Daily Dose of Real Estate for November 25

The real estate market continues to navigate a complex landscape of challenges and opportunities. Residential markets show resilience despite affordability concerns, while mortgage rates remain elevated. Commercial real estate faces sector-specific impacts from the Trump presidency, with multifamily REITs demonstrating strong performance. A packed week of economic indicators, including Case-Shiller Home Price Index and PCE inflation data, will provide crucial insights into housing market trends and broader economic conditions. Meanwhile, the Trump transition team's appointments, including Scott Turner as HUD Secretary nominee, signal potential shifts in housing and finance policies.

Key Takeaways

• Existing home sales climbed to 3.96 million in October, growing year-over-year for the first time since July 2021
• Mortgage rates increased to 6.84% for a 30-year fixed loan, reaching the highest level since July 2024
• Multifamily REITs posted impressive returns of 26.6% year-to-date, outpacing the broader REIT market
• A busy week of economic releases will provide insights into home prices, new home sales, consumer confidence, and inflation
• Trump's transition team appointments, including Scott Turner as HUD Secretary nominee, could signal shifts in housing and finance policies

Economic Indicators This Week

This week brings a flurry of important economic releases that could significantly impact the real estate market:

S&P CoreLogic Case-Shiller Home Price Index (Tuesday):

• September data; August showed a 2.6% year-over-year increase
• Forecast: 3.0% year-over-year increase, indicating continued home price appreciation

New Home Sales (Tuesday):

• October data; September saw 759,000 units sold (annualized rate)
• Forecast: 725,000 units, suggesting a slight cooling in new home demand

Conference Board Consumer Confidence Index (Tuesday):

• November data; October index stood at 102.6
• Forecast: 101.5, indicating a potential slight decrease in consumer optimism

ADP National Employment Report (Wednesday):

• November data; October showed 113,000 private sector jobs added
• Forecast: 120,000 jobs, suggesting steady job market growth

GDP (Second Estimate for Q3) (Wednesday):

• Q3 data; First estimate showed 4.9% annualized growth
• Forecast: 5.0%, potentially indicating stronger economic growth than initially reported

Pending Home Sales (Thursday):

• October data; September saw a 1.1% month-over-month increase
• Forecast: 0.7% month-over-month increase, suggesting continued growth in housing market activity

Personal Income and Outlays (Thursday):

• October data; September showed 0.3% increase in income, 0.7% increase in spending
• Forecast: 0.2% increase in income, 0.3% increase in spending, indicating moderate economic growth

PCE Price Index (Thursday):

• October data; September core PCE showed 3.4% year-over-year increase
• Forecast: 3.5% year-over-year increase in core PCE, crucial for Fed policy decisions

These indicators will provide crucial insights into housing market trends, consumer sentiment, inflation, and overall economic health, potentially influencing real estate market dynamics in the coming months.

Residential Real Estate Markets

Existing Home Sales Show Signs of Recovery

In a positive turn for the housing market, existing home sales climbed to 3.96 million in October, marking the first year-over-year growth since July 2021. This increase comes despite ongoing affordability challenges, suggesting a degree of resilience in the market Realtor.com.

Home Prices and Inventory Trends

The median price of homes sold continued to climb, while inventory also grew, keeping the market in roughly balanced territory. Regionally, the inventory recovery has been strongest in the South and West, aligning with areas where home sales grew the most in the past year Realtor.com.

New Construction Activity

According to the latest data from the U.S. Census Bureau, privately‐owned housing starts in October were at a seasonally adjusted annual rate of 1,372,000. This is 1.9 percent above the revised September estimate of 1,346,000 and is 4.2 percent above the October 2023 rate of 1,316,000. Single‐family housing starts in October were at a rate of 970,000, which is 0.2 percent above the revised September figure of 968,000 U.S. Census Bureau.

These figures indicate a modest improvement in new construction activity, particularly in the single-family sector. The increase in housing starts suggests that builders are responding to the ongoing demand for housing, despite challenges such as elevated material costs and labor shortages. This uptick in new construction could help alleviate some of the supply constraints in the housing market, potentially impacting home prices and affordability in the coming months.

Mortgage Markets

Mortgage Rates Continue to Climb

Mortgage rates have increased for the fourth consecutive week, with the 30-year fixed rate rising to 6.84%, its highest level since July 2024. This uptick in rates continues to pose challenges for both homebuyers and potential refinancers Mortgage Bankers Association.

Mortgage Applications Show Resilience

Despite the rise in rates, mortgage applications increased 1.7% from the previous week. The purchase index rose 2% on a seasonally adjusted basis, while refinance activity increased by 2% and was 43% higher than the same week one year ago Mortgage Bankers Association.

FHA and VA Loan Activity

FHA purchase applications saw a notable 7% increase, potentially due to some buyers taking advantage of increasing supply and slightly lower FHA rates compared to conforming 30-year fixed rates. VA applications also rose, with a 10% increase in refinance activity Mortgage Bankers Association.

Commercial Real Estate Markets (including Multifamily)

Trump Presidency Impact on Commercial Real Estate

A recent study by Oxford Economics examines the potential impact of Trump's presidency on U.S. commercial real estate. The report suggests that Trump's policies could have mixed effects on different sectors of commercial real estate:

• Industrial and Logistics: The sector may benefit from increased infrastructure spending and potential reshoring of manufacturing.
• Office: Deregulation could boost demand for office space in financial and energy sectors, but immigration policies might negatively impact tech hubs.
• Retail: Proposed tax cuts could increase consumer spending, potentially benefiting retail properties.
• Multifamily: Stricter immigration policies could reduce demand in some markets, while tax cuts might boost overall housing demand Oxford Economics.

