The Real Estate News Brief: Big Surge in Housing Inventory, Rent Growth Rocket Ship, Supersized Social Security COLA

In this Real Estate News Brief for the week ending July 16th, 2022… a big surge in housing inventory, the rent growth rocket ship, and a supersized prediction for Social Security’s 2023 COLA. 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 another surprise surge in the consumer price index. The Labor Department says the consumer price index or CPI rose 1.3% last month. That puts the annual rate of inflation at a 41-year record high of 9.1%. That’s up from 8.6% in May. The core rate was a little more encouraging. It excludes food and fuel because those prices are so volatile. That was up .7% for June, which brought the annual rate “down” a tenth of a percent to 5.9%. (1) Wholesale prices also jumped higher. The producer price index was up 1.1% in June, mostly due to higher gas prices. That raises the annual rate from 10.9% to 11.3% - for wholesale prices. Again the core rate offered better news. It was only up .3%. That brought the annual rate down slightly, to 6.4%. (2) Inflation isn’t discouraging consumer spending. The latest report on retail sales shows a solid 1% increase in June, but people are also buying things at higher prices. When you adjust for inflation, it appears that retail sales fell slightly. Senior economist for BMO Capital, Greg Daco, told MarketWatch: “American households are spending nearly as much money as they did earlier, but largely to keep up with higher prices, not to actually buy more stuff.” (3) Initial jobless claims crept higher. The Labor Department says there were about 9,000 more claims last week than the week before, for a total of about 244,000 applications. The number of continuing claims dropped by a lot more. They were down about 41,000 to 1.33 million. (4) Mortgage Rates Mortgage rates aren’t sitting still. After a big drop the week before last, they were up 21 basis points last week. Freddie Mac says the average 30-year fixed-rate mortgage was 5.51%. The 15 year was up 22 basis points, to 4.67%. (5) In other news making headlines... Home Buyers Canceling Contracts More and more home buyers are backing out of their contracts because of the high prices. A new Redfin report says home sale cancellations were just under 15% in June. That’s the highest level of contract cancellations since the start of Covid, when the economy briefly shut down. One year ago, in 2021, home buyers were canceling about 11% of their deals. (7) Redfin’s deputy chief economist, Taylor Marr, says we’re seeing the increase for a number of reasons. One is that home buyers have less competition and more time to back out of a deal if inspections or appraisals don’t go their way. They may also get a higher mortgage rate than they expected and discover they no longer qualify for a particular home. Or they may feel that home prices will decline and they could get a better deal by waiting. There’s also worry about a recession, and how that could impact their paychecks. Housing Inventory Rebound Meantime, a slowdown in sales is having a positive impact on inventory, which is quickly increasing. Calculated Risk reports that it was up 3.2% over the July 4th weekend. That’s unusual because it’s typically a busy weekend for homebuyers, and inventory levels are usually flat or slightly lower. (8) On a year-over-year basis, inventory is up around 32%, but the inventory problem has not yet been resolved. It’s still at historically low levels. While it’s up year-over-year compared to last year, it’s down 25% compared to the same week in 2020. Soaring Rents Could Be Peaking With more and more homebuyers getting priced out of the market, rental demand is strong, and that’s pushing rents higher. The Labor Department says the rent of a primary residence was .8% higher in June that it was in May. That’s up from a .6% increase the month before. (9) Some economists say that rent growth “may” be peaking. Moody’s chief economist, Mark Zandi, says: “Market rent appears to be topping out, as renters are not able to afford the higher rents and are balking.” He says: “More rental supply is also coming.” RealPage reports that 836,000 multifamily units are under construction, which is the most since 1973. Huge COLA Predicted for Social Security People getting Social Security could get a big pay raise next year. The Senior Citizens League is estimating a 10.5% cost-of-living adjustment, which is also known as a COLA. The exact amount will depend on what kind of inflation we see for the rest of the year. (10) The average monthly social security check is $1,668. A 10.5% increase would bump that up $175 to a total of $1,843 That’s it for today. Check the show notes for links. And please remember to hit the subscribe button, and leave a review! You can also get more in-depth information about the housing market at our website. We have hundreds of articles and webinars that you can check out for free. It’s also free to join for access to resources that could help you find and purchase rental properties around the country. Thanks for listening. I'm Kathy Fettke. Links: 1 -https://www.marketwatch.com/story/coming-up-consumer-price-index-for-june-11657713665?mod=economy-politics 2 -https://www.marketwatch.com/story/u-s-wholesale-prices-surge-again-and-signal-inflation-is-still-running-hot-11657802432?mod=economic-report 3 -https://www.marketwatch.com/story/u-s-retail-sales-climb-1-in-june-but-higher-prices-a-big-reason-why-11657889085?mod=economic-report 4 -https://www.marketwatch.com/story/u-s-jobless-claims-rise-to-highest-level-since-last-november-11657802226?mod=newsviewer_click 5 -https://www.freddiemac.com/pmms 6 -https://www.wealthmanagement.com/multifamily/rents-us-rise-fastest-pace-1986-buoying-inflation 7 -https://www.calculatedriskblog.com/2022/07/housing-inventory-july-11th-update-up.html 8 -https://www.wealthmanagement.com/multifamily/rents-us-rise-fastest-pace-1986-buoying-inflation 9 -https://www.cnbc.com/2022/07/13/social-security-cost-of-living-adjustment-could-be-10point5percent-in-2023.html