The Real Estate News Brief: Loan Rates Hit Home Prices, Rent Growth Slows, Lumber Prices Retreat

In this Real Estate News Brief for the week ending January 7th, 2023... home loan rates are hitting home prices, rent growth slows on apartments and single-family rentals, and lumber prices have returned to pre-pandemic levels.   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. Federal Reserve officials are seeing a long-term need for higher interest rates, according to the minutes of their last meeting. They raised the short-term rate by a half point at that meeting to a range of 4.25% to 4.50%. That’s after four three-quarter point rate hikes during past meetings. Minneapolis Fed President Neel Kashkari sees the federal funds rate going as high as 5.4%, or higher if inflation doesn’t settle back down. Their preferred inflation gauge showed a core rate of 4.7% in November, which is well above their target rate of 2%. (1)   At this point, the economy remains strong with a Q4 GDP of 3.9% and a job market that is running hotter than the Fed would like to see. Last week, unemployment applications fell to a 3-½ month low of 204,000. As reported by MarketWatch, jobless claims were down in 30 of the 53 states and U.S. territories. Continuing claims were also lower by 24,000 to a total of 1.69 million. This kind of data shows that the economy continues to grow as the Fed raises rates to slow the economy and tamp down inflation. (2)   The latest report on job growth shows that U.S. companies added 223,000 jobs in December and the unemployment rate dipped from 3.6% to 3.5%. That’s more proof of economic growth, but the report also shows that wage growth is slowing down. As MarketWatch reports, hourly wage growth was only up .3% in December to an annual rate of 4.6%. That’s down from 4.8% last month. (3)   The latest report on job openings shows that they decreased slightly from October to November, to a total of 10.5 million. It also shows that workers are quitting in high numbers. Both are signs of a strong job market. (4)   We have a bit of housing market news. The National Association of Home Builders released its construction spending report for November which shows a .2% increase. That’s higher than a forecast by Wall Street analysts who expected a .4% drop. Private residential construction was down half a point while private non-residential spending was up almost two points. (5)   Mortgage Rates   Mortgage applications were down last week, as rates moved higher. Freddie Mac says the average 30-year fixed-rate mortgage was up 6 basis points to 6.48%. The 15-year was up 5 points to 5.73%. (6)   It’s been a roller coaster ride for mortgage rates. Rates were subsiding at the beginning of December, but they surged again during the second half of the month. According to the Mortgage Bankers Association, mortgage application volume was down 13.2% during the last two weeks of the year. For refinancing loans, there was a bigger drop of 16.3%. (7)   In other news making headlines...   High Loan Rates Hit Home Prices   Higher mortgage rates are taking a bite out of home price growth. According to CoreLogic data, annual home price growth dropped below 10% for the first time in almost two years. It was down 8.6% and is now 2.5% lower than it was last spring and falling. Analysts expect to see “negative” home price growth sometime this spring, before it bounces back into the 2 to 3% range, next fall. (8)   The Sun Belt states are showing the highest home price growth, with Florida, South Carolina, and Georgia leading that list. Washington, D.C. is at the bottom, with a current year-over-year reading of 1.2%.   Rent Growth Declines Faster than Normal   Rent growth is also slowing down. Apartment List’s National Rent Report shows that apartment rent growth was down in December, for a fourth month in a row to an annual rate of 3.8%. That’s a far cry from the 17.6% rate of growth in 2021. (9)   Single-family rent growth is showing more strength. According to data from CoreLogic, single-family rents are still growing at an annual rate of 8.8%. That’s the lowest rate of appreciation we’ve seen in more than a year, but it’s also about three times higher than it was before the pandemic.   Lumber Prices Come Back to Earth   Lumber prices have finally come back down to earth. According to industry experts, they are now around $375 for 1,000 board feet of framing lumber. That’s cheaper than pre-pandemic levels of around $400, and much less than a pandemic peak of $1,733. (10)   Lumber prices are usually the highest in April and May so some of the price drop is due to the season. But the experts are not expecting to see another huge run-up in prices next Spring.   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 find out more about real estate investing as a member of RealWealth. It’s free to join at newsforinvestors.com.    Thanks for listening. I'm Kathy Fettke.   Links:   1 - https://www.cnbc.com/2023/01/04/fed-minutes-december-2022-.html   2 - https://www.marketwatch.com/story/jobless-claims-fall-to-3-1-2-month-low-of-204-000-in-sign-labor-market-still-too-hot-for-the-fed-11672926160?mod=economy-politics   3 - https://www.marketwatch.com/story/u-s-adds-223-000-jobs-in-december-and-jobless-rate-matches-55-year-low-of-3-5-11673012538?mod=economy-politics   4 - https://www.marketwatch.com/story/u-s-job-openings-stay-high-at-10-5-million-and-show-labor-market-still-very-strong-11672845265?mod=mw_latestnews   5 - https://www.marketwatch.com/story/construction-spending-rises-by-0-2-in-november-11672758912?mod=economic-report   6 - https://www.freddiemac.com/pmms   7 - https://www.cnbc.com/2023/01/04/mortgage-demand-plunges-interest-rates-rise.html   8 - https://www.cnbc.com/2023/01/03/home-price-gains-weaken-november.html   9 -  https://calculatedrisk.substack.com/p/rents-continue-to-decline-more-than   10 - https://www.calculatedriskblog.com/2023/01/update-framing-lumber-prices-down-67.html