The Real Estate News Brief: New Retirement Plan Rules, 2022 Builder Confidence, Single-Family Rental Demand in 2023

In this Real Estate News Brief for the week ending December 31, 2022... we say goodbye to a difficult year for real estate and hello to a new year that’s filled with opportunity. You’ll also hear about changes to retirement account rules, what happened to builder confidence in 2022, and what one institutional investor thinks of single-family rentals.   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 that includes significant changes to how taxpayers save for retirement. The changes are part of the SECURE ACT 2.0 which was written into the $1.7 trillion federal spending plan just approved by Congress and President Joe Biden. Some of the more than 90 changes will take effect right away, while others will be implemented in later years.   One of the biggest changes is an increase in the age that triggers mandatory minimum distributions, or RMDs, from tax-deferred accounts. Starting January 1st of this year, the age rises from 72 years old to 73 years old. It rises again in 2033 to 75 years old. The new rules also reduce the penalty for failing to take the required RMDs from 50% to 25% or 10% if the situation is corrected in a “timely manner.” Those changes are effective immediately.   There are also changes to early withdrawal rules that will go into effect next year. They currently allow 401k withdrawals before the age of 59-and-a-half for an “immediate and heavy” financial need, but there’s a 10% tax penalty along with income tax on withdrawals. Under the new rules, taxpayers can withdraw up to $1,000 a year and self-certify that it’s for a personal or family emergency. Plus, there will be no penalty for the early withdrawal.   Under the new rules, employers will be required to automatically enroll employees in 401k or 403b plans. That will take effect in 2025. There are also changes to the amount that workers are allowed to contribute which take effect immediately. Contributions will start with a minimum of 3% to a maximum of 10%. From there, they will rise 1% each year until they reach a range of 10% to 15%. This is supposed to help people save more for retirement.   There are many other changes. You’ll find a link in the show notes to a nasdaq.com article that covers the more significant ones. (1)   Back to economic news and the latest unemployment report. Initial claims were 9,000 applications higher last week to a level of 225,000. Continuing claims were up 41,000 to 1.71 million. That’s the highest level since last February and shows signs of a cooler job market, but the data is not an indication of major layoffs. Economists do expect the job market to soften more if the Fed continues to increase short-term interest rates. The unemployment rate was 3.7% in November. The Fed is expecting it to rise to 4.6% over the course of this year. (2)   Pending home sales are down again. The National Association of Realtors say they fell 4% in November to their lowest level since April of 2020. The year-over-year rate shows a decline of 37.8%. Potential sellers are putting off plans to list their homes, thanks to high prices for new homes and the high price of a mortgage. (3)   Those high prices are coming down a bit, however. The Case-Shiller national index shows that October home prices were down .3%. The 20-city index was down .5% with a year-over-year reading that dipped below 10%. That index is now at an annual home price growth rate of 8.6%. A different report on home prices from the Federal Housing Finance Agency shows that home prices were flat in October. The agency reports an annual increase of 9.8%. (4)   Mortgage Rates   Although mortgage rates have been coming down, Freddie Mac reports that the 30-year fixed-rate mortgage was up 15 basis points last week to an average rate of 6.42%. The average 15-year is currently at 5.68%. (5)   In other news making headlines…   2022 Decline in Builder Confidence   The National Association of Home Builders is highlighting stories that have attracted the most reader attention, and one of them is the housing market turning point that happened in April of last year. That’s when the NAHB’s Housing Market Index confirmed that higher home prices, construction costs and interest rates were making homes less affordable and builders less confident about selling them. (6)   This NAHB’s monthly confidence level ended the year with a reading of just 31 in December. That’s down from 84 in December of 2021. Anything below 50 is considered negative. The current reading is the lowest it’s been since the middle of 2012. There is some upside to this story. Builders say that lower mortgage rates and slower price growth is luring buyers back to the market.   Investors Prep for 2023 SFR Demand   The single-family rental space is attracting another big player. Global commercial real estate firm Newmark is formalizing its Single Family Rental group. The press release says that the group will focus on investment sales, joint-venture equity placement and finance.   Newmark’s Jeff Day says of the plan: “With Newmark’s significant presence in the multifamily and alternative real estate sectors, and a growing institutional interest in the SFR space, formalizing this practice was a logical next step.” Newman says its SFR group has already participated in transactions worth more than $15 billion. The press release commented about strong demand among renters for detached homes and an expectation that that will continue in the coming years.   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 about the mom-and-pop version of single-family rental investing at our RealWealth website. You can sign up for free at newsforinvestors.com, and have access to our educational materials, our data, our experienced investment counselors, and our curated list of real estate professionals.   Thanks for listening. I'm Kathy Fettke.   Links:   1 - https://www.nasdaq.com/articles/these-are-the-biggest-changes-to-retirement-plans-under-secure-act-2.0   2 - https://www.marketwatch.com/story/jobless-claims-move-higher-in-latest-week-11672321106?mod=economic-report   3 - https://www.marketwatch.com/story/u-s-pending-home-sales-fall-4-in-november-to-the-lowest-level-since-april-2020-11672239997?mod=economy-politics   4 - https://www.marketwatch.com/story/home-price-growth-falls-in-october-as-market-feels-effect-of-high-mortgage-rates-11672149882?mod=economic-report   5 - https://www.freddiemac.com/pmms   6 - https://eyeonhousing.org/2022/12/top-posts-of-2022-housing-market-at-inflection-point-as-builder-confidence-continues-to-fall/   7 - https://www.nmrk.com/insights/press-releases/newmark-introduces-national-single-family-rental-group