Marketplace - Housing market check-in

Episode Date: September 25, 2024

The average rate on a 30-year fixed mortgage is 6% right now — a better deal than 8%, which is where rates were a year ago. But home prices have grown tremendously in the past several years. So how much can falling rates really help prospective buyers? Also in this episode: a customs broker preps for a potential port strike, Dame Judi Dench could be your next AI assistant, and college football conference shake-ups are all about the money.

Hi, I'm Kyle Rizdal, the host of How We Survive. It's a podcast from Marketplace. In 1986, before I was a journalist, I was flying for the Navy. Mr. Gorbachev, tear down this wall. It was the Cold War and my first deployments were intercepting Russian bombers. Today though, there's another threat out there, climate change. This could be the warmest year on record. Climate change is here.

Temperatures here are warming faster than anywhere on earth. And while the threat seems new, the Pentagon's been funding studies on climate change since the 1950s. I think we will put our troops and our forces at higher risk if we don't recognize the impact of climate change. This season, we go to the front lines of the climate crisis to see how the military is preparing for the threat. Listen to how we survive wherever you get your podcasts.

I'll tell you what. Why don't we not start with a story about the Fed today? We got ports. We got college football, and okay, we got one Fed story. From American public media, this is Marketplace. ["The Newsreel"] In Los Angeles, I'm Kyle Rizdal.

It is Wednesday today, the 25th of September. Good as always to have you along, everybody. Hey, look, I know it's a little early, but any chance you've gotten your holiday shopping done yet? I ask because in six days, ports from Maine to the Gulf Coast might have their hands full with a long shoreman strike, which means not much if anything is going to be getting where it needs to go, which means that would be a not great thing for this economy. Getting things where they need to go is in point of fact Gretchen Blau's job.

She's a regular customs broker at a logistics plus in Erie, Pennsylvania. It's good to have you on. Good to be here. How closely are you watching this potential strike on the East Coast? Oh, very closely because it's going to make a mess if it happens. So keep going. So if this strike starts as planned, what does your next day in the office look like? Well, I mean, we're trying to stay ahead of things. And it's all a question of timing. If things hit the port at a point where we can do the customs entries and get them moving out of the port prior to the strike. That's

what we're planning on doing. It's all a question of how long the strike is. If it's only going to last a week, then we're kind of in a holding pattern because there's no point in rerouting stuff because things will actually take longer to arrive at their destination if that's the case. The options are limited as to rerouting. We could take things through Canada, but they don't have quite the infrastructure up there to handle everything if everything moves up to that, like to Montreal or whatnot. Then there are more customs filings that will need to be put in place so that it doesn't

have to clear in Canada, that it can travel in bond to the US. So we're hoping if this does happen, it will be short lived. As we saw with the bridge in Baltimore when we had to reroute it, because we knew it was long term, things got congested in the Port of New York and whatnot. So, we should point out that a strike that lasts a week does not mean it's only a week of backups and backlogs, right? Right. Because all that congestion has to clear.

And on top of that, we're looking at the steamship lines charging congestion fees of several thousand dollars a container. So that increases a container and there's like, oh, my, yes, that's a lot. Yes, that's like, oh my. Yes. That's a lot. Yes. That's a one-time cost. Some of the ports are waiving storage if a strike happens, but some of the steam ship lines are not, and you can't get your container out.

They're going to continue to charge storage on everything. Are you seeing companies hustling to get their stuff into the port and then out and into the economy before the deadline hits? Yes. But there's only so many trucks available. One thing we're seeing is on the export side is that if you're not in the port by, I want to say the 27th, so in two days, and your container isn't scheduled to be on a ship prior to the first, they're telling people just don't even show up or come and get your container because then the storage will start on the export side. Wow. Do you have like a file folder on your computer that just says open in case of strike?

