The Federal Reserve adjusted its inflation targeting policy, a move that will likely benefit employment in the next economic expansion. Consumer spending decelerated in July. And Fannie and Freddie extended programs offering relief to homeowners.
New Fed policy places more emphasis on unemployment
The Federal Reserve announced that they would now target an "average" of 2% inflation, rather than a fixed goal, suggesting they could overshoot for a period of time
The change means that, going forward, clear inflationary pressures will be required before increasing rates
Growth in consumer spending slowed in July
Personal consumption expenditures rose a seasonally adjusted 1.9% in July from June
Spending levels are down 4.6% from pre-pandemic levels
Fannie and Freddie extend homeowner relief programs through the end of the year
Fannie Mae and Freddie Mac announced Thursday that moratoria on foreclosures and evictions of homes associated with mortgages they service would be extended through December 31
The programs were due to expire on August 31
So what?
The Federal Reserve's major shift in their policy-setting framework and overall mandate was largely expected and will likely not have any significant impacts on monetary policy in the short or even medium term. It does, however, set the stage for a more cautious path for setting rates during the coming economic expansion, a decision that should have a noticeable impact on employment. The Fed's previous policy stance suggested that they raise overnight interest rates – thereby "slowing down" the economy – as the unemployment rate fell below a so-called "natural" level in order to prevent a presumed increase in prices. By targeting inflation thataverages2%, allowing them to overshoot for a period of time, job growth will be able to continue for longer, something that will disproportionately help disadvantaged populations who haven't been able to reap the benefits of past economic expansions. Recently, there have been calls for the Fed to explicitly target racial disparities in employment and wealth as part of their mandate – this change in policy stops short of that, but will implicitly address those issues.
U.S. consumers increased their spending for the third straight month in July but the rate of growth slowed considerably. The 1.9% monthly increase in consumer spending followed a 6.2% increase in June, a notable slowdown, particularly in a month when nearly two million jobs were added. The deceleration adds more evidence that uncertainty surrounding the virus spread and expiration of some fiscal benefits is weighing on consumers' outlooks. Indeed, high-frequency data show that the slowdown in spending has continued through August, and the personal savings rate remains very elevated relative to historic norms. Overall spending is down 4.6% from February's pre-pandemic levels. Consumer spending is responsible for about two-thirds of U.S. economic output, so how people respond to these enduring uncertainties in the coming months will be crucial in dictating the next chapter of the economy's recovery.
Acknowledging the uncertain path forward for the economy, Fannie Mae and Freddie Mac announced that programs helping suffering homeowners would be extended through the end of the year. On Thursday, the two government sponsored enterprises (GSEs) announced that their moratorium on foreclosures and evictions, which was due to expire on August 31, would remain active through December. What's more, the GSEs announced that they will continue to provide up to 12 months of forbearance to borrowers who have been financially impacted by the economic fallout due to the coronavirus. Combined, the announcement was surely welcome news for households and landlords who were stressing about the looming expiration date. Just under 1.5 million loans serviced by Fannie and Freddie remain in forbearance, a level that has fallen gradually from a high point in the spring and could increase in the fall as the impact of higher levels of persistent unemployment starts to take shape. It's important to note that the GSEs (as well as the FHA, which has also extended their moratorium to December 31) service about two-thirds of the single-family home loans in the U.S.
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As residents of Louisiana begin to assess the damage wrought by Hurricane Laura, some homeowners may be disappointed to learn that their insurance won’t cover all of their losses.
An early estimate from property data firm CoreLogic suggests that Hurricane Laura caused between $8 billion and $12 billion in insured losses for residential and commercial properties in Louisiana and Texas. Hurricane Laura made landfall in Louisiana on Thursday as a Category 4 storm—the 10th strongest tropical storm to ever hit the United States.
While the magnitude of the damage is stunning, it’s far less than other storms that have battered those states, including Hurricanes Katrina and Harvey. And luckily for many residents, forecasters’ fears of an “unsurvivable” storm surge didn’t fully come to fruition. Only $500 million of the estimated insured losses was due to storm surge, according to CoreLogic.
But as homeowners will soon discover, how much money they get back from their insurance company to rebuild will depend on what coverage they had and the specifics of their policy.
During a tornado, for instance, if high winds cause roof damage that leads to significant water accumulation within the house, most insurance policies will cover it. But if a nearby river crests because of the storm’s heavy rainfall and then causes flooding, the damage to homes will only be covered if the owners have flood insurance.
Damage caused by flooding isn’t covered by standard home insurance policies. Only homeowners who bought separate flood insurance for their homes were covered if storm surge destroyed their homes in coastal Louisiana. Meanwhile, if a home was damaged by the strong winds that came with Hurricane Laura, standard insurance policies will cover the damage, but homeowners will first need to pay out a deductible—a set amount of money a policyholder must pay before coverage kicks in.
Louisiana is one of the 19 states, plus the District of Columbia, where insurers can impose a hurricane deductible. Windstorm and hurricane deductibles vary from policy to policy, but are usually assessed as a percentage of the home’s overall value. In many cases, the deductible for a named storm will be more than the standard deductible.
Buying additional insurance policies for disasters like floods and earthquakes might seem like a no-brainer, but it’s an expensive proposition.
“They have to do a cost benefit analysis,” said Michael Crowe, co-founder and CEO of Clearsurance, a site where consumers can review and compare insurance companies.
The average annual premium for a policy through the National Flood Insurance Program was $699. But flood insurance premiums can easily cost thousands of dollars in regions that are determined to be at the highest risk of flooding.
Coverage for other disasters operates similarly to hurricanes. In volcanic eruptions, damage caused by lava flows or resulting fires is covered by a standard homeowner’s policy, but if the eruption causes seismic activity, homeowners will not be reimbursed unless they have purchased a separate earthquake policy.
What is covered under a standard homeowner’s insurance policy
Some natural disasters are almost always covered by homeowner’s insurance, including wildfires and hail storms. But other natural disasters are never or rarely covered under a standard homeowner’s insurance policy. They generally fall into two categories: floods and “earth movements.”
The first category comprises disasters caused by rising water, which includes everything from floods caused by extensive rainfall and hurricane-induced storm surges to dam failures and tsunamis. “Earth movements” include disasters such as earthquakes, landslides and sinkholes.
