Summary
- Uncertainty remains over the Fed’s next rate cut given the recent economic data, which has presented a stronger than expected economy.
- The number of Americans filing new applications for unemployment aid unexpectedly fell last week.
- Multifamily demand surges, vacancy drops, rents adjust regionally.
- Private capital targets affordable housing as subsides expire.
- Home sales hit 13-year low despite lower rates.
- Apartment Trends Austin & San Antonio Q3 Report (Austin Investor Interests)
- Austin new zoning incentives affordable housing developments.
- Austin mandates composting for larger multifamily properties.
- Dominium plans 298-unit affordable complex in Austin.
- NRP Group plans 349-unit complex near Brooks, SA.
- FHA proposes easing apartment construction loan requirements.
- San Antonio housing authority seeks review amid deficits.
National
Will the Fed Pause in November? (Kensington Advisors – No Link)
- A month ago, the market was full speed ahead with implied rate cuts, however, recent economic data has presented a stronger than expected economy diminishing the likelihood of future rate cuts.
- The expected interest rate reductions have been reduced, with the final SOFR rate now projected to be around 3.25%, up from the previous 2.75% estimate.
- The once-certain rate cuts for November and December are no longer assured, with only a slightly less than 100% chance of a 0.25% reduction on November 7, 2024.
- Market fluctuations are likely to persist until year-end. While further rate decreases are anticipated this year, they aren't certain.
- As a result, borrowers continue to engage in significant hedging activities to safeguard against potential changes in treasury yields, whether up or down.
US weekly jobless claims unexpectedly fall (Yahoo! Finance
)
- Why it matters: The number of Americans filing new applications for unemployment aid unexpectedly fell last week, but more people were collecting benefits in mid-October, which raises the risk of a rise in the jobless rate this month.
- The Federal Reserve's recent "Beige Book" report indicated mild employment growth in early October, with most regions showing small to moderate increases.
- September saw unemployment fall to 4.1% from August's 4.2%. The rise in joblessness from 3.4% in April 2023 to 4.3% in July 2023 prompted the central bank to implement an uncommonly large 0.5 percentage point interest rate reduction in the previous month.
Multifamily Market Sees Strongest Demand Since 2021, Lowering National Vacancy Rate (Costar
)
- Why it matters: Third quarter performance outpaces expectations.
- Apartment occupancy showed significant growth with 176,000 units filled.
- The first nine months of 2024 saw apartment demand exceed 2023's full-year figures by 100,000 units.
- For the first time in three years, vacancy rates decreased, falling by 0.1 percentage points.
Private Capital Firms Look to Invest Billions in Affordable Apartments as Federal Aid Fades (Costar
)
- Why it matters: Surge in expiration of affordable housing subsidies expected in 2025, as 30-year Low-Income Housing Tax Credit contracts expire.
- Turner Impact Capital has initiated a $750 million fund focused on affordable housing, contributing to a total investment of $2.3 billion.
- LaFranchi's firm has invested $140 million across 24 affordable housing projects, primarily without relying on government subsidies.
- In the coming five years, federal support for over 9,500 affordable housing properties is set to end.
Existing US Home Sales Fall to Lowest Level Since 2010 (Costar
)
- Why it matters: Dip in mortgage rates and increased supply hasn’t led to more sales so far.
- Despite interest rates approaching 6% in September, home prices remained relatively stable.
- The proportion of home purchases made by investors decreased from 19% to 16% month-over-month.
- The hesitation in buying activity could be attributed to investors' worries about potential tax policy shifts after the upcoming election.
