– US single-family rent prices increased 3% year over year in July 2018—
– Orlando had the highest year-over-year rent price increase at 6.4% in July 2018
– Low-end rental prices were up 3.9% compared to high-end price gains of 2.7% in July 2018
CoreLogic released its latest Single-Family Rent Index (SFRI), which analyzes single-family rent price changes nationally and among 20 metropolitan areas. Data collected for July 2018 shows a national rent increase of 3%,* compared to 2.7% in July 2017. Low rental home inventory, relative to demand, fuels the growth of single-family rent prices. The SFRI shows that single-family rent prices have climbed between 2010 and 2018. However, year-over-year rent price increases have slowed since February 2016, when they peaked at 4.1%, and have stabilized over the last year with a monthly average of 2.7%. High-end rentals continued to dampen national rent growth in July 2018, despite accelerating rates of increase among this tier. High-end rentals, defined as properties with rent prices greater than 125% of a region’s median rent, saw rent increases of 2.7% year over year in July 2018, up from a gain of 1.9% in July 2017. Rent prices among low-end rentals, properties with rent prices less than 75% of the regional median, increased 3.9% in July 2018, down from a gain of 4.3% in July 2017.
Of the 20 metros analyzed, Orlando had the highest year-over-year increase in single-family rents in July 2018 at 6.4% (compared with July 2017), officially outpacing Las Vegas where rent prices led the nation throughout the first half of 2018. Las Vegas experienced the second highest rent prices in July 2018 at 5.7%, followed by Tucson at 4.2%. Seattle experienced the lowest rent price increase in July 2018 at 1.1%. This is the first time since the start of the year that Honolulu did not see the lowest rent price increase among the 20 analyzed metros. Rent prices in Honolulu stopped decreasing in May 2018 after seven months of decline. Metro areas with limited new construction, low rental vacancies and strong local economies that attract new employees tend to have stronger rent growth. Both Orlando and Las Vegas experienced high year-over-year rent growth, driven by employment growth of 4.3% and 3.9% year over year respectively. This is compared with the national employment growth average of 1.6%, according to data from the United States Bureau of Labor Statistics. St. Louis experienced the lowest employment growth, which could be a factor in its low rent growth of 1.8%. Rent prices continue to increase in areas affected by last year’s hurricanes like the Houston metro area, which experienced growth of 3.8% year over year in July 2018. This is down from the metro’s 2018 peak of 4.4% in May 2018. However, it is up from a 1.2% increase in October 2017, which was the first rent increase for Houston since April 2016. “Single-family rents were quick to respond to the late-summer hurricanes in 2017 with increased rental demand showing up in higher rents in just one-two months after the disasters,” said Molly Boesel, CoreLogic principal economist. “Similar movements in rents could be seen in metro areas affected by Hurricane Florence in the following months.”
Trade talks with Canada to resume
Canada’s foreign minister will be back in Washington on Wednesday to resume talks aimed at reaching an agreement on a new trade deal with the US to replace NAFTA. Chrystia Freeland will meet with US Trade Representative Robert Lighthizer as a US-imposed deadline of Oct. 1 looms. It will be the first meeting between the two officials in eight days. Lower-level officials have reportedly been negotiating in recent days. American business and political leaders are increasing the pressure on Canadian Prime Minister Justin Trudeau to agree on a deal to renew NAFTA (North American Free Trade Agreement) and drop his insistence that no deal is better than a bad deal, according to Reuters. The two sides are said to be far apart in some areas and Trudeau says his Liberal government will walk away, if necessary. US negotiators are pressing for more access to Canada’s protected dairy market. US House Majority Whip Steve Scalise, R-La., issued a statement Tuesday citing “a growing frustration with many in Congress” over Canadian negotiating tactics and suggested Canada could be left out of NAFTA. Last month, President Trump announced a side deal with Mexico and made clear he was prepared to exclude Canada, if necessary. The United States takes 75% of Canada’s goods exports and Trump is threatening to impose tariffs on autos.