Certain natural disaster typically aren’t covered because of the level of the destruction they create, said Lynne McChristian, a spokeswoman for the Insurance Information Institute and executive director of the Center for Risk Management Education and Research at Florida State University.
With these disasters, “the damage is usually so widespread, and it’s typically a total loss,” McChristian said. “Insurance companies can’t price it appropriately to make it a viable line of business for them.”
How to get to the front of the line when you need help
Regardless of whether or not a homeowner has insurance coverage for a specific natural disaster, getting their property assessed is critical in beginning the rebuilding process.
Following a natural disaster, a consumer’s first step should be to contact their insurance agent or company immediately. That is critical because insurance claims are handled on a triage basis, McChristian said.
“Those with the most damage get to the front of the line because those people have the most need for recovery assistance,” McChristian said.
By clarifying how to file a claim and conveying the state of their property, homeowners can improve the chances of having their case handled more quickly by their insurer. Homeowners should also learn the ins and outs of how to file their claim, including what information is needed and how long they have to file. Now is also the time to determine what their policy’s deductible is.
Make a head-start on assessing damage
The insurance company will send its own adjuster free of charge to inspect the property and assess the total cost of the damage. Homeowners can take steps to prepare for this by documenting what was damaged or destroyed by the natural disaster, getting bids from contractors and keeping track of receipts for any expenses they incur following the storm. Homeowners shouldn’t hesitate to make temporary repairs to protect their property from further damage.
A pricier option: Hire a third-party insurance adjuster to assess their property. Given the backlog insurers will experience following widespread disasters, it can take a while to receive a payout. To expedite this process, a homeowner can choose to hire an independent or public adjuster to assess their property.
And even if homeowners aren’t covered for flood insurance, they should still have their insurance company assess their property and whatever damage occurred.
Crowe has experienced this firsthand. In 2006, an extended period of rainfall in Newburyport, Mass., where Crowe and his family lived, caused their newly remodeled basement to flood. However, their insurance policy did not include flood coverage. He thought he would have to pay for all the damage.
But when insurance adjusters inspected the property, they noted that the basement’s sump pump—designed to prevent water accumulation—had failed.
In other words, he got lucky. The insurance company categorized the damage as the result of a mechanical failure rather than a flood, so the company covered the damage.
“I thought to myself, ‘I’m really fortunate to have insider knowledge,’” Crowe said.
The government provides flood insurance
In the case of insurance for flooding, the federal government has stepped in. The National Flood Insurance Program was created in 1968 after insurance companies struggled to pay off claims following a slew of floods in the 1950s. Homeowners have the option to buy flood insurance through this program or to get a private insurance policy. In certain cases, homeowners may be required to purchase flood insurance by their mortgage lender if their home is located within a flood zone.
Private flood insurance now accounts for roughly 15% of all flood premiums nationwide, according to the Insurance Journal. And for many homeowners, a policy from a private insurer rather than through the federal insurance program could be cheaper. One briefing from Milliman found that private flood policies would have lower premiums for 77% of all single-family homes in Florida, 69% in Louisiana and 92% in Texas.
Earthquakes
Similarly, homeowners will need to purchase a separate policy or a rider to their standard home insurance policy from a private insurer to be covered for an earthquake. California residents also have the option to purchase coverage through the California Earthquake Authority. That said, if an earthquake causes a house fire, some damage might be covered by the standard policy alone.
Sinkholes
As for sinkholes, coverage options vary from state to state. A standard home insurance policy may cover minor damage caused by a sinkhole—but catastrophic damage (generally defined as damage to more than half of the structure) is excluded. People can either get sinkhole insurance in the form of a stand-alone policy or an endorsement (also called a rider) to the standard insurance policy, depending on where they live.
Tennessee and Florida require insurers to offer optional sinkhole coverage. Insurers in Florida are also required to provide insurance for “catastrophic ground cover collapse” through their standard policies.
Did the homeowner take care of the property?
The property’s upkeep can also play a role in whether or not damage caused by a storm or other natural disaster is covered. For instance, if winter storms cause an ice dam to form on the roof of the home and the owner is not proactive about removing it, the insurer may choose to deny coverage for water damage.
You have some options if you skip insurance
If homeowners don’t buy specialized insurance coverage and then get hit by some sort of disaster, they do have some options to offset their losses. They can get a grant from the Federal Emergency Management Agency or a loan from the Small Business Administration.
“Those are not designed to bring you back to a pre-disaster condition—they’re designed just to get you back on your feet,” McChristian said. “Insurance is designed to get you back to where you were before the disaster occurred.”
How to decide whether you need coverage
For starters, homeowners need to consider whether or not they are at risk. They should check government flood zone maps. They are generally available from county governments, or you can search by address on the FEMA website. But they aren’t foolproof because they are only periodically updated.
Other factors to consider include the property’s elevation (if it’s at or just a few feet above sea level it’s more prone to flooding) and whether there has been a lot of construction in the area. This could displace vegetation that would soak up rainfall and prevent flooding.
As for earthquakes, homeowners shouldn’t assume they’re not at risk just because they don’t live on the West Coast. Earthquakes have caused damaged in all 50 states at some point since 1900, according to the Insurance Information Institute (a trade group that of course has a vested interest in people getting insurance). And fracking for oil and natural gas has led to seismic activity in parts of the country that had never before experienced it.
The dog days of late summer are when sweaty urbanites most yearn for a waterfront escape—and this year, anyone who lives in a crowded city wants out, stat. Possibly forever.
Along the coasts, folks just head to their nearest beach for some splashy fun and relaxation. But farther inland, that’s not an option. Instead, people flock to the many lakes dotting this great land, many of them unknown beyond the borders of their state. There’s no saltwater or waves to surf on, but there might be paddleboarding, kayaking, or fishing, and, in some cases, a sandy beach. And these days, a fresh-air escape is more appealing than ever.
While lake home sales were growing before the pandemic sent everyone home from the office, demand surged with COVID-19 shutdowns, says Glenn S. Phillips, CEO and lead economic analyst of LakeHomes.com, which focuses on this niche in real estate.
“People saw their friends and family go to the lake and realized that if you are social distancing and home-schooling, the lake is a far better place than most primary residences,” he says. “In addition, we have also seen some people realize that life is short, so don’t wait [to buy] that dream home.” (The same impulse, he notes, is also pushing the sale of boats, recreational vehicles, and sports cars.)
