The Real Estate News Brief: Rate Hike Forecasts, New Rent Growth Record, Disney Gets Into Housing

In this Real Estate News Brief for the week ending February 19th, 2022… what economists are saying about rate hikes, where rents are growing the fastest, and a new residential development plan for Disney fans. 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 what economists are saying about inflation and rate hikes. St. Louis Fed President James Bullard believes the Fed should push rates up a full point in the near term. His comments about the need for more aggressive action is also pushing rate hike forecasts as high as seven this year. Bullard told CNBC: “I do think we need to front-load more of our planned removal of accommodation than we would have previously.” (1) The government reported last week that the annual rate of inflation hit 7.5%. (2) Unemployment applications were up 23,000 last week, but economists are not concerned about the strength of the job market. As CNBC reports, millions of businesses have open positions they’d like to fill, so we probably won’t see many layoffs. Currently, there are 11 million job openings. (3) Existing home sales were up almost 7% from December to January for a seasonally-adjusted annual rate of 6.5 million homes. That’s despite the tight inventory which has now dropped to a 1.6-month supply. Economists had predicted sales of 6.1 million homes. Sales were up in all parts of the country, but sales were strongest in the South with a 9% increase. (4) Builders are letting up on the gas pedal to some degree. The Census Bureau reported that housing starts were down 4% in January. Economists say the decline reflects a number of obstacles that builders are dealing with including supply-chain issues, COVID-19 cases, and bad weather in some areas. Builders are also worried that higher mortgage rates could impact demand. Permits were up 1%. The chief economist at Pantheon Macroeconomics, Ian Shepherdson, told CNBC: “The housing market is set for a sustained softening over the next few months.” (5) A monthly survey on homebuilder confidence was also down. The National Association of Home Builders says it fell for a second straight month, mostly due to supply chain delays. NAHB Chairman Jerry Konter says: “Production disruptions are so severe that many builders are waiting for months to receive cabinets, garage doors, countertops, and appliances.” (6) Mortgage Rates Mortgage rates have now jumped to their highest level since May 2019. Freddie Mac says the average 30-year fixed-rate mortgage was up 23 basis points to 3.92% last week. The 15-year was up 22 points to 3.15%. (7) In other news making headlines… Rents Are Surging Higher Rent growth hit a new record in January. Redfin says the average asking rent was up 15.2% year-over-year. Rent growth was the highest in Portland, Oregon, and Austin, Texas at 39% and 35% respectively. Other metros in the top ten list include the Florida metros of Tampa, Fort Lauderdale, West Palm Beach, and Miami. They are all in the 30% range. (8) Redfin’s chief economist Daryl Fairweather says that housing is expensive whether you are renting or buying. Redfin says the average monthly rent is now $1,891 while the average monthly mortgage payment is $1,595. Many consumers can’t afford to buy a home, however, because of the down payment. Investors Buying Record Share of Homes That kind of rent growth is great motivation for investors who bought 18.4% of U.S. homes in the fourth quarter. That’s almost 13% higher than Q4 of last year. Redfin says that investors are taking advantage of the strong demand for rentals and the incredible rent growth. (9) Redfin says that investors are paying high prices for homes because of that rent growth. Many are also paying in cash, which eliminates the expense of a loan. A typical price point for investors is about $433,000. That’s up 10% from last year. Disney’s Housing Development Plan If you love Disney theme parks, you may get the opportunity to enjoy the magic as your primary residence. The Walt Disney Company announced a residential development project called “Cotino” near Palm Springs, in Rancho Mirage. It’ll be a 24-acre “grand oasis featuring clear turquoise waters with crystal lagoons.” (10) It will house residents of all ages with a special section for the 55-plus age group. Homes will range in size from condos and single-family homes to larger estates. There will be a waterfront clubhouse, club-only beach area, water activities, and Disney events throughout the year. Disney cast members will run the community association. Day passes will also be available to non-residents. If you don’t want to live in the desert, Disney says it is working on other locations for future developments as part of its “Storyliving by Disney” long-term plan. 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.cnbc.com/2022/02/14/bullard-say-the-fed-needs-to-front-load-tightening-because-inflation-is-possibly-accelerating.html 2 -https://www.marketwatch.com/story/coming-up-consumer-price-index-11644498273 3 -https://www.marketwatch.com/story/u-s-jobless-claims-jump-23-000-to-248-000-11645105161?mod=economy-politics 4 -https://www.marketwatch.com/story/coming-up-u-s-existing-home-sales-11645195810?mod=economic-report 5 -https://www.marketwatch.com/story/coming-up-u-s-housing-starts-11645104312?mod=newsviewer_click 6 -https://www.cnbc.com/2022/02/16/builders-are-waiting-months-to-get-cabinets-and-garage-doors.html?__source=newsletter%7Ceveningbrief 7 -http://www.freddiemac.com/pmms/ 8 -https://finance.yahoo.com/news/real-estate-investors-buying-record-140000275.html 9 -https://www.redfin.com/news/redfin-rental-report-january-2022/ 10 -https://magazine.realtor/daily-news/2022/02/18/disney-to-build-themed-housing-development