The Real Estate News Brief: Forbearance Levels Drop, Rents Hit New Highs, New “Best Places” List

Real Estate News: Real Estate Investing Podcast

In this Real Estate News Brief for the week ending May 21st, 2022… forbearance claims hit a two-year low, rent levels are setting new records, and a new list of the “best places to live”.

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 the past week, and comments from Fed Chief Jerome Powell about the central bank’s resolve to fight inflation. He told the Wall Street Journal that “restoring price stability is… something we have to do” and, he says, “there could be some pain involved.” (1)

The Fed approved a 50 basis point increase for the federal funds rate at its last meeting. And, it expects to do the same at the next two meetings. The short-term rate is now within a range of .75 to 1%. Raising it another 100 basis points will bring it to 1.75 to 2%.

Powell says it’s still possible to avoid a recession, but he’s now describing the process as a “soft-ISH” landing. (2) He hopes to control inflation without a big impact on the labor market. He says, if there is a recession he hopes it will be “short and not all that deep.”

Many economists are lowering their economic forecasts because of inflation and higher interest rates. That includes Fannie Mae’s chief economist Doug Duncan. He says: “Financial conditions have tightened significantly and the economy is slowing faster than previously expected.” Fannie Mae now expects a full-year GDP of 1.3%. That’s .8% lower than the previous forecast. The Fannie Mae group is predicting a modest recession in the second half of next year 2023. (3)

Jobless claims hit a four-month high last week. There were 218,000 initial claims, which is 21,000 more than the week before. The number of people collecting benefits is still extremely low. 25,000 people dropped off that list last week, for a total of 1.32 million. That’s the lowest number of claims since 1969. Economists are watching unemployment numbers closely because they typically rise before a recession. (4)

New home construction hit a speed bump for the second month in a row. Housing starts were .2% lower to an annual pace of 1.72 million. Economists blame rising mortgage rates and higher home prices for the slowdown. Permits were down 3.2% to an annual rate of 1.82 million. A drop in single-family construction brought the numbers down. Starts on those projects were down more than 7% while multi-family starts were higher by almost 17%. Builders have shifted their focus to multi-family rental units as they try to meet the demand for housing. (5)

Existing home sales were down in April. The National Association of Realtors says they fell 2.4% to a seasonally adjusted annual rate of 5.61 million. If you compare these numbers to a year ago, sales were down almost 6%. As reported by MarketWatch, this is the third straight month that sales have declined. Currently, there’s a 2.2 month supply of homes on the market. (6)

Mortgage Rates

Mortgage rates came down slightly last week. Freddie Mac says the average 30-year fixed-rate mortgage was down 5 basis points to 5.25%. The 15-year was 4.43%. (7)

In other news making headlines...

Forbearance Claims Hit 2-Year Low

The number of home loans in forbearance has now dropped below 1%. According to the Mortgage Bankers Association, forbearance claims dropped from 1.05% in March to just .94% in April. That’s about 470,000 loans. The MBA says this is the lowest level since June of 2020, right before the pandemic left many homeowners without a paycheck, and without means to pay their loans. (8)

The five states with the highest number of loans in forbearance include: Louisiana, Mississippi, West Virginia, New York, and Oklahoma.

The five states with the lowest number of loans in forbearance include: Idaho, Washington, Colorado, Utah, and Oregon.

Rent Levels Are Setting New Records

Scorching hot demand for rentals is pushing apartment rents higher once again. Realtor.com says the U.S. median rental price hit a new high of $1,827 in April. The year-over-year increase for a studio apartment is 17.2%. For a one-bedroom, it’s 15.6%. And, for a two-bedroom, it’s 15.9%. (9)

Orlando posted the largest rent gains in April at 32.9%. Tampa was next at 27.8%. San Diego, Las Vegas, and Miami were also among the top five rent gainers.

“Best Place to Live” in 2022

When it comes to a great rental market, it doesn’t hurt to score a top spot on a list of “best places to live.” And that’s what you’ll find on the latest U.S. News & World Report list which places Huntsville, Alabama at the top. The report analyzes several metrics including affordability, quality of life, health care, employment, and crime. (10)

Editor Devon Thorsby says: “Much of the shakeup at the top of this year’s ranking is a result of changing preferences.” He says: “People moving across the country today are putting more emphasis on affordability and quality of life than on the job market.”

If you’re curious about the other 11 cities on the list, here they are: Colorado Springs, Colorado; Green Bay, Wisconsin; Boulder, Colorado; San Jose, California; Raleigh and Durham, North Carolina; Fayetteville, Arkansas; Portland, Maine; Sarasota, Florida; San Francisco; Ann Arbor, Michigan; and Naples Florida.

That’s it for today. Check the show notes for links. And please remember to hit the subscribe button, and leave a review!

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Thanks for listening. I'm Kathy Fettke.

Links:

1 -https://www.wsj.com/articles/feds-powell-to-take-wsj-questions-on-inflation-and-economic-outlook-11652779802

2 -https://www.marketwatch.com/story/powell-says-a-softish-landing-for-u-s-economy-is-plausible-11652812959?mod=economy-politics

3 -https://www.fanniemae.com/newsroom/fannie-mae-news/rapidly-rising-rates-and-persistent-inflation-further-soften-economic-outlook

4 -https://www.marketwatch.com/story/u-s-unemployment-claims-climb-to-four-month-high-of-218-000-11652963872?mod=economy-politics

5 -https://www.marketwatch.com/story/home-builders-slow-new-construction-for-second-month-in-a-row-as-demand-softens-11652877792?mod=coronavirus

6 -https://www.marketwatch.com/story/existing-homes-sales-fall-for-third-straight-month-in-april-11652969139?mod=economic-report

7 -https://www.freddiemac.com/pmms

8 -https://nationalmortgageprofessional.com/news/mortgages-forbearance-dip-below-1

9 -https://magazine.realtor/daily-news/2022/05/19/rents-jump-to-new-record-once-again

10 -https://magazine.realtor/daily-news/2022/05/18/best-place-to-live-is-down-south