While the Federal Reserve’s inflationary policies are publicized as protecting the American people, they are causing the American dream of homeownership to slip away. By raising the federal funds rate to combat their self-inflicted inflation, the Fed has driven up mortgage costs, making it harder for aspiring homeowners to secure a place in the housing market. These policies have resigned aspiring homeowners to a future of perpetual renting.
At the beginning of 2022, the federal funds rate was 0.08%. As of June 2024, that number is 5.33%. The rate hike was in response to the rampant inflation of previous years. The Consumer Price Index (CPI) rose 7.0% in 2021 and 6.5% in 2022, far exceeding the Fed’s 2% target. This spike was caused by the trillion-dollar infrastructure bills, COVID stimulus packages, and other imprudent government expenditures that had motivated the FED to increase the money supply. This inflation erodes purchasing power, increasing the cost of living for millions of Americans. With the economy in this desperate state, the FED attempted to counteract it with a federal funds rate surge. While increasing this rate is a proven tool to combat inflation, it is not without cost to consumers.
The federal funds rate is the interest rate banks lend each other overnight. It effectively sets the interest rate floor for the economy. When the FED increases this rate, it creates a chain reaction that increases borrowing costs for everyone, including those seeking mortgages. In response to the federal funds rate hike, the 2021 mortgage rate of 2.65% skyrocketed to 7.74% in June 2024.
This surge is devastating for potential homebuyers. Higher mortgage rates reduce what potential homeowners can afford. More of their monthly payment goes towards interest rather than principal, drastically affecting their buying power. For every 1% increase in mortgage rates, a buyer’s purchasing power decreases by approximately 13.80%. This means that a potential buyer who could previously afford a $750,000 home may now only qualify for a $646,500 home, assuming a fixed amount for a down payment.
This pushes previously affordable homes out of reach for many buyers and slows the housing market. According to the National Association of Realtors, the Housing Affordability Index dropped from 148.2 in 2021 to 98.2 in 2023, indicating a significant decrease in the ability of a median-income family to afford a median-priced home. This decline in affordability has led to a slowdown in home sales, with existing home sales falling from 6.12 million in 2021 to 4.09 million in 2023.
For borrowers with adjustable-rate mortgages (ARMs), the impact of federal funds rate hikes is even more direct. The federal funds rate influences the financial indices to which ARMs are tied. As the rate increases, so does the index, leading to higher monthly payments for ARM holders. This process creates financial strain for borrowers who didn’t anticipate such increases when they initially took out their loans.
Federal funds rate hikes have also had broader economic implications. The housing market is a crucial driver of economic activity, influencing everything from construction and real estate services to consumer spending on household goods. Housing-related activities typically account for 15-18% of GDP and the recent downturn has affected various sectors. For instance, new housing starts declined from 1.61 million in 2021 to 1.41 million in 2023, reflecting the cooling effect of higher rates on construction activity. When mortgage rates climb and home buying slows, these sectors experience a downturn, rippling throughout the economy.
Raising the federal funds rate is one of the FED’s classic inflation reduction methods. However, the root of the problem is the source of the inflation. Wasteful government spending and expansionary monetary policy were the origin of the crisis. The current regime believes frivolous expenditures and printing money won’t lead to negative consequences. But for the millions of Americans struggling to buy a home, or crushed by the crippling cost of living, these policies are far from benign. For rich politicians whose financial futures are set, the gravity of the situation may not be evident. But for homeless, hungry Americans, the time for action is now.
Costco is building a 'mixed use' 800-unit apartment complex in south Los Angeles - with 184 units designated as affordable housing, which some have speculated will allow them to fast-track the construction of an actual Costco Big Box store by taking advantage of a state law which removes significant red tape from such projects, the NY Post reports.
The project, in partnership with Baldwin Village by developers Thrive Living and architects AO, is still in the permitting stage so no word on when ground will be broken.
"The planning and land use system in California and in LA is a Rube Goldberg machine," housing activist Joe Cohen told SFGATE, "and this project is seeing that machine laid bare."