No, I mean everything's basically kind of a pivot that we do in logistics. I mean in addition to this strike we also have Hurricane Helena coming. So I mean it's gonna be this strike, we also have Hurricane Helena coming. So I mean, it's going to be an interesting few weeks here. How long you been doing this Gretchen? I've been doing customs brokerage itself for 10 years and I've been working in logistics for 16. Situate me historically.

Are things tighter now? Is the supply chain more fragile now in your experience than it was, you know, 1520 years ago, I think it is because we have less in terms of trucking options. We've had a number of bankruptcies in the trucking industry. So deliveries are a bit tighter. We've seen some mergers on the steamship lines as well. So I think it is much more fragile than it used to be.

We have different regulations as far as customs goes for forced labor, the China duties, the steel and aluminum tariffs, the solar panel tariffs, you know, it all adds up. Not to take a turn to the political, but since you did bring it up, I imagine you're without, you know, judging one way or the other, I imagine you're watching the election too, right? Oh, for sure.

Oh, for sure. For sure. China doesn't pay the tariffs. Tariffs will come down to the American consumer. So it's a bit concerning considering what's being bandied around out there. Gretchen Blau at Logistics Plus, Erie, Pennsylvania. She's a customs broker we turn to.

Gretchen, thanks a lot. I appreciate your time. Thank you. Traders weren't really bandying much about on Wall Street this Wednesday. They kind of took a pause. We'll have the details when we do the numbers. Music In no particular order, South Africa, China, Sweden, and the United States all have in the past week or so cut interest rates to lower borrowing costs and support economic growth. That in and of itself isn't unusual.

Central banks often work, if not in lockstep, then certainly in sync at key policy moments. Thing is, though, that a lot of central banks had been cutting rates months before the Federal Reserve started down that path last week. The Fed might not be the trendsetter in this rate-cutting cycle then, but as Marketplace's Mitchell Hartman reports, the direction it is going still does matter a lot for the rest of the world. Even though the central banks of Europe, England, Canada, and some emerging markets had already started cutting rates, Cornell economist Eshwar Prasad says the Fed's recent move marks a significant shift in global finance.

What the Fed does matters greatly to the rest of the world. US interest rates are essentially a benchmark in other parts of the world and also affect exchange rates in other countries. Prasad says as long as the US kept its benchmark interest rate high, keeping the dollar strong and making the US an attractive place to invest, it discouraged other countries from cutting rates too aggressively. It could make their imported goods more expensive or it could have led to capital flowing out

of their economies. Now those calculations are changing, especially for economies closely tied to the US through their exchange rates or trade, like Mexico and Canada, says Neil Shearing at Capital Economics. The fact that the Fed's lowering interest rates means that if other central banks feel like they need to lower too to give some support to their economies, well, it gives them a bit of cover. The European Central Bank began cutting rates back in June, getting out ahead of the Fed,

says Jay Hatfield at Infrastructure Capital Advisers. The European economy is in a minor recession. They'd be in a major recession if they didn't export to the US. So they have to cut. The Europeans wrestled inflation down faster than the US, giving policymakers there more room to maneuver, says Jacob Kierkegaard at the Peterson Institute for International Economics. He points out European inflation was mainly driven by the spike in energy prices after Russia's invasion of Ukraine.

Europe's dependency slash vulnerability to Russian energy exports are essentially gone. And the main reason for that is really conservation. Europe is using less natural gas at the same time it's boosted imports from the US, Australia, and the Middle East. A few economies around the world are actually bucking the rate-cutting trend. Japan, Brazil, and Nigeria have all recently raised interest rates to fight resurgent inflation. I'm Mitchell Hartman for Marketplace. Meta thinks it knows how to get you to talk to its AI voice assistant, Dame Judi Dench. The Academy Award-winning British actress is one of several celebrities to which Meta

has reportedly paid millions of dollars to bring a new generation of AI chatbots to life, metaphorically speaking, for now. Others include Awkwafina and Kegel, Mike and Key, also wrestler turned actor John Cena, but as Marketplace's Matt Levin reports, AI voice work presents some new complications for entertainers. Right now the relationship between humans and the voice assistant on your phone or nightstand is basically call and response. Tell me the weather, order me pizza. Meta wants chats with its AI assistant to be more like actual conversations.

