Daniel Acker | Bloomberg | Getty Images
Home prices are softening in most markets across the nation.
Yet home prices are still higher compared with a year ago, and it’s unlikely they will fall too steeply.
The sharp rise in mortgage rates over the past several months has made housing more expensive for anyone needing a loan. While that has some buyers pulling back, and some sellers lowering what they’re asking for, strong demand and tight supplies are supporting prices.
Recent reports are using monthly comparisons because of the sharp turnaround in the once-hot, pandemic-driven housing boom. So the changes can appear dramatic.
Black Knight, a real estate software, data and analytics firm, reported the second straight month of declines in August, with prices down 0.98% from July. It reported an upwardly revised 1.05% monthly decline in July. Put together, these mark the largest monthly declines in more than 13 years and the eighth largest since at least the early 1990s, Black Knight said.
“Either one of them would have been the largest single-month price decline since January 2009 – together they represent two straight months of significant pullbacks after more than two years of record-breaking growth,” Ben Graboske, Black Knight’s president of data and analytics, wrote in the report.
“The only months with materially higher single-month price declines than we’ve seen in July and August were in the winter of 2008, following the Lehman Brothers bankruptcy and subsequent financial crisis,” he added.
Despite all of these factors, it’s important to remember that real estate is also heavily influenced by local economic forces. It’s seasonal, too. Families tend to buy larger, pricier homes in the spring and summer, so they can move during between school years. That skews prices higher. Smaller, less-expensive homes tend to sell in the fall and winter, skewing prices lower. This is why home prices are usually compared year over year, to get the most accurate reading.
The average home price is now about 2%, or $8,800, off its June peak of $438,000. Black Knight reports prices are off their peaks in 97 of the 100 largest U.S. markets, but they’re still roughly 40% higher than they were in 2019, before the pandemic.
But the rate of growth is cooling. This week, CoreLogic reported that home prices were 13.5% higher in August than in the same month a year earlier. That is the lowest annual rate of appreciation since April 2021, according to the report. It partially reflects cooling buyer demand due to higher mortgage rates. CoreLogic expects these annual increases will continue to shrink, but will still show a gain of 3.2% by August of next year.
The National Association of Realtors, in its August home sales report, showed the median price of an existing home was up 7.7% year over year. Compare that to a 15% year over year gain just last May. The median is often skewed by the types of homes selling. After a boom in luxury home sales during the pandemic, sales of higher-priced homes dropped in August. That may account for at least some of the smaller annual gain.
The Realtors did, however, note that while home prices traditionally fall from July to August, this year they fell at three times the normal pace.
Certain markets are softening faster than others. Some of the markets seeing the biggest declines are some of the formerly priciest, such as San Jose, San Francisco and Seattle, according to Black Knight. These markets are being hit hardest by rising mortgage rates because they were so unaffordable to begin with.
Other markets seeing big declines are those that saw the biggest jump in demand during the pandemic, such as Phoenix and Las Vegas. With the ability to work from anywhere, people flocked to these comparably more affordable markets where the climate may have been more friendly. That surge in demand fueled prices.
Big price gains are holding up in Florida markets, which continue to see strong demand because of the shift in many tech workers from Silicon Valley to the Sun Belt during the pandemic.
Tight supply buoys prices
It’s unlikely home prices will fall dramatically the way they did during the Great Recession caused by the financial crisis because there is much more demand than there is supply.
Before the pandemic, supplies were low due to a decade of underbuilding following the Great Recession. The furious homebuying during the pandemic only exacerbated that shortage. That supply demand imbalance was what pushed home prices more than 40% higher in just two years.
There are fewer sellers, too. They see the market weakening and some don’t want to get less for their home than they feel it deserves.
“Right now, prospective sellers are not only coming to grips with falling demand and declining prices due to sharply higher interest rates, but they also have a growing disincentive to give up their own historically low-rate mortgages in this environment. Some may be waiting out the market to see if demand – and prices – return in the spring,” said Graboske.
