The U.S. economy charged ahead in the first three months of the year thanks to more Americans getting vaccinated, fewer people catching the coronavirus and Washington approving another gargantuan $1.9 trillion stimulus. Gross domestic product, the official scorecard for our economy, rose at a 6.4% annual pace in the first quarter, the Commerce Department reports. Growth would have been even stronger if supply bottlenecks and shortages of key materials didn’t curb production. Economists predict even faster growth in the months ahead if the bottlenecks ease, coronavirus cases keep falling and government restrictions fall by the wayside. Consumer spending surged 10.7% early in the new year, helped by a combined $2,000 in stimulus checks that the government sent to most Americans in January and March. More generous unemployment benefits and the creation of 1.5 million new jobs also spurred higher spending. 

Americans spent more on autos, home furnishings, recreational goods, clothing and takeout food, among other things. The private sector also ramped up spending, especially on new equipment and software. Business investment jumped 10%. Yet the value of stockpiled goods, or inventories, declined by a whopping $147.5 billion in the first quarter because companies could not keep up with demand. GDP would have risen 9% if the level of inventories had been unchanged. There’s a silver lining, though. The speedier recovery of the U.S. economy (along with generous government aid) has enabled Americans to spend more on imports as well as domestically produced goods and services. Our economy was bound to speed up again once the vaccinations did their job and coronavirus cases fell. About 43% of the population — and 55% of all adults — have received at least one coronavirus shot. Low interest rates and government stimulus on a unprecedented scale have also push our economy into overdrive. Much of the stimulus has yet to be spent, what’s more, and the Biden administration is aiming to spend even more money.

Mortgage Rates Remain Under 3%. Investors still have a chance to lock in ultra-low interest rates on their mortgages. But how long that opportunity will last could depend on the action the Federal Reserve takes to address potential inflation in the coming months. The 30-year fixed-rate mortgage averaged 2.98% for the week ending April 29, up one basis point from the previous week, Freddie Mac reports. The rate on the 30-year loan is down roughly 20 basis points since reaching its highest level at the end of March. The 15-year fixed-rate mortgage, meanwhile, increased two basis points to an average of 2.31%. The 5-year Treasury-indexed adjustable-rate mortgage averaged 2.64%, down 19 basis points from the previous week. Mortgage rates have fallen in response to the movement on long-term bond yields, including the 10-year Treasury note, which they roughly track. In light of the rising COVID caseloads globally, U.S. Treasury yields stopped moving up a month ago and have remained within a narrow range as the market digests incoming economic data. The Fed is poised to keep rates low for the foreseeable future. Also relevant to mortgage rates: The central bank plans to maintain its pace of asset purchases (which include mortgage-backed securities. By buying those securities), the Fed pumps liquidity into the mortgage market that allows lenders to dole out more loans with lower interest rates. Of course, the low rates are welcome to home buyers and existing owners alike. Lower rates ease the affordability constraints for buyers, which is especially important in a competitive spring housing market where prices are rising rapidly. And for homeowners, the extended period with sub-3% rates give them yet another opportunity to refinance their home loans if they have not already.

SoCal Home Prices Still Rising by Double Digits. According to data released [in May] by real estate firm DQNews, median home sale prices in SoCal’s six counties jumped by 14.5 percent since the same time last year, hitting a record $630,000. The number of houses, condos, and town homes sold in that period rose 32.2 percent. The upward trend predates the pandemic, but it took off with renewed vigor as the rest of our economy faltered. In December, when the median price reached $600,000, housing experts credited the surge to people whose earnings remained largely untouched by the crisis as shuttered work places left them craving more space. These lucky customers continue to drive the surge, along with plummeting mortgage rates and millennials who are entering their early 30s. Across the region, there wasn’t a single county that didn’t see a double-digit leap in the media price of homes in March. San Bernardino County saw the biggest increase—18.3 percent to $429,500—but Los Angeles County wasn’t far behind with a 17.2 percent increase to $750,000. While that sounds outrageous, Orange County remains the county in our six-county region with the highest median home price, $835,000, which represented a 10.6 percent jump last month.

