“The timing is far from ideal…”
The trends in the US real estate market we’ve been following are continuing on their merry way. As this article from CNBC explains, mortgage applications were up 9% week on week and up more than 25% year on year. Refinance applications dipped slightly but remained well up compared to last year. Amid continuing record low rates, “Housing demand remains strong, and… home sales are running at their strongest pace in over a decade”.
But the potential for real estate wobbles continues. On the residential side, the US Census’s Household Pulse Survey painted a grim picture. As explained in a recent Bloomberg article, “About 5.8 million adults say they are somewhat to very likely to face eviction or foreclosure in the next two months”, representing a full third of households “that are behind on rent or mortgage payments”.
The pain in commercial real estate continues as well. Though, like its residential counterpart, the weakness is geographically variable, the overall numbers aren’t pretty. As explained in this Wall Street Journal article, though the numbers of workers returning to the office had “climbed steadily during the summer and early fall”, it was down sharply recently, though that “likely reflected the Thanksgiving Day holiday”. The article notes that the lack of workers returning to the office has not only been accompanied by an increasing number of mortgage delinquencies, but has also hurt nearby businesses that are reliant on the patronage of those workers.
“Now is not the time…”
While the trends we’ve been following continue to play out in real estate (and other parts of the economy), markets are waiting to see if policymakers “get their rear in gear”. The good news is it appears that both the Fed and Congress are at least not in neutral. There’s a new $908bio stimulus bill being bandied about, the Fed is maintaining “an accommodative stance”, and renters may get lucky if Biden lives up to his comments favoring rent and foreclosure moratoriums (though the real dreamers are looking for the Omar solution). What’s more, Biden has selected his economic advisers, which includes the queen of coo, Janet Yellen, along with a coterie of advisers with backgrounds in “efforts to increase worker earnings” and others who have worked to “advance workers and labor rights”. Combine this with some big names saying, “governments must be ready to run deficits post covid if needed” and its clear that nobody wants to touch the brakes any time soon.