Overall, Phillips’ lake home specialists have seen sales increase over 40% from last year—and it probably would be even higher if inventory weren’t so low in so many of these waterside retreats.
But as usual, the most popular getaways tend to be expensive. With the country in a recession, even those ready to drop a bundle of cash on a second home that might end up replacing the first probably don’t want that bundle to be too big.
So where does one go without forking over the brood’s college fund?
To figure out the top affordable lake towns in the United States, the realtor.com team of data geeks scoured the site’s listings database from this spring for homes whose descriptions mention “lake” or “lake house.” Each place had to have at least 50 of these listings to make the cut, which was winnowed even further by factoring in the percentage of second/vacation homes (the higher, the better) as well as number of hotels and lodging establishments, water-based businesses, and attractions. Each category was ranked and then weighted, giving priority to price, lodgings, and seasonal-recreational homes. In order to sample the offerings from across the country, the list was limited to one place per state.
We also identified the median price for homes in these lake-affiliated towns, and while they’re all above the national median home price, we think they offer relatively good value—and we have advice on where to look for even better bargains.
Brant Lake is one of several lakes surrounding Chestertown.
KatieDobies / iStock
This Southern Adirondack lake town is small, really small. It’s home to just 515 residents. So while it’s not exactly a vacation hot spot, it’s part of a region dotted with small lakes that has been booming this year with second-home buyers, who make up about 80% of the real estate market.
Chestertown is very close to popular and pricier Lake George as well as Gore Mountain Ski Resort, but the serene town has become far more attractive with the social distancing of COVID-19—and it costs less.
“It’s much more quaint, with smaller lakes that are clean and beautiful,” says Angie Mead, associate broker with Gallo Realty. “It’s more of a boutique lake.”
Those who want to own a home right on the water should expect to fork over at least a half-million bucks, including for this $725,000 three-bedroom. But buyers willing to share rights to the still-quiet waterfront could get in starting in the $300,000 range, like for this sweet three-bedroom log cabin with a deeded dock on private Friends Lake listed at $339,000.
One thing hasn’t changed this summer: Last year’s No.1 lake town is still ranking high in 2020. Branson’s usually packed Silver Dollar City theme park, Dolly Parton’s Stampede (how do you not love that woman?), and live country music shows may not be nearly as appealing during the pandemic as they have been in summers past. But there’s plenty of opportunity to distance from strangers across the area’s many lakes.
Take advantage of the 43,000 acres of Table Rock Lake on a paddleboard, kayak, or boating trip with your quarantine pod. Or spread out and fish for trout in the clean, cool waters of Lake Taneycomo. Buyers who want a quieter place to shelter might prefer the latter, where single-family homes on the water start in the high $300,000s, including this turnkey three-bedroom for $399,000 or this sprawling four-bedroom on 2.31 acres for $410,000.
This bustling town is a Midwestern summer playground with lakes in every direction. It’s nestled between Lake Michigan’s Sleeping Bear Bay and the Glen Lakes, just 10 miles north of awe-inspiring Sleeping Bear Dunes National Lakeshore. So, house hunters need not look far to find a home right near the water. Getting a contract, this year, might be another story.
Glen Arbor real estate has been moving at a feverish pace this summer, says Tim Peterson, an agent with Coldwell Bankers Schmidt, Realtors®.
“It’s about as hot a real estate market as you get in Michigan. It’s the most desired area in the state,” he says.
There are plenty of folks willing to pay to find a spot right on Glen Arbor’s gorgeous white-sand beaches. This small two-bedroom on the bay is listed for a whopping $1,950,000. But those who want similar views at a fraction of the price have plenty of options, too.
One can take in the coastal breeze from the patio of a condo starting at around $400,000, including this two-bedroom with views of the lake and Crystal River listed for $410,000 or this two-bedroom with sunset views of the bay listed for $525,000.
The waters of Lake Chelan are clean enough to drink—or you can quaff one of the local wines.
4nadia / iStock
Just a three-hour drive east of Seattle, this high-desert town is a sunny escape from the rain and clouds of the coastal Pacific Northwest. The area is popular among urbanites, with around 85% to 90% of buyers in the area seeking second homes, says Justin Skaar of Coldwell Banker Lake Chelan Broker.
It’s not hard to see why. The idyllic glacial valley surrounds crystalline waters that are so clean, many homeowners get their drinking water straight from Lake Chelan.
During the summer months, visitors and locals cruise along the shores of the 55-mile-long body of water, sailing, wakeboarding, or paddling past historic cabins and sprawling vineyards, some of which churn out some impressive local wines.
In the winter, folks get into snowshoeing, cross-country skiing, and snowmobiling.
Chelan offers a wide range of housing options at a wide range of prices. Waterfront condos start in the mid-$300,000s, including this two-bedroom listed at $349,000. But those who want private access to the water from their backdoors need IPO-level cash and should expect to fork over six figures for places like this fancy four-bedroom listed at a cool $2,050,000.
Gouldsboro and its surrounding towns in Pennsylvania’s Poconos Mountain range have been on fire, figuratively, since the onset of the coronavirus pandemic. The folks who used to drive over for weekend trips to hike, ski, or gamble at the casinos are increasingly putting down roots.
New Yorkers and New Jerseyans have been buying in droves, seeking more space to social distance in this serene outdoor-lovers’ Eden. Around 70% of recent buyers have been coming in from out of town.
Turns out, those city dwellers can buy a single-family house for less than the cost of a studio in New York City. Entry-level lake homes start in the $100,000s, including this $155,000 four-bedroom with a giant deck. And buyers need not spend much more to find a place that’s turnkey. This beautiful three-bedroom across the street from Big Bass Lake was listed for $229,000.
The biggest problem here is finding a place to buy before someone else tries to snatch it away.
Vermilion has long been one of the most beloved beach towns on the south shore of Lake Erie. Arriving by land and water, visitors flock to “Harbour Town” for a New England–style getaway without stepping foot out of the Midwest. It boasts quaint shops and restaurants that surround the town square and plenty of locals who like to watch the passers-by as they sip beverages on their front porches.
In 2020, bustling town squares aren’t what they used to be—a source of stress rather than relaxation—but the natural scenery and plethora of beaches in the area are just as appealing while you’re trying to keep 6 feet away from others.