NAR – Realtors view technology as increasingly valuable for business, competition
As technology continues to transform and modernize the real estate industry, Realtors®, members of the National Association of Realtors®, are focused on adapting to and remaining at the forefront of this change. Last month, NAR kicked-off the inaugural Innovation, Opportunity & Investment Summit in San Francisco, where Realtors® joined real estate technology companies and the investment community to discuss evolutions in real estate technology and strategies for Realtors® to keep up with these trends. “During the iOi Summit, Realtors® collaborated with leading technology firms to identify Realtor®-friendly technology tools and resources. The summit is a part of an ongoing process of creating a dynamic, competitive real estate market that will help NAR advance our members-first mission for years to come,” said NAR CEO Bob Goldberg. Following the iOi Summit, NAR developed a survey focused on Realtors® day-to-day use of technology and analyzed ways technology continues to change how Realtors® and real estate businesses operate. According to the 2018 REALTOR® Technology Survey, Realtors® have spent countless hours and millions of dollars advancing real estate technologies and keeping up with the latest trends in order to further their business. “The iOi Summit and the Realtor® Technology Survey are both initiatives that help us better understand Realtors® use of technology, embrace change and identify the business technology tools of the future. Both are part of my vision as CEO, advocating for technologies that are Realtor®-centric and ensure a competitive market for consumers throughout the real estate transaction,” said Goldberg.
According to the survey, Realtors® continue to find the most value in current technology tools that increase efficiency and enhance remote work capabilities. The three most valuable technology tools Realtors® used in their businesses, excluding email and cell phones, were local MLS websites/apps (64%), lockbox/smart key devices (39%), and social media platforms (28%). As the real estate market becomes more dynamic and competitive with advances like smart technology, Realtors® are becoming more familiar with smart home and Internet connected devices. Realtors® always stay in touch with the latest trends buyers want in their homes. The survey found that Realtors® are most familiar with security devices (19%), home-connected wearable devices (12%), and home comfort devices (12%). While the majority of agents are satisfied with the technology tools provided by their broker, they do want some additional tools. When asked what additional technology tools Realtors® would like to see their broker provide in the future, respondents most wanted to see predictive analytics (36%), CRM tools (35%), and transaction management software (25%). According to the survey, 41% of Realtors® were somewhat satisfied with MLS-provided technology and nearly 29% were extremely satisfied with their MLS’s technology offerings. Only two% of respondents do not use any of the technology tools or services that their MLS offers. The tech tools that have given respondents or their agents the highest number of quality business leads in the last year were social media (47%), their MLS site (32%), their brokerage’s website (29%), and listing aggregator sites (29%).
Tesla chief Elon Musk’s comments spur criminal investigation
Electric automaker Tesla is under criminal investigation by the Department of Justice over comments made by CEO Elon Musk, Bloomberg reported Tuesday, citing two people familiar with the matter. The news sent shares of Tesla lower during Tuesday’s trading session. The company is reportedly being investigated for fraud after Musk rattled investors last month when he announced on Twitter that he was considering taking the company private, a process for which he claimed funding had already been “secured.” He offered no concrete details on a proposed strategy, but specified a buyout price of $420 per share. That sent shares soaring and raised concerns Musk made the announcement to give Tesla’s stock price a boost. But he later revealed that there was no concrete funding deal in place, and eventually announced he had decided it would be better for Tesla to remain a public company. The Justice Department declined to comment. A Tesla spokesperson said the company received a voluntary request for documents from the DOJ following Musk’s announcement about taking the company private, and Tesla has been “cooperative.” “We respect the DOJ’s desire to get information about this and believe that the matter should be quickly resolved as they review the information they have received,” the spokesperson said, adding that Tesla has not received a subpoena, request for testimony or any other formal process. Sources told Bloomberg the criminal investigation is still in its early stages. Last month, Musk said during an interview with The New York Times that he wrote the tweet in his car on the way to the airport and no one reviewed it. The billionaire businessman said at the time he did not regret sending the post, having previously offered the rationale via blog post that he wanted all of his shareholders to be made aware of the situation simultaneously.
