Investor Intel: Spring Has Sprung
Spring has already sprung for some in the housing industry. Presidents Day weekend is traditionally seen by real estate agents and homebuilders as the start of the spring housing market — the busiest time of year for home sales. And they’re nervous, as demand is outstripping supply. Inventory at the end of December nationally was down nearly 4 percent from the previous December, but sales were up nearly 8 percent, according to the National Association of Realtors. The supply of homes for sale was the lowest since the start of 2005.
Meanwhile, mortgage rates are falling, which should further fuel demand. Homebuilders are being slow to catch up, as U.S. housing starts and permits unexpectedly fell in January. However, this is expected to be only a temporary setback to the housing market, as the slowdown is likely due to bad weather.
Homebuilders are feeling the doldrums this month, but not because of the slow starts or bad weather (actually, maybe it is the weather). The National Association of Home Builders’ Chairman Ed Brady said, “Though builders report the dip in confidence this month is partly attributable to the high cost and lack of availability of lots and labor, they are still positive about the housing market.”
A labor shortage is right. The number of Americans filing for unemployment benefits unexpectedly declined last week to a three-month low, signaling persistent strength in the labor market.
Despite this nugget of good news, Americans’ expectations for the economy declined in February to a three-month low. Data from the Bloomberg Consumer Comfort Index showed economic outlook dropped to 42.5 from a January reading of 47. This is probably thanks to a wildly fluctuating Wall Street (though it could be the weather, again).
You’ll want to hear this: Renting is becoming more common for Americans over the age of 55, and that trend is likely to continue, according to Rolf Pendall, director of the Metropolitan Housing and Communities Policy Center at the Urban Institute. Pendall and his colleagues see the overall number of seniors rising, and the growth in the number of renters will outpace the growth in homeowners, rising from 5.8 million to 12.2 million.
If you’re thinking about laying out the welcome mat on a new rental, here are some markets to consider. NeighborhoodScout has released its annual top 100 safest and most dangerous U.S. cities list for 2016. The top three safest are Ridgefield, Conn., Winona, Minn. and Rancho Santa Margarita, Calif. The most dangerous are East St. Louis, Ill., Camden, N.J. and Detroit, Mich. Perhaps these cities have a spring ahead of them as well.
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