House hunters can pick up their own little slice of the Great Lakes for under $200,000, as long as they’re willing to make some upgrades, such as this $175,000 four-bedroom across the street from the beach.
Generally, though, those who want a waterfront view should expect to spend $400,000 and up, such as for this lakefront two-bedroom with a rooftop deck listed for $499,999.
This rural getaway attracts water-lovers from across the upper Midwest with its two local rivers, popular human-made Lake Delton, and around a dozen other bodies of water, with nice homes set right on the shoreline.
Halfway between Minneapolis and Chicago, the area has become a popular year-round destination for urbanites seeking an escape.
In the summer, families wakeboard, tube, and fish on the lakes and rivers—and take the kids out for mini golf and go-karts later in the day.
The winters may be harsh, but that makes it a haven for ice fishing, and the indoor waterpark is open throughout the year.
Oh, and did we mention you can get in cheap? Buyers can find three-season cottages on the water starting in the $100,000 range—as long they are willing to put in some elbow grease, like on this two-bedroom ranch with river access listed for $125,000. And condos, like this $55,000 one-bedroom, can start as low as $40,000 in some cases.
Again, the biggest problem with the Wisconsin Dells real estate market this year is actually finding a place to buy.
“A lot of people have realized that maybe they don’t want to vacation in hotels surrounded by people,” Kirkland Kettleson of Century 21 Affiliated says, driving up prices from years past. “So waterfront homes are going at a premium.”
Midwesterners travel from near and far to relax in the gorgeous bodies of water that dot the tourist towns of Okoboji and Spirit Lakes, which consistently rank among the top affordable, lakeside real estate destinations in the United States.
Last year, Iowa’s “Great Lakes,” which are located right on the Minnesota border, reached the seventh slot on our list of top lake home destinations. The family-friendly area boasts water sports and a drive-in movie theater—talk about a prime COVID-19-era amenity—in the summer months, with plenty of hockey, ice fishing, and other outdoor winter sports during the colder parts of the year.
It’s possible to get a single-family home right on one of the smaller lakes in the $100,000s range, including this three-bedroom on Center Lake for $119,00. But those who want to be on one of the larger bodies of water like East Okoboji Lake should expect to pay more than double. There, a good deal on a single-family begins in the high $200,000s, including this five-bedroom on the market for $289,000.
Tucked way up north in Minnesota, remote Ely is just a short jaunt from the Canadian border as the crow flies—though driving through an international border station takes a heck of a lot longer. The glacier-carved landscape is secluded and absolutely gorgeous, full of pristine lakes and unspoiled forests.
It really is like heaven on earth for outdoor recreation with millions of acres to hike and canoe, and whatever other isolated activities one can dream up. The top tourist attractions are the International Wolf Center and North American Bear Center, if that tells you anything.
For anyone who wants some waterfront privacy, this certainly is the place. Buyers can get acreage—not just lots—in the $200,000 range, such as this $225,000 one-bedroom log cabin overlooking Shagawa Lake. And for $600,000, it’s possible to buy a cabin on a private island, reachable by boat via the two docks.
Hot Springs Village—not to be confused with the city of Hot Springs and its namesake national park, 17 miles to the south—is the largest gated community in the United States. The 26,000-acre, census-designated place boasts nine golf courses, dozens of restaurants, 14,000 residents, and 11 lakes with plenty of single-family houses and townhomes on the shores.
Residents, many of whom move to the village for retirement, spend their days paddleboarding, fishing, and swimming in the lakes or walking along 30 miles of forested trails.
Waterfront townhomes start in the mid-$100,000s, including this two-bedroom for $168,000. Buyers willing to spend a bit more can find huge spreads like this three-bedroom on more than an acre right on the edge of Lake Desoto listed for $454,900.
Like in many other desirable lake towns around the United States, there aren’t a ton of entry-level waterfront homes for sale at the moment, but single-families right on the water often start in the $300,000 range, says Deb Seibert, an agent with Hot Springs Village Real Estate, who raised three boys in the community over 36 years there: “It’s a wonderful lifestyle for not a lot of money.”
The July new home sales report continued a strong stretch of housing data. Consumer confidence continues to deteriorate after signs of improvement in the spring. And mortgage rates fell sharply as the FHFA delayed the rollout of a new policy.
New home sales continue strong stretch
Sales of new homes rose 13.9% in July from June and 36.3% from July 2019
New home sales through July are up 8.2% year-to-date compared to 2019
Consumer confidence is waning
The Conference Board's Consumer Confidence Index fell 6.9 points in August from July to 84.8, its lowest level since 2014
Consumer confidence has fallen 14% since June
Mortgage rates plummet as refinance fee rollout is delayed
The FHFA announced that the implementation of their previously announced fee on mortgage refinances will be delayed until December 1st
The news propelled mortgage rates downward for the week
So what?
The July new home sales figures were the latest in a series of housing data that showed the industry is riding a positive wave. Even though the headline figure was likely inflated by seasonal adjustment factors that aren't as applicable this year than in the past, more new homes were sold in July than in June, showing that low mortgage rates, a shortage of existing homes up for sale and possibly changing preferences are buoying homebuyer demand into the summer months. However, even as the strong recovery of home sales continues, there are some hindrances looming. Despite the recent increase in home construction from builders bolstered by strong new home sales figures, sales of new homes will likely be constrained by a shortage of available homes at some point as builders race to get ahead of demand. Seasonal factors and, most notably, uncertainties brought upon by the enduring spread of the coronavirus could also hinder sales volume in the coming months. But for now, the housing market continues to blow past expectations and continue its strong 2020 well into the summer.
While the housing market continues to ride a strong wave of positive momentum, consumer confidence is waning. The Conference Board's Consumer Confidence Index decreased for the second straight month and below the series' level back in the pandemic's early days of April and May. In fact, the Index fell in August to its lowest total since May 2014. The report's forward-looking Expectations Index has retreated 20.9 points since June and now sits at its lowest level since 2016. Underlying measures reinforce the narrative as well. The report's so-called labor market differential, which measures the difference in the share of respondents who believe jobs are plentiful and the share who believe jobs are hard to get, fell to -3.7 in August from 2.2 in July. This gauge tends to map well to the overall employment situation in a given month, so the reduction (which followed four straight monthly improvements) does not bode well for the August jobs report next Friday. The share of respondents who plan to buy a home in the next six months also fell, but remains above levels from earlier in the spring and during previous recessions.
