In this week’s Real Estate News in Brief… the next rate hike, the trade war impact, and mail-order kit cabins from Amazon.
We begin with economic news from this past week, and the latest results on home sales.
The National Association of Realtors reported another slump for existing home sales. They dropped .4% from March to April, and were 4.4% less than a year ago. It’s the second month in a row for a sales drop, after a surge in February. Inventory is still tight but NAR expects increased activity soon, especially in the South and the Northeast. (1)
The slowdown in sales did not slow down price gains. The median existing-home price for all housing types in March was $259,400. That’s up from 3.8% from March 2018 ($249,800). March’s price increase marks the 85th straight month of year-over-year gains.
NAR’s chief economist, Lawrence Yun, says, tax policy changes will likely add further complications to the housing sector. “The lower-end market is hot while the upper-end market is not. The expensive home market will experience challenges due to the curtailment of tax deductions of mortgage interest payments and property taxes.”
As for new home sales, they were also down. The Commerce Department says they were 6.9% lower in April than they were in March. But even with that fall-off, they are sharply higher than they were a year ago. It would take about six months to exhaust the supply which indicates a balance between supply and demand.
Another tiny drop in long-term mortgage rates should inspire more home buyers. Freddie Mac says the average 30-year fixed-rate mortgage dropped one basis point this last week, to 4.06%. It’s the fourth week in a row that the average rate has declined.
In other news making headlines…
No Rate Hikes for “Some Time”
Minutes from the Federal Reserve meeting in early May indicate the board has no plans for another rate hike for quite some time. Committee members expect to see mild economic growth this year, but they say the lack of inflation makes their patient approach to rate hikes appropriate.
As CNBC reports, the Fed also commented on the housing market, saying that a slowdown in spending during the first quarter will be temporary. They expect more buying activity in the near term because of a surge in consumer confidence.
President Trump at NAR
President Trump announced the end of steel and aluminum tariffs imposed on Canada and Mexico during a speech to NAR members. It was a legislative meeting and trade expo in Washington, D.C.
He didn’t mention the lifting of Canadian lumber tariffs however, which are affecting residential construction costs. The National Association of Home Builders say the tariffs add almost $10,000 on to the cost of a new home.
Housingwire reports that in 2012, typical families could afford almost 78% of all new and existing homes on the market. Now, only about 61% of families can afford them.
Trade War Comes with High Price Tag
The tariffs are part of a trade war that could cost the global economy a bundle. The Organization for Economic Cooperation and Development estimates that an all-out trade war with China could bring the global GDP down .7% by 2021. And that’s at a time when economists are anticipating a global slowdown without a trade war.
The OECD is forecasting that the impact of a .7% decrease in global GDP is worth about $600 billion dollars. Bloomberg Economics has also offered a similar forecast. The U.S. China trade war intensified this last week after President Trump blacklisted Chinese telecom company Huawei Technologies. (2)
Survey Financial Shape
A new survey on the well-being of American households shows some improvement when it comes to emergencies. 61% of those surveyed said they could afford an unexpected $400 expense. That’s up from 50% in 2013.
75% of the respondents also said they were “doing okay” financially… or “living comfortably.” That’s also up about 12% from 2013. But 25% of the participants said they haven’t saved anything at all for retirement.
Amazon Selling Homes with Free Shipping
It sounds like a throwback to the days of mail-order homes from Sears. Only this time, Amazon is selling them, with free shipping. You can buy a small cabin-like prefabricated all-wood home for less than $20,000.
One cabin, called Lillevilla Escape, comes with 113-square feet of space and is selling for just $5,000. That doesn’t include a foundation. Roof shingles and insulation are also extra.
There are many more options to choose from on Amazon, including some that are much larger or custom-designed for whatever size you need. The parts are then sent with instructions on putting it together. With a few add-ons, they could easily be turned into a full-time living space. (3)
More Homeowners Want ADUs
There’s a growing interest in adding smaller units to residential properties. According to the National Association of Home Builders, contractors are getting more inquiries about adding ADUs to their homes. That stands for Accessory Dwelling Unit which is more commonly called a “granny flat.”
ADUs typically require a building permit so homeowners should check with local officials on any plan to add one. Housing advocates say that ADUs could help solve the housing shortage and help homeowners who can rent them out, and earn some extra money.
(1) Home Sale Slump: MarketWatch
(2) Trade War Costs: Business Insider
(3) Amazon Cabins