I would like to share a few headlines and a brief analysis of the Real Estate and [Housing] Development industry from the last few days. I hope you find them insightful:
Congress Introduces Workforce Housing Tax Credit Act: Senators Ron Wyden (D-OR) and Dan Sullivan (R-AK) and Representatives Jimmy Panetta (D-CA) and Mike Carey (R-OH) introduced the Workforce Housing Tax Credit Act (S. 3436 and H.R. 6686). The bill would create a workforce housing tax credit, similar to LIHTC, to be allocated by HFAs at $1 per capita, or a small state minimum of $1.5 million. At least 60 percent of the units must be occupied by individuals earning 100 percent or less AMI.
Increases in affordable housing investment volume and asset values since the Global Financial Crisis have closely tracked those of the overall U.S. multifamily market. Affordable housing investment volume grew to an all-time high of $13.5 billion in 2021 from just $674 million in 2009. Since averaging a 3.6% annual share of total multifamily investment between 2009 and 2022, affordable housing’s share jumped to 7.7% in H1 2023.
The surge in new apartment supply has eased conditions for renters, some of whom are receiving concessions after a three-year period in which rents rose quickly in many cities. Three times more apartment buildings provided concessions this October compared with two years ago, according to CoStar Group. Meanwhile, Zillow says that about one-third of apartment and home-rental listings offered a markdown in October.
"According to Paul Fiorilla's latest multifamily update report for Yardi Matrix, the apartment market has hit a plateau. After soaring in 2021 and 2022, rents have been falling for three months. Average asking rents fell $6 in November to $1,713, and rents are off $12 from the record high achieved in the summer of 2023. The short-term outlook remains clouded by stubborn inflation, slowing job growth and a building boom in the Sun Belt."
Shelter costs account for 35% of the consumer price index, meaning that they have a substantial impact on inflation. As a result, observers note that an easing of rent growth could help bring inflation down next year. "The gradual, continuous, consistent decline in rent growth is what we need to tame shelter inflation," says Lu Chen of Moody's Analytics.
New Residential Sales: Sales of new single-family homes unexpectedly declined to a seasonally adjusted annual rate of 590,000 units last month, according to the Commerce Department, but the decline is likely temporary given the lack of previously owned homes on the market. Sales of new single-family houses in November 2023 were at a seasonally adjusted annual rate of 590,000. This is 12.2 percent (+/- 15.6%)* below the revised October 2023 estimate of 672,000.November 2023: -12.2* % ChangeOctober 2023 (r): -4.0* % Change
Single-family construction surged in November as lower mortgage rates helped to assuage affordability concerns and unleash pent-up demand for housing. Privately-owned housing starts in November 2023 were at a seasonally adjusted annual rate of 1,560,000. This is 14.8 percent (+/- 14.0%) above the revised October 2023 estimate of 1,359,000.November 2023: +14.8 % ChangeOctober 2023 (r): +0.2* % Change
Elevated housing prices and mortgage rates have put homeownership out of reach for many would-be buyers. A CBRE analysis indicates that the monthly new mortgage payment is 52% more costly than the average apartment rent. Meanwhile, the National Association of Realtors reports that the median first-time homebuyer is 35 years old, near the record of 36 set last year.
The lowest mortgage rates since the summer are starting to lure buyers back to the housing market, but few homeowners who have locked in much lower rates appear ready to sell. Explore how home buyers’ growing appetites are set to affect the market heading into 2024.
Over the first ten months of 2023, the total number of single-family permits issued year-to-date (YTD) nationwide reached 773,526. On a year-over-year (YoY) basis, this is 10.7% below the October 2022 level of 865,815.
Mortgage rates fell below 7% for the first time in four months, bringing some relief to a US housing market long plagued with affordability issues. “Given inflation continues to decelerate and the Federal Reserve Board’s current expectations that they will lower the federal funds target rate next year, we likely will see a gradual thawing of the housing market in the new year,” says Sam Khater, Freddie Mac’s chief economist.
House Prices: "The Case-Shiller National Index increased 3.9% year-over-year in September and will likely be even more positive YoY in October. The MoM increase in the seasonally adjusted Case-Shiller National Index was at 0.65%. This was the eighth consecutive MoM increase following seven straight MoM decreases."
Renters Are Starting to Get Concessions From Landlords Again: The rise in rent discounts represents a reversal from last year, when renters in several U.S. cities had resigned themselves to competing in bidding wars to lock down a rental home or apartment.
Despite the fact that housing affordability has deteriorated to levels not seen since the '80s, only a fraction of U.S. homeowners have negative equity, meaning they owe more on their house than it’s worth. That’s according to CoreLogic’s Q3 2023 report published this week.
Commercial mortgage delinquencies rose for the third consecutive quarter, according to the Mortgage Bankers Association, and MBA's Jamie Woodwell attributed the trend to "higher interest rates, changes in some property market fundamentals and uncertainty about property values." However, Woodwell also noted that there is significant variation in mortgage performance based on property type and other factors.
"NAHB analysis of the Census Bureau’s quarterly state and local tax data shows that $129 billion in taxes were paid by property owners in the third quarter of 2023 (not seasonally adjusted). In the four quarters ending Q3 2023, state and local governments collected $757 billion of property tax revenue, an 11.6% increase over Q3 2022."
The number of homeless people in the U.S. increased 12% between 2022 and 2023, the biggest rise in records dating back to 2007. It's no longer just an issue for expensive coastal areas. WSJ's Shannon Najmabadi and Jon Kamp profile efforts in Grand Rapids, Mich., and other midsize cities to reduce homelessness.
The sharp increases in commercial property insurance costs that have occurred recently could be slowing, according to industry reports. Ivans Insurance Services noted that property insurance rates rose 9.9% in November, compared with a 10.4% increase in October. Woodruff Sawyer has forecast that rates will rise by single digits next year, although inflation and other factors could affect the outlook.
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1yGreat information thank you for sharing.