Spring! We finally made it. We are a quarter into 2023 and much of the industry chatter remains focused on the economy, the bank collapses, the FED and the real estate market. While we have not seen any wild swings in any one direction over the first quarter, we have rounded up here market updates that we expect to impact relocation.
Cyber Security: Cyber security is a worldwide concern and companies continue to expect that partners within the supply chain adhere to necessary controls. XONEX takes these concerns seriously and has implemented a wide range of new controls, including MFA and an annual SOC 2 audit. The SOC 2 will be included alongside our SOC I Type II audit as part of our standard governance protocol moving forward.
Mortgage Rates: According to Wells Fargo, the average rate on 30-year fixed-rate mortgage as of April 6th was 6.28%, a decrease of four basis points from the previous week. The rate has fallen 45 basis points since its March 9 reading of 6.73%. The March average was 6.54%, up from February’s 6.26%. For comparative purposes, the average rate reached a recent high of 7.08% in mid-November. In late March, the FED announced another quarter-point rate hike. The FED remains non-committal on future rate hikes for the moment, although experts anticipate another hike in 2023. We have seen some clients bring back mortgage buydowns, but sparingly. Buydowns remain an incentive tool in those cases where the business need for immediate talent outweighs the cost of the program.
Real Estate: According to the National Association of Realtors' March reports, February brought 4.58 million in sales, a median sales price of $363,000, and 2.6 months of inventory. The median sales price is down 0.2% year-over-year, while inventory was up 0.9 months from February 2022. Properties typically remained on the market for 34 days in February, up from 33 days in January and 18 days in February 2022. Fifty-seven percent of homes sold in February were on the market for less than a month. While month-to-month sales rose across the board, year-over-year sales fell 22.6%. Home sale price trends vary by region, with prices increasing in the Midwest and South and decreasing in the Northeast and West.
What does this mean for your relocation program? While we are seeing a slight correction in the housing market, it’s still competitive. Increasing mortgage rates are leaning on home prices, but buyers are still out there. Recent panic over the SVB bank (and others) bank collapse caused some concern, but not in housing. In fact, NAR maintains that the collapse could lead to downward pressure on mortgage rates.
On the other hand, home purchase sentiment is still low and first-time buyers comprise only 27% of buyers in February. In November 2022, NAR found that the annual share of first-time home buyers was at 26%, the lowest since NAR began tracking the data. Will home purchase benefits help entice talent to move? We have seen a few companies offer home purchase benefits to renters to better incentivize relocation. Renters who want to purchase but do not have the means could see this benefit as a way to achieve this life goal.
Lastly, time on the market is increasing from all-time lows. While there is no need to panic, we should not take 2021-2022’s swift sales for granted moving forward. Companies offering GBOs should work with their relocation provider to understand the home and market conditions unique to each property. The goal should always be to weigh any possible risks against the business need to determine the best course forward.
Household Goods: The Federal Motor Carrier Safety Administration recently announced the launch of Operation Protect Your Move, a nationwide crackdown on scam movers ahead of the busy summer moving season. Through Operation Protect Your Move, FMCSA is deploying dozens of investigators across the country in an enforcement sweep to address the significant uptick in complaints of movers holding household possessions hostage to extort exorbitant additional charges from consumers. It will also address complaints against moving companies and brokers that are not in compliance with federal safety and consumer protection regulations and statutes while transporting household goods.
This announcement serves as a good reminder that vetted, professional moving services are best suited for moving corporate talent. While lump sum programs fill an important need, your relocation provider should be able to connect your lump sum population with reliable providers. Further, we are seeing an increase in companies that are giving household goods moving as a defined benefit and then supporting the rest of the relocation with a lump sum.
Rental Market: According to the latest data from Zillow, the price of asking rents increased by 0.5% from February to March — the second monthly increase since September 2022. The previous month-over-month increase in February was 0.3%. The March 2023 increase is slightly lower than the typical March increase of 0.6%, averaged over data from 2016 to 2019. Typical asking rents are now $1,996, a 6% increase compared with the same time last year. Rent growth, overall, has been slowing since its 17.0% year-over-year peak growth in February 2022.
There are a variety of factors driving rent cost, but the leading factors are inflation and a lack of inventory. Those of us in mobility are very much aware of the challenges transferees face not only in finding a new rental if they are renters, but also in finding adequate temporary living accommodations. This challenge will continue, especially in major growth markets (ex. Atlanta) and remote markets. It may take longer for renting transferees to find suitable housing, so we encourage mobility to initiate as soon as possible and provide transferees with destination services support to aid in the hunt. Likewise, transferees should be prepared to search for housing early on in the relocation process. Patience across all parties is imperative.
Corporate Sentiment and Talent: According to the 2023 Atlas Corporate Relocation Survey, companies surveyed are lukewarm on the economy, but they remain bullish on relocation. In 2022, 68% of companies surveyed reported an increase in relocation volume and 64% reported an increase in relocation spend. Companies surveyed expect more increases in 2023, with 60 and 58 percent of companies anticipating an increase in the volume of relocations and relocation budget, respectively.
As the labor market continues to tighten, relocation will continue to be a critical tool for mining and deploying talent. Twenty-seven (27) percent of companies report difficulty in finding local talent. When asked about the internal factors impacting relocation, twenty-nine (29) percent of companies cited knowledge and skills transfer as having a major internal impact on relocation, up from only 13% in 2021. At the same time, companies report having more difficulty in finding employees to accept relocation. Twenty-seven (27%) of companies cite employee ineligibility/inability to relocate as a leading factor impacting relocation, which was up from 17% in 2021.
The Great Resignation, coupled with an increase in remote work and an unwillingness to move for personal and/or economic reasons is pressuring HR and talent acquisition teams to find new ways to both attract talent and successfully transfer internal knowledge. Are you striking a good balance between the budget requirements and talent goals unique to your business? The best relocation programs will aim to allocate resources to where they are most needed, depending on your corporate culture and talent strategy.
As we approach summer, we cannot let this update pass without reminding all mobility managers to initiate relocations as soon as possible. The mobility supply chain is still strained in some areas. Household goods companies continue to face a labor and driver shortage. Temporary living accommodations are in high demand, especially in the Southeast. The sooner we understand your transferees’ needs, the better we can accommodate them through the busy season.