Mortgage rates fell sharply in recent days to end the week down, driven by a delay in the FHFA's new 0.5-percentage-point fee on some refinances. The FHFA announced its Adverse Market Refinance Fee, which applies to all mortgage refinances serviced by government entities, will be delayed to December 1, rather than September 1. After the surprise announcement of the policy a couple of weeks ago, lenders scrambled to increase fees on all mortgages – not just refinances – to account for the losses they were due to incur on loans in which rates were already locked in. The decision to delay the policy's rollout appears to have had the opposite effect, as rates immediately fell sharply on Wednesday following the news. The fee, of course, is still due to be implemented in the late fall, but the forewarning given to lenders this time around will likely mean that any future rate increases will be more gradual and weighted toward refinances, as the policy intends.
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Millennials, long viewed as perennial home renters who were reluctant or unable to buy, are now emerging as a driving force in the U.S. housing market’s recent recovery.
Demand from millennials, who today range from their mid-20s to late 30s, has been increasingly important to the housing market since at least the middle of the last decade. But more recently, these new homeowners have been pushing aside older generations to become an even bigger influence.
Millennials reached a housing milestone early last year when the group first accounted for more than half of all new home loans, and they consistently held above that level in the first months of this year, the most recent period for which data are available, according to Realtor.com. The generation made up 38% of home buyers in the year that ended July 2019, up from 32% in 2015, according to the National Association of Realtors.
The group last year also surpassed baby boomers as the biggest living adult generation in the U.S., according to the Pew Research Center. The largest cohort of millennial births was in 1990, Pew said, meaning that group turns 30 sometime this year.
“We anticipate as they turn 31 and 32, we’ll just see homebuying demand grow,” said Odeta Kushi, deputy chief economist at First American Financial Corp. Millennials could be responsible for at least 15 million home sales in the next decade, the firm said.
That raised questions about how millennials would build nest eggs, because homeownership has commonly been viewed as a pillar of wealth creation. Now, brokers and economists say millennials’ homebuying interest was simply delayed. Older millennials are marrying and having children later in life than previous generations, after finishing their education and building up savings.
That growing demand is compounded by younger millennials, who are now entering their 30s and starting to buy homes more actively. That is more in line with the ages at which many baby boomers and Generation X, the group born before millennials, began buying homes.
“Millennials, they’re roaring into homebuying age,” said Rick Arvielo, chief executive of mortgage lender New American Funding. “What the industry’s been talking about for a decade is whether they’re going to follow their predecessor generations in terms of their desire to own homes,” he said, adding, “Yeah, they do—they have the same desires.”
Younger buyers were a big reason why home sales continued on the path to recovery in July. Sales of previously owned homes surged almost 25% in July to their highest seasonally adjusted annual rate since December 2006.
First-time buyers accounted for 34% of sales in July, up from 32% a year earlier, NAR said.
Low interest rates, and a desire for more space as the coronavirus pandemic leads people to spend more time at home, are boosting demand for homeownership among Americans of all ages. Many millennials have additional motivations, especially parents of young or growing families.
Sandra Martinez-Gonzalez, who is 32 years old and lives in Las Vegas, used to think she didn’t want to own a home. She preferred the freedom to pick up and move. But when she started looking for a new place to rent at the beginning of the year, she realized buying would be cheaper than renting in her neighborhood.
Ms. Martinez-Gonzalez and her husband moved into their first home with their 2-year-old daughter in July. “It feels amazing,” she said, citing the bigger space and a home office. “Now that we have a home it kind of feels like: Why didn’t we do this sooner?”
A strong housing market can be a positive sign for the economy, as home purchases can lead to increased spending on furniture, appliances and renovations. Home builders have also expanded activity in response to the demand. Some equity analysts have pointed to a strengthening housing market as a reason for the U.S. stock market’s resurgence, despite high unemployment and concerns about the continuing pandemic.
For those who remain employed, ultralow interest rates offer an additional incentive to buy, as they can reduce monthly payments and make homeownership more affordable. The average rate on a 30-year fixed-rate mortgage rose to 2.99% last week, near record lows, said mortgage-finance giant Freddie Mac.
Still, housing prices have risen relative to incomes in the past decade, making a down payment a big hurdle for many millennials, especially those with student-loan debt. In the year that ended in July 2019, more than one in five buyers in their 20s and 30s used a gift from family or friends for their down payment, according to the NAR.
Some millennials are willing to move out of state to become homeowners. Rachelle Nelson and Phillip Nelson opted to build up savings rather than buy a house when they got married in 2013. Then home prices in Fort Collins, Colo., became too high for them to afford, said Ms. Nelson, who is 28. When Mr. Nelson got a new job in June, they started shopping in Cheyenne, Wyo.
They closed on a two-story home in Cheyenne last month. “We had been wanting to buy for a long time,” Ms. Nelson said. “With his new job that he got, it was what we needed in order to actually go forward.”
Time capsule spotters came across a doozy this week—a riverfront residence with must-see listing photos. The well-preserved Washington home tallied a ton of clicks and coasted to the top spot as this week’s most popular home on realtor.com®.
The pristine home is filled with custom-designed interiors and vintage treasures. We’re intrigued by the perfectly preserved wallpaper, purple shag carpet, and retro tiled bathrooms. But it was a black vinyl upholstered bathroom door that left us speechless.
Behold the majesty.
Time capsule bathroom
realtor.com
Besides the throwback interiors, there’s plenty to love about this property, which is surrounded by nature and sits along the Yakima River.
On the other end of the decor spectrum, a pair of sexy Southern California homes listed by stars of the “Real Housewives” franchise grabbed your attention. Vicki Gunvalson‘s Orange County abode and Teddi Mellencamp‘s Hollywood Hills house are both over-the-top and glam to the max.
You also clicked on two particularly gorgeous renovations. The Anchorage brick estate in Ohio was given a whimsical makeover with lovely results, and a distinctive Moorish-style mansion was transformed into something spectacular.
So whether you’re a time capsule enthusiast, a fan of glam, or lover of historic homes, you’ll find something to swoon over this week.
And if you do happen to buy the time capsule house, we beg you not to change the green tile bathroom. Scroll on down for a full look at this week’s most popular homes.
