Central Texas Roundup | JLL Multifamily | 9/30/24

Summary

• US home prices hit record high for 14th consecutive month
• Rate cuts may lead to market recovery in 2025.
• Multifamily completions Reach 50-Year High
• Mortgage rates hit 2-year low after Fed rate cut
• Mortgage lending continues to decline for second year
• Tricon Residential launches 155-home build-to-rent (BTR) community in Leander
• Austin’s BTR supply quadrupled in a decade
• Weston Urban plans to acquire downtown San Antonio apartments for $4.35M
• Florida developer plans 209-space manufactured housing subdivision called Presa Grove
• Hemisfair mixed-use development up for final design review

National

US Home Prices Hit Record for 14th Straight Month (Costar)

• Why it matters: Prices of existing single-family houses across US rose to another record high.
• Despite 14 months of record-high prices, growth has decelerated for four consecutive months.
• The housing price index continues to outpace long-term averages, even when adjusted for inflation.
• Current housing data doesn't reflect the recent Federal Reserve rate reduction, which has led to lower mortgage rates.
• Some experts anticipate that the newly reduced interest rates could reignite home price growth as more buyers enter the market.

‘Christmas for Real Estate:’ Which CRE Sectors Will Benefit Most From Interest Rate Cuts (ABJ)

• Why it matters: The interest rate cut is expected to increase liquidity in commercial real estate financing and spur new deals.
• The Federal Reserve's recent actions and the possibility of an additional rate cut this year create favorable conditions for commercial real estate to recover from the current market cycle.
• The present real estate cycle is defined by elevated interest rates, reduced office occupancy, and an oversupply in the multifamily sector.
• A real estate law expert noted that declining rates generally benefit developers, investors, and syndicators.
• Capital markets activity is expected to rebound in 2025, suggesting that capitalization rates have reached their peak and are likely to decrease over the next year.

Multifamily Completions Reach 50-Year High (RealPage)

• Why it matters: The multifamily development cycle has tilted towards influx of deliveries, however a lack of starts and future completions to follow.
• Annualized multifamily completions reached 740,000 units, a level not seen since April 1974.
• Multifamily starts decreased by over 6% both monthly and annually to 333,000 units, with units under construction also declining to 850,000 compared to July and August of the previous year.
• In contrast, single-family starts increased by 15.8% month-over-month and 5.2% year-over-year to 992,000 units, reversing the recent downward trend. Single-family starts are projected to continue rising throughout the rest of 2024 as interest and mortgage rates decrease.

Mortgage Rates Hit Lowest Average in Two Years (Costar)

• Why it matters: The 30-year fixed-rate mortgage is at its lowest average in two years and refinance applications are at a two-year high.
• This change comes after the Federal Reserve's first interest rate reduction in four years.
• The mortgage market is seeing renewed activity, with mortgage applications rising 11% in the week ending September 20.
• Lower rates are expected to boost refinancing and attract more buyers to the market. However, some potential buyers are holding off, anticipating further rate decreases as new economic data emerges in the coming weeks.

Austin

Numbers Still Down for Many Mortgage Lenders (ABJ)

• Why it matters: There is more optimism around the residential market as listings are up today, however closed sales are still down.
• Home mortgage executions have declined for two consecutive years.
• Austin's median home prices continue to decrease, yet remain unaffordable for most potential buyers.
• Active home listings increased by 15.4%, while closed sales dropped by 10.4%.
• Reduced mortgage rates improve buyers' purchasing power, but home prices remain elevated following the Covid-19 pandemic.
• The current rate reductions are not substantial enough to significantly boost buyer demand.

New Build-to-Rent Neighborhood Aims to Inject Housing Into Fact-Growing Leander (ABJ)

• Why it matters: Tricon Residential is on track to deliver 1,000 new Build-to-Rent homes in 2024 and 1,000 more in 2025 through three developments.
• Tricon Residential, affiliated with Blackstone Real Estate, is launching Tricon Bryson, a Build-to-Rent community of 155 single-family homes.
• Leander, an Austin suburb, has seen its population more than triple since 2010, creating a heightened demand for housing and increasing difficulty in obtaining neighborhood approvals.
• Rental rates in the Bryson neighborhood are 30% to 50% lower than the cost of homeownership for comparable properties.
• The Austin Board of Realtors reports a median home sales price of $439,990 in the Austin metro area.
• The core housing issue in areas like Austin stems from rapid population growth coupled with limited housing supply, resulting in escalated home prices.

Build-to-Rent Supply Expands, Offering Austin, Texas Renters an Alternative (Costar)

• Why it matters: Austin’s build-to-rent supply has quadrupled in a decade.
• Build-to-rent developments have gained popularity by combining the advantages of traditional apartments and single-family homes.
• These projects typically require larger land parcels and are situated farther from city centers.
• Williamson County has seen over 55% of the new build-to-rent developments.
• Approximately 40% of Austin's build-to-rent inventory was completed after 2023, resulting in a 24% vacancy rate in this sector.
• Construction starts have decreased in 2024, with minimal supply expected in 2025. As ongoing projects reach completion, the build-to-rent market is anticipated to stabilize by 2026.

San Antonio

Weston Urban Set to Acquire Downtown Low-Income Apartment Tower (SABJ)

• Why it matters: Weston Urban is preparing to add to its expansive downtown holdings.
• Weston Urban, a developer, plans to purchase the Robert E. Lee Apartments at 111 W. Travis St. for $4.35 million.
• This acquisition aligns with Weston Urban's existing land holdings in the area, which include 300 Main, Weston Centre, the Milam Building, and land earmarked for a new ballpark.
• The property is subject to a 90-day right of first refusal clause, allowing other potential buyers the opportunity to make competing offers.

Manufactured, Production Homes to Pop Up Across San Antonio (SABJ)

• Why it matters: Manufactured housing is especially popular on San Antonio’s South Side neighborhoods.
• Florida developer Dean Warhaft has submitted plans for a manufactured housing subdivision on San Antonio's Southeast Side.
• The development, named Presa Grove, will accommodate 209 manufactured homes.
• Presa Grove residents will own their homes while leasing the land beneath them.
• The developer collaborated with the San Antonio Water System to secure essential water and sewage connections for the project's feasibility.

Hemisfair Mixed-Use Development Up for Final Design Review (SABJ)

• Why it matters: The 10-story tower will have 304 residential units, nine-level parking garage, and ground level retail, and will break ground in Q4 2024.
• The 2.4-acre site will be divided into two parcels: one featuring residential units with ground-floor retail, and the other containing a three-story building dedicated to food and beverage establishments.
• Post Lake Capital Partners and Trube Corp., the project developers, are pursuing a certificate of appropriateness from the Historic and Design Review Commission.
• This development aims to restore the Hemisfair district to a density level not experienced since before the 1968 World's Fair.