The Real Estate News Brief: Record High Homeseller Profits, Adding Value with ADUs, Top Destination States
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In this Real Estate News Brief for the week ending November 6th, 2021… why it’s a “banner year” for homeseller profits, how much an ADU will increase your home value, and which states are attracting the most newcomers.
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 Federal Reserve has announced its “taper timetable.” The Fed is currently buying Treasurys and mortgage-backed securities at a rate of $120 billion a month an economic stimulus. It now plans to reduce that amount by $15 billion per month in November and December, with similar reductions expected next year. If there’s no adjustment to the pace of reductions, the tapering process would be complete by mid-2022. Although the Fed believes the economy is strong enough to begin the taper, Fed chief Jerome Powell says: “We don’t think it’s time yet to raise interest rates.” (1)
The jobless rate dipped again this last week. There were only 269,000 initial claims for state benefits and 2.1 million continuing claims. Altogether, 2.67 million people are collecting either state or federal benefits. Before the pandemic, there were just under 2 million people getting unemployment checks. (2)
Construction spending was down slightly in September, compared to August. The census bureau says it was down about a half a percent, with a bigger drop for single-family homes. But compared to September of last year, it’s up almost 20%. The National Association of Home Builders blames the dip on supply chain issues, higher material coasts, and the labor shortage. (3)
That pullback isn’t helping the inventory problem. HouseCanary says it dropped close to record lows in September. And it expects the situation to get worse as we head into the next year. Higher home prices are contributing to the problem as fewer less expensive homes are put up for sale. (4) According to the St. Louis Fed, the nation had 6.5 months of supply in August. That dropped to 5.7 months of supply in September. (6)
Meanwhile, the homeownership rate hasn’t changed over the last quarter. It’s still at 65.4%, which is down from a high of 67.9% in the second quarter of last year. If you determine homeownership by age, it’s highest for people over age 65 at about 80%. Regionally, the Midwest is the highest at about 71%. (7)
Mortgage rates are backing off a bit from a recent rise. Freddie Mac says the 30-year fixed-rate mortgage was down 5 basis points to 3.09%. The 15-year was down 2 points to 2.45%. (8)
In other news making headlines…
New High for Homeseller Profits
Home sellers are realizing some big gains. ATTOM Data Solutions says they are getting almost 50% more than they paid for the home, or about $100,000. That’s for a median-priced single-family home or condo. In the second quarter of this year, sellers typically gained about $89,000. (9)
ATTOM’s chief product officer, Todd Teta, says: “The third quarter of this year marked another period in a banner year for a housing market boom that’s steaming ahead through its 10th year.” He says: “For now, the market engine seems to have nothing but high-octane gas in the tank.”
ADUs Add Big Value to Homes
ADUs can also add a lot of value to your home. According to Porch.com. An accessory dwelling unit can add an average 35% onto the sale price. In some cities, such as Savannah, Georgia and Cleveland, Ohio, it can “double” the sale price. (10)
They can also generate passive income as rentals, but they are not cheap to build. The Porch.com study says the average cost of an ADU is $180,000. There are about 1.4 million of them in the U.S., according to 2019 information.
States Attracting the Most Residents
A new study on resident migration shows that Florida is the top destination for people looking to move to another state. The LendingTree analysis looked at mortgage loan data for the last year-and-a-half to identify pandemic migration patterns. The researchers say: “The Sunshine State has a long history of bringing in visitors and new residents, particularly retirees, thanks to a mix of affordable housing, no state income tax, and sunny weather.” (11)
The analysis also found that Texas has the highest number of people moving “within” the state. Oklahoma and Florida were close behind Texas, while New York had the highest number of people fleeing the state.
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Thanks for listening. I'm Kathy Fettke.