Is the U.S. Housing Market Heading for a Crash? That’s the question a lot of Americans appear to be asking themselves (see storm clouds accumulating below). Data from Google underscore the concerns that many people have about the state of the housing market. Searches for the phrase, “When is the housing market going to crash,” are up 2,450% over the past month.  Similarly, Americans are searching in droves for explanations about why the housing market is so hot and why home prices are rising, Google reports. Americans’ concerns are perhaps a natural by-product of today’s extremely competitive market. For some, today’s real-estate market might feel eerily similar to the market conditions that preceded the Great Recession. Given that the last housing boom triggered a global economic meltdown, these concerns are certainly understandable.  But housing experts argue that Americans don’t need to get themselves too worked up — yet. A year ago, when COVID-19 cases first skyrocketed across the U.S., the home-buying market came to a screeching halt as people were advised to stay home to avoid getting sick. At the time, it seemed the housing market was poised for a downturn. Instead, the opposite occurred. When real-estate transactions were allowed to resume, Americans flocked to buy homes. With jobs turning remote and schools becoming virtual, families sought more space in the suburbs. Some city residents tired of their cramped apartments and decided to make a permanent move to more rural areas, while others merely opted to purchase second homes to escape to amid the stay-at-home orders. With the sudden crush of people seeking to buy homes, prices skyrocketed. The demand for housing also triggered a building craze. Last year saw a 12% gain in the construction of single-family homes. The sudden increase in home-building activity has since caused a surge in the prices for lumber, driving up the prices of new homes even higher.

 

Coeur d’Alene is the Hottest Emerging Housing Market. The picturesque lakeside city of Coeur d’Alene, Idaho (with the wonderfully romantic name), tops the list of the country’s hottest emerging housing markets, according to a new ranking launched Tuesday. The Wall Street Journal/Realtor.com’s “Emerging Housing Market Index” identifies the top metro areas for home buyers seeking an appreciating housing market and appealing lifestyle amenities. Los Angeles was NOT on the list. After Coeur d’Alene, the top metro areas in the ranking are Austin, Texas, Springfield, Ohio, Billings, Mont., and Spokane, Wash. (just across the state border from Coeur d’Alene). In case you haven’t heard, buyers from other Western states are moving to northern Idaho in droves, seeking a more rural and less expensive place to live. The median sales price in the Coeur d’Alene region rose in March to $476,900, up 47% from a year earlier, according to the Coeur d’Alene Association of Realtors. Finding a home to buy in the metro area of about 166,000 is getting tougher: Inventory of homes for sale shrank by 71% to just 337 homes. That amounts to less than a month’s supply. Over 70% of page views on Coeur d’Alene property listings came from outside the state in the first quarter, up from about 66% a year earlier. Guess which metro area had the most page views of Coeur d’Alene listings? Los Angeles, of course, followed closely by Seattle and Spokane. Coeur d’Alene has a small-town feel. Some buyers have been drawn to Coeur d’Alene’s more relaxed Covid-19-related restrictions. Students in Coeur d’Alene public schools have been able to attend school in person at least part-time all year. Kootenai County, where Coeur d’Alene is based, had 105.6 Covid-19 cases per 1,000 people as of April 19 (in the top half of counties in the U.S.). Coeur d’Alene is also a popular second-home and luxury market owing to the area’s natural beauty and access to outdoor activities, such as skiing and water sports. That has helped boost the number of high-end sales. In the first two months of the year, 67 homes in the area sold for $1 million and above, up from 12 sales in that price range in the first two months of 2020. New residents who recently sold homes in more expensive markets such as Seattle and Los Angeles are often able to buy homes in Coeur d’Alene with cash. But that threatens to price out professionals the city needs.  

 

After practicing law for over 30 years (specializing in real estate litigation), Lloyd Segal assumed leadership of the Los Angeles Real Estate Club in 2017 from the late Phyllis Rockower. Lloyd is also an author, real estate investor, mentor, public speaker, and LANDLORD. He is also the author of four real estate reference books, including “Stop Foreclosure in California” (Nolo Press), “Stop Foreclosure Now” (American Management Association), “Foreclosure Investing” (Regency Books), and “Flipping Houses” (Regency Books). The Los Angeles Real Estate Investors Club (“LAREIC”) is the oldest (23 years) and largest investor club in California. In his new role as President, Lloyd has been busy expanding LAREIC events and programs for members and real estate investors. For more information visit https://www.lareic.com.