[REN #331] Weekly Real Estate News Brief: August 22nd, 2017

coffee design for Real Estate News for Investors Podcast Episode #331

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In this week’s Real Estate News in Brief… we’ll hear about housing bubble fears, which cities are winning the homebuilding race, and U.S. cities ranking the highest for high-tech.

Economic News

We begin with economic news from Market Watch:

Retail sales jumped to a yearly high in July, thanks in part to Amazon’s Prime Day and strong car sales. The increase was .6% which beat expectations. Prime Day contributed to non-store retail sales increase of 1.3%.

Home builders are showing a lot of enthusiasm. The National Association of Home Builders says July sentiment bounced back from an 8-month low. It surged four points to a reading of 68. Any number over 50 on the monthly confidence gauge shows that conditions are improving.

Housing starts and permits faltered in July. They were both down more than 4% compared to June. Market Watch says new home construction continues to slowly increase and that economists are encouraged. It says that developers are focusing more on single-family homes indicating a positive view of homeownership, and a housing market that is stabilizing.

The Conference Board reported a .3% increase in the Leading Economic Index. That’s viewed as another sign that the U.S. economy is doing well. It’s now up to 128.3. It was at the 100 level in 2010.

Consumers are also feeling more optimistic about money matters. The University of Michigan Consumer Sentiment Index rose to 97.6 in August. That’s a 4-point jump from July and is just a smidge below a 13-year high in January.

Interest Rates from Freddie Mac:

Interest rates took another dip this past week. They fell 1 basis point to 3.89% for the 30-year fixed-rate mortgage. Freddie Mac says they are holding at a lower level due to the economic uncertainty.

Other Real Estate News Making Headlines:

 

HARP Extension

The government has extended the HARP refinance program for another year. The Home Affordable Refinance Program was supposed to expire at the end of next month, but The Federal Housing Agency extended it 15 months, to December 31st of next year.

The last extension was to allow the creation of a new refinance product Fannie Mae and Freddie Mac would launch in October. The FHA says that product is still on track for a launch but needs tweaking, so the HARP program will remain in place for all of next year.

Housing Bubble Fears

A majority of homeowners are fearing the worst, when it comes to high home prices. Forbes recently wrote about a new survey shows that 58% of homeowners believe there’s a housing bubble that will likely “pop” within the next two years. A down payment insurance company called ValueInsured did the survey. It says that 83% of the respondents believe it’s a good time to sell.

Redfin Chief Economist Nela Richardson doesn’t agree. She tweeted that: “The market is expensive, competitive and unaffordable, but there’s no evidence of a bubble.” She says the housing market collapsed ten years ago because of “exotic mortgages and lax underwriting.” Home prices were high then too, but the market went south because people took on loans they couldn’t afford. Now, she says there’s equity supporting price growth, along with good economic fundamentals like job growth.

Redfin isn’t the only one. HousingWire writes that a new study from the U.S. Department of Housing and Urban Development and one from Case-Shiller also agree with the Redfin economist. Among those findings are home prices that are growing more expensive along with renters who can’t afford them, but a lack of evidence that we are about to “repeat the bubble years”.

I agree. Housing is on solid ground. Approximately 30% of purchases this decade have been all-cash, and those who acquired loans had to really qualify.

Job losses would be the main factor that could affect housing negatively. A stock market crash or global financial crisis could cause that, so it’s important for real estate investors to look at outside factors that could affect our market.

Trulia: Texas is Winning the Homebuilding Race

Texas is red hot when it comes to building new homes. Trulia says that Dallas, Houston, and Austin are on track to build almost 130,000 new homes this year. It says that’s more than 10% of all the building permits in the U.S. It’s also almost as much as the total number of homes being built in “50” other large U.S. cities.

This will certainly help get the Texas housing market moving. As Trulia points out, new homes are not just a source of inventory. They also provide options for current homeowners who want to upgrade. That frees up existing homes, and allows more prospective buyers to move into the market. Trulia researchers say they have found that homebuilding is the single best predictor of home inventory in the U.S.

But why are some cities building more than others when there’s a national inventory problem? Regulations and construction fees hamper building efforts in some areas. Texas is known as a more business-friendly state. Trulia says strong job growth, higher wages, and home appreciation all play important roles in the homebuilding scenario.

New York City vs. Landlords in Eviction Battles

The New York City Mayor signed a bill into law, that will help low-income tenants fight eviction. The bill guarantees that any low-income family facing eviction will have access to a lawyer.

He said in a Curbed New York piece that: “New Yorkers should not lose their homes because they can’t afford a lawyer and stopping wrongful evictions from happening makes both ethical and economic sense.” The blog says that in 2013, only 1% of tenants had lawyers representing them in housing court. It’s a first-of-its-kind ordinance that de Blasio hopes will set an example for other cities.

Cities with Most High-Tech Jobs

Fortune just did a piece on the 25 Most High-Tech Cities in the World. It says that city populations are growing, and the ones that will flourish the most in the coming years, are the ones that are the most technologically advanced. 2thinknow did the ranking and based it on 10 factors including the number of patents, startups, tech venture capitalists, and the use of smartphones.

At the very top of the list is San Francisco, and the Silicon Valley. Fortune says the quote “supply chain of innovation has made its home there, even as smaller contenders claw at the title.”

Los Angeles ranked number four for high tech. Despite it’s reputation as the movie capital of the world, it also has more high-tech jobs than any other city in the nation.

Chicago made the list as tenth “techy-est” city in the world. Fortune says the Windy City is a startup magnet, and is gaining a strong reputation for innovation with its CityWorks infrastructure management platform.

Dallas-Fort Worth took the 11th position. Fortune says the region has established itself as a high-tech hub and is attracting growing numbers of venture capitalists. The city is also integrating technology in many parts of its operation.

Washington, D.C. just barely made it on the list, in the 25th position. Fortune says technology and tech-related jobs have been gaining ground over the last decade. It’s also the home of the federal government, and venture-capital firms with deep pockets.

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