ADUs Get Love, Jobs Report, Rent and Home Values Soar

Freddie Mac released guidance on June 1st 2022 that allows for rental income received from ADUs on single family properties to be used as qualifying income for purchase and non-cashout refinance transactions. Additionally 2-3 units properties that have one ADU (previously it was only single units) are eligible. Furthermore, manufactured homes can also be considered an ADU of a single family home (see guides below). I anticipate that this will help bolster the value of homes with ADU’s as they will be more widely marketable.

Mortgage Rates – mortgage rates increased slightly this week as the price of Mortgage Backed Securities (MBS) declined. MBS are still trading above their previous negative trend line. Rates are up approximately 2.125% from this time last year.

Jobs – the Bureau of Labor and Statistics (BLS) reported 390K job creations and stable unemployment levels at 3.6%. If you look at the U6 unemployment figure which includes individuals that are no longer actively seeking work the actual unemployment rate is at 7.1%, which is up 0.1% from last month. Weekly earnings are up 4.3% year over year which was slightly below expectations.

Rents – over the past 12 months rents increased 15.3%. Rent growth in May between 2018 and 2019 was closer to 2.4%

Home Values – Case Shiller reported home values increased 2.6% in March. From March 2021 to March 2022 values are up a whopping 20.6%. It will be interesting to see April and May as they will show home values factoring higher interest rates.

Mortgage Applications – to purchase homes declined by 1% last week and are now down 14% year over year. Refinances declined 5% in the previous week and are down 75% year over year.

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