In this Real Estate News Brief for the week ending February 22nd, 2020… the spring construction boom, the latest surge in foreclosures, and the new Gen Z homebuyers.
We begin with economic news from this past week.
The latest report on existing home sales shows a dip in January. According to the National Association of Realtors, they were down 1.3% to an annual pace of 5.46 million homes. That’s still 10% higher than they were in January of last year. The experts say they’d probably be even higher if there wasn’t such a tight squeeze on inventory. The median price for an existing home is $266,300. That’s up 6.8% from last year.
Builders are planning a busy spring. Although housing starts were down 3.6% in January, permit applications hit a 13-year high. The Commerce Department says they were up 9.2% to an annual rate of 1.55 million. Economists say low mortgage rates are contributing to the construction rebound. (1)
That exuberance is also reflected in the monthly home builder confidence index. The National Association of Home Builders says the index was down one point from 75 to 74, but that’s just two points below a 20-year high in December. Anything above 50 means that home builders are feeling good about the market.
Mortgage rates were up slightly this last week. Freddie Mac says the average 30-year fixed-rate mortgage rose 2 points to 3.49%, so they are still below 3-and-a-half-percent. (2) The mortgage guarantee company says purchase applications are up 15% compared to a year ago.
In other news making headlines…
Rent Growth Dips Slightly for SFRs
Rent Growth was a little slower in December, as reported by Inman News. (3) CoreLogic says the annual rate was 2.9% compared to 3% in November. Corelogic principal economist, Molly Boesel, says rent growth remains strong. She says 2019 rent appreciation rose at the fastest annual rate since 2016.
Rent growth was best for homes worth less than 75% of the local median. Those rents were up 3.4% year-over-year. Rents for homes worth 125% or more of the local median were up 2.5%. The Southwest cities of Phoenix, Tucson, and Las Vegas experienced the biggest spike in rent growth at 6.7, 5.7 and 5.1% respectively.
Price Growth in Opportunity Zones
Many of the homes in Opportunity Zones are increasing in value faster than the national average. ATTOM Data Solutions says almost half of them rose an average of 9.4% last year. (4) Some 3,700 economically disadvantaged areas were qualified as Opportunity Zones by the Federal Government. Real Estate Investors who put money into these areas enjoy significant tax breaks.
ATTOM’s Todd Teta says, “Home prices in thousands of Opportunity Zone neighborhoods targeted for revival across the United States continue to ride the tide of the national housing market boom.”
The report shows that median prices rose in 66% of the zones. Prices were down for the homes in the other 34%.
Foreclosure Activity in January
ATTOM Data Solutions also reported a surge in foreclosure activity last month. It was up 13% from December, and 7% from a year earlier. That translates into a foreclosure notice for one in every 2,270 homes, or a total of more than 60,000 homes.
Foreclosure starts were up 27% in California with a 66% jump in Los Angeles. But the states with the worst foreclosure rates in January were New Jersey, Delaware, Illinois, Maryland, and Ohio.
Lenders repossessed almost 21,000 homes. That’s up 49% from December, and 70% from a year ago.
Generation Z Making an Entrance
Generation Z is starting to leave a few footprints on the real estate market. Realtor.com says these youngsters bought about 2% of the homes on the market in quarter four. They were more affordably priced homes like the ones you might find in smaller Midwest and Southern cities. (5)
Jason Dorsey of the Center for Generational Kinetics says, “Gen Z is more practical with their money than previous generations. They’re better positioned to enter the home-buying market than millennials when millennials were the same age.” He says, “They are savers, and they’re looking for stability.”
(3) Inman Article