Daily Dose of Real EstAte for November 12

Opening Summary

The real estate market continues to navigate a complex landscape as we approach the end of 2024. Mortgage rates remain volatile, hovering around 7% for 30-year fixed loans, while the housing market faces ongoing affordability challenges. Recent data shows a surge in commercial real estate lending, with a 59% year-over-year increase in originations during the third quarter. Meanwhile, the residential market is grappling with the lowest share of first-time homebuyers on record, at just 24%. These developments, coupled with the potential impact of recent political changes, are shaping a dynamic environment for real estate professionals and investors alike.

Key Takeaways

1. Mortgage rates continue to fluctuate, with the average 30-year fixed rate around 7%, influenced by economic data and political developments.

2. First-time homebuyers face significant challenges, with their market share dropping to a historic low of 24%.

3. Commercial and multifamily mortgage originations rose 59% compared to Q3 2023, indicating renewed investor confidence.

4. Home equity withdrawal reached $48 billion in Q3 2024, the largest volume in two years, as homeowners tap into record equity levels.

5. The commercial real estate sector shows varied performance across property types, with health care properties seeing a 510% year-over-year increase in loan originations.

Residential Real Estate Markets

Housing Market Stabilization and Growth Projections

The National Association of Realtors (NAR) has released an optimistic forecast for the housing market in the coming years. According to NAR chief economist Lawrence Yun, the market is expected to stabilize, with projections indicating a 10% increase in existing-home sales and an 11% rise in new home sales for 2025. This positive outlook comes after a challenging period in 2023 and 2024 [Mortgage Professional America](https://www.mpamag.com/us/mortgage-industry/market-updates/stable-mortgage-rates-could-drive-2025-home-sales-increase-nar/513377).

Yun attributes this potential recovery to several factors:

• Mortgage rates are expected to settle around 6%, creating a more favorable environment for buyers.
• Continued job growth is supporting market rebound.
• Homeownership remains a powerful wealth-building tool, with homeowners' equity hitting a record $35 trillion.

Home Price Trends Across U.S. Markets

Recent data shows that home prices continue to rise in most U.S. markets, albeit at a slower pace compared to previous quarters:

The national median price for an existing single-family home is now $418,700.

• 7% of U.S. markets experienced double-digit price hikes over the past year, down from 13% in the second quarter.

Regional price appreciation varies significantly:

• Northeast: 7.8%
• Midwest: 4.3%
• West: 1.8%
• South: 0.8%

[NewsNation](https://www.newsnationnow.com/business/your-money/home-prices-mortgage-rates-data/) reports that eight of the ten most expensive housing markets are in California, with Honolulu, Hawaii, and Boulder, Colorado, rounding out the top ten.

Affordability and Wealth Building Through Homeownership

The importance of homeownership as a wealth-building tool is becoming increasingly evident:

• Homeowners enjoy a median net worth of $415,000, compared to just $10,000 for renters.
• Yun emphasizes, "Homeowners' wealth steadily rises while renters' wealth does not. If you don't enter the housing market, you are in the renter class where wealth is not being accumulated."

This stark contrast underscores the long-term financial benefits of homeownership, despite current market challenges [Mortgage Professional America](https://www.mpamag.com/us/mortgage-industry/market-updates/stable-mortgage-rates-could-drive-2025-home-sales-increase-nar/513377).

Mortgage Markets

Mortgage Rates Remain Volatile Amid Economic Uncertainty

The mortgage market continues to experience significant volatility, with rates fluctuating in response to economic indicators and geopolitical events. According to MortgageNewsDaily, mortgage rates started the week slightly lower but have since shown an upward trend [MortgageNewsDaily](https://www.mortgagenewsdaily.com/markets/mortgage-rates-11042024). The average lender moved rates back down toward 7% for a top-tier conventional 30-year fixed scenario, compared to 7.125% late last week.

However, the market remains highly sensitive to economic data and political developments. Matthew Graham of MortgageNewsDaily notes that election-related volatility has been having a big impact on the bond market and mortgage rates [MortgageNewsDaily](https://www.mortgagenewsdaily.com/markets/mortgage-rates-11052024). This volatility is expected to continue in the short term, with potential for significant movements based on election outcomes and economic reports.

Federal Reserve's Impact on Mortgage Rates

The relationship between Federal Reserve actions and mortgage rates remains a topic of intense interest. Despite recent Fed rate cuts, mortgage rates have not seen a corresponding decrease. MortgageNewsDaily emphasizes the importance of understanding that Fed rate cuts do not automatically lead to lower mortgage rates [MortgageNewsDaily](https://www.mortgagenewsdaily.com/markets/mortgage-rates-11062024). The market has already priced in expected rate cuts, and longer-term rates, which influence mortgage rates, are more affected by economic outlook and inflation expectations than short-term Fed actions.