Price: $925,000 Why it’s here: Custom-built in 2004, this four-bedroom home features a grand foyer with curved staircase, hardwood floors, black marble kitchen countertops, and chandeliers throughout. The 2-acre property includes a heated pool, bluestone patio, and veranda, all secured by a professional surveillance system.
Price: $5,995,000 Why it’s here: “Real Housewives” cast member Teddi Mellencamp and hubby Edwin Arroyave are moving their family to brand-new digs in Encino. But first they’re selling their home in the Hollywood Hills. Built in 1972 and remodeled into a modern masterpiece, the five-bedroom home boasts spectacular views and requisite luxe SoCal upgrades, including indoor-outdoor living, a pool terrace built over the hillside, and style to spare.
Price: $489,900 Why it’s here: This three-bedroom home has been updated since it was built in 1927, but it retains plenty of its original charm. It sits on a corner lot with a pergola, enclosed dog area, pool, and koi pond. Inside, the hardwood floors were recently refinished and the infrastructure updated. The home boasts stained-glass windows, a brand-new master suite, and a renovated kitchen.
Price: $89,500 Why it’s here: This place needs a rescue! Built in the 1880s and expanded in 1902, this Greek Revival–style home has six bedrooms and three bathrooms. According to the listing, Franklin and Eleanor Roosevelt were frequent guests in this 3,344-square-foot home. It needs TLC, and its low price is sure to entice contractors, flippers, or investors.
Price: $3,250,000 Why it’s here: This offering includes two homes in a parklike setting. The five-bedroom main house was built in 1989, and the two-bedroom addition was constructed in 2012. Amenities include a home theater, indoor basketball court, and den. The compound comes with a pool, spa, and plenty of areas for entertaining.
Price: $3,350,000 Why it’s here: Reality TV star Vicki Gunvalson is finally saying ciao to Coto! After starring on “Real Housewives of Orange County” for 14 seasons, the OG of the OC is selling her five-bedroom mansion. Built in 1995, the grand home was the site of many epic dramas. The 5,456-square-foot home features stylish interiors that are updated and camera-ready. Out back, the enormous patio is highlighted by a custom pool with waterfall and grotto.
Price: $2,650,000 Why it’s here: Known as “The Anchorage,” this Tudor-style mansion was built in 1928 for a Goodyear executive. After a masterful modern-meets-art deco renovation, the home is a stunning showplace. Its imposing exterior yields lovely and light interiors. Sitting on 3 acres, the 10,600-square-foot mansion comes with a pool, lush grounds, and tons of history.
Price: $1,400,000 Why it’s here: Dating to 1901, this jaw-dropping piece of architecture was originally built as an entertainment hall for the larger mansion next door. Inspired by the Alhambra in Spain and immaculately restored to its original glory, the distinctive residence is unlike any home we’ve ever seen.
Price: $599,000 Why it’s here: This tranquil retreat was built in 1950 and has a bit of a treehouse vibe. The spacious three-level home features five decks to take in views of nature. The interiors are warm and flooded with light from floor-to-ceiling windows. Soak in the stylish surroundings in the home’s hot tub, on one of the patios, or just hang with friends at the well-appointed bar.
Price: $399,900 Why it’s here: On the banks of the Yakima River sits a lovely home built in 1910. Although it’s over a century old, most of the pristine decor appears to date to the late 1950s or early 1960s.
Antique bathroom tile, shag carpets, and built-ins are all present and accounted for. Wild wallpaper and crazy color choices are also evident throughout. What a buyer decides to do with the purple shag carpet and mirrored ceiling in the master bedroom is entirely up to him.
A waterfront estate on the north shore of Lake Tahoe has splashed onto the market for $44 million, making it this week’s most expensive new listing.
Part of the affluent community of Incline Village, NV, it’s far and away the most expensive listing in town. There are 209 homes on the market in Incline Village, with a median list price of $1.2 million.
This 1.2-acre property with 150 feet of lake frontage last changed hands in 1997 for $6.8 million. The buyer was listed as Spirit of the Lake LLC, an entity connected to Madylon and Dean Meiling, who own the Nevada-based company Chemeon Surface Technology.
On the market for just nine days, the stone, glass, and wood structure is already in “contingency” status—which means an offer is in place.
The listing notes the lakefront retreat features “almost 12,000 square feet of custom designed craftsmanship, with exquisite ‘Tahoe Blue’ lake views from almost every room.”
Walls of glass
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Great room
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Casual dining area and kitchen
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Formal dining room
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Bar
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Office with fireplace
realtor.com
Home theater
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Bedroom
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Lake and dock
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Built in 2006, the home features iron gates and a heated, tree-lined driveway.
The great room has a beamed, 35-foot ceiling and a wall of glass facing the lake. The open and airy space includes seating areas, a fireplace, grand piano, and chandeliers.
A professionally equipped kitchen comes with an island and butler’s pantry and is adjacent to a casual eating area. The kitchen also opens out to a patio for lakeside meals. In addition, the home features a formal dining room.
The home has four bedrooms, four bathrooms, and three half-baths. On the second level, the master suite includes a sitting area and a fireplace. Luxe spaces include an office, library, and wet bar. Other high-end amenities include a home theater, exercise room, 1,200-plus-bottle wine cellar, and an elevator.
The grounds include perennial gardens, a year-round stream, as well as a boat dock. And you’ll never be without a place to park with a seven-car garage.
In a boon for a buyer in a hurry, the property is being offered fully furnished, including the Yamaha grand piano, a shared pier, and a Cobalt boat.
Tracey A. Cutler with Windermere Prestige Properties holds the listing.
Measures of monthly rent payment rates offer differing forecasts for the rental market. Small businesses expressed a wide range of outlooks for the next 12 months. And mortgage forbearance rates continue to steadily decline.
Headline rental payment rates stay afloat, but other reports show a more pronounced decline
According to the National Multifamily Housing Council, 90% of rental households in professionally managed apartment buildings paid at least part of their rent through August 20, down just slightly from July
A separate report states that the payment rate among independently managed rental units is closer to 70%
Small businesses offer a wide range of outlooks
According to the National Federation of Independent Businesses, 21% of small businesses will have to close permanently if economic conditions do not improve in the next six months
But for half of surveyed businesses, revenues are either at or above pre-pandemic levels
Participation in mortgage forbearance programs continues to steadily decline
7.2% of mortgages were participating in relief programs as of August 20, according to the MBA
That's down 1 basis point from the previous week and 1.35 percentage points since early June
So what?
