The Real Estate News Brief: Fed’s Next Rate Hike, Mortgage Rate Surge, Pets Who Sell Homes

The Real Estate News Brief - Week Ending March 26, 2022 Fed’s Next Rate Hike, Mortgage Rate Surge, Pets Who Sell Homes In this Real Estate News Brief for the week ending March 26th, 2022... the Fed’s next rate hike, the latest surge in mortgage rates, and why pets might help sell homes. 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 Federal Reserve is ramping up for bigger rate hikes. Fed policymakers are saying that inflation is much too high, and that more aggressive action may be needed, including a 50 basis point rate hike in May. San Francisco Fed President Mary Daly said at an event last week: “With the labor market so strong, inflation, inflation, inflation is at the top of everyone’s mind.” Fed Chief Jerome Powell also said the central bank may start reducing its $9 trillion balance sheet in May. The Fed’s portfolio mushroomed in size with the purchase of Treasuries and mortgage-backed securities during the pandemic. (1) Unemployment applications have hit their lowest level since 1969. They were 28,000 lower last week than the week before for a total of just 187,000 initial claims. The number of people already getting benefits was also much lower. It was 67,000 lower for a total of 1.35 million claims. As reported by MarketWatch, that’s the lowest level since the 1970’s. (2) New home sales were down in February, despite higher inventory numbers. They were down 2% to an annual rate of 772,000. If you compare this February to a year ago, sales were down 6% while the supply of new homes increased to 6.3 months. That’s the highest since 2008. So what’s happening? Prices are getting too high for many first-time buyers. The average sales price for a new home that was sold in February was $511,000 while the median was $400,600. Realtor.com’s chief economist Danielle Hale says: “A new home is not an option for many first-time homebuyers even before the impact of higher mortgage rates is considered.” (3) Pending home sales were also down in February. They were down 4.1% according to the National Association of Realtors thanks to lack of affordable inventory and rising mortgage rates. Realtor.com economist researcher, George Ratiu, says: “With mortgage rates moving toward 5%, we are seeing early signs of a shift in housing fundamentals, as many people looking for a home have hit a ceiling on their ability to afford one.” (4) Consumers don’t see their economic situation improving much in the next year. The University of Michigan consumer sentiment index fell slightly to 59.4 which is close to an 11-year low. Americans are worried about Inflation and the war in Ukraine, although they are feeling confident about finding a job. (5) Mortgage Rates Mortgage rates surged higher this last week. Freddie Mac says the average 30-year fixed-rate mortgage rose 26 basis points, to 4.42%. The 15-year was up 24 basis points to 3.63%. (6) In other news making headlines... Rents Taking Larger Share of Paychecks Renters are spending more of their paychecks on rent. According to the most recent rent report by realtor.com, Americans are generally spending 30% of their paychecks on rent, and in 14 out of 50 metros tracked, they are spending more. Realtor.com’s chief economist, Danielle Hale says: “The general rule of thumb is to keep monthly housing costs to less than 30% of your income.” Anything above that, economists considered a debt-burden for households. (7) High rents are motivating some renters to become home-buyers, but high home prices and rising mortgage rates along with a lack of inventory is forcing many to keep renting. Homebuyers On the Move The number of people moving from one state to another is hitting a new high. Redfin.com says that 32.3% of its users planned to relocate during the first two months of the year. That’s up from 26% in 2019. The data was pulled from a sample of about 2 million Redfin.com users who searched for homes in 111 metros, and looked at a minimum of 10 homes in specific areas. (8) Redfin says there are more people leaving the more expensive coastal areas for more affordable inland areas. The research also shows that people are looking to move to warmer locations. Miami, Phoenix, and Tampa have been attracting the most attention. Pets Help Sellers Sell Homes If you are selling a home, you don’t have to hide your pet. A new study from Quicken Loans shows that buyers are more than open to buying a home that has had pet living there. (9) 79% of the respondents said that seeing signs of a pet won’t discourage them. Almost 20% said that it might even increase their desire to buy a particular home, so long as there aren’t any visible signs of pet damage. Only about 1 in 10 said they might regret buying a home with a barking dog next door. 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 join RealWealth for free at newsforinvestors.com. As a member, you have access to the Investor Portal where you can view sample property pro-formas and connect with our network of resources, including experienced investment counselors, property teams, lenders, 1031 exchange facilitators, attorneys, CPAs and more. Thanks for listening. I'm Kathy Fettke. Links: 1 - https://www.reuters.com/article/usa-fed-mester/fed-policymakers-march-toward-bigger-rate-hike-in-may-iduskcn2lk1ik 2 - https://www.marketwatch.com/story/u-s-jobless-claims-fall-to-lowest-level-since-1969-11648125485?mod=bnbh_mwarticle 3 - https://www.marketwatch.com/story/new-home-sales-slide-even-though-the-inventory-of-properties-for-sale-has-hit-the-highest-level-since-2008-11648044987?mod=economy-politics 4 - https://www.marketwatch.com/story/pending-home-sales-decline-for-fourth-consecutive-month-underscoring-down-shift-in-housing-market-11648217352?mod=economic-report 5 - https://www.marketwatch.com/story/high-u-s-inflation-leaves-consumer-sentiment-stuck-at-almost-11-year-low-11648217381?mod=economy-politics 6 - https://www.freddiemac.com/pmms 7 - https://magazine.realtor/daily-news/2022/03/23/rents-taking-a-bigger-bite-out-of-pay 8 - https://magazine.realtor/daily-news/2022/03/24/buyers-moving-states-in-record-numbers 9 - https://magazine.realtor/daily-news/2022/03/23/pets-may-attract-buyers-to-homes