Last Updated: | Author: Kathy Fettke | Topic: [REN #762] Real Estate News Brief: Rate Cuts, Refinancing Surge, and Smart Home Security
Date: July 9, 2019
In this week’s Real Estate News Brief… what economists expect from the next Fed meeting, how much homeowners can save by refinancing, and why smart home devices could compromise your internet security.
We begin with economic news from this past week, and an unexpected drop in construction spending. The Commerce Department reported a .8% drop in May. That’s the biggest drop since last November, and a surprise for economists who expected to see a slight increase. CNBC says, homebuilding remains weak despite lower mortgage rates. It reports that residential construction spending has shrunk for five consecutive quarters. (1)
The Labor Department issued a strong jobs report. It said that U.S. employers added 224,000 new jobs in June. That’s much higher than MarketWatch economists had forecasted. Among the increase in workers, were 21,000 new hires in the construction industry. The report also shows an increase in jobless claims as more unemployed individuals started looking for work. That pushed the unemployment rate from 3.6% to 3.7%.
The strong jobs report is making a Fed rate cut less likely. The Federal Reserve issued a statement after the jobs report saying it will “act appropriately” to sustain the current economic expansion, which is now the longest in U.S. history. Economists feel Fed officials have less reason to lower interest rates, although many still expect a rate cut at July’s meeting, but a smaller one, according to Business Insider.
President Trump also commented on the situation, saying the U.S. economy would blast off if the Fed cuts rates. The President said, “If we had a Fed that would lower interest rates we would be like a rocket ship, but we’re paying a lot of interest and it’s unnecessary.”
The Fed raised the overnight lending rate four times in 2018 to a range of 2.25 to 2.50%. That gives Fed officials room to cut rates if there’s a downturn. The President has been putting pressure on the Fed to lower interest rates now, as a way to supercharge the economy.
Long-term interest rates were “up” slightly this last week, from a three-year low. Freddie Mac says the average 30-year fixed-rate mortgage is 3.75%.
In other news making headlines…
Low Mortgage Rates Boost Refinancing
The low mortgage rates are boosting the number of homeowners who could benefit from a refi. According to data company Black Knight, some 8.2 million borrowers could lower their interest rates by at least 75 basis points, and save quite a bit of money each month. The average savings would be about $266 per month, for a total of $2.2 trillion in savings.
The Mortgage Bankers Association says refinancing activity has risen sharply among homeowners who took out loans last year. Rates peaked at just over 5% in November. (2)
Buyers Prefer Short Commutes to Larger Homes
Priorities are changing among home buyers. A new survey by Realtor.com shows that 85% of buyers would sacrifice desirable home features for shorter commutes. That includes things like lot size, home size, and home style.
The results of the survey also prompted Realtor.com to offer a new “filtering tool” for its listings. Buyers can now search for homes according to rush-hour and off-peak commute times. A Realtor.com spokesperson says, “With a more holistic view of their drive to and from work, people are able to make more informed decisions about where to live and, hopefully reduce some unnecessary stress from their daily lives.”
Choices Dwindle for Home Buyers
It’s becoming more difficult for home buyers to find what they want in their price range. According to the National Association of Realtors, half of all buyers want a home that costs less than $288,000, but that’s 9% or about $27,000 below the median list price. Realtor.com researchers say, the U.S. housing market needs another 94,000 lower-priced homes to meet the demand.
Realtor.com’s chief economist Danielle Hale says, “Entry-level homes continue to be difficult to come by as the inventory composition shifts more and more toward higher-priced homes.” She says, “This is causing smaller and more affordable homes to appreciate rapidly, resulting in a mismatch between what buyers are able to spend and what sellers expect to receive.”
Some of the cities where it’s easier to find affordable homes are also good for single-family rentals. Cities on that list that we endorse as great rental markets are Pittsburgh, Pennsylvania; Cleveland; and Detroit.
Smart Home Breach
New reports of a massive data breach involving smart home technology is raising questions about smart home vulnerability. Security researchers say a database for devices made by China-based Orvibo was completely exposed to the internet, without password protection. And the database is quite large. Forbes says, Orvibo has about one million users and the database held more than 2 billion logs for those users. Exposed information included things like passwords, account reset codes, and conversations recorded by smart cameras.
Researchers told Forbes that account reset codes are the most risky pieces of information that hackers can get hold of. With them, hackers can change email addresses and account logins. The report says, “Changing both a password and an email address could make the action irreversible.” If you own a product by Orvibo, security experts are recommending that you change your smart device passwords. (3)
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