The mixed-use complex would rise on a vacant, five-acre lot that was previously home to a hospital.
The plans include a gym, multi-purpose spaces, gardens, a rooftop pool, landscaping and a large parking lot, according to the press release. -NY Post
According to Cohen - who calls it Costco Prison, the complex is "a bunch of small units along these long hallways, with a massive recreation center as an amenity space," adding "From a plain view, it looks like an old school prison design," due to its use of pre-manufactured apartment modules that can he brought to the site by truck.
The reason for the 'prison' look, Cohen says, is that "Costco was facing years of public hearings, millions of dollars of consultant fees, and an uncertain outcome," in order to gain approval.
Thrive Living
"However, mixed-use housing projects that meet certain criteria are automatically exempt from discretionary reviews by state law (AB 2011)," he continues.
"So Costco did what any good Scooby-Doo villain would do. They put on a mask that says "I'm an apartment building, not a big-box store.""
To get the full protection of state housing laws (HAA), mixed-use buildings must be at least 2/3 residential. The Costco itself is 185,000 square feet. So they needed at least 370,000 sq ft of residential.
(They ended up with 471,000 sq ft of residential plus an additional 56,000 sq ft of amenity space)
But for a project that big, to qualify for AB 2011, you need to not only pay prevailing wages, but use "skilled and trained" (aka union) labor.
"luckily", union labor requirements only apply to on-site construction. So to lower the amount of on-site labor needed, Costco turned to pre-fab building modules.
Pre-fab modules need to fit on trucks, which results in mostly small shotgun-style one-bedroom units.
And that's how you end up with a Costco housing project that resembles a prison! -Joe Cohen
The Costco store itself will be close to mass transit, and will include a multi-floor, underground garage, pharmacy, and optical center according to SFGATE.
"Mayor Bass has declared a housing emergency in Los Angeles, and we’re answering the call," Jordan Brill of Thrive Living in a statement included in the press release. "Our company is focused on addressing the severe housing affordability crisis in Los Angeles, while also attracting retailers willing to make long-term commitments."
A new report from Moody'soffers yet another grim outlook that the commercial real estate downturn is nowhere near the bottom. Elevated interest rates and persistent remote and hybrid working trends could result in around 24% of all office towers standing vacant within the next two years. The office tower apocalypse will result in more depressed values that will only pressure landlords.
"Combining these insights, with our more than 40 years of historic office performance data, as well as future employment projections, our model indicates that the impact on office demand from work from home will be around 14% on average across a 63- month period, resulting in vacancy rates that peak in early 2026 at approximately 24% nationally," Moody's analysts Todd Metcalfe, Anthony Spinelli, and Thomas LaSalvia wrote in the report.
In a separate report, Tom LaSalvia, Moody's head of CRE economics, wrote that the office vacancy rate's move from 19.8% in the first quarter of this year to the expected 24% by 2026 could reduce revenue for office landlords by between $8 billion and $10 billion. Factor in lower rents and higher costs, this may translate into "property value destruction" in the range of a quarter-trillion dollars.
In addition to remote working trends, Moody's analysts pointed out that the amount of office space per worker has been in a "general downward trend for decades."
At the peak of the Dot-Com boom, office workers used an average of 190 sq ft. The figure has since slid to 155 sq ft in 2023.
"The argument for maintaining or even increasing remote work practices remains compelling for many businesses," the analysts said, adding, "If productivity remains stable and costs can be reduced by forgoing physical office spaces, the rationale for mandating in-office attendance diminishes."
Related research from the McKinsey Global Institute forecasts that office property values will plummet by $800 billion to $1.3 trillion by the decade's end.
Moody's expects vacancy rates to top out as office towers are demolished or converted to residential ones in the coming years.
"Right-sizing will continue over the next decade as the market shakes out less efficient space for flexible floorplans that support our relatively new working habits," they said.
Earlier this year, Goldman analyst Jan Hatzius pointed out that a further 50% price decline would make office tower conversions financially sensible.
Recently, Freddie Mac, a government-sponsored enterprise, sought approval from its oversight agency, the Federal Housing Finance Agency (FHFA), to purchase and guarantee second mortgages in the United States.
