[REN #774] Real Estate News Brief: Big Drop in GDP, Mortgage-Free Homes, and Google’s Plan for Affordable Housing

Picture of clock and notebook and phone for Real Estate News for Investors Podcast Episode #774

In this week’s Real Estate News Brief… we’ll find out why the dramatic drop in the GDP, how many U.S. households have “no” mortgage, and what Google is doing to make Bay Area housing more affordable.

Economic News

We begin with economic news from this past week that shows a rebound in new home sales. After two month of declines, they rose 7% in June to an annual rate of 646,000. That’s 4.5% higher than June of last year, mostly due to lower mortgage rates. (1)

Those low mortgage rates didn’t do much to help existing home sales, however. They dropped 1.7% in June, and are 2.2% lower than they were a year ago, because of the tight inventory and high homes prices.

The Commerce Department reported a big drop in the GDP for the second quarter. It says the gross domestic product sank to an annual rate of just 2.1%. It was 3.1% for the first three months of the year. Consumer spending was strong, but economists say that wasn’t enough to offset a bigger trade deficit and a slowdown in the restocking of business inventories.

Mortgage Rates

Mortgage rates dipped again this last week. Freddie Mac says the average 30-year fixed-rate mortgage was down 6 basis points to 3.75%.

 

In other news making headlines…

 

Fed Expected to Cut Rates

The central bank will be discussing a possible rate cut at their monthly meeting this week. Economists are expecting a half percent cut, after comments by two senior Fed officials. They had said something about the need to act quickly if the economy falters.

Some Federal Reserve Governors don’t agree. Prudential Financial’s chief market strategist, Quincy Krosby, says, “We already know of two Fed presidents who don’t think we need it, so there’s obviously going to be a discussion.”

Mortgage-Free Homes

The number of U.S. households that are “free and clear” of a mortgage has been rising steadily for the last ten years. Zillow says, about 37% of those homeowners have fully paid for their homes. That’s about 5.5% higher than it was at the start of the Great Recession.

Realtor.com researcher, Javier Vivas, commented, “In general, higher home equity is financially preferable and the rise in mortgage-free ownership is in line with brighter economic conditions.” But Zillow says, it’s also due to a homeownership demographic that’s become older because the younger generations are waiting longer to buy homes. (2)

Google Invests in Affordable Housing

Google is putting $50 million into a fund that will help create affordable housing in the San Francisco Bay Area. It’s the Housing Trust Silicon Valley’s Tech Fund which stands for Tech Equity Community Housing.

LinkedIn put $10 million into the fund in 2017. Cisco and Pure Storage added another $10 million the next year. But HousingWire says that Google’s investment is the largest one so far.

The funds are used to preserve affordable housing and to build new homes, with many listed at below-market-rates. Google CEO, Sundar Pichai, says, the company plans to repurpose some of its Bay Area property in the next ten years as a way to support the development of at least 15,000 new homes. That would include housing options for all income levels. (3)

Bernie Madoff Wants Trump to Reduce Sentence

Ponzi scheme mastermind, Bernie Madoff, is appealing to Trump for a shorter sentence. He pleaded guilty ten years ago to the operation of the largest Ponzi scheme ever and was sentenced to 150 years in prison.

Investors lost about $20 billion, but the trustee who managed the dismantling of the company has recovered about $13 billion. A former prosecutor in the case doesn’t think Madoff deserves a commutation. He told HousingWire, “The president can surely find more deserving recipients of his commutation power.

Equifax to Pay $700 Million for Breach

Equifax will be dishing out $700 million dollars to settle claims in the massive 2017 cybersecurity data breach. The incident compromised personal information for some 150 million people, or about half of the US population. About $425 million of the settlement will be used to reimburse victims. Another $175 million will go to states to help boost their cybersecurity. An additional $100 million will cover expenses for the investigation by the Consumer Financial Protection Bureau.

Federal Trade Commission Chair, Joe Simons, says the settlement also “requires that the company take steps to improve its data security going forward, and will ensure that consumers harmed by this breach can receive help protecting themselves from identity theft and fraud.”

The FTC says, Equifax will provide at least four years of free credit monitoring for people affected by the breach. People who don’t want to enroll in the credit monitoring program may be eligible for a $150 payment, or more in some cases.

Big Gains for Hispanic Home Buyers

Hispanic home buyers are pumping up the U.S. homeownership rate. The National Association of Hispanic Real Estate Professionals says, Hispanics comprise just 18% of the U.S. population but are responsible for 63% of the homeownership gains in the last ten years. That includes people buying their first homes and those returning to the market after a foreclosure. The association’s CEO, Gary Acosta, says, “The housing market would look very different today if it weren’t for a tidal wave of Latino home buyers.”

Despite that big increase in Hispanic homeownership, the overall rate for Hispanics is only 47.4%. That’s much lower than the 73% rate for non-Hispanic whites.

Links:

(1) MarketWatch Report

(2) Mortgage-Free Homes: HousingWire

(3) Google’s Affordable Housing Investment: HousingWire

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