In this week’s Real Estate News in Brief… chaos in Washington over the shutdown, home builders negotiate a new source of lumber, and an Airbnb cat house in Silicon Valley.
We begin with another week of political and economic turmoil because of the partial government shutdown. President Trump is standing firm on his demands for border wall funding, while 800,000 federal employees are on furlough or working without pay. The shutdown is now the longest in U.S. history, and there’s growing concern about the economic impact.
The National Association of Realtors says it’s not about federal employees going without pay because they’ll be paid eventually. NAR’s chief economist Lawrence Yun says, “It’s more about people becoming more uncertain about the direction of the economy, this perception that there’s chaos in Washington.”
One area of concern is the processing of tax returns when the tax filing season begins on January 29th. The IRS has recalled 46,000 employees to handle tax returns and refunds, but that’s only about 57% of its workforce.
CNN says this shutdown is causing more of an impact than the 21 shutdowns we’ve endured since 1976, because this one is so long. Businesses say revenues are down and economists are expecting that to slow economic growth.
JPMorgan Chase CEO, Jamie Dimon, told CNBC, if the shutdown continued for a whole quarter it could reduce economic growth to “zero.” (1)
The shutdown has delayed government economic data including December housing starts and building permits. The National Association of Homebuilders did offer some good news this last week on builder sentiment. The index was up two points for January, to a reading of 58. Builders say the slide in long-term mortgage rates has revived buyer interest.
The average 30-year fixed-rate mortgage is 4.45%, the same as it was last week. Freddie Mac says that “lower interest rates are beginning to have a positive impact on some segments of the economy.”
In other news making headlines…
Rate Hikes May Have Ended
Former Fed Chief Janet Yellen says it’s “very possible” that the Fed will not raise short-term interest rates for the foreseeable future. She says, “If there is a downturn in the global economy and that spills into the U.S., it’s very possible we may have seen the last interest rate hike of this cycle.”
Federal Reserve policymakers had reduced their projections from four rate hikes to just two later this year. Yellen says we may see another rate hike or two, but she expects the Fed to take a break on rate hikes while they evaluate the state of the economy.
Border Wall Prototype Can Be Breached
As our economy takes a hit from the border wall stand-off in Washington, D.C., there’s another news story worth mentioning. ABC News is reporting that a prototype of the steel wall that President Trump would like to build, can be easily breached with a saw.
The information comes from a test conducted by the Department of Homeland Security. Border Patrol agents and members of the military were told to try to break through the barrier, and they found they could do that with a common saw.
DHS spokeswoman Katie Waldman says the wall isn’t meant to be impenetrable. She says, “Even a wall that is being breached is a valuable tool in that it allows us to respond to the attempted illegal entry.” (2)
Chile to Provide New Source of Lumber
U.S. home builders may have a new source for less expensive lumber. The National Association of Home Builders says that U.S. home builders spent four days negotiating with the Chilean government and more than 100 Chilean lumber-producing companies on a plan to increase lumber exports to the U.S.
NAHB CEO Jerry Howard expects demand for softwood lumber to grow as the housing recovery continues. He says the increased competition among lumber producers will “benefit American families who want to buy homes and U.S. builders who are seeking a steady supply of affordably priced lumber.”
Pricey Apartment for Two Cats
You might think $1,500 in rent is affordable for a 400-square-foot San Jose studio apartment, but in this case, it’s for two cats. CNBC reports that a father is renting an Airbnb studio for his daughter’s cats while she’s attending a college and living in a dorm in Los Angeles. (3)
He didn’t want the cats staying with him because they don’t get along with his fiance’s dog, and he didn’t want to put them up for adoption, so he rented an apartment for the cats. That may seem a little excessive to some people, but the situation is apparently temporary. The daughter plans to bring the cats to L.A. when she moves out of the dorm. In the meantime, these cats are enjoying some prime real estate in the heart of Silicon Valley.
(1) Newsmax Article
(2) NBC News Article
(3) CNBC Article