The Real Estate News Brief: A Supply Chain Fix, Housing Affordability, Rental Income Side Hustle

In this Real Estate News Brief for the week ending July 24th, 2022... how Yellen would like to fix the supply chain, a return to 2007 housing affordability, and the latest way to make rental income off your property. Hi, I'm Kathy Fettke and this is Real Estate News for Investors. If you like our podcast, please subscribe and leave us a review. Economic News We begin with economic news from this past week, and reassurances from former Fed Chief Janet Yellen. She said during an interview on NBC’s “Meet the Press” that the U.S. economy is slowing down, but says that a strong job market is proof that we’re not in a recession. (1) Her words come before a week of important economic reports. Coming up in the week ahead, the second quarter GDP, inflation, consumer income and spending, and what is expected to be a three-quarter point rate hike by the Federal Reserve. Let’s rewind to this past week. Although hiring is strong, the government reports a jump in state unemployment claims. They were up 7,000 to 251,000. Wall Street economists had expected a slight decline in those initial claims. Currently, there are 1.38 million collecting unemployment checks. (2) The housing market slowdown continues. Housing starts fell in June. the Commerce Department reports that they were down 2% in June to 1.56 million new home starts. That’s also a 6.3% annual drop in starts and the lowest level since last September. Building permits were also down .6% to 1.69 million. Breaking the report down further, construction starts fell 8.1% for single-family homes while apartment starts were “up” 15%. The number for permits were similar. (3) As a real estate investor, it’s important to remember that the housing market is “local” so national numbers don’t tell the whole story. The National Association of Home Builders issued a report on permits showing the top ten markets for single-family construction. At the top of the list is Houston, followed by Dallas-Fort Worth, Phoenix, Atlanta, Austin, Charlotte, Orlando, Nashville, Tampa, and Jacksonville. Despite the overall slowdown, some markets are still fired up. (4) Demand is still strong for single family homes, but prices have gotten too high for some buyers. The National Association of Realtors says that existing home sales fell 5.4% to a seasonally-adjusted annual rate of 5.12 million homes in June. That’s the weakest they’ve been since the start of the pandemic, and compared with last year, they are down 14.2%. (5) In addition to high home prices, sales are being impacted by higher mortgage rates and a lack of more affordably priced homes. (5) Housing market conditions have weakened home builder confidence. The NAHB says the monthly confidence index dropped 12 points to 55 in July. That’s a larger-than-expected decline, and the second largest since the association created the index. As a comparison, the index was at 80 last July. (6) Mortgage Rates Mortgage rates crept a little higher last week. Freddie Mac says the average 30-year fixed-rate mortgage was 3 basis points higher to an interest rate of 5.54%. The 15-year was 8 points higher to 4.75%. (7) In other news making headlines... Yellen on Supply Chain Issues Yellen offered a suggestion for supply chain issues. She said that allied countries could strengthen their supply chains by “friend-shoring.” The term is similar to “onshoring” which refers to production or operations within our borders. (8) She says she’s not discouraging trade with any country, but says that by working more with trusted partners, supply chains would be more resilient when there’s some sort of global emergency or conflict. Housing Affordability Near 2007 Level Housing affordability is hovering near 2007 levels. A report by S&P; Global Ratings shows that homebuyers will have to pay about 28% of their income on mortgage payments by the end of this year. That’s the highest percentage since the first quarter of 2007. NAR guidelines state that a homeowner’s mortgage payment should not be higher than 25% of their paycheck. (9) That calculation is based on a 10% down payment. The analysis also shows that it will take entry-level buyers 11.3 years to save up for that down payment. It’s more than twice as long as a pre-pandemic rate of five years. Swimply There’s more ways than one to make money renting some part of your home. A website called Swimply makes it easy to rent out your pool for hours at a time. A CNBC Make It blog profiled an Oregon resident who spent $110,000 building a luxury pool ten years ago, and over the last two years has more than made that money back. (10) He says it’s important to know a lot about pool maintenance and water chemistry. He also says that he was a lot busier when there were fewer people doing the same thing because there are now a lot more pools for potential customers to choose from. That’s it for today. Join RealWealth for free here. Check the show notes for links, and remember to hit the subscribe button for the latest news on real estate, the housing market, and the economy. By subscribing, you’ll have easy access to all past and future podcasts. If you like what you hear, we would greatly appreciate a review with lots of stars! Thanks for listening. I'm Kathy Fettke. Links: 1 -https://apnews.com/article/inflation-economy-prices-janet-yellen-948009cdbc67f5b6f9742a35f7214feb 2 -https://www.marketwatch.com/story/u-s-jobless-claims-jump-to-highest-level-since-november-11658407332?mod=economic-report 3 -https://www.marketwatch.com/story/u-s-housing-starts-fall-in-june-for-the-second-straight-month-11658234929?mod=mw_latestnews&mod;=u.s.-economic-calendar 4 -https://eyeonhousing.org/2022/07/slowdown-in-single-family-permits-in-may-2022/ 5 -https://www.marketwatch.com/story/u-s-existing-home-sales-fall-for-the-fifth-straight-month-in-june-11658326211?mod=economic-report 6 -https://www.marketwatch.com/story/u-s-home-builder-confidence-plunges-in-july-nahb-reports-11658152827?mod=economy-politics 7 -https://www.freddiemac.com/pmms 8 -https://www.cnbc.com/2022/07/19/us-treasury-secretary-on-supply-chain-resilience-use-friend-shoring.html 9 -https://seekingalpha.com/news/3859754-us-housing-affordability-poised-to-fall-to-lowest-since-gfc-on-soaring-prices-rates 10 -https://seekingalpha.com/news/3859754-us-housing-affordability-poised-to-fall-to-lowest-since-gfc-on-soaring-prices-rates 11 -https://www.cnbc.com/2022/07/21/swimply-side-hustle-making-money-renting-backyard-pool-to-strangers.html