In this week’s Real Estate News Brief… we’ll tell you how much U.S. rents have risen, which cities are the best for tech jobs, and what Google is launching to help you connect with like-minded people.
We begin with economic news from this past week and signs that the central bank is ready for a rate cut. In his testimony to Congress, Fed Chief Jerome Powell expressed concern about the global economy and weak inflation numbers strengthen the case for a rate cut. New York Fed President, John Williams, also signaled support for a rate cut with a speech about the need for pre-emptive action. As reported by the Wall Street Journal, he also clarified afterward that his speech was only academic and not a foretelling of any policy decisions. Many economists are anticipating a half-point rate cut. (1)
If you want to get my commentary on how I think this will affect the economy this year and next, and the impact it could have on housing in the U.S., I just recorded a webinar on my 2019 Midyear Housing Update. That will be posted on my other podcast, The Real Wealth Show, and under recent webinars.
Builders are not breaking as much ground on new homes. The latest report on housing starts shows a .9% dip in June to an annual pace of 1.25 million. Permit applications fell even more which is a sign of less residential construction activity in the months ahead.
Builders are feeling confident about the market, however. According to The National Association of Home Builders, their confidence level was up one point in July, although they are still complaining about the cost of “lumber, labor, and land.”
Consumers are also feeling good about the economy. The University of Michigan Consumer Sentiment Index is up slightly for July. It rose to 98.4 which is close to a 15-year high.
Long-term mortgage rates moved higher this last week. Freddie Mac says the average 30-year fixed-rate mortgage was 3.81%. (2) Freddie Mac doesn’t expect that to dampen homebuyer enthusiasm. It says, “Homebuyers are taking advantage of the multi-year low rates in droves.”
In other news making headlines…
Bidding Wars Ahead
Many realtors expect more bidding wars in the months ahead, because of those low mortgage rates. Realtor.com says, low rates are luring more home buyers into the market, and that will probably lead to more competition where inventory is limited.
Redfin’s chief economist, Daryl Fairweather, says recent mortgage rate drops correspond to higher home search activity. He says, the supply of homes had been trending higher, but that momentum has waned, and inventory is once again decreasing. He says, “If the trend we’re seeing continues, overall inventory could near record lows by early next year.”
Rents Marching Higher
Rents are continuing to move higher. RentCafe says, the national average was up .8% from May to June, and 2.6% year-over-year. That represents a yearly increase of about $37 a month for tenants, to a national average of $1,465 per month. (3)
RentCafe data shows that rents have gone higher in 88% of the nation’s largest metros. The most expensive metro for renters is Manhattan. The monthly average there is $4,190. The least expensive metro is Wichita, Kansas, where the average is just $656 per month.
Fastest Growing Tech Job Markets
Orlando is gaining a reputation as a hot market for technology jobs. Commercial real estate firm CBRE put together a list of the fastest-growing tech job markets, and Orlando led with a 14.1% growth rate. San Diego came in second with a 10.2% growth rate, followed by Chicago with 8%. Cleveland and Detroit are also on that list. CBRE calls them “momentum markets.”
As for markets with the biggest existing tech labor pools, San Francisco takes first place, followed by Seattle, and Toronto. Atlanta is on the list in the eighth position. The top cities are all large markets, with at least 50,000 tech workers.
California May “Fine” Cities for Not Building Enough Homes
California lawmakers are considering legislation that would “fine” cities that don’t build enough homes. A court would decide if a city or county is violating state laws that set targets for housing. If there’s a violation, local governments would have a year to comply. If they don’t, fines could be as high as $600,000 a month.
The state has already sued Huntington Beach for not doing enough to create more housing. Orange County has also been admonished, and Governor Gavin Newson has threatened more lawsuits.
Spending Rises for Home Improvements
Consumers are spending more for home improvements this year. HomeAdvisor reports a 17% increase to an average of $7,560 a year. That’s much higher than the average $1,105 for maintenance. HomeAdvisor says, “2018 was a robust year for overall consumer spending on home services.”
Home emergencies also took a bite out of homeowner wallets. The average for people who had an emergency was $1,206. But there’s also less than a 50% chance that individual homeowners will have an emergency in any given year.
Google’s “Shoelace” Social Network
Google may have shuttered its Google+ social network, but it’s testing a new one called “Shoelace.” It’s designed to connect people with shared interests and get them together for meet-up activities. They do that by listing their interests. The app then suggests activities called “Loops” that are based on those interests.
Realtor magazine suggests that people with an interest in real estate and housing might benefit from this kind of social site, especially if you are a realtor or agent who’d like to promote a seminar or event. Google will introduce the site in phases across the country, but is offering a test version for people who want to check it out.
(1) Rate Cuts
(3) RentCafé Report