Ever thought about what happens when mortgage rates climb, home designs shift, and the Writers Guild of America goes on strike? Well, that's exactly what we're exploring in this episode. We're peeling back the layers on the current real estate market trends and how they've been affected by the Federal Reserve's interest rate hikes. You'll be surprised to learn that despite overall house sizes reducing, builders are adding more bedrooms, a trend possibly driven by the increased demand for home offices in the work-from-home era.
But that's not all. We further delve into the ripple effects these shifts might have on the economy, with insights from Lee Ohian, an economic professor at the University of California in Los Angeles. As we discuss the ongoing Writers Guild of America strike, you'll see it's not just about the creatives in Hollywood. It's about the catering businesses, the set builders, the florists, and more. With the entertainment industry making up almost 20% of the LA area's income and employing around 700,000 people across California, the potential impact on discretionary spending and the housing market might be significant. So, buckle up for this comprehensive exploration of the intersection between real estate, economics, and the entertainment industry.
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With mortgage rates creeping up, it may put real estate in a tight spot. Find out more and this week's weekly real estate market update. But before that here's this week's housing market data, courtesy of Redfin. Mortgage purchase applications during the week ending August 18 declined 5 percent. Home purchase applications dropped to their lowest level since 1995. Guys, that's nuts. 1995 purchase applications were down 30 percent from a year earlier. Google searches for homes for sale were down 7 percent from a month earlier during the week ending August 19 and down about 14 percent from a year earlier. Builders are adding more bedrooms, reported Bloomberg. Of more than one million new single family houses built in the US last year, 48 percent contained at least four bedrooms, the highest share since the US census started keeping track in 1973. The bedroom explosion comes at a time when Americans houses are getting considerably smaller and builders are cutting out dining areas, living rooms, bathtubs and much more from their blueprints. Only 33 percent of existing US homes have four or more bedrooms. But the work from home era jacked up demand for a home office, which is presumably what all of those extra bedrooms are. Reported Fox Business. The Federal Reserve's aggressive interest rate high campaign sent mortgage rates soaring above 7 percent for the first time in nearly two decades, cooling the post-COVID red hot. Market Rates have been slow to retreat, hitting a fresh two decade high last week. Experts report that rates on the popular 30 year mortgage rates are hovering around 7.09 percent, while above the 5.13 rate recorded one year ago and the pre-pandemic average of 3.9 percent. On top of high mortgage rates, there's also a nationwide housing supply crunch. Sales of previously owned homes tumbled 2.2 percent in July, while the National Association of Home Builders reported new home construction sentiment dropped six points in August. Lastly, as the Writers Guild of America strikes continues, here's how it will impact the economy and real estate. According to CNBC, the strikes don't impact just writers or actors. Haunted productions impact all kinds of business, including companies that provide catering for productions, restaurants and studios, prop houses, set builders, dry cleaners, professional drivers, florists and much more. People who hold entertainment jobs and entertainment adjacent roles account for almost 20 percent of the LA area's income, says Lee Ohian, an economic professor at the University of California in Los Angeles. The economic impact is even bigger because average compensation in the industry is considerably higher, said Ohianian. Then the average earner. He tells CNBC that can have a big downstream effect if those workers pull back on their discretionary spending, especially for big purchases like buying a car or a home. A housing crunch could cause red prices higher and cause lower earners to leave the state. Across the state, some 700,000 people are employed in entertainment jobs, or close to 5 percent of the California workforce. And this has been your weekly real estate market update. I'll see you guys next week. Peace out.