Summary
- Conflicting economic signals cause market volatility post-election and fed cuts.
- Inflation firm, but Fed cut still likely.
- Multifamily vacancy rate stabilizes after long rise.
- Greystar debuts first US modular apartment project.
- $260M refinancing for six-property multifamily portfolio.
- Developer plans $3B suburbs projects near Austin.
- New Home Co. invests $17M in Georgetown.
- Knightvest buys San Antonio apartment, plans renovations.
- Lennar expands, new apartments planned in San Antonio.
- San Antonio housing market shows recovery signs.
NATIONAL
Post election market update by Kensington Capital Advisors [JLL Derivative Advisory] (No Link)
- Why it matters: ?Conflicting economic signals cause market volatility post-election and fed cuts.
- Market participants view Trump's victory and Republican control of Congress as potentially inflationary. Analysts expect that proposed tariffs, increased spending, and tax cuts may drive inflation upward.
- Investors are focusing on potential policy shifts from the new Washington administration and their inflationary impact, despite recent indicators suggesting a weakening labor market.
- Unexpectedly, long-term interest rates increased following Fed rate cuts, due to higher-than-expected inflation data and reduced expectations for future cuts. This surprised borrowers who had postponed hedging or securing fixed rates in anticipation of lower rates.
- When the Federal Reserve initiated rate cuts in late September, the projected terminal rate for SOFR was 2.75% by mid-2026. However, the market now forecasts a terminal rate of 3.60%, an 85 basis point increase in less than two months.
- Economic forecasts suggest inflation will decrease to 2.2-2.3%, contrasting with post-election predictions of inflationary pressures from a potential 'Red Sweep'. This discrepancy creates uncertainty and volatility in the US rates market.
- The Federal Reserve's data-dependent approach, combined with market focus on potential tariffs and historical inflation patterns, indicates a complex interest rate environment. Despite recent yield increases, there remains a high probability of a near-term rate cut.
- The job market continues to slow due to higher interest rates, but monthly gains remain above recession levels. While the accuracy of BLS job numbers may be debated, the overall trend suggests the job market has been more resilient under tighter financial conditions than investors and the Federal Reserve anticipated.
Inflation Stays Firm, but Not Enough to Derail December Fed Cut (WSJ)
- Why it matters: The 2.6% increase is in line with forecasts. Investors take that as a sign that Trump and the Fed won’t immediately be at loggerheads.
- Consumer prices increased 2.6% year-over-year in October, up from 2.4% the previous month, while core prices rose 3.3%.
- Despite firmer inflation, the Federal Reserve is expected to cut interest rates in December, supported by robust consumer spending and consistent hiring.
- The inflation report was received positively by investors, who increased their bets on a rate cut. The report's findings align with economists' predictions.
- Inflation continues to show regional variations, with notable price hikes in used vehicles and airline fares, while energy prices held steady. The Federal Reserve aims to strike a balance with rate cuts, avoiding reigniting inflation while supporting economic growth.
National multifamily vacancy rate may have finally peaked (Costar)
- Why it matters: The national multifamily housing vacancy rate peaked at 7.9% in Q3 2024, marking the first non-increase in three years.
- The current rate stands 170 basis points above the pre-pandemic five-year average of 6.4%, following a rise from a record low of 4.8% in Q3 2021.
- Projections indicate the vacancy rate will hold steady for the next three quarters before gradually decreasing. However, notable regional differences persist, particularly in Sun Belt markets such as Austin, Texas, where the vacancy rate is 15.1%.
- Coastal and upper Midwest markets exhibit the lowest vacancy rates, with New York City at 2.8% and Orange County, California, at 4.5%. This underscores the importance of understanding local trends amid growing market diversity.
Greystar Nears Debut of its First Modular US Apartment Project (Costar)
- Why it matters: Modular development shows promise of delivering 40% faster construction.
- Greystar's Ltd. Findlay project marks their first multifamily development constructed using modular components from their Pennsylvania facility.
- The 312-unit complex, offering one, two, and three-bedroom configurations, is set to open on December 2nd.
