May 21, 2024 – Music To Our Ears?


Economic Commentary

It is hard to admit that we are rooting for poorer economic conditions. Less job growth, lower consumer confidence, slower service sector growth, tepid retail sales and more. But if you are a fan of lower interest rates, that is exactly what we need to see in order to bring inflation down to the point that the Federal Reserve is open to lowering short-term rates. In fact, we have seen economic reports in the past weeks providing some evidence of such a slowdown and future economic traps.

Last week we saw the monthly numbers for inflation as well. The Consumer Price Index (CPI) came in slightly below forecasts and the Producer Price Index (PPI) readings that were a bit higher than expected–altogether mixed, but better than most expected. Speaking of inflation, remember that higher interest rates increase the cost of housing, both renting and owning. Therefore, lower rates could accelerate our progress against inflation, and this could give the Fed even more leeway.

The Fed will be meeting again in mid-June and again at the end of July. Could additional reports indicating that the economy is slowing push them to end their “higher for longer” policy? It is too early to tell. A few reports do not constitute a trend. But we could very well see a trend before these meetings take place. Of course, with these slower economic reports, the markets could continue to react before the Fed decides to make their move. We have already seen a reaction which has caused rates to retract somewhat from 2024 highs. Let’s hope for more.

Weekly Interest Rate Overview

Rates continue to fall in response to weaker economic news, including a tepid retail sales report, and mixed inflation news — which was better than expected on the retail side. 30-year fixed rates fell to 7.02% from 7.09% the week before. In addition, 15-year loans eased to 6.28%. A year ago, 30-year fixed rates averaged 6.39%, 0.63% lower than today. Attributed to Sam Khater, Chief Economist, Freddie Mac, “Mortgage rates decreased for the second consecutive week. Given the news that inflation eased slightly, the 10-year Treasury yield dipped, leading to lower mortgage rates. The decrease in rates, albeit small, may provide a bit more wiggle room in the budgets of prospective homebuyers.” 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

There’s a coming population boom in the United States that is going to put its housing stock—and maybe its entire housing system—to the test. There are currently more than 58 million people in the U.S. aged 65 or older, a number that’s expected to climb to over 80 million by 2040. Within the next decade, there will be 25 million people who are older than 75. According to a new report, the places where these older adults live are simply not designed for the needs of an aging population. The report, Housing America’s Older Adults, was issued by Harvard University’s Joint Center for Housing Studies (JCHS). It explores the many ways the housing stock of the U.S. has been built without the needs of older people in mind, from a lack of accessibility features for those with mobility challenges, to geographic isolation from services, to the sheer dearth of affordable housing for those with limited means. “We have deficits on all these fronts,” says Jennifer Molinsky, who led the creation of the report as project director of the Housing and Aging Society Program at the JCHS. “We worry about the safety of the house, the accessibility of the house, and also its connection to all the things that you need in a community and a neighborhood.” These issues are concerning because the vast majority of older adults live in their own homes either as owners or renters, and only tend to leave when they are forced to by poor health. Despite the high prevalence of ambulatory challenges among older adults, very few of these homes are designed to accommodate what the report calls the “three foundational features” of accessible housing: single-floor living, no-step entries, and wide hallways and doorways. According to the most recent data, less than 4% of homes nationally have all these features. Less than 1% are wheelchair accessible. Age-appropriate homes do exist, of course. The report notes that four million older households live in age-restricted, or retirement, communities. Another 1.4 million older adults live in nursing homes. These options, though, are often financially unattainable to older adults who tend to live on fixed incomes. Molinsky says one solution to this conundrum is to build more, and more diverse, housing. That could take the form of accessible condos located near medical and social services, or simply homes that are priced to match the financial limits of many older adults. Source: Fast Company

Baby boomers are exhibiting an overwhelming desire to age in place in their own homes, but their children — largely members of Generation X — are also making their desires felt by seeking out homes that can accommodate their needs as they get older, according to a recent report from the New York Times. Citing 2021 data from the Harvard University Joint Center for Housing Studies that showed 88% of adults 65 and older are aging in place, many members of the following generation — primarily born between the mid-1960s and early-1980s — are already taking proactive steps by thinking “about where they will live in their 70s, 80s and even 90s,” the Times reported. Homebuilders are observing a rise in demand for homes that can accommodate natural aging from Gen X buyers. David O’Reilly, CEO of Howard Hughes Holdings which constructs planned communities, describes the market being “at the cusp,” saying that the demand appears to be coinciding with more members of Gen X nearing a time where they will become “empty nesters.” “That’s normally the tipping point,” O’Reilly told the Times. Gen X buyers are also more likely to have more financial means and control over their potential options, and are keeping access to necessary later-life services in mind when choosing where to live as they get older, the story explained. “In new developments, [Gen X buyers] are seeking access to health and wellness amenities, like hiking trails and tennis courts, as well as opting for home features like showers instead of bathtubs, for instance, and asking for the latest gadgets to help them as they age,” the reporting said. One analyst said that Gen X buyers are motivated to act now for aging-appropriate housing due to the state of the housing market. “If they are shopping for homes, given the tightness of the market and remote work, I do believe you see more Gen X-ers seeing a home purchase as a home for the rest of their lives,” said Cristian deRitis, deputy chief economist at Moody’s Analytics to the Times. Source: Reverse Mortgage Daily

As the July deadline for the implementation of the business practice changes outlined in the National Association of Realtors’ (NAR) commission lawsuit settlement agreement approaches, the trade organization is looking to iron out some details about buyer broker agreements. Under the terms of the settlement agreement, agents will have to have a written agreement with a client in order to work with them as a buyer’s agent. NAR recently published an FAQ page related to the settlement agreement where it clarifies that the phrase “working with” is meant to “distinguish MLS participants who provide brokerage services to a buyer from MLS participants who simply market their services or just talk to a buyer.” Examples of broker-provided services include identifying potential properties, arranging for the buyer to tour a property, performing or facilitating negotiations on behalf of the buyer, or presenting offers by the buyer. Conversely, a broker who is ”providing an unrepresented buyer access to a house they have listed” is an example of someone who is not ”working with” a buyer. Additionally, the FAQ states that an agent is not working with a buyer if they are working only as an agent or subagent of the seller, or if the MLS participant is only performing ministerial acts without the expectation of being paid for these acts. Under these circumstances, the agent or MLS participant would not need a written agreement with the buyer. But if the agent is representing both the buyer and the seller in the transaction — also known as dual agency — a written buyer broker agreement is needed. NAR also noted in the FAQ that a written agreement between an agent and a buyer would be necessary prior to that agent taking the buyer on any home tours, unless state law requires that the agreement be signed earlier in the process. The FAQs noted, however, that if an MLS participant hosts an open house on behalf of their seller and an unrepresented buyer comes to look at the house, the listing agent hosting the open house would not need to have a written agreement with that buyer since the agent is not working with them. Source: HousingWire


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