21% compared to March, with the biggest decline of 48% in the Northeast.
NAR also believes that we’ve hit the bottom for pending home sales. NAR’s chief economist, Lawrence Yun, says, “With nearly all states under stay-at-home in April, it is no surprise to see the markedly reduced activity in signing contracts for home purchases.” He’s predicting a big rebound during the summer months, after states reopen and consumers feel more comfortable about the home buying process.
Strength in the housing market is also reflected in home price appreciation. The S&P CoreLogic Case-Shiller 20-city price index shows a 3.9% year-over-year rise in home prices for April. That’s up from 3.5% for March. There is a two-month lag in the data however, so the pandemic is not fully reflected in those figures.
Another 2.1 million Americans applied for unemployment benefits, but the overall number of people collecting those checks has dropped. They were down about 4 million. There are currently a little more than 21 million people on the unemployment rolls.
Generous unemployment benefits helped boost personal income numbers. The Commerce Department says personnel income rose 10.5% in April. People applying for unemployment are getting the normal amount of money, plus $600 a week. For many people, that adds up to more than they were getting when while working.
A revision on the first quarter GDP shows the U.S. economy shrank 5%, instead of the previously reported 4.8%. MarketWatch economists expected much worse numbers for March. They are predicting the numbers will drop to an annual rate of 27.7% in the second quarter because of the coronavirus lockdown. (2)
Consumers are not feeling as nervous about the economy. The Conference Board says the consumer confidence index was up about a point from April to May. That’s after a steep drop in March. Government stimulus checks, and current reopening plans are contributing to a more optimistic outlook.
Mortgage rates hit a new all-time low. Freddie Mac says the average 30-year fixed-rate mortgage dropped 9 basis points to 3.15%. That’s the third time we’ve hit a new record low in the last three months. (3) Buyers are taking advantage of those low rates. The Mortgage Bankers Association says that mortgage applications jumped 9% last week compared to the week before.
In other news making headlines…
Redfin Rehiring Furloughed Agents
Not only are buyers coming back into the market, Redfin says it is rehiring many of its furloughed agents. The brokerage furloughed about a thousand agents during the lockdown, and is rehiring about 350 to handle the surge in purchasing demand.
Redfin says that available homes are going under contract quickly. The brokerage says about half of them are selling in less than two weeks.
Jump in First-Timers, Fewer Investors
There’s been a recent shift in the buyer demographic. The National Association of Realtors says, there have been more first-time home buyers and fewer investors. It says the number of first-time buyers hit 36% in April, compared to 32% a year ago while the percentage of cash buyers dropped from 20% last year to 15% this year, in April.
NAR says, the newbies are encouraged by a lack of competition from cash buyers, and the low mortgage rates. NAR researcher Scholastica “Gay” Cororaton believes that investors may be concerned about the financial risks associated with renters and the pandemic. There are also fewer discounts than there were during the Great Recession and the foreclosure crisis.
Landlords Offering Flexible Lease Terms
More landlords are offering flexible lease terms to tenants worried about their financial situation. Realtor.com says that many are offering month-to-month arrangements, or shorter lease terms of 3- or 6-months to keep tenants who don’t want to sign a longer lease. Some are also adding termination riders to the lease to reassure renters who may need to move.
Data from New York listing site, StreetEasy, says there’s been a 70% increase in demand for short-term lease agreements in New York. Demand for furnished rentals is also higher. It’s up 40% from last year.
New Priority on Outdoor Living Space
House hunters are looking for great backyards. That’s the word from the CEO of Compass, Robert Reffkin. He says there’s been a 40% increase in people searching for single-family homes with a yard compared to people looking for a condo. And, he says that many are searching for specific outdoor amenities like in-ground pools, outdoor kitchens and hot tubs. Office space is also important. Reffkin says, search parameters have also shifted to less populated areas, and believes that these trends will continue.
(2) GDP Drop in Q2
(3) Mortgage Rates