Paul Wiseman of AP News reports that the U.S. economy grew at an annual rate of 3% in Q2 2024, driven by solid consumer spending and business investment. This marks a significant increase from the 1.4% growth in Q1 and an upgrade from the initial 2.8% estimate. Despite high interest rates and ongoing concerns about inflation, the economy remains resilient as the presidential election approaches.

Augusta Saraiva of Bloomberg reports on the economic data, highlighting that consumer spending led the growth, up 2.9% in the quarter, well over the 2.3% estimate. Analysts predict continued economic moderation for the rest of 2024 due to high borrowing costs. The Federal Reserve is expected to lower interest rates next month as inflation decreases, potentially relieving sectors heavily impacted by borrowing costs like housing and manufacturing.

“The other main gauge of economic activity — gross domestic income — rose a more moderate 1.3% in the government’s first estimate for the period, matching the first-quarter gain. Whereas GDP measures spending on goods and services, GDI measures income generated and costs incurred from producing those same goods and services. The average of the two growth measures was 2.1%.”

Statista points out that economic growth is normalizing compared to the previous decade. Here is the annual percentage change in the real GDP from Q1 2013 to Q1 2024.

Source: Statista (September 2024)

That said, Alexandre Tanzi of Bloomberg reports that the U.S. labor market is projected to grow by 0.4% annually through 2033, adding 6.7 million jobs over the decade. This slower growth, driven by reduced population increases, marks a significant decline from the pace of the previous decade. As a result, older individuals will comprise a larger population share, leading to a projected 1.4% drop in labor force participation, bringing it down to 61.2% by 2033.

Source: Bloomberg (September 2024)

Freddie and Fannie new lease standards

According to a new press release, Freddie Mac has announced a new policy framework requiring minimum lease standards for multifamily properties with enterprise-backed loans, effective February 2025. These standards include a 5-day grace period for rent payments, a 30-day notice for rent increases, and a 30-day notice of lease expiration.

Fannie Mae sent out its press release detailing the main provisions of the new policy:

• 30-day Notice of Rent Increases: Renters will receive written notice of a rent increase at least 30 calendar days before the increase.
• 30-day Notice of Lease Expiration: Renters will receive written notice of the residential lease’s scheduled expiration at least 30 calendar days before the expiration date.
• 5-day Grace Period for Late Rent Payments: Renters will have at least five calendar days from the rent due date before late fees or other penalties can be charged.

Kevin Palmer, head of Multifamily for Freddie Mac, noted: 

“These lease standards seek to extend the reach of common baseline tenant protections…Although many borrowers already exceed these minimum standards, all will be required to meet the standards to obtain GSE financing in the future. The details we released today are intended to give lenders, borrowers and other market participants clearer expectations with regard to how we will implement, monitor and enforce the new requirement.”

The Federal Housing Finance Agency (FHFA) announced the policy in July, which was developed in collaboration with Fannie Mae. The policy aims to extend tenant protections. Freddie Mac has also released implementation details and monitoring provisions, signaling a move towards more resident-centered housing practices across the industry.

According to Chris Clow of HousingWire, these measures aim to enhance tenant protections and increase landlords’ administrative responsibilities. Landlords must now adhere to these uniform guidelines to qualify for GSE financing. The policy is part of a broader effort to improve communication and transparency between housing providers and tenants.

The entire policy framework can be found here. 

Starter homes

According to a Redfin analysis, pending sales of starter homes surged by 10.2% in July compared to the previous year, marking the highest level since October 2022. This uptick contrasts with declines in other price brackets, where sales of middle-price and upper-price homes fell by 6.5% and 10%, respectively. 

Source: Redfin (September 2024)

Despite the median price for a U.S. starter home rising to $250,000, the price growth was slower than in other categories, making these properties more attractive. The increase in starter home sales reflects a renewed interest from first-time buyers, spurred by falling mortgage rates and rising inventory.

Redfin Senior Economist Sheharyar Bokhari comments on the data:

“The overall market remains sluggish, but we are beginning to see first-time homebuyers come off the sidelines, buoyed by falling mortgage rates and an increased number of homes hitting the market..Not only do you have young families and investors looking at starter homes, you also have buyers who have been forced to consider less-expensive options due to near-record home prices. More buyers means more sales, but so far we aren’t seeing prices skyrocket, because the rising number of homes hitting the market is enough to satisfy the increased demand—a positive outcome for both buyers and sellers.”

Additional data from Dana Anderson at Redfin shows that there are still affordability challenges, even with the starter home segment. Homebuyers must earn about $80,000 to afford the median-priced starter home. This is a 4.4% increase from last summer and only about $500 below the all-time high. This means that starter homes are barely affordable to families earning the median U.S. income and are unaffordable to families earning less than the median income. 

Source: Redfin (September 2024)

In half of the 50 most populous U.S. metros, a family earning the local median income can’t afford a starter home. The largest affordability gap is in Los Angeles and Anaheim, where a family needs to earn double the local median income to buy a starter home.

Kristen Smithberg of Globe St reports on the data at a city level, highlighting that starter home sales saw the most significant increases in San Francisco, San Jose, and Cincinnati. At the same time, Fort Lauderdale, West Palm Beach, and Phoenix experienced the most significant declines. The number of available starter homes rose, most notably in San Antonio, Fort Worth, and Tampa, with Milwaukee being the only city where active listings decreased. 

Ana Teresa Solá of CNBC reports on the proposal from Vice President Kamala Harris that her administration would implement tax breaks for homebuilders who sell starter homes for first-time homebuyers. That said, the author notes that there will be difficulty in defining precisely what a starter home means as prices vary significantly by state.