Despite the fact that the economic downturn and lack of additional fiscal relief presents a disproportionate challenge for renters, monthly rental payment rates have held up fairly well to this point. A widely-cited measure of payment rates in professionally managed apartment buildings – courtesy of the National Multifamily Housing Council (NMHC) – was updated today and showed that 90% of rental households had paid at least part of their August rent as of August 20. That's down from the year before and from July, but not nearly the precipitous fall that many had expected. But a separate report today suggests that the share of August payment rates is actually far less than the NMHC survey would indicate. According to Avail — a technology and marketing platform for small landlords – 31% of renters of single-family or multi-family rental units that are owned by individual landlords were unable to pay their August rent. In July, that rate was 25%. There are about 23 million households that rent these units, according to the Census. Absent any additional fiscal support, it's very likely that this delinquency rate could rise much higher, affecting millions of rental households as well as the individual landlords (and the properties they own) who count on their monthly payments.
This theme of varying economic hardship faced by different groups also translates to small businesses. According to the National Federation of Independent Businesses (NFIB), just over a fifth of small business owners believe that they will have to close their business permanently if economic conditions do not improve in the next six months. An additional 19% of small businesses believe that will be the case should the economy look the same in 7-12 months as it does today. However, the current conditions are quite positive for a significant share of small businesses. According to the survey, 36% of small businesses say that sales are "nearly back" to where they were pre-pandemic, while an additional 14% saying that sales are even better than before the coronavirus arrived. Taken together, half of small businesses feel like things are about as good as before, or even better, while 40% are very concerned about even existing a year from now. The NFIB survey is just another example of the wide range of impacts felt by different groups and industries throughout the economy, and how uneven the recovery may look.
According to the Mortgage Bankers Association, the share of home loans in forbearance plans has fallen for ten consecutive weeks. Just 7.2% of loans – or about 3.6 million mortgages – were receiving forbearance assistance as of August 16. That's a 1.35 percentage-point decline — a reduction of about 700,000 loans – since the first week of June. The still-elevated participation in these programs is the likely cause of a recent spike in serious mortgage delinquencies, a fact that reinforces the difficult financial state that the pandemic has placed millions of households in. There is a long way to go in the recovery, but the fact that the forbearance participation rates are decreasing, and that there has not yet been a resurgence following the end of extra unemployment benefits, is an encouraging sign for the housing market.
Click here to read past editions of Zillow’s Market Pulse updates.
Late summer is prime time for both wildfires in the West and the hurricanes that menace the Gulf of Mexico. But this year’s massive wildfires in Northern California, and a feared double whammy of storms in Texas and Louisiana, arrive in the midst of a historic pandemic that has transformed everyday life in the U.S. and will complicate the recovery.
“I’ve never seen anything like this,” says Randall Bell, CEO of Landmark Research Group, which analyzes real estate after cataclysmic events. “We’re always busy [with natural disasters]. This is just overload. The country’s psyche is already beat up by everything, and it just keeps piling on.”
The confluence of two potential clusters of major disasters, at a time when the nation’s economy is reeling from a coronavirus-fueled recession, means that the typical resources for recovery, from housing to insurance adjusters to people’s personal finances, will be spread thin. The pandemic itself adds another level of health risk to every interaction, and more delays at every step. And the displacement of tens of thousands of people and potential wide-scale damage to housing are likely to exacerbate a long-running housing shortage and affordability problem, especially in California.
More than a million acres have been consumed by wildfires in California, after a series of freak lightning storms. The largest of the nine major fires, according to the California Department of Forestry and Fire Protection, is the SCU Lightning Complex, a group of fires just east of Silicon Valley that have consumed almost 364,000 acres and destroyed 18 structures. It just recently outstripped the LNU Lightning Complex in Napa and Sonoma counties, north of San Francisco, which has killed five people, burned through almost 353,000 acres, and destroyed more than 930 structures.
Although not many residences have been affected so far, roughly 17,125 homes with an estimated value of $11.8 billion were at risk as of Tuesday afternoon, according to the most recent realtor.com® analysis.
Meanwhile, Tropical Storm Marco fizzled into a tropical depression shortly after making landfall in southern Louisiana on Monday, but there was no time for a sigh of relief. The area is still braced against Hurricane Laura, expected to hit the coasts of Texas and Louisiana on Wednesday night or Thursday morning as a Category 3 storm with maximum sustained winds of 115 mph, according to the National Hurricane Center.
Nearly 432,000 homes could be affected, with a reconstruction cost value of $88.63 billion, according to a recent analysis from real estate data firm CoreLogic. More than a half-million people were ordered to evacuate the coast in advance of Laura’s arrival. And if they return to damaged or destroyed homes, they’ll have a long road ahead of them.
“Rebuilding, a big task in the best of times, is going to be uniquely challenging in a pandemic,” says realtor.com Chief Economist Danielle Hale.
Evacuations are fraught and temporary housing is scarce
Evacuees wait to board a bus as they are evacuated from Lake Charles, LA, in advance of Hurricane Laura.
Joe Raedle/Getty Images
As these natural disasters displace tens of thousands of people, problems with both short- and longer-term housing are already looming. Whether evacuees stay with friends and family or in temporary shelters, there will be an increased risk of transmitting the coronavirus at a time when people are supposed to be staying 6 feet apart. For elderly and immunocompromised people, that’s a significant danger.
“If you have to evacuate a lot of people, it’s mixing [people] and having people traveling long distances,” says Chuck Watson, director of research and development at Enki Holdings. The Savannah, GA–based data and analytics firm looks at economic impacts from natural and human-made disasters.
There’s a financial toll, as well. Many of those who stay in hotels and short-term rentals will be paying those expenses out of pocket at a time when many families are grappling with unemployment, loss of income, and financial insecurity indirectly caused by the pandemic.
Those whose homes are rendered uninhabitable will have to seek temporary rentals, pushing up prices on whatever housing remains. Displaced renters will find themselves competing with one another as well as with homeowners, who often have larger budgets, for a slim supply of rental properties.
