The Real Estate News Brief: Lot Values Are Surging, Renters Get Home Loan Help, and a Tiny Home Design Contest

Real Estate News: Real Estate Investing Podcast

In this Real Estate News Brief for the week ending August 14th, 2021… where lot values are surging, how rent payments can help new home buyers, and a contest for tiny home designs.

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 today’s episode with economic news from this past week. Two inflation reports show that prices are still heading higher. The consumer price index was up .5% in July. That’s down from .9% in June which prompted some economists to say that inflation is moderating. But the yearly rate is 5.4% which is the same as June, and well above the Federal Reserve’s 2% target. The core rate is a bit lower. That omits prices for energy and food. It was up .4% to a yearly rate of 4.3% which is slightly lower than the June rate. (1)

Although the numbers show that inflation is backing off a little, it’s still a whole lot higher than it was last year. The consumer price index was running at 1% annually while the core rate was about 1.6%.

And… a report on wholesale prices also came out last week, and that’s running hot. It shows the cost of goods rose .6% in July, mostly because of higher energy prices. Wholesale food prices were down 2.1% however. The producer price index also has a core rate which strips out food, energy, and trade margins. That was up .9% and boosted the core rate of wholesale inflation to 6.1%. MarketWatch says that’s one of the highest wholesale inflation levels in several decades. (2)

Economists say inflation could settle back down when everyone returns to work and supply chain bottlenecks are eliminated, but as MarketWatch reports, many feel that higher inflation may be here to stay. Fed Chief Jerome Powell has also acknowledged that inflation could run hotter than the Fed expected for a longer period of time. (3)

The latest unemployment report shows that fewer people are asking for benefits, and fewer people are collecting them. The Labor Department says that initial claims dropped 12,000 to 375,000 last week. That’s still higher than a pandemic low of 368,000 that occurred last month. But continuing claims were also down and they hit a new pandemic low of 2.87 million. If you tally up all the state and federal programs available, there are a total of 12.1 million people collecting unemployment checks or about 10 million more than there were before the Covid outbreak. (4)

One of the more stunning reports from last week is from the University of Michigan. It shows that consumer sentiment took a nose dive in August to a reading of 70.2. That’s down from 81.2 in July, and is now the lowest reading in a decade. That means it’s lower right now than it was during any other month of the pandemic. MarketWatch economists believe that people are worried about inflation and a virus that may not go away anytime soon. (5)

Mortgage Rates

Mortgage rates did a small u-turn last week. They had been slowly sinking lower, but Freddie Mac says the 30-year fixed-rate mortgage rose 10 basis points. The average is now at 2.87%. The 15-year was up 5 basis points to 2.15%. (6)

In other news making headlines...

Lot Values Are Surging

Lot values are surging. An analysis by the National Association of Builders shows that lot values for single-family homes that broke ground last year, have appreciated 18% to a record high of $53,000. That’s close to the lot value record in 2005-2006, before the housing meltdown. Lots were going for $43,000 back then but that’s equal to about $55,000 in today’s dollars. (7)

Lots are most expensive in New England at about $120,000 or more, but due to zoning laws, they are also usually much larger making them less expensive per acre. In the West, the median lot value is $203,000 but those lots are smaller making them the most expensive lots of all. In the Mountain region, the median value is $73,000. In the West South Central region, the median value is about $60,000 which is the least expensive but is also double what they were valued at just eight years ago.

New Underwriting Bonus for Homebuyers

On-time rent payments could help renters get a home loan. Fannie Mae announced that rent payment history can be used during the underwriting process. That will help people who don’t have enough credit history to qualify for a loan. (8)

FHFA Director Sandra Thompson said in a press release: “There is absolutely no reason timely payment of monthly housing expenses shouldn’t be included in underwriting calculations.”

Lenders will have to get permission from mortgage applicants to check bank statements for rent payments. The new underwriting feature will be available starting September 18th.

Tiny Home Design Contest

Salt Lake City is holding a contest for the design of tiny homes. The city is soliciting designs for a master-planned tiny home community for the homeless. But all the submitted designs will be put into a library that can be used by homeowners and city officials. (9)

The contest is open to both students and professionals. The two winners will each get $1,000. Runners-up will get $500. The deadline to register is September 10th. Submissions are due by October 29th.

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.marketwatch.com/story/u-s-core-consumer-inflation-moderates-in-july-11628686146?mod=economic-report

2 - https://www.marketwatch.com/story/u-s-wholesale-prices-surge-again-and-show-inflation-still-rampant-ppi-finds-11628772476?mod=economic-report

3 - https://www.marketwatch.com/story/u-s-inflation-is-still-running-high-and-it-doesnt-look-like-it-will-fade-fast-soon-11628344325?mod=article_inline

4 - https://www.marketwatch.com/story/u-s-unemployment-claims-fall-to-375-000-and-return-close-to-pandemic-low-even-as-delta-variant-surges-11628772686?mod=economic-report

5 - https://www.marketwatch.com/story/u-s-consumers-suffered-a-stunning-loss-of-confidence-in-early-august-u-mich-survey-finds-11628864164

6 - http://www.freddiemac.com/pmms/

7 - https://nahbnow.com/2021/08/lot-values-surge-at-record-breaking-pace/

8 - https://nahbnow.com/2021/08/fannie-mae-to-include-rent-payment-history-as-part-of-mortgage-approval-process/

9 - https://www.builderonline.com/design/awards/salt-lake-city-offers-cash-prizes-for-tiny-home-designs_c