In this week’s Real Estate News Brief… rents hit an all-time high, Chicago bumps San Francisco as the greenest city, and Amazon wants to put warehouses underwater.
We begin with economic news from Market Watch:
Sales of existing homes dropped to their lowest level since February as buyers pick through a limited supply. The National Association of Realtors said on Monday that existing-home sales fell to a seasonally adjusted annual rate of 5.52 million in June. Zillow Chief Economist Svenja Gudell says: “It’s difficult to sell homes when there are so few available.” She says we are bordering on an “inventory crisis”.
On Tuesday, the S&P/Case-Shiller 20-city Index revealed a slight pullback in the growth of home prices, but only by a tenth of a percent. They rose 5.7% during the three-month period that ended in May, and are still rising faster than wages.
The Conference Board announced that consumer confidence rose to its second highest level in 16 years. It hit 121.1 in July compared to 117.3 in June. The confidence level has gone up as the employment situation improves.
On Wednesday, the Commerce Department reported an increase in new home sales, to a seasonally adjusted annual rate of 610,000. That was almost 1% higher than May’s rate but was also a disappointment for Wall Street analysts.
The Federal Reserve decided against another rate hike in its latest meeting. The central bank committee said on Wednesday, that it will hold the overnight lending rate at the current level between 1% and 1.25%.
The Commerce Department reported on Thursday that orders for durable goods hit a three-year high in June. They surged to 6.5% and flew past what economists had expected. Market Watch says more money is flowing as companies and investors anticipate business-friendly policy changes from the Trump administration.
The Census Bureau also reported the second quarter rental vacancy rate at 7.3%. That’s about half a percent higher than the last quarter. The homeowner vacancy rate is slightly lower than the last quarter, at 1.5%.
And on Friday, we heard that the GDP for quarter two was 2.6%. That’s up from a revised 1.2% in the first quarter, and zooms past the 2% minimum the central bank likes to see for a potential rate hike. It’s also edging much closer to the 3% GDP that President Trump has promised.
Interest Rates Down Again
Freddie Mac says the 30-year fixed-rate mortgage fell 4 basis points to 3.92%, but the Treasury yield also rose 5 basis points. This could lead to slightly higher interest rates next week since mortgage rates tend to follow those yields. The decision against a rate hike and the central bank’s plan to begin the unwinding of its balance sheet could also affect home loan rates.
Other Real Estate News Making Headlines:
New Rules on Freddie Mac’s Low Down Program
Freddie Mac announced that it’s changing the rules on its low down payment mortgage program. HousingWire reports that lenders will no longer be allowed to provide some of the 3% down requirement necessary for the transaction. Borrowers must come up with the entire sum themselves.
The program is meant to help first-time homebuyers and other qualified individuals who don’t have enough cash for a down payment. To help them get the loan, lenders have often provided 2% of the down as a “gift” or “grant”. They will also often roll that money back into the loan.
Freddie Mac says lenders can no longer help pay the 3% down, and they can no longer roll these kinds of perks back into the loan. The new rules will go into effect for loans which settle on or after November first.
Rents Hit New All-Time High
Rents have hit a new all-time high. Census Bureau data shows that asking rents jumped 7.4% year over year. The national median went from $864 to $910 in the first quarter. The biggest increase in rents happened in the Western and Northeast regions, where median rents spiked 16 and 21% respectively.
Housing experts say the increase in rents runs contrary to a rise in the rental vacancy rate. However, they say higher rents are likely good news for the central bank, and the need for a little more inflationary activity.
Huge Houses for Less than $100,000
With home prices in many areas climbing to record heights, it may seem like an impossibility to find larger, family-sized homes for $100,000. But there are still markets where you can do just that. ATTOM Data Solutions just came out with a report that identified five cities where you can buy a “huge” house for that amount of money.
These houses range in size from about 2,000 square feet in Birmingham, Alabama, to about 3,500 square feet in Detroit, Michigan. Homes in Cleveland, Ohio; Dayton, Ohio; and Jackson, Mississippi fall in the middle of that range.
Big Profits for Home Sellers
ATTOM also says that homeowners are realizing big profits right now, when they sell. The company released a report that shows an average gain of $51,000 for homeowners that sold in the second quarter. That’s the highest level since 2007, when the average gain was $57,000.
Chicago Named “Greenest City”
The Windy City has taken on a new title as the “greenest city” in the nation. Chicago pushed San Francisco out of the top spot in the latest Green Building Adoption Index. The survey shows that 66% of the city’s office buildings have been green certified. The buildings are certified to either an Energy Star or LEED standard, or both. San Francisco took second place with almost 62% of its office buildings as green certified. Atlanta, Houston, and Minneapolis/St. Paul round out the top five.
The survey names the top 30 cities for green certification, and while most of the cities on the list are among the biggest in the nation, the city of Walnut Creek in the San Francisco Bay Area placed 12th on the list. The RealWealth Headquarters is located in Walnut Creek.
Amazon Patent for Underwater Warehouses
Amazon has filed a patent for a futuristic warehouse that’s located “underwater”. The publication “Dezeen” reports that Amazon filed a patent earlier this year to use lakes, reservoirs, and pools of water as fulfillment centers. Merchandise would be placed in waterproof boxes and dropped into the water. Each box would have an air canister that could be triggered to inflate a balloon. When the merchandise inside the box is needed, a signal would be sent to the air canister, the balloon would inflate, and the box would rise to the surface where it could be picked up, by delivery teams, or even by “drones”.
The underwater warehouse patent follows one for “flying warehouses”, that we learned about last year. In that scenario, airships would serve as “airborne fulfillment centers”. They would be stationed over cities during periods of high demand, and would house an army of delivery drones. The drones could be dispatched rapidly for fast deliveries. The patent suggests that the airships would be most useful for areas with difficult access, such as sporting events and music festivals.