It’s no secret that the past few years have been wild for everyone. In the context of relocation, however, it’s likely we’re all feeling some fatigue in regards to the numerous changes and updates we’ve had to collectively weather. As much as we would like to suggest still waters, this is not the case. XONEX Relocation, and our trusted partners, expect relocation trends to evolve rapidly in the coming months.
The big news this week is the FED’s larger-than-expected 0.75-percentage-point interest-rate increase. With inflation impacting all sectors of the economy, we braced for rate hikes, albeit at a slower pace.
This news is joined by some additional market trends, so we have rounded up market updates that we expect to impact relocation.
1. Mortgage Rates: According to Wells Fargo, the average rate on 30-year fixed-rate mortgages rose 14 basis points to 5.23% in the week ending June 9. That rate matches May’s average; in April it was 4.98%. With the FED announcing another, steeper increase, we expect 30-year fixed-rate mortgage rates to continue climbing. As we move through the summer, we will be watching closely to determine what, if any, changes should be made to relocation programs. Will the mortgage buydown benefit return?
2. Real Estate: Since the housing boom over a year ago, prices continue to be inflated. The National Association of Realtors reports a rise of 39% in home prices since two years ago. Even with the pricing increase, 88% of homes are on the market less than 30 days, according to a Wells Fargo report. Recently, some markets have cooled, with existing home sales decreasing by 5.4% and new home sales falling by 16.6% in April, based on the same report. What does this mean for your relocation program? This remains to be determined. On the one hand, increasing mortgage rates may serve to correct (if only a little) this market trend. On the other, home purchase sentiment is at a historic low and, according to Atlas’ 2022 survey, housing is one of the top reasons why employees are turning down relocation offers. Will home purchase benefits need to increase to entice talent to move?
3. Household Goods: Household Goods carriers continue to struggle logistically with an imbalance of moves from / to certain areas of the country and certain states in particular (i.e. California and Florida). These logistic challenges are joined by both driver and labor shortages. In addition, the Electronic Logging Device rule imposed by the Department of Transportation has forced movers to adjust time frames and the number of moves they can service. Fuel prices continue to climb at unprecedented rates. All of these factors together are driving the cost of moving goods.
On a more positive note, international shipping is getting better as port congestion has eased. Rates are still high but, as of the last few months, have shown a decrease.
4. Lumber: With rising mortgage rates, a decline in home renovations, and growing inflation, lumber prices have been falling since the beginning of the year. This is good news for specialty services and crating. This drop will be good for the consumer and the building industry to give some push back to the supply and demand problem that began two years ago; however, construction costs remain high.
5. Final Move / DIY Moving: Please be advised that the IRS has just announced a new mileage rate for the last 6 months of the year, up 4 cents from the rate at the start of the year. This new rate begins July 1, 2022.
6. Temporary Living: The relocation struggles in 2020 have created many changes in the corporate living industry as companies realign with new trends, merge with other providers or simply shut down. As corporations adapt to the shifting workforce and individuals move to new locales to work remotely, certain metropolitan areas are seeing increases in relocations. This influx in certain populations, along with a competitive housing market, has put a strain on the temporary living industry as they accommodate corporate relocation and individual transfer alike. We advise that mobility managers treat temporary living much like household goods – inquire for availability as early as possible.
Moving talent around the world is never dull, but these rapidly evolving trends make it all the more challenging. While we cannot change market forces, we can weather them together strategically and with some patience. In the coming weeks and months, please be on the look out for more XONEX updates, including policy ideas and advice for how to best manage these tumultuous seas.