While the business case for this proposal is deficient (for an excellent perspective on that, see the article by R. Christopher Whalen), I will discuss the economic and political premises behind this move and its possible consequences.
What Does It Mean to “Nationalize Second Mortgages”?
Understanding the single-family mortgage market in the US means realizing that there is no market in the real sense of that term. A whopping 70 percent of home mortgages in the US are owned or guaranteed by Freddie Mac and Fannie Mae, the two government-sponsored enterprises created by Congress to “support the housing market.” When the Federal Housing Administration and ancillary agencies are included, the proportion of mortgages supported by the government rises to approximately 95 percent. Naturally, this ubiquitous subsidy scheme supports a political goal—that of widespread home ownership—while making mortgages more accessible and homes much more expensive.
The government-sponsored enterprises are only nominally private—they were established by Congress specifically to “provide liquidity” to the home mortgage market by buying mortgages originated by banks and other institutions. They have always been subject to regulatory oversight by the government. This is especially true since their failure during the 2008 housing crisis, at which point they were placed into conservatorship under the FHFA.
Aside from mortgage loans, which are primarily used when acquiring a home, homeowners have additional ways to access the equity in their home. Banks and credit unions offer home equity lines of credit, home equity loans, and other second mortgage products to prospective borrowers. They’re “second” because, while secured by the underlying property, they are legally subordinate to the existing (“first”) mortgage. As such, second mortgages are riskier, are generally smaller in size, and incur a higher interest rate. Freddie Mac wants regulatory approval to hold these loans.
Freddie Mac, if approved, will almost certainly be followed by Fannie Mae. Thus, Freddie Mac’s proposal is an attempt to de facto nationalize the second mortgage market, in similar fashion to the existing first mortgage market.
There Will Be Blood
The Freddie Mac proposal should be seen in the context of an ongoing housing bubble combined with all-time highs in consumer debt. The Case-Shiller US National Home Price Index remains at all-time highs despite leveling off around the time benchmark interest rates increased in mid-2022.
Figure 1: Case-Shiller US National Home Price Index compared to the median weekly real earnings of those employed full time, 2019–24
In the meantime, consumer debt continues to climb as price inflation persists and real wages are stuck.
The political imperative is clear—get more people to borrow against the equity that’s been created in the housing bubble of the last ten to fifteen years, especially the last four years. Doing so will likely boost gross domestic product figures as homeowners convert illiquid paper wealth into actual liquidity with which they will buy goods. Never mind that the debt created by this will pile on top of an already-unsustainable burden. This is especially true for the lower- and middle-income segments of the population, as 36 percent of US adults have more credit card debt than emergency savings.
Subverting the Free Market Again
If market participants wanted additional liquidity in second mortgages, they would create and price it accordingly. Shoehorning government participation will only guarantee malinvestment and significant collateral damage, exacerbating existing problems with asset inflation and household indebtedness. The will of individuals acting in their own interests is what creates a healthy market—not government decree from increasingly harebrained regimes desperate for shallow political points.
Flipping Rate Increases for Second Quarter in a Row While Profit Rebound Continues; Investment Returns Still Low but Reach 30 Percent Nationwide for First Time in Over a Year; Raw Flipping Profits Also Hit High Point Since 2022
IRVINE, Calif. – June 20, 2024 — ATTOM, a leading curator of land, property and real estate data, today released its first-quarter 2024 U.S. Home Flipping Report showing that 67,817 single-family homes and condominiums in the United States were flipped in the first quarter. Those transactions represented 8.7 percent, or one of every 12 home sales nationwide, during the months running from January through March of 2024.
The latest portion was up from 7.7 percent of all home sales in the U.S. during the fourth quarter of 2023 – the second straight quarterly gain. While the portion was still down from 9.8 percent in the first quarter of last year.
As flipping rates went up, fortunes kept improving for investors who buy and quickly resell homes. The latest data showed that home flippers typically earned a 30.2 percent gross profit nationwide before expenses on homes sold during the first quarter of this year, marking the third time in four quarters that margins increased following a six-year period of mostly uninterrupted declines.