And who wouldn't want to talk with Awkwafina? Samantha Wolf teaches tech marketing at NYU. Metta enlisted the voices of celebrities to say, you know, hey, if you use these recognizable celebrity voices, does that encourage a different kind of interaction? The novelty of famous people voicing tech is nothing new, think Arnold Schwarzenegger directing you on Waze. But AI could offer performers something more lucrative.

Matt Bellany covers Hollywood for the media company Puck. I think this is the future. I think this is the next phase of celebrity endorsement slash brand partnership. But that future might also be more fraught than traditional endorsements or voiceover work. It's one thing if Judi Dench tells you too late to take a right turn. It's another if her AI voice spews misinformation or hate speech. I imagine there is an out if something goes haywire. If these chat bots start saying things or doing things that is not on brand.

These AI voice deals also come at a time when many in Hollywood feel like the technology is not only an existential threat, but also unethical. Justine Bateman is a filmmaker and former actress. She's also the founder of Credo 23, an organization that certifies AI was not used in movies or series productions. All you have is your body and your voice and your choices. And to just give that away such that it can say anything to anybody, it's just repulsive to me.

I would never do that. What else do you have? Meta did not respond to a request for comment. I'm Matt Levin for Marketplace. Coming up. Those are late stressful nights where I would come home at 11 smelling like a bunch of dirty dishes. That is no fun at all. First though, let's do the numbers.

Dow Industrial is down 293 points today, 7 tenths percent, 41,914. The NASDAQ gained seven points, less than a tenth percent eighteen thousand and eighty-two the S&P 500 subtracted ten two tenths percent fifty seven twenty two there semiconductor maker Micron Technologies due to report earnings after markets closed stock added one and nine tenths percent during the session so let's take a look at some competitors shall we Intel which has gotten some coverage on the show this week, ascended 3.2%. AMD rose 2.3%. Kmart, you might have heard this, announced it's closing its last full-scale store in

the United States, leaving just one small outpost in Miami and a smattering of stores in Guam and the U.S. Virgin Islands. Company today is owned by TransformCo, there's a name, which bought assets of Sears and came out out of bankruptcy in 2019. Today, as it happens, is National Lobster Day. Now, why CHI is it National Lobster Day? Well, because back in 2014, the two sitting senators from Maine made a congressional proclamation declaring it to be so. So, Darden Restaurants, former owner of Red Lobster, descended 1-3 quarters percent.

Bloomin' Brands, owns Bonefish Grill, sank about a half percent. Ark Restaurants Corporation, owns Bunch Seafood Restaurants in the Southeast, dove 2-1 tenth of one percent. You're listening to Marketplace. I'm Kai Rizdal. Would be and actual home buyers in this economy have been having a rough couple of years, high and rising home prices coupled with mortgage rates higher than they've been in 25 years. It's a delicate dance trying to buy a house, balancing what you can afford with what the

market has to offer. Home prices, as we've been saying, are still high. We told you about the latest Case-Sherler data yesterday, 14 months in a row of rising prices. But rates on mortgages have been easing for a while now. So what is that going to mean, both for those prices and for the people who want to buy? Marketplace's Samantha Fields reports. It's finally happening, the thing so many people have been waiting for. Mortgage rates are coming down.

On its face, definitely that feels like good news for a lot of prospective home buyers who have been sidelined from the market because of lack of affordability and lack of inventory. Chris Salvati, a senior housing economist at Apartment List, says a lot of people who feel ready to buy have been waiting, hoping for a bit of a break from what has been a rough housing market. Over the past five years, the median home price has increased by 50 percent nationally. That's before you even take into account the increasing mortgage rates.