- In 2022, modular construction expenditure reached $12 billion, representing 6% of all construction initiations.
- Greystar's modular strategy aims to reduce insurance premiums by 25% and accelerate construction timelines by 40%.
- The company has approximately 15 modular projects in development, with six currently under contract.
AUSTIN
Two Austin Apartment Properties Part of $260M Refinancing (ABJ)
- Why it matters: A $260 million refinancing deal secured for a national multifamily portfolio, including two properties in Austin’s Rainey Street and Domain areas.
- The portfolio consists of six properties totaling over 1,500 apartments with a 95% occupancy rate.
- BWE secured a five-year loan through Northwestern Mutual at a 5.07% interest rate.
- Two Austin properties are included: Skyhouse Austin (91% occupied, built in 2013) and The Addison Apartments (96% occupied, built in 2015).
- Taking advantage of a treasury market trough, BWE obtained a favorable rate, including a forward commitment for partial funding in 2025.
Houston-Based Developer Aims For Up to $3B in Projects in Austin’s Suburbs (ABJ)
- Why it matters: Epitome Development LLC is planning up to $3 billion in projects across Austin’s suburbs, including Leander, Hutto, Elgin, and Lockhart.
- Epitome's developments may encompass thousands of acres, featuring 6,000 single-family residences, 1.5 million square feet of industrial space, 600 multifamily units, and hotel accommodations.
- The company's strategy focuses on establishing affordable, pedestrian-friendly communities integrated with employment hubs.
- Elgin Gateway, Epitome's latest venture, is a $500 million mixed-use project spanning 242 acres.
California-based Homebuilder New Home Growing in Austin Metro (ABJ)
- Why it matters: New Home Co.'s $17M investment in Georgetown signals strong confidence in Austin's housing market, potentially impacting local real estate dynamics.
- The acquisition includes 105 homesites for residences spanning 2,100 to over 4,000 square feet, with prices ranging from the low $600,000s to $700,000s. Sales are expected to commence in late 2025.
- The company is expanding its presence in the Austin area, with new communities planned in Buda and Kyle, reflecting increasing demand for suburban housing.
- This substantial single-family development may indirectly influence the multifamily market by altering the overall housing supply and rental demand dynamics.
SAN ANTONIO
Knightvest Expands Apartment Portfolio in Fast-Growing San Antonio (Costar)
- Why it matters: Knightvest Capital purchased 308-unit Ayra Grove Apartments in Universal City.
- The company intends to renovate and rebrand the property as Sagebrush, aiming to compete with newer developments and increase rental rates.
- Over the past 12 months, rents at the property have decreased by 3% to slightly under $1,200, while vacancy has reduced by 90 basis points to 7.8%.
- This acquisition marks Knightvest's sixth multifamily property in San Antonio and the third through Knightvest Fund II, which is expected to continue accepting new capital until mid-2025.
- San Antonio is a key market for Knightvest due to its rapid population growth and reduced competition from fewer new apartment construction projects.
Miami Homebuilder Plots More Than 600 Homes, New Apartments Underway (SABJ)
- Why it matters: Miami-based homebuilder Lennar is expanding rapidly in San Antonio.
- During Q3 2024, Lennar submitted more residential building permits than the combined total of all other production homebuilders in San Antonio.
- Lennar has concentrated its efforts mainly on San Antonio's South, East, and Far West areas.
- Palladium USA, collaborating with the San Antonio Housing Trust, is constructing the Palladium Crestway apartment complex near Windcrest, backed by up to $43 million in bonds.
- Despite the current market deceleration in the multifamily sector, the planning commission agenda featured additional multifamily residential projects.
Existing Home Market Sees Late-Stage October Surge (SABJ)
- Why it matters: San Antonio's housing market shows signs of recovery with increased sales, potentially impacting both single-family and multifamily sectors.
- Total home sales increased by 3.5% in 2024, with existing home sales experiencing a 20% rebound in October following earlier declines.
- The new construction market has consistently outperformed last year's figures, showing double-digit growth.
- Recent Federal Reserve rate reductions impacted mortgage rates, which briefly dipped to 6% before climbing to 6.8%.
