The Real Estate News Brief: Inflation Still Too High, Annual Home Price Decline, Amazon Launches HQ2

In this Real Estate News Brief for the week ending May 27th, 2023... you’ll get the latest reading on inflation, how much home prices have come down in a year, and the long-awaited opening of Amazon’s HQ2.    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 this past week. Minutes from the Fed’s May meeting offer a few insights. They reveal that several officials believe we may not need more rate hikes to get inflation back down to the 2% level. Forward guidance also indicates a pause in hikes at the June meeting, although some Fed officials say rate hikes have not been ruled out. (1) And, with the latest report on inflation, there’s new concern that the Fed could be inclined to hike rates again.    The U.S. Bureau of Economic Analysis released the April reading on the PCE index. It shows it going in the wrong direction ahead of the Fed’s next meeting. The index was up .4% and raises the annual rate from 4.2% to 4.4%. The core rate was also a disappointment. It eliminates prices for food and fuel, and was up .4% to an annual rate of 4.7%. The PCE is the Federal Reserve’s preferred inflation gauge, so it will play an important role in their next rate hike decision. (2)   The Fed minutes also offer a recession forecast, predicting a mild recession in the fourth quarter of this year. A moderately priced recovery would follow with unemployment set to increase this year, and then peak next year. Those numbers would start coming down in 2025, according to Fed officials. But they also acknowledged that the impact of the tightening process would be lagging, and that close monitoring of incoming data is essential. (3)   Cleveland Fed President Loretta Mester spoke out on Friday after the PCE was released, and said the data shows the Fed has “more work to do.” She believes that the central bank will need to rate rates again, while other Fed officials appear to be undecided. (4)   Jobless claims pulled back from the previous week, after a major crackdown on fraudulent claims in Massachusetts. The latest report shows 229,000 applications for benefits. That’s up 4,000 from the revised numbers for that surge in claims. As MarketWatch reports: “Jobless claims show little or no sign of rising U.S. layoffs since the early spring.” (5)   Consumer spending has kept a recession at bay, and April was no exception. Consumers shelled out .8% more money in April, which was double the amount that Wall Street Journal analysts had forecast. A lot of the money went toward new cars, but also for travel, recreation, and other services. As reported by MarketWatch, that’s a sign of confidence in the economy. (6)   Consumers also spent money buying new homes. New home sales were up 4.1% in April, according to the Commerce Department. That brings the annual rate up to 683,000 from a revised 656,000 in March. That number is seasonally adjusted, and reflects the “pace” of construction and how many homes would be built if that pace continued for the entire year. (7)   One thing driving consumers to new homes is the low inventory of existing for-sale homes. The National Association of Realtors reports that pending home sales were flat for the month of April thanks to a shortage of those homes, and high mortgage rates. (8)   Mortgage Rates   Mortgage rates have continued to rise. Freddie Mac says the average 30-year fixed-rate mortgage was up 18 basis points to 6.57%. The 15-year was up 22 points to 5.97%. (9) The Mortgage News Daily reports a higher average of 7.14% for the 30-year and 6.54% for the 15-year. (10)   In other news making headlines…   High Home Prices Slowly Deflating   Although home buyers are still struggling with affordability issues, home prices are deflating. Redfin reports that U.S. prices are down about 4.1% nationwide or close to $18,000 for the average home. That brings the median sale price down from $426,000 last year, to approximately $408,000 this year. (11)   But some markets are seeing steeper declines, mostly because prices went sky-high previously, especially during the pandemic. In Oakland, for example, prices have come down 16% or about $174,000 for a typical home. In Boise, Idaho, the average home costs about $80,000 less than it did at the same time last year. And some markets have actually seen prices rise over the past year. According to Redfin, Tampa home prices were up 5.0% in April compared to last year, selling for a median price of $420K. On average, homes in Tampa sell after 22 days on the market compared to 7 days last year.    Amazon HQ2 Is Now Open for Business!   It was five years ago that Amazon solicited bids from various cities as it searched for the perfect place to build a second headquarters. Well, the day has finally arrived that Amazon’s HQ2 has launched, and is welcoming its first employees.   The winning city was Arlington, Virginia which now has more than two million square feet of new Amazon office space. The company has been bringing employees into temporary office space and is now transferring them to the new complex. Amazon expects to have 8,000 people working there by this fall, with a total of 12,500 working there eventually.   Starting May 1st, Amazon required that employees work in offices at least three days a week. The new digs feature some amazing amenities however including two rooftop dog parks and a 2.5 acre park with another dog park. That’s because Amazon employees are allowed to bring their dogs to work! Not so for children, although Amazon helps employees find good childcare.   That’s it for today. Check the show notes for links. And please remember to hit the subscribe button, and leave a review! You can also join RealWealth for free at newsforinvestors.com and learn more about real estate investing.    Thanks for listening. I'm Kathy Fettke.   Links:   1 - https://www.marketwatch.com/story/several-fed-officials-said-more-rate-hikes-may-not-be-needed-and-other-key-takeaways-from-may-minutes-5b3ae0ab   2 - https://www.marketwatch.com/story/u-s-prices-rise-sharply-pce-shows-in-sign-fight-vs-inflation-has-stalled-3214dfac   3 - https://www.calculatedriskblog.com/2023/05/fomc-minutes-staff-predicts-recession.html#:~:text=May%2024%2C%202023-,FOMC%20Minutes%3A%20Staff%20Predicts%20Recession%20Starting%20in%20Q4%3B%20Future%20Monetary,May%202%2D3%2C%202023.   4 - https://www.marketwatch.com/story/mester-says-pce-shows-fed-has-more-work-to-do-on-interest-rates-60a1057c   5 - https://www.marketwatch.com/story/jobless-claims-register-a-low-229-000-in-late-may-after-fraudulent-filings-removed-49c20a31   6 - https://www.marketwatch.com/story/consumer-spending-far-from-dead-americans-ring-up-cash-registers-in-april-4513ef3a   7 - https://www.marketwatch.com/story/u-s-new-home-sales-rise-4-1-in-april-as-buyers-contend-with-a-tough-resale-market-5d24e81b   8 - https://www.marketwatch.com/story/lack-of-homes-for-sale-stalls-sales-in-april-as-mortgage-rates-top-7-77b570f9   9 - https://www.freddiemac.com/pmms   10 - https://www.mortgagenewsdaily.com/   11 - https://www.nasdaq.com/articles/the-median-home-price-is-nearly-%2418000-lower-than-a-year-ago 12 - https://www.bisnow.com/washington-dc/news/office/amazon-employees-start-working-in-new-hq2-buildings-119056