The typical first-quarter profit margin – based on the difference between the median purchase and median resale price for home flips – remained about 25 percentage points below peaks hit in 2016. It also stayed within a range that could easily be wiped out by carrying costs that include renovation expenses, mortgage payments and property taxes.
But it was up from both the fourth quarter of 2023 and from a low point over the past decade of about 25 percent in the first quarter of last year.
Gross profits on typical flips around the country, meanwhile, increased to $72,375. That remained down from a high of about $80,000 reached in 2022. But it was up from $65,000 in the fourth quarter of 2023 and was about $10,000 above last year’s low point.
“The latest numbers show that investors still face an uphill climb to clear significant profits after expenses,” said Rob Barber, CEO for ATTOM. They, like others, also face tenuous times amid a housing market boom that’s cooled down over the past year. But we now have a year’s worth of a trend showing that things have started to turn around for the flipping industry, with clear signs of increasing interest flowing into the market.”
The continued improvements in profits and profit margins over the past year reflect a rejuvenated pattern of investors benefitting from shifts in prices going in their favor between the time of purchase to resale.
In the first quarter of 2024, the typical nationwide resale price on flipped homes increased to $312,375, a 4.1 percent improvement over the fourth quarter of 2023. The increase outpaced the 2.1 percent rise in median prices that recent home flippers were commonly seeing when they were buying their properties. Similar gaps appeared annually as well, leading to the quarterly and yearly improvement in investment returns.
Home flipping rates turn upward in almost 80 percent of nation Home flips as a portion of all home sales increased from the fourth quarter of 2023 to the first quarter of 2024 in 134 of the 173 metropolitan statistical areas around the U.S. with enough data to analyze (77.5 percent). Most of the declines were by less than two percentage points. (Metro areas were included if they had a population of 200,000 or more and at least 50 home flips in the first quarter of 2024 and sufficient data.)
Among those metros, the largest flipping rates during the first quarter of 2024 were in Warner Robins, GA (flips comprised 18.7 percent of all home sales); Macon, GA (17.1 percent); Fayetteville, NC (15.8 percent); Atlanta, GA (14.7 percent) and Memphis, TN (14.6 percent).
Aside from Atlanta and Memphis, the highest flipping rates among metro areas with a population of more than 1 million were in Columbus, OH (12.8 percent); Birmingham, AL (12.7 percent) and Kansas City, MO (12.1 percent).
The smallest home-flipping rates among metro areas analyzed in the first quarter were in Honolulu, HI (3.7 percent); Oxnard, CA (5.3 percent); Naples, FL (5.4 percent); Des Moines, IA (5.5 percent) and Seattle, WA (5.5 percent).
Typical home flipping returns rise in slightly more than half of U.S. The median $312,375 resale price of homes flipped nationwide in the first quarter of 2024 generated a gross profit of $72,375 above the median investor purchase price of $240,000. That resulted in a typical 30.2 percent profit margin in the first quarter of 2024, up from 27.7 percent in the fourth quarter of 2023 and 25.3 percent in the first quarter of last year. But the latest nationwide figure still remained far beneath the 56.3 percent level in mid-2016 and from a more recent peak of 48.8 in 2020. .
Profit margins went up from the fourth quarter of last year to the first quarter of this year in 89 of the 173 metro areas analyzed (51.4 percent) and were up annually in 111 of those markets, or 64.2 percent.
The biggest year-over-year increases in the typical profit margins during the first quarter came in Reading, PA (ROI up from 56.7 percent in the first quarter of 2023 to 124.9 percent in the first quarter of 2024); Trenton, NJ (up from 22.7 percent to 64.2 percent); Harrisburg, PA (up from 73.6 percent to 113.6 percent); Lynchburg, VA (up from 49 percent to 87.5 percent) and Columbus, GA (up from 41.8 percent to 80.1 percent).