There is about three months of supply in the existing home market, which is about half of what is considered a balanced market. There is more supply in the new home market, but new construction comes at a price premium, and buyers today are contending with higher mortgage rates. Affordability is still at one of the worst levels in history, despite prices softening slightly.
What most experts seem to agree upon is that this is not a “normal” housing market or even a normal correction in prices. Inflation, global economic uncertainty, rising mortgage rates and a still tight supply of homes for sale are all weighing on potential buyers. It remains to be seen how far they will pull back and how much that pullback will cool prices.
House approves tentative labor deal to avoid rail strike, sends to Senate
A rail employee works a Union Pacific Intermodal Terminal rail yard on November 21, 2022 in Los Angeles, California.
Mario Tama | Getty Images
The House passed legislation Wednesday that would force a tentative rail labor agreement and thwart a national strike. The bill now goes to the Senate, where Majority Leader Chuck Schumer, D-N.Y., has promised swift passage.
The House voted 290 to 137 — with 79 Republicans joining 211 Democrats — to pass the legislation, which approves new contracts providing railroad workers with 24% pay increases over five years from 2020 through 2024, immediate payouts averaging $11,000 upon ratification, and an extra paid day off.
Eight Democrats and 129 Republicans voted against the legislation.
In a separate 221 to 207 vote, the House also approved a resolution to provide seven days of paid sick leave in the contract instead of one, which is rail workers’ main disagreement with the current deal. As it stands rail workers don’t have guaranteed paid sick leave.
The vote comes after President Joe Biden called on Congress to intervene in the stalled talks between railroads and some of the industry’s major unions. He met with the four House and Senate leaders Tuesday in an effort to avoid the economic impacts of a rail strike, which the industry forecasts could cost the U.S. economy $2 billion per day.
Biden has said he’s reluctant to override the vote against the contract by some unions but that a rail shutdown would “devastate” the economy.
“This overwhelming bipartisan vote in the House of Representatives makes clear that Democrats and Republicans agree that a rail shutdown would be devastating to our economy and families across the country. The Senate must now act urgently,” Biden said in a statement.
Railways and their labor unions had until Dec. 9 to reach an agreement before workers promised to strike.
In a statement Tuesday, the Brotherhood of Maintenance of Way Employees Division of the International Brotherhood of Teamsters said passing legislation to enforce an agreement denies them the right to strike and will not fix the problems or concerns of railroad workers.
The union said it was calling on Biden and any member of Congress who “truly supports the working class to act swiftly by passing any sort of reforms and regulations that will provide paid sick leave for all Railroad Workers.”
According to the Association of American Railroads, an industry group, a presidential board created to help resolve contract talks reviewed the union’s request for additional paid sick days and instead offered additional salary.
“If the unions are interested in a holistic discussion for structural changes as it relates to their sick time, I think absolutely the railroad carriers would be up for a holistic discussion, but [they] have not done it in the zero hour,” AAR President and CEO Ian Jefferies said at a press conference on rail preparations.
Each union has its own sick day policy, according to National Railway Labor Conference, or NRLC. If an employee is sick, they need to be out of work between four and seven days before they collect their version of sick pay.
The tentative labor deal grants workers one additional personal day, for a total of three personal days for railroad workers. A worker must provide 48 hours notice to request a personal day. The measure approved by the House Wednesday would add paid sick leave to the agreement.
Sen. Bernie Sanders, I-Vt., said on social media before the vote that the tentative agreement did not go far enough.
Strike prep curtails trade
Even the threat of a strike can have impacts on rail movement.
According to federal safety measures, railroad carriers begin prepping for a strike seven days before the strike date. The carriers start to prioritize the securing and movement of sensitive materials such as chlorine for drinking water and hazardous materials.
Ninety-six hours before a strike date, chemicals are no longer transported. According to the American Chemistry Council, railroad industry data shows a drop of 1,975 carloads of chemical shipments during the week of Sept. 10 when the railroads stopped accepting shipments due to the previous threat of a rail strike.