The math, especially for a lot of first-time buyers, just hasn't been working. So how much of a difference could falling rates make? Salviotti says on the median priced home, which is now over $400,000. Maybe the monthly mortgage payment comes down by a couple hundred dollars a month. Right. So that's meaningful for folks on the margin. But he says that's only if home prices stay the same. It's completely feasible that we could just see price growth increase and just eat up any of the benefit that would even come from falling mortgage rates.

That's what you would expect to happen in a normal housing market. This is a very weird market. Lisa Sturtevant is chief economist at Bright MLS. It's getting so hard to use the traditional fundamentals of demand and supply to predict this housing market and frankly this economy since everything's so weird. What's weird about it? Well, the record run up in prices over the last few years for one.

Then of course we have the record low mortgage rates followed, the record run up in prices over the last few years, for one. Then, of course, we have the record low mortgage rates followed by the record surge in mortgage rates, which has created this lock in effect. That is an unprecedented market that we see ourselves in. And even that mortgage rate spike of the last couple of years didn't bring prices down, as it might have in a more normal market. They just kept climbing. So what happens in this housing market when mortgage rates fall? Sturtevant says it's anyone's guess. Normally falling

rates bring more buyers into the market, but in this market they're also bringing a lot more sellers into the market. So we're seeing both demand and supply on the rise, which could help balance prices as opposed to sending prices up higher. Realistically, she says, that is probably the best case scenario for buyers, since it's unlikely home prices will fall. But Daniel McHugh at Harvard's Joint Center for Housing Studies says it's also possible that mortgage rates will fall just enough to lure more buyers into the market,

but not more sellers. A lot of the mortgage holders are still holding mortgages that are pretty far below market. Almost 75% of them have an interest rate below five and one out of every five mortgage holders has an interest rate below three. So even though rates have come down to around 6% from nearly 8% last fall, it could still be a while before it feels worth it to many homeowners to sell. Daryl Fairweather, chief economist at Redfin, says what happens next will depend somewhat

on where you live. Everything in real estate is local. In dense coastal markets in the Northeast where there's little new construction, it's more likely that prices will just keep creeping up. But in many southern markets, More demand can just result in more construction so prices don't end up going up quite as much.

It's all about supply. The bottom line is there just isn't enough of going up quite as much. It's all about supply. The bottom line is there just isn't enough of it. And as long as that's the case, falling mortgage rates will only do so much to make buying a home more affordable. I'm Samantha Fields for Marketplace. Hey, I don't know if you know this, but David Brancaccio has been in Los Angeles all week, which means he is getting up extra early in the morning, middle of the night, in fact, to bring you all the business and economic news you need to start your day.

Check it out at the Marketplace Morning Report. More than 10 million people tuned in on Saturday to watch Michigan beat USC 27-24, go blue. That is 37% more people, CBS says, than watched whatever game it was that was on last year in that same time slot. Once upon a time, those two far-flung teams being in different conferences might have only met, say, in the Rose Bowl, Pac-12 versus Big Ten. Now, though, they compete in the same Big Ten conference,

the result of the mad scramble the past couple of years as lots of brand-name college football teams clustered into just a couple of really big conferences, which has left the smaller conferences scrapping over the teams that are left behind. Marketplace's Savannah Maher has more on that. It's hard to keep up with all the recent shifts in college football.

California schools are playing in the Atlantic Coast Conference. There are 18 teams in the Big Ten, and only two in the Pac-12. Crassly will say, I guess it's all about money. Mike Reynolds with S&P Global Market Intelligence says this game of musical chairs starts with TV and streaming contracts. Rick Franza, a professor of management at Augusta University says when brand name schools with big fan bases all compete in the same conference. I think the product for the viewer is better. You know, there's more matchups that never happened before.