Markets with the largest returns on investment for typical home flips completed during the first quarter of 2024 were concentrated in lower-priced areas of the Northeast, led by Buffalo, NY (127.8 percent return); Reading, PA (124.9 percent); Pittsburgh, PA (120.6 percent); Scranton, PA (115.7 percent) and Harrisburg, PA (113.6 percent).
Metro areas with a population of at least 1 million and the weakest returns on typical home flips in the first quarter of 2024 were Austin, TX (0.3 percent); Honolulu, HI (1.7 percent); San Antonio, TX (2 percent); Dallas, TX (5.3 percent) and Houston, TX (8.4 percent)
Investors earn highest raw profits in more expensive areas of West, South and Northeast The largest raw profits on median-priced home flips in the first quarter of 2024, measured in dollars, were concentrated in areas of the West, South and Northeast regions where resale prices mostly topped $400,000. Fifteen of the top 20 fell into that category, led by San Jose, CA (typical gross profit of $297,500 on a median resale value of $1.6 million); San Francisco, CA ($280,000 profit on a median resale value of $1.1 million); San Diego, CA ($190,750 profit on a median resale value of $926,500); Bridgeport, CT, ($175,000 profit on a median resale value of $500,000 million) and Oxnard, CA ($162,000 profit on a median resale value of $929,500).
The South also dominated the opposite end of the range, with 16 of the 20 worst raw profits on median-priced transactions during the first quarter, although resale price ranges were mixed. The weakest numbers were in Jackson, MS ($3,873 loss on a median resale value of $185,560); Killeen, TX ($1,209 loss on a median resale value of $208,750); Austin, TX ($1,178 profit on a median resale value of $427,725); San Antonio, TX ($5,144 profit on a median resale value of $258,259) and Honolulu HI ($10,092 profit on a median resale value of $597,567).
All-cash investing by home flippers holds steady
Nationwide, 63.8 percent of homes flipped in the first quarter of 2024 had been purchased by investors with cash. That was virtually the same as the 63.7 percent level in the fourth quarter of 2023, although still down from 65.4 percent portion in the first quarter of 2023. Meanwhile, 36.2 percent of homes flipped in the first quarter of 2024 had been bought with financing. That was down slightly from 36.3 percent in the prior quarter, but still up from 34.6 percent a year earlier.
Among metropolitan areas with a population of 1 million or more and sufficient data to analyze, those with the highest percentage of homes flipped in the first quarter of 2024 that had been purchased with cash were in Buffalo, NY (82.2 percent); Detroit, MI (77.3 percent); Cleveland, OH (74.8 percent); Birmingham, AL (73.1 percent) and Pittsburgh, PA (73 percent).
Average time to flip nationwide rises but remains down from a year ago The average time it took from purchase to resale on home flips increased to 164 days in the first quarter of 2024. That was up from 156 in the fourth quarter of 2023, but still down from 178 days in the first quarter of 2023.
Investor resales to FHA buyers increase Of the 67,817 U.S. homes flipped in the first quarter of 2024, 11.2 percent were sold to buyers using loans backed by the Federal Housing Administration (FHA), marking the second straight quarterly increase. The latest portion was up from 10.4 percent in the fourth quarter of 2023 and from 10.7 percent in the first quarter of 2023.
Among metro areas with a population of 200,000 or more and at least 50 home flips in the first quarter of 2024, those with the highest percentages of flipped properties sold to FHA buyers — typically first-time home purchasers — were in Scranton, PA (27.1 percent); Bakersfield, CA (26.8 percent); Visalia, CA (26.8 percent); Yuma, AZ (25.9 percent) and Flint, MI (25.8 percent).
One-third of counties have home-flipping rates of at least 10 percent Home flips accounted for at least 10 percent of all home sales in 284, or 31.5 percent, of the 902 counties around the U.S. with at least 10 flips in the first quarter of 2024. That was well above the 22.7 percent of all counties with enough data to measure in the fourth quarter of 2023. The leaders in the first quarter of this year were Cobb County (Marietta), GA (23.5 percent); Hickman County, TN (outside Nashville) (20.3 percent); Houston County (Warner Robins), GA (20.1 percent); Clayton County, GA (outside Atlanta) (19.6 percent) and Douglas County, GA (outside Atlanta) (19.5 percent).