Apartment Trends Austin & San Antonio Q3 Report Summary (Apartment Trends
)
- Occupancy: 88.39%; Up 0.1% over the quarter; Down 2% over the year
- Rents: $1.68 psf / $1,450 per month; Down 3.85% over the quarter; Down 9.7% over the year
- Absorption: 7,882 new units added in Q3; 80-90% absorption rate in last two active quarters
- Construction: 198 projects (47,959 units) under construction; 21% decrease compared to last year; 23,785 conventional units expected in next year
- Class-A Properties: Occupancy: 83.8%; Rents: $1.79 psf / $1,569 per month; Average concessions: 9.3% ($146 off market rents)
- Occupancy: 89.42%; Up 0.2% over the quarter; Down nearly 6% since Q4 2021 peak
- Rents: $1.40 psf / $1,189 per month; Down 1.8% over the quarter; Down 4.3% over the year
- Absorption: 3,100 units absorbed in Q3; Outpaced new units added for second consecutive quarter
- Construction: Nearly 20,000 units currently under construction; 3,489 units added in Q3 (record number); 13,990 units anticipated to start construction in next 12 months
- Class A Properties: Occupancy: 85.7% (lowest since 2020); Rents: $1.59 psf; Average concessions: 6.7% off market rents
Austin?
New City Zoning Program That Uses Density as Carrot to Encourage Affordable Housing Proving Popular So Far (ABJ
)
- Why it matters: New zoning designation should boost supply of housing in Austin, especially in submarkets surrounding the CBD.
- In February, the city council approved Density Bonus 90, or DB90.
- This policy permits residential structures to reach 90 feet in height, which is 30 feet taller than the usual limit, provided they include ground-floor commercial space and a specified proportion of affordable units.
- DB90 is expected to stimulate development in areas near the central business district where property values are higher.
Austin Rolls Out New Requirements For Multifamily Communities – Here’s How it Can Impact Households (Microsoft
)
- Why it matters: Austin became first city in Texas to have composting requirements for multifamily developments with more than five units.
- Commercial composting collection services must now be made available by property managers.
- This measure aims to reduce waste in the city's landfills.
- The mandate applies to various residential properties including apartments, condominiums, dormitories, assisted living facilities, and nursing homes.
- This initiative is part of Austin's broader goal to achieve Zero Waste by 2040.
Dominium Adding 3rd Southeast Austin Apartment Complex (ConnectCRE
)
- Why it matters: Dominium proposing The Sage at Franklin Park, 298-unit rental community.
- The development plan encompasses 10 residential structures, a community center, landscaped areas, and a children's play area.
- Dominium has sought a $50 million bond from the Austin Housing Finance Corporation to support the project.
- The company currently oversees over 38,000 housing units across 19 states.
San Antonio
National Apartment Developer Plans 349 Units Near Brooks (SABJ
)
- Why it matters: The proposed "Haynes Lofts" development signals increased density and investment in San Antonio's South Side.
- The project's position near Brooks, along with its easy access to the Acequia Trail and Mission San Juan, may appeal to those desiring a mix of city conveniences and historical surroundings.
- As two structures are situated within the Mission Historic Overlay zone, they must receive approval from the Historic and Design Review Commission (HDRC).
Fed Propose Changes For Easier Access to Apartment Construction Loans (SABJ
)
- Why it matters: The Federal Housing Administration's proposed policy changes could significantly ease financing for eligible apartment developments, potentially stimulating housing production in a challenging economic climate.
- The Federal Housing Administration plans to adjust loan-to-cost ratios upward and lower debt service coverage ratios for affordable and market-rate developments, easing the path for developers to obtain financing.
- In the multifamily sector, these changes could potentially increase loan capacity by $2-$3 million for a standard project.
Housing Authority to Conduct Organizational Review Amid Multi-Million Dollar Deficit (SABJ
)
- Why it matters: Opportunity Home San Antonio is seeking external consultation to improve its efficiency and service delivery, which could impact the availability and quality of affordable housing in the area.
- The housing authority faces significant financial challenges, including a deficit in the millions, $400 million in deferred maintenance, and a waiting list exceeding 100,000 families.
- To address these issues, they are bringing in an external consultant to perform a thorough assessment of the organization's framework, processes, and workforce.
