October 26, 2021 – An Important Week Coming Up. The year is winding down, but the economic news will be heating up.


Economic Commentary

An Important Week Coming Up. The year is winding down, but the economic news will be heating up. In the next week or so we will have the “trifecta” of economic events. First, this week we will see the measure of economic growth for the third quarter. This reading will be especially important because, following two strong quarters of economic growth, the economy is expected to slow down as the year comes to a close.

This expected slowdown will factor into the second economic event. Next week the Federal Reserve Board’s Open Market Committee is meeting with many analysts expecting the announcement of the start of tapering of their bond and mortgage purchases. A disappointing economic report could delay this announcement and a surprisingly strong report could cause all systems to gear up for tapering.

Which brings us to the third leg of this economic trilogy. Next week we will also see the October Jobs report. The employment data is always important, but after two disappointing reports, the analysts will be looking for more encouraging news. Like economic growth, any surprising results could cause the Fed to rethink their strategy. One thing for sure, there will be potential for volatile markets in the next week or so.

Weekly Interest Rate Overview

The Markets. Mortgage rates continued to move higher in the past week. For the week ending October 21, 30-year rates rose to 3.09% from 3.05% the week before.  In addition, 15-year loans increased to 2.33% and the average for five-year ARMs fell slightly to 2.54%. A year ago, 30-year fixed rates averaged 2.80%, approximately .25% lower than today. Attributed to Sam Khater, Chief Economist, Freddie Mac – “Mortgage rates continued to rise this week due to the trajectory of both the economy and the pandemic. Even as the availability of existing homes is improving, prices remain high due to homebuyer demand and limitations on housing starts and permits resulting from the ongoing labor and material shortages. Despite these countervailing forces, we expect the housing market to remain strong as we head into the end of the year.”  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

New data from American Advisors Group (AAG) has found that seniors’ homes not only have a great deal of monetary worth, but also significant sentimental value, thus a great reluctance to part with their home, even in this red-hot sellers’ market. AAG polled more than 1,500 participants, ages 60-75, for its “Importance of Home Survey,” to gain a deeper understanding of exactly just how meaningful “home” is to America’s senior population. “Our studies have shown that seniors in this country have a strong attachment to their home and the pandemic only strengthened that bond,” said AAG Chief Marketing Officer Martin Lenoir. “It’s no secret that many seniors have built substantial equity in their homes after years of ownership, but what is interesting is that very few want to sell their house to obtain that money. For seniors, the comfort, safety and independence of their home outweighs the desire to move and that’s why we’re seeing so many older Americans interested in reverse mortgages.” The report found that most of America’s seniors do not intend to sell their home, and have no plans of ever moving, with 82% of seniors polled saying they want to live in their home for the rest of their lives. Seniors indicated that they want to remain in the comfort of their own home. In fact, 92% of seniors said they would prefer to live their later years in their current home instead of moving to an assisted living facility. Respondents indicated that the desire to live in one’s home ties closely to a feeling of safety, as more than four in five seniors (83%) reported that they feel safer at home than anywhere else. Nearly two in three (62%) of the seniors polled said they have an emotional attachment to their home, as they see value in their homes that goes beyond simple finances. Source: MReport

Small inns and bed and breakfasts saw business rapidly decline during the pandemic. But operators are recasting their inns and offering them to home buyers in a new light—as a new home. The Wall Street Journal reports that home buyers are purchasing spacious B&Bs and renovating them into single-family homes. A shortage of homes for sale and a desire for larger homes is fueling demand. Rick and Suzanne Weichert purchased the 4,800-square-foot Jabberwock Inn in Monterey, Calif., for $2.38 million in 2014. In 2020, they closed for four-and-a-half months during the start of the pandemic. They recently listed the home for $4.95 million as a single-family home, believing a buyer from the Bay area may gravitate to the half-acre property—one of the largest in the area—to work remotely. “It was an insanely difficult year,” Suzanne Weichert told The Wall Street Journal about their decision to sell. B&B revenue dropped 43.7% to about $1.3 billion in 2020, compared to 2019, according to the research company IBISWorld. The number of B&Bs also fell, dropping about 1,400 to a total of 7,340. Source: The Wall Street Journal

The nation’s birth rate is at more than a 100-year low and is at the lowest level since the National Center for Health Statistics first started collecting such data. The lower birth rate could have a future impact on housing demand, Jessica Lautz, vice president of demographics and behavioral insights at the National Association of REALTORS®, writes for the association’s blog. Birth rates have been declining since 2007 but have been falling at a faster clip since the pandemic. “The baby bust has likely been fueled by economic and health concerns of women during the pandemic,” Lautz writes. “As some families saw women leave the workforce in the last year, it may not have been financially possible to add a new baby to the family. Some women may not have felt comfortable going into a doctor’s office during pregnancy or had limited family support systems due to safety concerns of COVID-19.” The birth rate can have implications for real estate. Having a baby is often a leading housing decision, prompting new families to buy a home or desire a larger home, Lautz notes. The decline in childbirth is coinciding with fewer home buyers with children in the home. In 1985, 58% of buyers had children under the age of 18. That percentage has since fallen to 33%, Lautz notes. Source: The National Association of REALTORS® Economists’ Outlook blog

Leave a Reply

Your email address will not be published. Required fields are marked *

Leave this empty: