Daily Dose of Real Estate for July 15

As we navigate the turbulent waters of real estate in mid-July 2024, the industry finds itself at a crossroads of market dynamics and unprecedented events. Today's "Daily Dose of Real Estate" brings you the most impactful stories shaping the domestic real estate and mortgage sectors, including an unexpected political development that's sending shockwaves through the market.

Trump Assassination Attempt Rattles Markets and Real Estate Outlook

In a shocking turn of events, former President Donald Trump was shot in the ear during a rally in Pennsylvania on July 13, 2024. While Trump is reported to be fine after the incident, the assassination attempt is already having significant ripple effects on financial markets and real estate forecasts.

Key impacts:

• Investors predict a surge in "Trump victory trades" in the coming week
• The dollar is expected to strengthen
• The U.S. Treasury yield curve may steepen

Real estate implications:

1. Potential policy shifts: A possible Trump presidency could lead to looser climate change regulations and less overall regulation, potentially impacting commercial real estate development and investment.
2. Tax considerations: Expectations of extended corporate and personal tax cuts could influence real estate investment strategies.
3. Market sentiment: Historically, Republican victories have led to improved CEO confidence and small business optimism, potentially boosting spending and investment in commercial real estate.

Commercial Real Estate: A Sector in Flux

The commercial real estate (CRE) landscape continues to evolve rapidly. Current updates paint a more accurate picture of where things stand today:

1. Office sector struggles: Net absorption in the office sector remains negative .
2. Multifamily sector cooling: Rental cost growth is slowing as a record number of apartment buildings near completion.
3. Industrial sector stabilization: After years of e-commerce-driven growth, the industrial sector may be normalizing, though rental costs remain over 7% higher than last year.
4. Retail sector resilience: Despite e-commerce accounting for 15% of total sales, the retail sector maintains strength with vacancy rates below pre-pandemic levels.

Bank Earnings and CRE Losses

As we approach the bank earnings season, investors are closely watching for potential commercial real-estate losses . With banks holding an estimated 40% to 50% of all commercial real-estate debt outstanding, the potential for significant losses looms large.

Residential Real Estate: A Tale of Two Markets

The residential real estate market continues to present a complex picture:

1. Inventory challenges: While overall inventory is rising, the supply of newly built homes appears disproportionately high , with a nine-month supply compared to just over four months for existing homes.
2. Price resilience: Despite increasing supply, home prices continue to rise, up 4.9% in May compared to the previous year.
3. Regional variations: Markets in the Northeast and Midwest are seeing stronger price growth, while Florida and Texas are experiencing price declines due to larger increases in supply.
4. Mortgage rate impact: With rates hovering around 7%, the market faces continued affordability challenges, potentially dampening demand in the coming months.

Looking Ahead: Navigating Uncertainty

As we move through the second half of 2024, the real estate market faces a confluence of factors that could significantly impact its trajectory:

1. The ongoing presidential campaign and its potential policy implications
2. The Federal Reserve's interest rate decisions
3. The resolution (or escalation) of geopolitical tensions
4. The long-term effects of shifting work patterns on commercial real estate

For industry professionals, staying informed and agile will be crucial in navigating these uncertain waters. As always, local market knowledge and a keen eye on national trends will be key to success in this ever-evolving landscape.

Real Estate on the Edge: Stay updated with these impactful changes and plan strategically to ride the waves of uncertainty with informed confidence.

Please check out ALFReD for yourself at www.impactcapitoldc.com

Tim Rood

Founder / CEO

301-875-1684

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