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Report methodology ATTOM analyzed sales deed data for this report. A single-family home or condo flip was any arms-length transaction that occurred in the quarter where a previous arms-length transaction on the same property had occurred within the last 12 months. The average gross flipping profit is the difference between the purchase price and the flipped price (not including rehab costs and other expenses incurred, which flipping veterans estimate typically run between 20 percent and 33 percent of the property’s after-repair value). Gross flipping return on investment was calculated by dividing the gross flipping profit by the original purchase price.
Several major apartment landlords from across the country are under fire over rental rates — allegations that have spawned a wave of class-action lawsuits and garnered the attention of state and federal authorities.
The lawsuits have high-stakes for the apartment market and beyond, with potential to shape how pricing software could be utilized in multiple industries.
At issue are dozens of large apartment-building owners and real estate companies using the services of software firm RealPage Inc.
Inflation is the surest way to trigger a Pavlovian response from politicians, whereby they blame monopolists, middlemen, greedy entrepreneurs, profiteers, and price gougers. In 1793, French Revolutionaries fueled inflation by running persistent deficits that they monetized. Their response was to instill fear — courtesy of the guillotine — by blaming productive French citizens for being greedy. Luckily, the guillotine has long been ditched, but the common tropes used by the Biden administration and its allied members of Congress to deflect blame for inflation have not.
While the money supply has increased by more than 30 percent since 2020, and the Federal government deficit is above 5 percent of national income with no end in sight, Democrats have preferred to blame the private sector. Their most recent target is RealPage, a US software provider that analyzes supply and demand dynamics in the rental real estate market to help landlords price their properties. President Biden went so far as to say “we’re cracking down on big landlords who break antitrust laws by price-fixing and driving up rents.”
This type of Advil politics, where the government attempts to treat the symptoms instead of the underlying causes of inflation, comes with costly unintended consequences.
Without flexible pricing strategies, fluctuations in consumer demand cause inefficient excess demand or excess supply for goods and services. For instance, airfares are higher during summer and lower during the off-peak season to avoid flying empty planes. By using data to optimize their pricing strategy, airlines are able to operate at higher capacity and, therefore, at a lower cost. More recently, software and artificial intelligence developments have helped apply those revenue management methods to other sectors. For example, Uber can optimize supply and prices such that an Uber driver spends much less time without a passenger than a cab driver used to.
By providing valuable information about pricing, companies like RealPage can reduce rental vacancies. This means a greater supply available to renters and lower rents. It is certainly true that RealPage will sometimes recommend its clients raise rents if demand is sufficiently high to warrant it. Yet increasing rents in these contexts prevents demand from being more than capacity, allocates resources to clients valuing them the most, and incentivizes entrepreneurs to increase the supply of rentals.
Overall, RealPage is no different from many other companies engaged in revenue management. Take Perfect Price, which allows car rental companies to determine dynamic pricing. Or Pace, which does the same for hotels. What, then, is the problem progressives have with RealPage?
It also opened a criminal probe into the company in March 2024. In both cases, the company is accused of facilitating collusion between landlords who collectively adopt rents set by RealPage.
These arguments are unconvincing on several grounds.
First, rentals constitute a minority of the US housing market, with the rentership rate below 35 percent. This leaves little room for landlords to charge monopoly prices as it would induce many Americans to switch to homeownership.
Second, the rental real estate market is very competitive, with individual investors owning around 40 percent of all rental units in the US.
Third, RealPage faces competition from other real estate revenue management companies, such as Yardi.
Finally, if revenue management companies helped fix anti-competitive prices, they would incentivize landlords to chisel by charging lower rents than advised by RealPage, thus undercutting competition from RealPage’s other clients. Instead, 90 percent of RealPage clients have adopted the company’s pricing suggestions. That is not evidence of anti-competitive behavior.
Landlords can charge non-competitive prices only if they can restrict the market supply. If increases in rents had been driven by RealPage helping landlords charge monopoly prices since 2020, the rental vacancy rate should have increased after 2020. Instead, it declined from 6.8 percent in 2019 to 5.8 percent in 2022.
