National home prices hit a new high in June for the second month in a row. Prices rose 4.1% as compared to a year earlier.
This happened during the spring home buying season which is normally one of the briskest of the year. The problem is that this year, the number of homes sold declined for the fourth consecutive month.
Low Inventory
Less homeowners are selling due to interest rate increases. If you locked-in a fixed mortgage in the 2% – 3% range, then you’re not going to be in a hurry to sell your home given what the new interest rate would be on the home you would potentially purchase.
You’ll sit pat until the rates come down even if you’re in a hurry to move. Given the 3% – 4% difference between existing mortgage and new mortgage rates, this trend probably won’t change for a while.
But the longer lasting economic effects of what some economists are now calling the “Lock-In Effect” include…
Spending Linked To Home Sales Declines
Sellers normally spend money to spruce up their homes before putting them on the market. Also work for the realtors and attorneys handling those transactions has dried up and new home construction is down significantly
These activities normally comprise 3% to 5% of our total national GDP.
But Those Sitting Pat Spend More
The other side of the equation is that potential home sellers locked into lower mortgage rates now have an additional $119K on average in equity on their existing homes. This is creating additional spending which is keeping the economy rolling.
The Labor Market
Workers who might have moved elsewhere to accept a new position aren’t going anywhere. A study by University of California Irvine and the University of California Berkeley estimated that 660K moves to new zip codes were prevented over 12 months given the lower interest rates on a worker’s existing mortgage. In many instances, a potential salary increase wasn’t enough to justify the increase in housing costs.
Many are expecting the Fed to begin dropping interest rates in September. There’s going to be a substantial amount of pent up demand in the housing market once 30 year fixed mortgage rates come back down.
I’ll continue to write as this story unfolds.
Let me leave you with this…
About a year ago, my daughter Cassie, who runs our electronic payroll service, began getting suspicious emails. The communications said that a current employee wanted to change their direct deposit information on the payroll, and that she should click the link in the email to begin the process.
The problem was that I’m the employee who had supposedly sent the request.
This newest Phishing Scam has become rather popular lately. If you make the mistake of clicking on the link, malware is attached to your system. Given the latest issues the world is having with the Crowdstrike Meltdown, you can only imagine what would happen next.
Be wary when you receive unsolicited emails from either current or former employees requesting any sort of change on payroll. Make a phone call to confirm or talk to them face to face before making any changes.
My payroll service hasn’t had any of these problems either currently or in the past. We’re extremely cautious and have security protocols in place where this sort of problem would be extremely unlikely.
But not everyone runs a payroll service the way a public accounting firm does. Most services employ nothing but minimum wage workers in order to squeeze profits out of the system.
That’s right. Your most personal information is safe-guarded by someone who probably should be flipping burgers at Mickie D’s.
I can’t tell you how many stories I know where a client using another payroll service had anywhere from a quarter to half of their employee’s identities cloned. Many times it happened overnight. It happened so quickly that there was nothing the employer could possibly do.
At that point the affected workers had a six month process of cleaning up their credit and other borrowing histories. The event also had long-lasting effects on the companies where they worked. I know of at least three instances where the affected workers left the company because they were angry about what happened and worried that it would happen again.
Be careful. Don’t just click on those links.
If you’ve had problems in this regard, we’d love to help you…
We’re all going to get through this. Let’s get through it together.
Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. Whether you need Payroll Services, or Accounting and Tax Work, you have but to ask. I’m here and I remain,
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Sincerely yours,
Chris Amundson
President
Accounting Solutions Ltd.
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