March 12, 2024 – Renting More Expensive Than Ever.

Economic Commentary

Between Friday and today we have quite the economic “one-two” punch. On Friday the jobs report was released, and this report showed an increase of 275,000 jobs, which on the surface was stronger than expected. Going back one more month, in January we had an impressive number of jobs added and therefore the “adjustment” in this number was also a focus on Friday. The number of jobs added for January was adjusted downward by 124,000 jobs. Taken together, this means we have added 500,000 jobs in the first two months of the year, certainly a robust performance.

The unemployment rate came in at 3.9%, higher than expected, which is a sign that more Americans are entering/re-entering the market as opposed to job losses. Another focus was the increase in wages. The stronger the job market, the greater the potential for wage inflation. However, wages grew by only 0.1% from last month and were up 4.3% year-over-year. Wages have represented one of the “stickier” sectors of inflation and the Fed is watching these numbers very closely. The small monthly gain was good news.

Speaking of inflation, the second punch will be the Consumer Price Index, which will be released today. The Producer Price Index follows on Thursday. Together with jobs growth and wage inflation, the Fed has plenty of data to chew on when they meet next week. The markets have given up on the idea that the Fed might lower rates next week based upon the data we have seen thus far this year. Thus, as usual, the market analysts will be pouring over the statement released after the meeting to get a hint regarding when a rate decrease may be coming.

Weekly Interest Rate Overview

The Markets. Mortgage rates eased a bit in the last week, reversing the recent trend of higher rates. For the week ending March 7, 30-year fixed rates fell to 6.88% from 6.94% the week before. In addition, 15-year loans decreased to 6.22%. A year ago, 30-year fixed rates averaged 6.75%, 0.15% lower than today. Attributed to Sam Khater, Chief Economist, Freddie Mac, “Evidence that purchase demand remains sensitive to interest rate changes was on display this week, as applications rose for the first time in six weeks in response to lower rates. Mortgage rates continue to be one of the biggest hurdles for potential homebuyers looking to enter the market. It’s important to remember that rates can vary widely between mortgage lenders so shopping around is essential.”  Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

Real Estate News

According to a recent Realtor.com-Avail Landlord & Renter Survey, renting has been more expensive than it has ever been in the past several years. And, since rental affordability is a major national concern, both landlords and tenants believe it is affecting their future plans. While fewer independent landlords said they planned to raise rent this year, many renters said it would likely impact their plans to buy a home this year because more tenants have been paying consistently higher rents in recent years. “The once-hot rental market has been stabilizing and softening year-over-year since May 2023, mostly from a surge in new rental options coming to the market that gave renters more to choose from. But the surge in rents and the sheer number of renters, many of whom have held off on buying in recent years, continue to minimize any potential price impacts that increased rental inventory could have on the market,” said Danielle Hale, Chief Economist at Realtor.com. The survey shows that although 60% of landlords anticipate raising rent in the upcoming year, this percentage has decreased recently, from 65% in Q1 2023. Most landlords who responded to the study—roughly 69%—stated that they raise rent for renewals and new leases in different ways, choosing to increase rent by 0-5% for renewals and by 0–10% for new leases. Among the landlords that do not set separate rent rates for new compared to renewed renters, some 50% want to hike rent by 0–5%. Anticipated rent hikes correspond with rising expenses for many Americans, including landlords who are charging their renters more for their services. Most landlords (60%) reported that during the previous year, their ownership costs went up by more than 10%. 72% of landlords who say they don’t intend to raise rent this year do so because their units are currently priced at or above the value of the local market. Source: MortgagePoint

Homeowners in the US are choosing to remain in their homes for much longer than they did in the previous two decades, according to an analysis by Redfin. The real estate brokerage revealed in its report that the typical US homeowner has spent 11.9 years in their current home, nearly double the 6.5 years reported in 2005. This trend reached its peak in 2020, when the pandemic kept the average homeowner tenure at 13.4 years.In its analysis, Redfin identified older Americans as the primary drivers of longer homeowner tenures. It pointed to data indicating that nearly 40% of baby boomers have lived in their current homes for at least 20 years, while an additional 16% have remained in their homes for 10 to 19 years. Over a third (35%) of Gen Xers have also stayed in their homes for at least a decade. Conversely, Redfin’s report found that millennials and Gen Zs tend to move more frequently due to job changes and life stage adjustments. They are also less likely to own homes compared to the older generations. In fact, less than 7% of millennial homeowners have lived in their current homes for over a decade. Meanwhile, the majority of Gen Z homeowners – the youngest of whom was only 26 in 2023 – have been in their homes for less than five years. Redfin cited several factors contributing to increased homeowner tenure among older generations. Many baby boomers and Gen Xers have been incentivized to stay put in their homes due to low monthly homeownership costs and advantageous mortgage rates, Redfin said. Certain states also have tax policies that are favorable to older homeowners. The report additionally noted the older generation’s preference for “aging in place,” bucking previous practices which would see seniors moving to smaller homes or entering assisted-living facilities. Source: Mortgage Professional America

Although the Valentine’s holiday has passed, single people are still often reminded of the perks of having a partner. While independence can feel like a great feat, the hefty “singles tax” found in Zillow’s latest report may depress many single Americans. Tenants entering the solo rental market for a one-bedroom apartment are now shelling out an extra $7,110 annually to live alone—a significant rise of over $100 over the already startling amount from the previous year. The “singles tax” increased in 2024, now standing at $7,110, which means that cohabitating renters collectively save $14,220 annually on average by living together. “While some renters may envy their coupled-up friends for dodging the singles tax, solo renters enjoy perks that go beyond financial savings. There’s no arguing over which show to binge-watch next or disputes about whose turn it is to clean up after dinner,” said Emily McDonald, Zillow rental trends expert. “Still, it’s crucial for renters to really dive into what living alone costs in their area and decide if the price tag is worth it.” Source: Zillow