[REN #587] News Brief – SFR Buyer’s Market in 2020, While Retail Strengthens

picture of calendar for Real Estate News for Investors Podcast Episode #587

In this week’s Real Estate News in Brief… experts predict when we’ll see a buyer’s market, home buyer activity in the wake of wildfires, and proof that the retail apocalypse doesn’t exist.
 

Economic News

We begin with economic news from this past week.

The latest reading on home prices from Case Shiller shows that price growth is leveling off. It’s not going down, but the national index only rose a seasonally adjusted .3% in June while the 20-city index was up just .1%. MarketWatch economists say it’s not surprising. Prices can’t keep going up as fast as they have. The city now taking the lead for fastest rising prices is Las Vegas. Seattle and San Francisco followed in second and third place. [1]

Pending home sales are also lagging. The National Association of Realtors say they were down .7% in July, which brought NAR’s index down to 106.2. The index has been up four times and down four times since the beginning of the year. On an annual basis, it’s down 2.3% in a market that is high on demand and low on inventory.

The government issued a revision for the second quarter gross domestic product. Officials now say the economy expanded at a rate of 4.2% instead of the previously reported 4.1%. Tax cuts and consumer spending helped fuel that growth. Business investment also grew somewhat and contributed to that number.

While consumer spending grew .4% in July, consumer income only rose .3% so consumers are spending more than they are making. Inflation is also creeping higher. It rose from 2.2% to 2.3% in July. That’s the highest rate of inflation since April of 2012.

Consumers are feeling confident about their economic situation though. The Conference Board says consumer confidence is now the highest it’s been since October 2000. That’s mostly because of low unemployment numbers and bigger after-tax paychecks. But, there are worries about what’s ahead. The University of Michigan reading on consumer sentiment was down due to worries about inflation, tariffs, and higher prices.
 

Mortgage Rates

Long-term mortgage rates continue to idle. Freddie Mac says, the 30-year fixed-rate mortgage only ticked up one basis point this week, to around 4.52%.
 

In other news making headlines…

 

High Home Prices Creating Income Barriers

We have a report from Bloomberg that shows the highest prices for entry level homes since 2008. It says, first-time buyers need to spend 23% of their income for your average starter home. That’s up from 21% just one year ago.

The figures show a rise in the amount of money U.S. home buyers need but those numbers are low compared to some individual markets. Bloomberg says people in New York and San Francisco who earn a median income need to spend 65% of their paycheck to buy a home. In Los Angeles, that income level drops slightly to 59%. In Miami, buyers need to spend 55% of what they earn.
 

Buyer’s Markets Expected in 2020

Even though home price growth is slowing down, the current seller’s market is expected to persist for at least another two years. Zillow conducted a survey among housing experts and three-quarters of them said the shift to a buyer’s market won’t happen until 2020, or beyond. [2]

Zillow is reporting that the “winds are beginning to shift,” however. It cites a number of trends that feed into that including slower home value appreciation in many of the larger markets. There are an increasing number of price cuts, as well, and a slower decline in inventory.

As for exactly which year this shift will happen:

  • A few say it has already happened or will happen this year
  • 13% say next year
  • 43% say 2020
  • Another 18% say 2021
  • 6% say 2022
  • The rest say sometime after 2022.

 

Home Buyers Not Scared Off by Wildfires

A new study shows, home buyers are not deterred by the risk of wildfires. The study analyzed real estate transaction data for almost 360,000 properties in eight Colorado counties affected by wildfires over recent years.

It found that home prices usually rebound within one or two years, and were not much different than home prices in low-risk areas. Researchers expect the same to happen in California, where people have experienced recent wildfires.

Researcher Shawn McCoy, of the University of Nevada in Las Vegas, said, this risk tolerance is a problem. He said,“A lot of recent work shows that wildfires are not just a result of changes in global climates, but also rapid housing development into forested lands.” And without a fear of fire, he says, that rapid development will likely continue.
 

Retail Apocalypse a “No Go”

There’s new proof that the world of brick-and-mortar stores is not going belly up. The IHL Group published new research that shows robust growth for retail. It reports that 8,825 stores are closing this year, but North American retailers are expected to open 12,663 new ones.

It also found, most of the store closings are happening among just 16 companies. The report said, “We can’t emphasize enough that the closings have been driven by a handful of retailers, not the entire market.” It said, “Overall retail is very healthy… But there are vast differences in retail segments with some growing rapidly and others struggling.” [3]
 

Labor Day Statistics

The Labor Day weekend is coming up and along with it, the end of summer. The National Real Estate Investor Association published a few interesting statistics about the U.S. labor market.

It shows that unemployment has dropped from 4.3% to 3.9% over the last year, and that an additional 1.8 million people have jobs. Almost 156-million people are working and a little over 6-million are unemployed.

If you look at the male to female demographic, 66.3% of the male population is working compared to 55% of the female population. Women are making about 81% of a man’s median paycheck. The overall median for men is $962 a week and for women, it’s $779 a week.

The workforce is made up of 129 million full-time workers and 27 million part-time workers. Most of them expect to retire at age 66, but many don’t have a backup plan for income if they have to retire sooner than that.

Do you have a back-up plan? If you don’t, you might want to think real estate. It’s what I’ve done for my own family, and have advocated for thousands of other people.

You can find out more about creating your real estate back-up plan here at RealWealth.
 
Links:

[1] MarketWatch Report

[2] Zillow: 2020 Buyers Market

[3] Retail Still Strong

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