Housing market warms to buyers
For housing, it has been a seller’s market for many months but now, with low supplies and rising prices, this trend could be reversing. An analysis of the housing market by First American Chief Economist Mark Fleming and Senior Economist Odeta Kushi noted that housing inventories have increased modestly since December 2017, which marked a 25-year-low point. In December 2017, only 166 homes out of 10,000 were for sale. In July 2018, this number increased to 174 per 10,000. According to Fleming, “While this is still very low, it’s the first time we’ve reached this level since July 2017 and a slight improvement from December’s 25-year-low point.” The supply shortage is easing only in higher-end homes nationally. In July, the inventory of homes worth less than $200,000 was down 15.6% nationally versus a year ago, while the supply of homes that cost more than $350,000 increased 5.7% – with the economists citing realtor.com data. According to Fleming and Kushi, potential homeowners should still “take heart” from the recent inventory increase and the slowdown in price appreciation, which are potential signals of good news for those interested in buying a home. “These factors indicate that the seller’s market may be coming to an end. It’s been six years since the end of the last one, but the rare buyer’s market may be the housing market’s future,” according to Fleming.
NAHB – builder confidence remains firm in September
Builder confidence in the market for newly-built single-family homes remained unchanged at a solid 67 reading in September on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). “Despite rising affordability concerns, builders continue to report firm demand for housing, especially as millennials and other newcomers enter the market,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La. “The recent decline in lumber prices from record-high levels earlier this summer is also welcome relief, although builders still need to manage construction costs to keep homes competitively priced.” “A growing economy and rising incomes combined with increasing household formations should boost demand for new single-family homes moving forward,” said NAHB Chief Economist Robert Dietz. “However, housing affordability is becoming a challenge, as builders face overly burdensome regulations and rising material costs exacerbated by an escalating trade skirmish. Interest rates are also forecasted to keep rising.” Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor. The HMI index measuring current sales conditions rose one point to 74 and the component gauging expectations in the next six months increased two points to 74. Meanwhile, the metric charting buyer traffic held steady at 49. Looking at the three-month moving averages for regional HMI scores, the Northeast rose one point to 54 and the South remained unchanged at 70. The West edged down a single point to 73 and the Midwest fell three points to 59.
CoreLogic – US homebuyers’ “typical mortgage payment” up 15% year over year – more than double the median sale price’s gain
While the US median sale price has risen by just over 6% over the past year the principal-and-interest mortgage payment on that median-priced home has increased more than 15%. Moreover, the CoreLogic Home Price Index Forecast suggests US home prices will be up 4.7% year-over-year in June 2019, while some mortgage rate forecasts suggest the mortgage payments homebuyers will face at that point will have risen almost twice as much. One way to measure the impact of inflation, mortgage rates and home prices on affordability over time is to use what we call the “typical mortgage payment.” It’s a mortgage-rate-adjusted monthly payment based on each month’s US median home sale price. It is calculated using Freddie Mac’s average rate on a 30-year fixed-rate mortgage with a 20% down payment. It does not include taxes or insurance. The typical mortgage payment is a good proxy for affordability because it shows the monthly amount that a borrower would have to qualify for to get a mortgage to buy the median-priced US home.
The US median sale price in June 2018 – $233,732 – was up 6.3 year over year, while the typical mortgage payment rose 15.1% because of a .67-percentage-point rise in mortgage rates over that one-year period. A consensus forecast suggests mortgage rates will rise by about 0.36 percentage points between June 2018 and June 2019. The CoreLogic HPI Forecast suggests the median sale price will rise 2.2% in real terms over that same period (or 4.7% in nominal terms). Based on these projections, the inflation-adjusted typical monthly mortgage payment would rise from $955 in June 2018 to $1,018 by June 2019, a 6.5% year-over-year gain (Figure 1). In nominal terms the typical mortgage payment’s year-over-year gain would be 9.2%. An IHS Markit forecast calls for real disposable income to rise by less than 3% over the next year, meaning homebuyers would see a larger chunk of their incomes devoted to mortgage payments. When adjusted for inflation the typical mortgage payment puts homebuyers’ current costs in the proper historical context. Figure 2 shows that while the inflation-adjusted typical mortgage payment has trended higher in recent years, in June 2018 it remained 25.3% below the all-time peak of $1,279 in June 2006. That’s because the average mortgage rate back in June 2006 was about 6.7%, compared with an average rate of about 4.6% in June 2018, and the inflation-adjusted US median sale price in June 2006 was $248,312 (or $199,750 in 2006 dollars), compared with a June 2018 median of $233,732.