The Real Estate News Brief: Double Dose of Inflation Data, Preventing a Housing Market Crash, Remote Worker Worries

In this Real Estate News Brief for the week ending February 18th, 2023... a double dose of inflation data, why investors might save the day for the housing market, and what remote workers are worried about this winter.   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. The government released “two” inflation reports, that show we’re not making as much progress as we’d like in taming those high prices. The Consumer Price Index or CPI shows that the cost of living was up .5% in January, with a slight drop in the annual rate from 6.5% to 6.4%. The core rate, which omits food and gas, was also higher than expected at .4% for January and an annual rate of 5.6%.   Most of the increase was due to higher housing costs and gas prices, and was higher than Wall Street economists expected. Rents were up .7% in January while the yearly cost for shelter jumped to a new peak of 7.9%. Housing is the single largest CPI category, but it’s also a lagging indicator by about six months. (1)   The latest Producer Price Index or PPI was also released and shows a .7% jump for January. Economists had expected about half that much. The annual rate is down from 6.5% to 6% however, but both reports show that inflation is still well above the Federal Reserve’s 2% target. (2)   Meanwhile the job market is showing stubborn resilience against the Fed’s effort to slow the economy. Initial jobless claims were still below 200,000 for a fifth week in a row. Ongoing claims rose slightly to 1.7 million. Both readings are still low, although the continuing claims have been rising gradually since last spring. (3)   Housing starts were down again, thanks to builder concern about a lull in buying activity. The Commerce Department says they were down a seasonally adjusted 4.5% in January to 1.31 million. As MarketWatch reports, construction is now at its lowest level since June of 2020 with the annual rate of housing starts off by 27.3%. But, builders are becoming more confident about an increase in sales, with signs that they plan to increase production in the coming months. (4)   The National Association of Homebuilders says the home-builder confidence index is now up to 42. It’s still below the breakeven point of 50 but it’s an 11 point jump from December. (5)    Mortgage Rates   The rate for a 30-year fixed-rate mortgage didn’t move much this past week. Freddie Mac says the average was up two basis points to 6.32%. But the 15-year was up a quarter of a point, to 5.51%. (6)   In other news making headlines…   Will Investors Prevent a Housing Market Crash?   A billionaire real estate fund manager is speculating that investors will prevent a housing market crash. The rapid rise in home prices combined with higher interest rates have sidelined a lot of buyers, and there’s speculation that we’ll end up seeing a housing market crash. But Grant Cardone told Benzinga that “investors will re-enter the market before it starts teetering toward a crash. He apparently plans to be one of those investors. (7)   He said in a statement: “Investors will step in to pick up single-family homes at lower prices with less competition. That being said, there will be no housing crash. Investors, like myself, will save the day and step in to buy the home.”   Strong Year Expected for Build-to-Rent SFRs   A new analysis of Census Bureau data shows the market share of build-to-rent homes is growing, and the trend is expected to continue. The National Association of Home Builders reports a 6% increase in build-to-rent starts during the fourth quarter of last year. That’s about 17,000 homes, with a yearly total of about 69,000. Compared to 2021, that’s a 33% increase. (8)   The numbers only include homes that were specifically built for renting, and not for homes that were sold to another party for rental purposes. Based on industry surveys, the NAHB estimates that the build-to-rent market share is higher by another 5% or more if you include those homes.    Remote Work Getting Too Expensive for Some Workers   While many remote workers love the freedom to work from home or wherever, the winter months have apparently been a wake-up call for some. Remaining at thome means higher heating bills, and with the rising cost of energy, that’s turning into a big expense for some people. (9)   Internet provider Sky Connect conducted a survey among 1,000 remote workers and found that 87% are worried about their energy bills. Many said they have been forced to find another place to set up shop, like a local cafe. The only downside is that internet service may not be as reliable.   The upside is the support of local businesses, and the need for those businesses to provide the kind of working environment that will keep those remote workers happy when they are not working from home.    That’s it for today. Check the show notes for links. And please remember to join our network of investors at newsforinvestors.com, and subscribe to our podcast. Our podcast team would also greatly appreciate a review.   Thanks for listening. I'm Kathy Fettke.   Links:   1 - https://www.marketwatch.com/story/cpi-shows-u-s-inflation-still-sticky-e08c9671?mod=economic-report   2 - https://www.marketwatch.com/story/wholesale-inflation-surges-in-early-2023-ppi-shows-2efefb24?mod=economy-politics   3 - https://www.marketwatch.com/story/jobless-claims-stay-below-200-000-for-fifth-straight-week-labor-market-still-hot-b7f7aa9e?mod=economy-politic   4 - https://www.marketwatch.com/story/u-s-housing-starts-fall-by-4-5-in-january-to-the-lowest-level-since-june-2020-3aebe306?mod=search_headline   5 - https://www.freddiemac.com/pmms   6 - https://www.businessinsider.com/real-estate-investors-will-save-us-housing-market-from-crash-2023-2   7 - https://eyeonhousing.org/2023/02/single-family-built-for-rent-growth-strong-in-2022/   8 - https://fortune.com/2023/02/16/remote-workers-wfh-expensive-utility-costs-sky-connect/