Manage episode 306364868 series 2394432
In this Real Estate News Brief for the week ending October 30th, 2021... the rebound of big city rents, the state and local property tax bonanza, and a tragic reminder to check smoke alarms in 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.
We begin with economic news from this past week. The latest report on the GDP shows a big slowdown in the third quarter. The Commerce Department says the economy downshifted from 6.7% in the second quarter to just 2% in the third. (1) The slowdown was expected but the Wall Street Journal had anticipated a beefier 2.8%. Economists say we’re experiencing slower growth because government stimulus money is drying up while businesses struggle with supply chain issues and the nation continues to deal with the coronavirus.
Consumers are working and spending money however, which keeps the economy on the growth side. Consumer spending was up .6% in September. (2) And, the latest unemployment report shows that new state claims dropped to another pandemic low of 281,000. Existing claims also fell, from 2.48 million to 2.24 million. (3) The unemployment rate is currently at 4.8%.
Much of that spending went into new homes. New home sales rose in September despite higher price points. The sales rate grew to an annual rate of 14% while the median price rose to a new record high of $408,800. (4) The sales rate hit a six-month high in September, but it’s almost 18% lower than it was a year ago.
The sale of existing homes went in the opposite direction. The National Association of Realtors says pending sales were down 2.3% in September, and compared to a year ago, they were down 8%. (5) A tight inventory continues to plague buyers, along with rising prices.
According to the latest report from the S&P CoreLogic Case-Shiller Home Price Index, national home prices are up 19.8% from a year ago. (6) For those who can buy, they are making those decisions quickly. The National Association of Realtors says that 86% of homes sold in September were on the market for less than a month. (7)
Mortgage rates continue their slow climb skyward. Freddie Mac says the average 30-year fixed-rate mortgage rose 5 basis points to 3.14%. The 15-year was up 4 points to 2.37%. (8)
In other news making headlines…
Big City Rents Are Rebounding
Rents are rebounding in the nation’s big cities. Realtor.com says that rents in many cities are now “higher” than they were at the beginning of the pandemic. Rents had dropped as tenants fled to less-crowded areas, but they are rebounding in a big way. (10)
Realtor.com’s monthly rental report shows that rents in the ten largest U.S. tech cities, are now about 6.3% “higher” than they were when the pandemic first hit. The report says that the annual pace of rent growth for all U.S. rentals is about 13.6% right now. And it says there’s no sign of it slowing down.
Realtor.com’s manager of economic research, George Ratiu, says: “With rents continuing to surge to new highs nationwide, including in big tech hubs, September data confirms the U.S. rental market has moved past the recovery phase and is fully back in business.”
Property Tax Bonanza
State and local governments have reaped the rewards of higher home prices. An analysis by the National Association of Home Builders shows that property tax collection is now the highest it’s been since 2009. (9)
That review shows that homeowners paid $703.5 billion from Q3 of last year to Q2 of this year. That’s a 13% increase from the previous year. State and local governments rely heavily on property tax. The NAHB says they get about 38% of their revenue from that tax base.
Tragic Lesson about Fire Alarms
A story out of Southern California is a tragic reminder to all landlords to make sure smoke detectors are working in all rentals. A fire at a short-term rental in Malibu killed a 22-year-old college student last January, and his father recently filed a lawsuit against the landlords, TripAdvisor, and a TripAdvisor subsidiary for negligence. (11)
The lawsuit was filed in Los Angeles by Brad Schneider. It claims his son, Grant, was not able to escape the fire because there were not enough smoke detectors in the home, and the ones that were there were not working.
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Thanks for listening. I'm Kathy Fettke.