The Real Estate News Brief: Lot Shortages Remain but Easing, Rent Growth Declines Nationwide, All-Cash Offers Rise

In this Real Estate News Brief for the week ending June 10th, 2023… what builders are saying about the lot shortage, where rent growth is highest and lowest, and the rising number of all-cash offers for homes.   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… which doesn’t amount to much. Economists are focused more on what’s coming up “this week.” The Fed’s June meeting is scheduled for Tuesday and Wednesday where members of the Federal Open Market Committee will be deciding what happens next with interest rates. CNBC reports that a majority of economists are predicting a pause on rate hikes, but that we could see another rate hike in July. (1)   Much depends on where we stand on inflation right now, and we’re set to get those numbers just ahead of this week’s Fed meeting. The government will release May reports on the Consumer Price Index, or CPI, and the Producer Price Index, or PPI. The PPI will tell us what’s happening with wholesale prices.   The only economic report that I’d like to share in this episode is the weekly jobs report. It shows a surge in jobless claims. They were up 28,000 from the week before, to a total of 261,000. As reported by MarketWatch, that’s a two-year high. (2) According to Logan Mohtashami, lead analyst of HousingWire, if jobless claims break over 323,000 on the four-week moving average, the 10-year yield would likely decline along with mortgage rates.   Mortgage Rates   Mortgage rates settled down a bit this last week. Freddie Mac says the average 30-year fixed-rate mortgage was down 8 basis points to 6.71%. The 15-year was down 11 points to 6.07%. (3)   In other news making headlines…   Lot Shortage Easing Up But Still an Issue   The lot shortage appears to be easing up, but it’s still not easy for builders to get the buildable lots they need. In a report by the National Association of Home Builders Builders, 42% of single-family builders say the supply is “low” while another 25% says it’s “very low.” That’s a total of 67% reporting some kind of shortage. But it’s better than in 2021 when 76% of builders said they were having a tough time finding enough lots. (4)   The survey also shows a more acute shortage among the most desirable “A” lots. 67% of builders report low or very low access to those lots, while 58% reported difficulties getting ahold of “B” lots, and 52% said the same about “C” lots.   The NAHB says that a lack of easy credit is one reason that builders can’t get the lots they need. The association also blames government regulation. It says the red tape involved with building a single-family home is responsible for about 42% of the cost of the lot.   Asking Rents Down Slightly Nationwide   Asking rents are down slightly nationwide according to data from Redfin.com and Rent.com. The latest report shows the median U.S. asking rent was down .6% in May to $1,995. It’s the first time rent growth has decreased since March of 2020, and is well below a near-record in May of last year, when year-over-year rent growth was up 16.5%. (5)   An increase in supply is one of the reasons that rent growth is slowing down. Builders are building more apartments and single-family homeowners are often choosing to rent out their previous homes instead of selling them. Redfin expects more of those homes to hit the market once housing prices bounce back.   But rent growth varies from region to region. Redfin says that rent growth has fallen the most in the West. It was down 2.1% year-over-year. In other parts of the country it has gone up. It was up 5.4% in the Northeast, 4.9% in the Midwest, and .8% in the South.   More Buyers Paying Cash for Homes   More and more homebuyers are avoiding high interest rates by paying for homes in cash. Redfin reports that 33.4% of the homes bought in April were paid for in cash. That’s up from 30.7% in April of last year.   Redfin Senior Economist Sheharyar Bokhari says the homebuyer who can afford to pay in cash is weighing two options: “They can use cash to pay for the home and avoid high monthly interest payments, or take out a loan and pay a high mortgage rate. In that case, they could use the money that would have gone toward an all-cash purchase to invest in other assets that offer bigger returns.”   That’s it for today. Check the show notes for links at newsforinvestors.com. While you are there, be sure to hit the Join for Free button. You’ll get complete access to our website, with information on real estate investing, various rental markets, and our curated list of real estate professionals. That includes our investment counselors who are available to qualified investors, for free.   And please remember to hit the subscribe button, and leave a review!   Thanks for listening. I'm Kathy Fettke.   Links:   1 - https://www.cnbc.com/2023/06/09/wall-street-placing-its-bets-for-a-big-fed-meeting-and-inflation-reports.html   2 - https://www.marketwatch.com/story/jobless-claims-leap-to-21-month-high-of-261-000-818ce50e?mod=home-page   3 - https://www.freddiemac.com/pmms   4 - https://eyeonhousing.org/2023/06/for-builders-lot-shortage-eases-but-is-still-a-problem/   5 - https://www.redfin.com/news/redfin-rental-report-may-2023/   6 - https://www.wsj.com/articles/home-insurers-curb-new-policies-in-risky-areas-nationally-c93abac0?mod=pls_whats_news_us_business_f