And those exciting new matchups can drive up the value of media rights. Caitlin Jaclyn is the college athletics leader at Deloitte. You know, bringing more people into the stands, have more people watching at home across broadcast and streaming. The reshuffling has winnowed the field from six major conferences to just four, says Alicia Jessup, an expert on the business of sports at Pepperdine. What we're seeing is a consolidation. Consolidation that's pushing smaller schools and conferences further out of the limelight,

and making it harder for them to generate revenue. Jessup says the move away from regional conferences is also a geography problem. Because we have to remember that the people who field the teams for these schools, they're students. And while football is the moneymaker, conference changes affect all athletes at these schools, who are juggling academic deadlines and papers and midterms with regular cross-country trips to compete. If you're having to travel now thousands of miles to go to a swim meet, to go to the

track meet, to play a baseball game. Mike Reynolds with S&P Global says down the road those costs might not pencil out for student athletes or schools. You know, to cross sports metaphors, we're in the first inning here. Eventually, Reynolds says we could see college football break away from the conference system and do its own thing. I'm Savannah Marr for Marketplace. lease. We talk to a lot of economists on this program. We talk to professors and small business owners. We hear less frequently from people who are in the jobs that literally keep this economy

fueled and fed. Essential workers doing the things we couldn't live without. That's the setup for today's installment of our series, My Economy. I'm Natalie Adams and I'm a produce clerk at the Snow Isle Food Co-op in Everett, Washington. So before my current position, I was working in restaurant jobs, just one restaurant gig after another. A change of pace seemed like a good idea at the time. I was getting really burnt out from the restaurant work, from the kitchen work. So I figured, you know, what the heck?

What if I worked in a grocery store? So going into the interview, I showed up a little early just to look around the store, see what the vibe of the place was, and I felt pretty confident, not only in the skills I could bring, but also in the environment I'd be working in. My first day on the job was a bit of a culture shock. My manager made sure I took my breaks and I had never worked in an environment where it was important to anyone that people were taking breaks. It was really refreshing.

Man, the comparison between the work I was doing and the work I'm doing now is night and day. Working in restaurant kitchens, especially the bar kitchens I was working in, those are late nights. Those are late, stressful nights where I would come home at 11 smelling like a bunch of dirty dishes. Nowadays, I don't I haven't worked later than 3 p.m. I really enjoy the work I do. I enjoy customer interactions.

I enjoy handling all the different products. The citrus fruits are starting to come in again and man, the box of lemons I opened up today was absolutely gorgeous. Personally, I am grateful for the fact that what my labor does is feed people. It's absolutely gratifying. Natalie Adams, produce clerk, but somehow a little bit more too, right? Snow Isle Food Co-op in Everett, Washington. We cannot do this series without you.

Tell us, would you, about your job. Marketplace.org slash My Economy. This final note on the way out today, good-ish news on the global economy, comes to us from the Organization for Economic Cooperation and Development, you might know it better as the OECD, which said today in its quarterly outlook that Falling interest rates and growth in real wages is gonna boost global economic growth a little bit Anyway, 3.2 percent for the planetary economy as a whole this year. That is up just a hair from last year the catch Because you know, there's got to be a catch is that inflation's got to stay where it is or, you know, keep going down too, that'd be all right. Our Meteor Production team includes Brian Allison, Jake Cherry, Justin Duhler, Drew

Jostat, Gary O'Keefe, Charlton Thorpe, Warren Carlos Torado, and Becca Weinman. Jeff Peters is the manager of Meteor Production, and I'm Kyle Rizdal. We will see you tomorrow everybody. This is APM. Understanding personal finance can feel like an impossible task, but it doesn't have to be that way. I'm Janelia Espinal and on Financially Inclined, I'll guide you through simple money lessons that will change your financial future. Learn about credit scores, how to avoid scams, and why you need a savings account. Plus, we explore the brain science behind FOMO and what you can do to make smarter money decisions. Listen to Financially Inclined wherever

you get your podcasts.