Current Commercial Real Estate Trends

According to Altus Group's latest CRE This Week report:

Office: The sector continues to face challenges with hybrid work models, but there's increasing interest in high-quality, amenity-rich spaces.

• Industrial: Demand remains strong, driven by e-commerce and reshoring trends.
• Multifamily: The sector shows resilience, with strong demand in suburban and secondary markets.
• Retail: Experiential retail and neighborhood centers are outperforming traditional malls Altus Group.

Multifamily REITs Outperform

In contrast to other sectors, multifamily REITs have demonstrated impressive performance in 2024. As of November 13, multifamily REITs posted returns of 26.6%, significantly outpacing the 10.3% return of the FTSE Nareit All Equity REITs Index. This strong performance is attributed to robust demand for rental housing and expectations that supply pressures may ease in the coming year REIT.com.

CMBS/REIT Markets

CMBS Performance

The Commercial Mortgage-Backed Securities (CMBS) market has shown mixed performance across different property types. While industrial and multifamily CMBS have demonstrated resilience, office and retail CMBS continue to face challenges. The delinquency rate for CMBS loans has seen a slight increase, primarily driven by struggles in the office sector Trepp.

REIT Sector Performance

Real Estate Investment Trusts (REITs) have shown varied performance across different sectors:

• Multifamily REITs: As mentioned earlier, multifamily REITs have outperformed the broader market with a 26.6% return year-to-date.
• Industrial REITs: Continue to benefit from e-commerce growth and supply chain reconfiguration.
• Data Center REITs: Show strong performance driven by increasing demand for cloud services and digital infrastructure.
• Office REITs: Face ongoing challenges due to remote work trends and oversupply in some markets.
• Retail REITs: Performance varies, with grocery-anchored and necessity-based retail outperforming enclosed malls Nareit.

Trump Transition Planning

Key Appointments and Their Potential Impact

As the Trump transition team moves forward with appointments, several key positions could significantly influence housing and finance policies:

1. HUD Secretary Nominee: Scott Turner has been nominated as Secretary of Housing and Urban Development. Turner, a former NFL player and Texas state representative, has been a strong advocate for opportunity zones and economic empowerment. His nomination suggests a potential focus on market-driven solutions to affordable housing and urban development challenges The White House.
2. Treasury Secretary Nominee: Scott Bessent has been nominated as Trump's Treasury Secretary. His appointment could influence broader economic policies, including those affecting mortgage markets and housing finance reform. Bessent's background and policy positions will be closely watched for potential impacts on GSEs like Fannie Mae and Freddie Mac.

Speculative Candidates for CFPB and FHFA

Recent news articles have speculated on potential candidates to lead the Consumer Financial Protection Bureau (CFPB) and the Federal Housing Finance Agency (FHFA) under the Trump administration:

CFPB Director Candidates

1. Todd Zywicki: A law professor at George Mason University and a longtime critic of the CFPB, Zywicki is rumored to be a top contender for the director position. His appointment could signal a significant shift towards deregulation and a potential restructuring of the bureau American Banker.
2. Brian Brooks: Former Acting Comptroller of the Currency under the previous Trump administration, Brooks is also mentioned as a potential candidate. His experience in both government and the private sector, particularly in financial technology, could bring a unique perspective to the CFPB Bloomberg Law.

FHFA Director Candidates

1. Mark Calabria: Although he previously served as FHFA Director under Trump, there's speculation that Calabria could be reappointed. His strong advocacy for ending the conservatorship of Fannie Mae and Freddie Mac aligns with Trump's previous policy goals Housing Wire.
2. Jonathan McKernan: Currently serving as a senior advisor at the FHFA, McKernan is considered a potential candidate for the director position. His experience within the agency and familiarity with ongoing initiatives could provide continuity in FHFA's operations Inside Mortgage Finance.
3. Travis Hill: Hill, who previously served as a senior advisor at the FHFA and has experience in both government and private sector roles related to housing finance, is being considered for the FHFA director position. His background in policy development and implementation could be valuable in shaping the future of the GSEs National Mortgage Professional.

Potential Policy Directions

Based on previous Republican administrations, campaign promises, and the backgrounds of potential appointees, policy directions could include:

• Efforts to reduce government involvement in the housing market
• Potential reforms to Fannie Mae and Freddie Mac, possibly including steps towards ending their conservatorship
• Revisions to Dodd-Frank regulations affecting mortgage lending, potentially easing compliance burdens on smaller lenders
• Changes to affordable housing initiatives and funding, possibly with a greater emphasis on market-based solutions
• Potential restructuring or scaling back of the CFPB's authority and enforcement activities

As these appointments are finalized and policy priorities become clearer, stakeholders across the real estate and mortgage industries will be closely monitoring developments for their potential impacts on market dynamics and regulatory landscapes.

Wrapping Up: A Market at a Crossroads

The real estate market stands at a crucial juncture, with this week's packed economic calendar poised to provide valuable insights into housing market trends and broader economic conditions. The resilience in home sales and strong multifamily REIT performance offer positive signals, while elevated mortgage rates and sector-specific challenges in commercial real estate present ongoing hurdles. Key releases such as the Case-Shiller Home Price Index, New Home Sales, and PCE inflation data will be closely watched for their potential to influence market sentiment and Federal Reserve policy decisions. The potential impacts of the Trump presidency on various real estate sectors, coupled with key appointments like Scott Turner as HUD Secretary nominee, add another layer of complexity to the market outlook. As we navigate this intricate terrain, stakeholders across the industry must remain vigilant, adaptable, and well-informed to successfully navigate the evolving real estate landscape in the coming months.

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