August 23, 2024
Welcome to your Daily Dose of Real Estate, where we provide you with the latest insights and trends in the real estate market. In today's edition, we cover the residential, multifamily, commercial, and mortgage markets, along with updates on the CMBS and REIT sectors. Stay informed with our comprehensive analysis and key takeaways.
Key Takeaways
- Residential Market: Stabilization with higher mortgage demand and stabilizing home prices.
- Multifamily Market: Positive but weaker growth expected by year-end 2024.
- Commercial Market: Significant decline in office sector value; industrial and retail sectors remain strong.
- Mortgage Market: Decrease in mortgage rates to the lowest level in over a year.
- CMBS Market: Facing challenges with high interest rates and refinancing difficulties.
- REIT Market: Resilient with consistent distributions.
Summary
The real estate market is experiencing a mix of stabilization and challenges across different sectors. The residential market shows signs of stabilization with higher mortgage demand and stabilizing home prices. The multifamily market is expected to see positive but weaker growth by year-end 2024. The commercial market faces significant challenges, particularly in the office sector, while the industrial and retail sectors remain strong. Mortgage rates have decreased to the lowest level in over a year, and the CMBS market is facing refinancing difficulties due to high interest rates. The REIT market remains resilient with consistent distributions.
Residential Real Estate Markets
Market Trends
- Stabilization and Forecasts: The residential real estate market is showing signs of stabilization. According to HousingWire, the market is expected to see higher mortgage demand, stabilizing home prices, and an uptick in housing inventory. Zillow's forecast predicts home values will level off, falling by 0.2%, while Freddie Mac anticipates a slower house price increase of 2.6% in 2024, down from 5.4% in 2023.
- Sales Data: The National Association of Realtors (NAR) projects that existing-home sales will jump 13.5% in 2024 after an 18% decline in 2023. The National Association of Home Builders expects single-family home building to increase to an annual pace of 925,000 units next year, up from 744,000 units in 2023.
Inventory and Prices
- Inventory Levels: According to the National Association of Realtors, total housing inventory registered at the end of July was 1.33 million units, up 0.8% from June and 19.8% from one year ago (1.11 million). This level of inventory and the current pace of sales suggest that the market has four months' worth of inventory left, which points to a seller’s market—although a fairly balanced one.
- Home Prices: Zillow expects home values to climb 1.8% in 2024, a modest decrease from last month’s projection of 2% growth. Sales are anticipated to be 1% more than last year but lower than the previous forecast of 4.2 million home sales (Zillow).
Multifamily Real Estate Markets
Market Performance
- Permitting Trends: Madison, WI, Columbus, OH, and Omaha, NE, have shown strong multifamily permitting gains in the first half of 2024 (Arbor Realty Trust).
- Rent Growth and Vacancy Rates: The multifamily market is expected to see positive but weaker growth by year-end 2024. Rent growth is forecasted at 2.7% for the year, slightly below the long-term average, while vacancy rates are expected to increase to 6% (Freddie Mac).
Market Outlook
- Supply and Demand: New multifamily supply is expected to peak in 2024, with more than 500,000 apartment units likely completed in 2023. Rent growth is expected to be in the range of 1.0% to 1.5% in 2024, with the national multifamily vacancy rate rising to 6.25% (Fannie Mae).
- Investment Activity: The multifamily market remains resilient amid volatility and high supply. Investment activity is slowly returning, with origination volume expected to reach $320 billion by the end of 2024 (Orion Prop).
Mortgage Markets
Current Rates
- Mortgage Rates: As of August 20, 2024, the average mortgage rates are:30-year fixed-rate mortgage: 6.49% (Mortgage News Daily)15-year fixed-rate mortgage: 6.21% (CNN)5/1 Hybrid Adjustable-Rate Mortgage (ARM): 6.23% (Bankrate)30-year fixed-rate jumbo mortgage: 6.98% (Forbes)
Market Predictions
- Rate Trends: Mortgage rates have decreased to the lowest level in over a year, with the average rate for a 30-year fixed-rate mortgage recently dropping to 6.47% (Norada Real Estate). Experts predict a slight decline in mortgage rates over the coming weeks. The Mortgage Bankers Association (MBA) expects the 30-year fixed-rate mortgage to average 6.8% in Q3 and 6.6% in Q4 2024 (Forbes).
Market Activity
- Mortgage Applications: Mortgage applications decreased 10.1% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Applications Survey for the week ending August 16, 2024. The Refinance Index decreased 15% from the previous week and was 90% higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 5% from one week earlier (Mortgage Bankers Association).
Commercial Real Estate Markets
Market Trends
- Valuation and Sales: The US commercial real estate market has seen a significant decline in value, particularly in the office sector, due to high vacancy rates post-pandemic. Wells Fargo is selling off billions of dollars in commercial mortgages, a move that reflects the broader challenges in the market (CNN).
- Sector Performance: The industrial sector continues to perform well due to e-commerce demand, while the retail sector remains strong with lower vacancy rates compared to pre-pandemic levels. However, the office sector continues to struggle with negative net absorption and increasing available spaces for lease (BOMA).
Market Outlook
- Investment and Lending: The commercial real estate market is expected to face continued challenges with high interest rates and tighter lending standards. The Mortgage Bankers Association's latest Quarterly Survey reports a 3 percent increase in U.S. commercial and multifamily mortgage loan originations in the second quarter of 2024 compared to the same period last year, and a significant 27 percent jump from the first quarter of 2024 (World Property Journal).
CMBS and REIT Markets
Market Trends
- CMBS Market: The CMBS market is facing significant challenges with high interest rates making refinancing difficult and increasing the risk of maturity defaults. However, economic growth in the US is expected to mitigate some of the valuation risks, and new issuance is predicted to steadily increase (Trepp).
- Special Servicing: A notable trend in the CMBS market is the transfer of loans to special servicing due to defaults. For instance, a $180 million loan on a Manhattan office property was recently transferred to special servicing (CRE News).
REIT Market
- Performance and Distribution: The REIT market remains resilient with consistent distributions. For example, HomeCo Daily Needs REIT announced a quarterly distribution for the period ended June 30, 2024 (MarketScreener).
This comprehensive analysis provides a snapshot of the current state of the residential, multifamily, commercial, and mortgage markets in the United States, highlighting key trends, predictions, and developments that could impact various sectors. Please check us out yourself at www.impactcapitoldc.com.