Corey Rosenbusch, president and CEO of The Fertilizer Institute, said railroad carriers have told their members that ammonia shipments, a critical component for fertilizer companies, would not be allowed on the rail starting Dec. 4 if a labor agreement isn’t reached.
“It traditionally takes five to seven days for the supply chain to catch up when you have a shutdown,” said Rosenbusch. “Fertilizer manufacturing would have to be curtailed.”
The four major railroads typically move more than 80% of the agricultural freight traffic, according to the National Grain and Feed Association.
“We are looking for alternatives now to position our product,” said Mike Seyfert, the association’s president and CEO. “We have zero elasticity right now. There are zero drivers, and the barge situation with the low water levels has only added to this challenge.”
Collective bargaining’s future
Brendan Branon, NRLC chair, told CNBC that Congress, in voting on the labor deal, is also weighing in on the future of collective bargaining. He urged Congress to follow the recommendations of the Presidential Emergency Board, which Biden created in July to resolve the ongoing dispute between major freight rail carriers and unions.
The board crafts its recommendations under a principle known as pattern bargaining, which is the process used by trade unions and employers where demands and entitlements are made.
“Pattern bargaining promotes stability in collective bargaining, and it encourages settlement,” Branon said. “There’s any number of arbitrators and PEBs who have recognized that this is not only acceptable, this is the most appropriate form to settle complex negotiations, especially multi-employer, multi-craft agreements.”
Branon said a number of industries including the railroads have developed a set of clear practices in bargaining, and the additional negotiating by the unions after the tentative agreement departs from the framework recommended by the PEB.
“Departing from a pattern would establish a precedent that there’s still a better outcome achievable, and I think it would pose significant stress and risk for collective bargaining in the future for the railroad industry,” he said.
Airbnb launches platform allowing renters to host apartments, partnering with major landlords
Airbnb is partnering with several major landlords and management companies to list designated apartment buildings where renters are allowed to offer short-term sublets on the site.
The company said Wednesday that a new page on its website will list so-called Airbnb-friendly buildings, which will give tenants the option to host their apartments just as homeowners can.
Typically, rental buildings prohibit tenants from subletting for short stays.
To start, Airbnb is showcasing 175 apartment buildings in more than 25 major markets, including Los Angeles, San Francisco, Atlanta, Dallas, Houston, Denver, Seattle and Phoenix. Some cities, such as New York City and Washington, D.C., are not available due to local restrictions on short-term rentals.
The platform will help tenants host their rentals, and help the buildings attract tenants who may want to host. How much tenants could earn will vary.
“It depends on the building, depends on the location, there are a lot of different assumptions,” Nathan Blecharczyk, co-founder of Airbnb.
Given how much apartment rents have climbed over the past few years, along with home prices and other rising prices, tenants are increasingly looking for ways to supplement their incomes to make their monthly payments. Rents are starting to ease, but are still up 10% from a year ago, according to Apartment List.
Last year, rents rose more than 15% from the year before.
The new page on Airbnb’s website will also offer a calculator to show how much money the tenant can potentially make per month. The calculation changes depending on the number of bedrooms and the number of nights each building allows, as well as the potential asking rents, given the building’s amenities.
Apartment buildings can also charge the primary tenant a fee of up to 20% of the price of each Airbnb use. For those buildings that have been in test mode so far, Airbnb said tenants have hosted an average of nine nights per month with an average income of $900 per month.
All hosts in the participating buildings must be the primary resident, and the buildings can restrict how many nights per month the apartment can be sublet. That’s generally between 80 and 120 nights per year. The restrictions, which can be enforced since the transactions all take place on the portal, are intended to prevent investors from taking part and subletting the apartments full-time.
The apartment building owner or management company also have the right to review the listings before they go live and deactivate a listing if it does not comply with the building’s standards. They can also mandate a government ID from all potential subletters.
Equity Residential and UDR, which are apartment real estate investment trusts, or REITs, and Greystar, the largest apartment management company in the U.S., are among the major names offering apartments with hosting privileges on the new Airbnb platform.