“There’s just not a lot of spare housing, whether you’re looking at homes that are for sale or for rent nationwide,” says Hale. “That’s going to make it more difficult for displaced families looking for temporary housing.”
In the longer term, the loss of these homes and rental units in the affected regions will likely exacerbate the housing shortage and affordability problem.
“Demand for undamaged homes goes up” after a disaster, says appraiser Bell.
Prices for rentals and for-sale properties in nearby areas that were spared can rise 10% to 20% “easily,” he says. “People are desperate. They want to stay in their communities.”
Recovery amid a coronavirus-fueled recession could be slow
Workers place plywood over the windows of a home ahead of Hurricane Laura’s arrival in Galveston, TX.
Scott Dalton/Bloomberg via Getty Images
Homes might already be less prepared for disaster this year than they would have been in a stronger economy. Blame the bite the recession took out of many folks’ budgets. Out-of-work homeowners are likely to put off maintenance like repairing leaky roofs or trimming flammable brush, or skip preventive measures like buying sandbags to prevent flooding.
“People don’t have as much money to spend on mitigating the effects of natural disasters,” says John Rollins, who specializes in catastrophe-exposed properties as a principal at Milliman, an actuarial and consulting firm.
The pandemic, meanwhile, could lead to delays in insurance claim payouts, which in turn would delay reconstruction efforts. Insurance adjusters must travel to these damaged and destroyed properties to assess the damage, at a time when travel is seen as a high-risk activity. In addition, having two clusters of disasters in different parts of the country at roughly the same time means there are fewer of these insurance specialists to go around.
In addition, the calamities will likely lead to higher insurance premiums down the line. Insurance companies paying out wildfire claims on one coast and storm damage in another part of the country will incur substantial costs, says Rollins. Those costs are typically passed down to consumers when they renew their policies.
It also can take years for communities to recover from a major catastrophe.
Alyssa Medina looks over the charred remains of her family home during the LNU Lightning Complex fire in Vacaville, CA.
Josh Edelson/AFP via Getty Images
California is still rebuilding from wildfires that blazed through the state over the past few years. The town of Paradise, which was devastated by the Camp Fire, is still rebuilding two years later, says appraiser Bell. A worst-case scenario is New Orleans’ experience after Hurricane Katrina in 2005. It took the city about a decade to recover, although some would argue that it still hasn’t finished.
The confluence of several disasters is also likely to drive up prices for construction workers and building materials—at a time when many folks can least afford those inflated costs.
After large-scale catastrophes, regional prices for materials such as lumber and drywall are usually higher for three to six months, says Robert Dietz, chief economist of the National Association of Home Builders. This can slow down home reconstruction.
This year, lumber prices were up more than 125% since mid-April, even before the disasters. That’s because of the pandemic and the resulting flurry of homeowners remodeling their homes and builders rushing to put up new construction projects to meet fresh demand. The cost of some other materials has more than tripled.
“There are already material availability concerns for the industry,” says Dietz. “Increased demand from disaster repair would make this situation worse, and harm housing affordability.”
The S&P CoreLogic Case-Shiller U.S. National Home Price Index® rose 4.3% year-over-year in June (non-seasonally adjusted), down from 4.5% in May.
Annual growth was down from May in the smaller 20-city index (to 3.5%, from 3.7%) and in the 10-city index (to 2.8% from 3.1%).
Phoenix (+9.0%), Seattle (+6.5%), and Tampa (+5.9%) reported the highest year-over-year gains among markets in the 19-city index (Detroit was excluded from the 20-city index this month).
The June Case-Shiller numbers show the housing market continues to withstand the pandemic-driven blows that have caused so many other facets of the economy to suffer.
The national Case-Shiller Home Price Index rose 4.4% year-over-year in June. The smaller 10- and 20-city composite indices grew more slowly, at 2.8% and 3.5% year-over-year, respectively. The annual rate of growth was lower in June than in May in the national, 10-city and 20-city indices. On a monthly (seasonally adjusted) basis, the 10-city index was down 0.1% and 20-city index remained unchanged from May; the national index was 0.2% month-over-month.
Zillow Forecast, Released 7/28/20
Actual Case-Shiller Indices,
Released 8/25/20
Historical Median Absolute Error*
10-City Composite,
Month-Over-Month (SA)
0.1%
-0.1%
0.2%
10-City Composite,
Year-Over-Year (NSA)
2.8%
2.8%
0.2%
20-City Composite,
Month-Over-Month (SA)
0.1%
0.0%
0.2%
20-City Composite,
Year-Over-Year (NSA)
3.4%
3.5%
0.1%
U.S. National
Month-Over-Month (SA)
0.2%
0.2%
0.1%
U.S. National
Year-Over-Year (NSA)
4.3%
4.4%
0.1%
*Calculation of Median Absolute Errors are based on Zillow’s forecasts dating to 2011. The national Case-Shiller forecasts began in 2014.
Mortgage rates and for-sale inventory are each plumbing new lows, ratcheting up competition for the few homes on the market. That's placed consistent upward pressure on home prices, a trend that has held through the summer. While recent data suggest headwinds such as the enduring spread of the coronavirus and uncertainty surrounding the next round of relief payments could jeopardize the path of the economic recovery, these concerns haven't materialized in home prices to this point. It could be that the housing market will eventually suffer as these concerns linger, but it appears that low rates are here to stay for now, which should continue to send prices higher.
Annual growth in July as reported by Case-Shiller is expected to speed up slightly in the 10- and 20-city indices, and stay steady in the national index. S&P Dow Jones Indices is expected to release data for the July S&P CoreLogic Case-Shiller Indices on Tuesday, September 29.
Index
Actual June
Case-Shiller Change
Zillow’s Forecast for the Case-Shiller July Indices
10-City Composite,
Month-Over-Month (SA)
-0.1%
0.0%
10-City Composite,
Year-Over-Year (NSA)
2.8%
2.9%
20-City Composite,
Month-Over-Month (SA)
0.0%
0.1%
20-City Composite,
Year-Over-Year (NSA)
3.5%
3.6%
U.S. National
Month-Over-Month (SA)
0.2%
0.2%
U.S. National
Year-Over-Year (NSA)
4.4%
4.4%
Note: Case-Shiller and Case-Shiller Index are registered trademarks of CoreLogic Solutions, LLC. The statements herein are not endorsed by or provided in association or connection with CoreLogic, LLC.
