This is our last publication of the year, and in looking back, what a year it has been. Think the kind of year your grandchildren will ask you about. In just the last 12 months, we’ve all weathered a global pandemic, shelter in place orders, the rise of “work+parent from home”, a near economic collapse, two eviction moratoriums, a highly contentious election, a Utah monolith, and yes...murder hornets. Wow. Just wow. I truly believe we are stronger for facing and overcoming these challenges and 2021 will be a fantastic year! Until then, Happy Holidays!
Headlines
- November Jobs Report - The labor market rebound has slowed significantly with only 245,000 jobs being added in November and the unemployment rate falling slightly to 6.7%. This marks a significant downturn from the 610,000 added in October (with unemployment at 6.9%), and leaves us at 9.8 million jobs lost since the start of the pandemic. That may sound “okay”, until you consider that after accounting for the unemployed, those workers on temporary layoff, and those who’ve left the labor market completely, you are looking at roughly 19 million American’s out of work and an unemployment rate of 11.2%.
- Jobless Claims - Another 853,000 American’s filed for unemployment last week, the largest number recorded since mid-September and the third increase in the past 4-weeks. New claims spiked locally as well with 4,758 new filers compared with figures in the 2,500 range the previous two weeks. This spike is attributed to the surge of new coronavirus cases (what else?) and reverses a promising trend.
- COVID-19 Cases - We have some good local news on the pandemic front as Utah’s rolling 7-day average of new COVID-19 cases fell to 2,892 from 3,101 on Tuesday. Local Health Department officials feared daily case counts in the 4,000-6,000 range following Thanksgiving, but so far (fingers crossed) we have avoided a holiday surge. This is no doubt good news, but to keep things in perspective, hospital ICU capacity remains dangerously high at 88.7%.
Remember, Remember the end of December
You’ve likely heard about the famous doomsday clock that represents the likelihood of a man-made global catastrophe. Well, if we had one for the U.S. economy, it might read December 31st, 2020. Why, you ask? Well, dozens of government stimulus programs are set to end before the calendar turns to January. Beginning on December 26th, two important provisions of the CARES Act will officially expire. One of these programs granted “gig workers” (think freelancers and the self-employed) eligibility for state unemployment benefits while the other extended benefits an additional 13-weeks beyond a state’s normal cut off period. As of mid-November, more than 14 million Americans utilized these programs. With regard to housing, the CDC eviction moratorium protects an estimated 6.7 million renter households from eviction, and it expires at the end of December. Additionally, the foreclosure moratorium for homeowners with a Fannie Mae or Freddie Mac backed mortgage, which covers an estimated 28 million borrowers, also expires at the end of the year.
It’s not just unemployment and housing benefits either. December 31st also marks the deadline for small business PPP loan forgiveness, the expiration of various small business tax credits/deductions, the end of student loan payment holds, and the final day for state and local government to spend their emergency funding. Simply put, tens of millions of cash-strapped Americans rely on the above aid for survival, and allowing all of it to expire at the same time represents a serious threat to our economy.
The powers that be in Washington clearly understand this as they’ve been “negotiating” additional stimulus for months. In fact, a new bipartisan stimulus bill emerged last week that leaves out stimulus checks, but includes expanded unemployment benefits, additional funding for the Paycheck Protection Program, an extension of the eviction moratorium (but with rental assistance attached!), as well as help for state and local governments. As of this writing, House Speaker Nancy Pelosi and Senate Majority Leader Mitch McConnell have yet to get anything across the finish line. However, there is hope. In the face of worsening economic data, both sides seem to be coming to terms on the overall size of a package (Pelosi backs the bipartisan $908B plan while McConnel prefers Treasury Secretary Steven Mnuchin’s $916B proposal). At this point, the deadline to watch is December 18th, as any deal going into effect before year end would need to be finalized before the end of next week.
Utah Real Estate Market
In the last few updates, you may have heard us mention that now is a great time to own real estate in Utah. Well, don’t take our word for it. Corelogic, a data and analytics company, announced that U.S. homeowners saw an equity gain of $1 trillion ($17,000 per homeowner) last quarter due to the Covid-19 housing boom. In fact, according to Salt Lake Board of Realtors President Alicia Holdaway: “Wasatch Front home sales in 2020 are on track to being the third best year on record.”
The median home price continues to climb as inventory remains low. In fact, the number of listings in Salt Lake, Davis and Utah counties is down 64.2% from 11/29/19 to 11/29/20 (see attachments)
Median Sold Price
October: $425,000
November: $428,121
% Change: Up 0.7%
Sold Count
October: 2,373
November: 2,076
% Change: Down 12.5%
Average Number of Active Listings
October: 2,200*
November: 1,644 (11/29)
% Change: Down 25.2%*
* approximate. We used a monthly average in October, but switched to an actual date for November.
Industry Updates
- Utah Rents Climb - Some good news for a change. Average rents for 1 and 2 bedroom apartments in Salt Lake City climbed 2.0% and 3.1% respectively last month to a total of $1,040 (1 bed) and $1,340 (2 bed). 1 bedroom rents are still down 5.5% on the year, but it’s a step in the right direction.
- Utah Rent Growth vs. the U.S. - According to data from the U.S. Census, Utah ranked #18 for states with the fastest growing rents. From 2000 to 2019, the beehive state saw median rent growth of 83.9% while the median household income climbed 59.4% to $75,780.
- Serious Delinquency Rate Drops - Fannie Mae reported that the serious delinquency rate fell to 3.05% in October. This is down from 3.2% in September, but well above the 0.67% reported in October of 2019. Absolutely no one is rooting for people to lose their homes, but this could spell opportunity for investors following the expiration of the foreclosure moratorium.
- Inaccurate Background Reports - How much does it cost to provide inaccurate information in your background reports? About $4.2 million. Property management software provider, and former software of choice for yours truly, Appfolio agreed to pay a massive settlement over inaccuracy in their screening reports. Risk is simply everywhere in this business.
