Peter Coy of Bloomberg Businessweek reports this week on the growing problem of housing in America. “Even after a gradual rebound from its nadir in early 2009, the rate of starts on erecting single-family residences remains below the level of the early 1960s, when the U.S. population was less than 60 percent of what it is today.”
Source: Bloomberg Businessweek
According to Coy, “The shortage is being aggravated by low unemployment, which is making it hard to hire workers. Not-in-my-backyard zoning rules are exacerbating the issue of an already small pool of construction-ready lots, and developers claim regulation is driving up costs.”
Indeed, Steve Randall of Mortgage Professional America reports that demand for lower-end housing is driving up house prices. Many markets ”are seeing prices fueled by demand for entry level homes, where inventory of these homes is tight.”
Outside of interest rate risk reduction, this is another reason for Freddie Mac’s new lending product noted above—non-LIHTC Forward. According to Beth Mattson-Teig of the National Real Estate Investor, this new product aims primarily to fill the growing gap for workforce housing in America.
Low interest rates (again)
Alcynna Lloyd from Housing Wire covered this week the release of Freddie Mac’s Primary Mortgage Market Survey, which notes that the 30-year fixed-rate mortgage averaged 4.41%, falling again from previous levels. “Freddie Mac Chief Economist Sam Khater said the U.S. economy remains on solid ground, inflation is contained, and the threat of higher short-term rates is fading from view, which has allowed mortgage rates to drift down to their lowest level in 10 months.”
Brian O’Connell from The Street reports this week that U.S. mortgage rates have been on a steady decline for decades, painting an interesting picture of the history of U.S. mortgage rates with one graph:
Source: The Street
Kathy Orton from The Washington Post reported on short-term rates, highlighting that not only have we seen historically low rates over the years, but on a 10-month basis we are also seeing low rates again. Orton adds that “Mortgage rates are likely to pause while the financial markets try to sort out where the economy is headed.” Orton also shows the current 30-year rate in relation to previous rates over the past 12-month period:
Source: The Washington Post
On the topic of interest rate risks, Beth Mattson-Teig from the National Real Estate Investor reports on Freddie Mac’s new lending product which aims to address this: The non-LIHTC (low income housing tax credits) forward loan. These allow developers to secure favorable terms for projects featuring affordable and workforce housing. The main reason for this product? Interest rate risk reduction.
When commenting on traditional A and B-class apartment loan acquisition, David Leopold, Vice President at Freddie Mac, notes the following, “For rent-restricted properties, that is a tough calculus, because if interest rates go up, your deal might not work. So, the key thing that this product does is it protects the borrower against interest rate risk.” According to Mattson-Teig, “Freddie Mac expects to provide more than $300 million in non-LIHTC Forward financing during the first 12 months of the program.”
Amazon HQ2 update
It’s been a few months with little news on the Amazon HQ2 announcement from this Fall. Now rumor has it they may be reconsidering.
Lily Katz over at Bloomberg reported this week on rumours that the tech giant was “reconsidering its plans amid a fierce public backlash.” Reports of public protests and political opposition have been making headlines of late, and Amazon has reportedly noticed. As Katz reports, this has made local real estate investors nervous. “A lot of euphoric offers have come in for buyers that wanted to be in the area. People made serious bets on Amazon being there, and there’s not much of a local office market there right now.”
Bob Bryan of Business Insider provides some more context to ongoing debate, and Amazon’s reconsideration. Bryan reports that state lawmakers have “complained that HQ2 is not worth the roughly $3 billion in incentives the state and city have promised Amazon.” That said, according to a study commissioned by New York Gov. Andrew Cuomo’s office, the presence of Amazon in the city will bring in $27.5 billion in municipal and state tax revenue.
Following this flurry of activity, reports are that Chicago and Illinois officials have reached out to Amazon late last week, as reported by Ally Marotti at the Chicago Tribune. According to the story, as a result of the ongoing opposition in New York, Chicago has “renewed effort to win a 25,000-job campus that would serve as part of the tech behemoth’s second headquarters.”
The Stessa Weekly Newsletter is hand-curated every week to bring you insightful accounts of new features, investing tips, business insights, and market trends from the real estate ecosystem. This week, we will cover recent best of markets lists, the effect of student loans on housing, and the 20% deduction clarification from the IRS.