This indicates that other factors, such as monetary and fiscal policies that increased overall demand for goods and services, are the likely culprits behind rent increases.
In the free market, the price system lays the cards on the table. Entrepreneurial success means lower prices; the acid of competition erodes inefficiencies.
Politics, on the other hand, is the art of making market roadblocks that are unseen to the public.
Imposing new costly regulations will not make housing more affordable — unleashing the housing supply by deregulating zoning and overly strict building codes will. There is still time for the players in Washington, DC to reverse course.
Confidence among U.S. home builders weakened again in June, hampered by high mortgage rates, according to a report from the National Association of Home Builders released Wednesday. Here are the report's main takeaways:
--The NAHB Housing Market Index, produced alongside Wells Fargo, declined to 43 in June from 45 in May, a second-straight fall and the lowest reading since December. The index is a gauge of builder confidence in the market for single-family housing.
--Economists surveyed by The Wall Street Journal had expected the index to remain at 45, below the index's 50 break-even point.
--"Persistently high mortgage rates are keeping many prospective buyers on the sidelines," NAHB Chairman Carl Harris said.
--Home builders are also dealing with higher rates for construction and development loans, chronic labor shortages and a lack of buildable lots, Harris said.
--The use of sales incentives by builders edged up to 61% in June from 59% in May, while 29% of builders cut home prices to bolster sales in June, NAHB said. However, the average price reduction held steady at 6% for the 12th straight month.
--All three of the components used in the overall index worsened in June, with each coming in below the 50 threshold. The index for sales expectations in the six months fell the sharpest, followed by current sales and traffic of prospective buyers.
--On a regional three-month basis, the index for the Northeast held steady, but it weakened in the Midwest and South.
Amazon is adding $1.4 billion to its affordable housing fund to build or maintain an additional 14,000 homes for people on low incomes in what the e-commerce giant calls its “hometown communities” in the states of Washington, Virginia and Tennessee in the US.
One of Amazon’s affordable apartment blocks in Seattle
The injection of new funds, announced by CEO Andy Jassy, brings to $3.6 billion the total invested by the company in affordable housing to create or support 35,000 units.
Amazon’s Housing Equity Fund, launched in 2021, aimed to finance 20,000 units over five years in the three areas – the Puget Sound in Washington state; Arlington, Virginia, and Nashville, Tennessee. The extra funds will be allocated to the same areas.
“We are pleased to announce that we have exceeded our original goal two years early and have provided $2.2 billion to create and preserve over 21,000 affordable homes,” said Jassy. “The extension of the Housing Equity fund underscores our commitment to affordable housing and to helping thousands of families live closer to where they work or near transportation hubs, removing a major barrier to success.”
The fund was initiated in response to criticism, not directed just at Amazon but at other tech firms, that the influx of highly-paid tech employees had led to a spike in housing prices in the areas there their employers’ offices were located.
Cities like Seattle and San Francisco have seen longtime residents being displaced and having to move out of town as rents and prices became unaffordable due to demand from tech employees.
An Amazon-funded block of flats in Washington
Amazon said it wants to cater to the “missing middle”, professionals like teachers or nurses who do not qualify for government subsidies but often struggle to afford the rent. The group’s housing solutions are targeted at people on low-to-moderate incomes, defined as those earning between 30% and 80% of the area’s median income.
Great attention has been paid to residents’ quality of life, Amazon said: 92% of the homes are near bus or train stations to reduce transportation costs, while 41% of the housing units have two or more bedrooms so that families can move in.
“We created the Amazon Housing Equity Fund to preserve and create homes that will remain affordable for the next century, ensuring families can stay in their communities for generations to come,” said Jassy. “We hope that our additional commitment, coupled with other public and private resources, will help make a meaningful difference for thousands more people and enable these regions to thrive.”
Until now, a majority of the financing has been provided to both non-profit and for-profit developers in the shape of loans, enabling Amazon to generate revenue from interest payments.
