The Real Estate News Brief: Job Market Flexing Its Muscles, Investors Head for the Sidelines, New Battle Over Short-Term Rentals

In this Real Estate News Brief for the week ending June 3rd, 2023... a new surge in job openings and job creation, a big drop in investor activity, and a new legal battle over short-term rentals in New York City.   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 and several reports on the strength of the job market. The government reports that companies created a whopping 339,000 new jobs in May. That’s a sign of strength for the job market, but the report also shows a surge in unemployment from 3.4% to 3.7%. That’s the highest jobless reading since October. Some economists see that as a potential warning sign.   But job market resilience is also showing up in a report on job openings which rose from a revised 9.7 million in March to a three-month high of 10.1 million in April. Wall Street Journal economists had forecast a drop in job openings to 9.5 million. (1)   Job openings increased the most for retail, health care, transportation, and warehousing. They were down for manufacturing, government, leisure and hospitality. When comparing job openings to the number of unemployed workers, they rose in April from 1.7 to 1.8 openings per person. The Fed would like to see those numbers at a pre-pandemic level of 1.2. (2)   The weekly unemployment report shows only a slight increase in claims. Applications were up 2,000 to 232,000. The takeaway from all this – the labor market is showing strength overall, with businesses hiring and no word of major layoffs. That’s not exactly what the Fed wants to see. It’s hoping for a weakening of the job market in its fight against inflation. (3)   Builders are among those contributing to job market strength. The Commerce Department reports that construction spending was up 1.2% in April. That’s much higher than a Wall Street forecast of .1%. The numbers break down to a .5% monthly increase for private residential construction but that includes a .8% decrease for single-family and a .6% increase for multi-family. The construction industry contributed 64,000 of those new jobs in May. (4)   Home prices are still moving higher. The S&P CoreLogic Case-Shiller national index shows a .4% increase in March. The Southeast shows the strongest price growth, thanks to strong demand for housing and potential sellers who don’t want to list their homes right now. The 20-city index was up .5%. A few of the cities showing the strongest price growth were Tampa at 4.8%, Charlotte at 4.7%, and Atlanta at 4.5%. On the flip side, Seattle prices are down 12.4%. San Francisco prices have also fallen by almost as much at 11.2%. (5)   Consumers are showing more concern about the economy. The Conference Board says consumer confidence was down in May to a six-month low. (6)   Mortgage Rates   High mortgage rates are one of the things consumers are worried about. And they spiked a bit last week ahead of another potential rate hike by the Fed this month. Freddie Mac says the 30-year fixed-rate mortgage was up 22 basis points to 6.79%. The 15-year was up 21 points to 6.18%. (7)    In other news making headlines…   Record Slowdown for Investor Home Purchases   Many investors are sitting on the sidelines as interest rates rise and home values fall. Redfin says investor home purchases shrank almost 50% year-over-year in the first quarter. But investors are still accumulating a large share of homes, buying up 18% of homes that sold in the first quarter. That’s higher than pre-pandemic percentages, but down slightly from a peak of 20% last year. (8)   The Redfin analysis covers 40 of the most populated metros in the nation, and includes both institutional and individual investors. But one Redfin agent says there isn’t much activity from the Wall Street investors. The agent from Jacksonville, Florida, says: “Some smaller companies and mom-and-pop investors are still active in the market, but the big corporations aren’t buying anymore.”   Redfin expects to see investor activity slow further as interest rates rise. Of course, investors with cash aren’t feeling that kind of restraint.    Short-Term Rental War Heats Up in New York City   The battle over short-term rentals is escalating in New York City. Airbnb is suing the city for what it says is an “extreme and oppressive” law that the city plans to begin enforcing next month. It claims that the law is confusing and conflicts with Federal law that protects websites from liability for content posted by users. The New York Times also reports that three Airbnb hosts have filed similar lawsuits for a law that they say is too complicated.    The Big Apple is a huge market for Airbnb with more than 38,500 active listings and $85 million in revenue last year. The company argues that short-term rentals are important for tourism and for hosts who need extra income. The city says it is committed to preserving permanent housing as it deals with a lack of housing for residents.   Other cities have fought similar short-term rental battles including Santa Monica, Boston, and San Francisco. Airbnb worked out a deal in Santa Monica to be sure that listings are registered with the City, and according to the Times, Santa Monica is currently looking at ways to expand the number of legal Airbnb listings.   You can get more information on all these stories by following links in the show notes at newsforinvestors.com. I also encourage anyone who hasn’t subscribed to the podcast to please do so, and leave a review!    When you are at our website, you can become a member for free and have access to hundreds of webinars about real estate investing, and lots of information about single-family rental markets and how to build your own investment portfolio – even in a tough market like we’re seeing today!   Thanks for listening. I'm Kathy Fettke.   Links:   1 - https://www.marketwatch.com/story/job-openings-rise-to-3-month-high-in-more-bad-news-for-the-fed-3b42f0a3?mod=home-page   2 - https://www.marketwatch.com/story/jobs-report-shows-big-339-000-gain-in-may-b90df90b   3 - https://www.marketwatch.com/story/jobless-claims-inch-up-to-232-000-but-no-sign-of-major-layoffs-907b8b8d   4 - https://www.marketwatch.com/story/u-s-construction-spending-and-hiring-still-going-strong-3fbaa9f3?mod=economic-report   5 - https://www.marketwatch.com/story/home-prices-rise-squeezed-by-fewer-listings-case-shiller-index-finds-6ba5cf70?mod=mw_latestnews   6 - https://www.marketwatch.com/story/consumer-confidence-slips-to-six-month-low-americans-gloomy-about-economy-6b20538e?mod=economy-politics   7 - https://www.freddiemac.com/pmms   8 - https://www.redfin.com/news/investor-home-purchases-q1-2023/   9 - https://www.nytimes.com/2023/06/01/nyregion/airbnb-sues-nyc-rentals.html