“We believe this platform will provide the right tools for both owners and residents to effectively manage short-term rental activity without impacting overall housing supply,” a Greystar representative said. “We are collaborating with Airbnb on this innovative approach to participate in the 21st century sharing economy in a thoughtful way.”
CNBC producer Lisa Rizzolo contributed to this story.
Disney is the biggest winner — and loser — at the Thanksgiving box office
This year’s Thanksgiving box office was both feast and famine for Walt Disney.
While “Black Panther: Wakanda Forever” added $64 million to its domestic tally during the five-day time frame, Disney’s latest animated feature “Strange World” failed to lure in moviegoers, generating just $18.6 million between Wednesday and Sunday and a dismal $11.9 million for the traditional three-day opening.
That is the worst three-day opening for a Disney animated feature since 2000’s “The Emperor’s New Groove,” which brought in just under $10 million during its debut, according to data from Comscore.
The dichotomous weekend comes as CEO Bob Iger returns to the helm of the company, promising to restructure Disney in a way that puts creativity at the forefront. Iger is expected to expand on these plans during a company town hall on Monday.
The week of Thanksgiving is typically a robust time at the box office. In the last decade, not counting 2020 and 2021, the five-day Thanksgiving spread — consisting of the Wednesday before Thanksgiving through Sunday — has resulted in more than $250 million in ticket sales each year.
This year, the domestic Thanksgiving box office tallied around $121 million. “Black Panther: Wakanda Forever” led the pack, with “Strange World” taking second place. All other films, including Sony’s “Devotion,” Disney and Searchlight’s “The Menu,” Warner Bros.‘ “Black Adam” and Universal’s “The Fabelmans” tallied less than $10 million each.
Not in the mix is Netflix’s “Glass Onion.” The streamer declined to share box office receipts for the latest Rian Johnson film, although it is believed to have tallied between $13 million and $15 million during the five-day stretch.
While “Strange World” outperformed a number of other films this weekend, its muted opening raises concerns about Disney’s animation strategy and if Iger can right the ship.
Disney’s previous CEO Bob Chapek, who took over for Iger just as the pandemic was starting in early 2020, made a series of decisions that alienated the company’s creative leaders in the wake of movie theater closures.
To start, he reorganized the company to funnel creative decisions through a single executive, rather than with each studio, taking power away from the people who were responsible for Disney’s biggest blockbusters.
Chapek then opted to have a number of Pixar and Disney Animation films released directly on the company’s streaming service instead of in theaters. This was in part because, at the time, children weren’t vaccinated and families were avoiding theaters, but also to try and bolster Disney+’s library with new content.
These decisions have led to a lot of confusion for audiences when animated Disney films have been released theatrically. Either these moviegoers are unaware the film is being put into the market or they think it is coming to Disney’s streaming platform.
This happened when Disney released “Lightyear” in cinemas in June. While the two previous Toy Story franchise films each opened to more than $100 million domestically, “Lightyear” snared just $50 million in ticket sales during its debut.
Compounding this strategic decision is the fact that family films have been sparse at the box office in the wake of the pandemic. This means there are fewer opportunities for studios to market film trailers to their designated audience in cinemas and must rely more heavily on television and digital ads.
“No question a slow overall marketplace and a lack of awareness building horsepower for ‘Strange World’ hurt its potential to follow in the tradition of the long line of Disney animated hits over this very important holiday weekend in theaters,” said Paul Dergarabedian, senior media analyst at Comscore.
The Thanksgiving box office crown has long been held by Disney and its animated features, with films like “Frozen II,” “Coco,” “Moana,” and “Ralph Breaks the Internet” leading the pack in the last decade.
Even “Encanto,” which was released during the Thanksgiving frame last year, managed to generate more than $27 million during its three-day opening and more than $40 million across the full five-day holiday weekend.
Perhaps, “Strange World” will follow a similar path as “Encanto” and gain more attention from families once it is added to Disney+.
Disclosure: Comcast is the parent company of NBCUniversal and CNBC. NBCUniversal distributed “The Fabelmans.”
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