In this week’s Real Estate News in Brief… Janet Yellen may have sung her swan song, Mr. Cooper will pay your mortgage, and million dollar neighborhoods are on the rise.
We begin with economic news from this past week
Existing home sales also fell to their lowest level since last August. The National Association of Realtors reported a 1.3% drop in the sale of existing homes, to 5.44 million.
Tight inventory and a strong demand for both new and previously-owned homes is pushing prices higher for some buyers, and leaving others empty-handed. NAR Chief Economist Lawrence Yun says demand is so strong and competition is so fierce, that buyers are moving quickly, and many homes are going under contract in less than 30 days.
Builders trying to add to the housing inventory actually saw a softening in sales. The Commerce Department reported that new homes sales tumbled to a 7-month low in July. They fell more than 9% from the month before, to a seasonally adjusted annual rate of 571,000. This may be because new home prices are approximately 20% higher than existing home prices. Builder costs have risen over 30%, making it more challenging to develop the much needed affordable housing.
Janet Yellen Defends Dodd-Frank
The Fed Chief spoke at the central bank’s annual forum this last week, and may have talked herself out of a job. Her term ends at the beginning of February, and it’s up to President Trump to keep her, or replace her. But, during her speech, she countered the President’s strong opposition to banking regulations with support for those regulations.
Yellen said they’ve made the financial system safer without a big drag on economic growth or the lending ability of banking institutions. Without naming the regulatory act, she indicated that Dodd-Frank may need a few changes, and she said the Federal Reserve is committed to “evaluating” the rules and making “improvements”. But, she said that any changes should be “modest”. President Trump has threatened to give the Dodd-Frank Wall Street Reform Act a “a very major hair cut”.
Home buyers are enjoying even lower mortgage rates this week. The 10-year Treasury yield fell 6 basis points, and the 30-year fixed-rate mortgage followed with a 3-point drop to 3.86%. That’s a new low for the year. Analysts blame the lower Treasury yield on lack of inflation.
Those concerns could affect the Fed’s plan for further interest rate hikes. Just this last week, the San Francisco Fed President John Williams indicated that there might only be a few more rate hikes in the future, and the new “normal” will be well below what it’s been in the past. He said the current rate of about 1.25% is about halfway to where he thinks it should be, at about 2.5%. It was about 5% before the recession hit, but has swung wildly since 1954. They hit a record high of about 20% in 1980 and a record low of .25% in 2008, when the market collapsed.
Other Real Estate News Making Headlines:
Million Dollar Neighborhoods
High home prices are turning more and more U.S. communities into million-dollar neighborhoods. Last week, Zillow said the U.S. has gained 346 million dollar zip codes in the last three years. That brings the total up to about 1,280 compared to 1,108 in 2007. A million dollar neighborhood is defined as one where at least 10% of the homes are worth $1 million or more.
Zillow’s Chief Economist Dr. Svenja Gudell says, “As home values reach new peaks, $1 million homes are increasingly common, even in neighborhoods once considered middle class.” She says the appreciation is good for those families so long as they can afford the higher property taxes.
The metros with the most newly minted million dollar neighborhoods are along the coasts, in the San Francisco Bay Area, Los Angeles and New York. San Francisco now has a total of 125 million dollar zip codes. San Jose has 46, Los Angeles as 146, and the New York metro area has 254.
Zillow’s Home Value Index shows a median of around $200,000 for the nation. But in the million-dollar zip codes, that index is more like $900,000.
Mr. Cooper Will Pay Your Mortgage
Nationstar is now officially known as “Mr. Cooper.” To go along with the unique name, the home loan servicing company is offering a unique credit card. Mr. Cooper says it will be offering a rewards card that will help pay down the card-holder’s mortgage. It’s connected directly to the loan, and provides a 1% cash back reward on most purchases that is applied toward the principal balance.
Mr. Cooper says it’s the first “non-bank” to offer this kind of credit card, but HousingWire says GMAC Mortgage offered something similar before the housing crisis. Mr. Cooper’s chief marketing officer Kevin Dahlstrom told HousingWire that the credit card is one of several new products to help its customers “keep the dream of homeownership alive.”
Whole Foods Prices Going Down on Monday
Amazon announced that its $13.7 billion acquisition of Whole Foods is closing Monday August 28th, and that price cuts will be implemented immediately. It said in a press release that the two companies will pursue a goal to make “high-quality, natural, organic food affordable for everyone.” It says prices will be lowered right away on various best-selling organic grocery staples like bananas, avocados, brown eggs, baby kale, crunchy almond butter, apples, rotisserie chicken, and other products — did you hear any of your favorites in there?
Amazon also plans to turn the Amazon Prime membership into a rewards program at Whole Foods. Products with a Whole Foods private label like the 365 Everyday Value, Whole Foods Market, Whole Paws and Whole Catch will be available through AmazonFresh, Prime Pantry, and Prime Now features. Some Whole Foods stores will also have Amazon Lockers that shoppers can use as a shipping destination or return pick-up location for Amazon products.
Amazon’s Co-founder and CEO John Mackey says, “ We can’t wait to start showing customers what’s possible when Whole Foods Market and Amazon innovate together.” He continues, “This is just the beginning.”