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Real Estate Recovery: Economic Factors to Watch

Home Industry News
By Liz Dominguez
July 29, 2021
Reading Time: 2 mins read
Real Estate Recovery: Economic Factors to Watch

The real estate industry is unlike any other, exemplified through the market’s resilience during this pandemic while the overall economy was hit hard. However, much of real estate hinges on overall recovery, and there are several economic factors you’ll want to keep an eye on:

The Delta Variant
Concerns over COVID-19 variants, particularly the highly infectious Delta strain, have begun cropping up, especially in areas with low vaccination rates where the virus has taken hold.

This week, the Centers for Disease Control (CDC) revised its mask guidelines, changing its stance and again recommending wearing masks indoors in parts of the U.S. where Delta is surging. Some areas are already seeing an impact at the consumer confidence level.

Stay tuned for an upcoming survey from RISMedia measuring COVID-19 and the Delta variant’s impact on real estate business.

Inflation
The Labor Department’s last Consumer Price Index (CPI), which is a strong gauge of inflation in the markets, reported that consumer prices increased by 0.9% in June, a sign that things are continuing to heat up. However, there are several elements that point to a stabilized real estate market: low interest rates, stronger lending practices and an increase in equity-rich households.

Interest Rates
Fed rates are still holding near zero, with the committee optimistic that the economy continues to “strengthen,” according to its latest report on Wed., July 28. The Federal Reserve continues to state it is nowhere near a rate hike. While Fed interest rates don’t directly impact mortgage rates, they are a good indicator of what’s to come.

The 30-year fixed-rate mortgage (FRM) just increased slightly to 2.80%, still staying below the 3% threshold, according to Freddie Mac.

“As the economy works to get back to its pre-pandemic self, and the fight against COVID-19 variants unfolds, owners and buyers continue to benefit from some of the lowest mortgage rates of all-time,” said Sam Khater, chief economist at Freddie Mac. “Largely due to the current environment, the 30-year fixed-rate remains below 3% for the fifth consecutive week while the 15-year fixed-rate hits another record low.”

Supply Chain
While real estate’s surging demand has been a boon for the industry, it hasn’t been without repercussions, particularly in exacerbating the nationwide inventory shortage. A slowdown in global trade and supply chain constraints, especially in lumber, have only lifted home values, pricing homebuyers out of their markets and encouraging a year-long competitive atmosphere that is just now starting to soften.

The future of these economic indicators heavily relies on the pandemic’s path. The growing concern surrounds new variants, and although another quarantine period is likely not in the cards, new indoor protocols could have an impact on consumer confidence and real estate business practices.

Liz Dominguez is RISMedia’s senior online editor. Email her your real estate news ideas to lizd@rismedia.com.

Tags: CoronavirusEconomic FactorsHousing MarketIndustry NewsPandemicreal estate newsReal Estate Recovery
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