Mortgage Application Trends

The Mortgage Bankers Association's (MBA) latest weekly survey reveals a decline in mortgage applications amid rising rates. Key findings include:

• The average 30-year fixed mortgage rate increased from 6.73% to 6.81%
• Refinance applications decreased, accounting for 39.9% of total applications, down from 43.1% the previous week
• The average loan size fell below $300,000
• FHA loans represented 15.5% of total applications, down from 16.4%
• VA loans accounted for 12.5% of total applications, down from 14.6%

These trends indicate that higher rates are dampening both purchase and refinance activity in the current market [MortgageNewsDaily](https://www.mortgagenewsdaily.com/news/11062024-mortgage-applications-mba).

Home Equity Trends and HELOC Activity

Despite challenging market conditions, homeowners are beginning to tap into their home equity more actively. CNBC reports that in the third quarter of 2024, mortgage holders withdrew $48 billion of home equity, the largest volume in two years [CNBC](https://www.cnbc.com/2024/11/04/homeowners-pulling-cash-properties-rates.html). This increase in home equity withdrawal comes as homeowners sit on a record $17 trillion in total equity, with approximately $11 trillion considered tappable.

The average homeowner now has $319,000 of equity in their home, of which $207,000 is tappable. However, the current extraction rate of 0.42% of all tappable equity is still less than half the rate seen in the decade leading up to recent Federal Reserve rate hikes.

First-Time Homebuyers Face Challenges

The National Association of Realtors' (NAR) 2024 Profile of Home Buyers and Sellers reveals significant challenges for first-time homebuyers:

• The first-time homebuyer market share decreased to a historic low of 24%, down from 32% last year
• The median age of first-time buyers increased to 38 years, up from 35 last year
• The median household income for first-time buyers rose to $97,000, a $26,000 increase in the last two years

These statistics highlight the growing affordability challenges in the housing market, particularly for younger and first-time buyers [NAR](https://www.nar.realtor/newsroom/first-time-home-buyers-shrink-to-historic-low-of-24-as-buyer-age-hits-record-high).

Looking Ahead: Mortgage Rate Forecasts

While short-term volatility remains a concern, some experts are cautiously optimistic about the long-term trend in mortgage rates. Ralph McLaughlin, senior economist at Realtor.com, suggests that the long-run trend in rates is expected to be downward as the fight against pandemic-induced inflation comes to an end [Forbes](https://www.forbes.com/advisor/mortgages/mortgage-interest-rates-forecast/).

However, the timing and extent of rate decreases remain uncertain. Samir Dedhia, CEO of One Real Mortgage, notes that while a single rate cut may have limited effect, consecutive cuts could improve affordability and drive more market activity, particularly if the Federal Reserve indicates a commitment to maintaining lower rates over a longer period.

Commercial Real Estate Markets (including Multifamily)

Surge in Commercial Real Estate Lending

The commercial real estate sector is experiencing a significant uptick in lending activity, according to recent reports:

• Commercial and multifamily mortgage originations rose 59% compared to the same period in 2023 and were up 44% from the previous quarter [Mortgage Professional America](https://www.mpamag.com/us/specialty/commercial/commercial-real-estate-lending-surges-in-q3/513376).
• The increase in activity is attributed to a drop in the yield on the 10-year Treasury bond, which fell from an average of 4.31% in June to 3.72% in September.

Property-Specific Lending Trends

Different property types saw varying levels of growth in loan originations:

• Health care properties: 510% year-over-year increase
• Hotel properties: 99% increase
• Retail properties: 82% increase
• Industrial properties: 57% increase
• Multifamily properties: 56% increase
• Office properties: 3% decrease

These figures highlight the divergent performance across different segments of the commercial real estate market, with health care and hospitality showing particularly strong growth [Mortgage Professional America](https://www.mpamag.com/us/specialty/commercial/commercial-real-estate-lending-surges-in-q3/513376).

Investor Activity and Lending Sources

The types of investors driving the increase in loan originations varied:

• CMBS loans saw a 260% year-over-year rise
• Loans from depository institutions increased by 69%
• Investor-driven lenders up by 62%
• Life insurance companies up by 31%
• Government-sponsored enterprises (GSEs) like Fannie Mae and Freddie Mac up by 28%

This diverse range of lending sources indicates broad-based confidence in the commercial real estate market [Mortgage Professional America](https://www.mpamag.com/us/specialty/commercial/commercial-real-estate-lending-surges-in-q3/513376).

CBRE Lending Momentum Index

CBRE's recent report provides additional insights into the commercial real estate lending market:

• The CBRE Lending Momentum Index increased 13% quarter-over-quarter and 15% year-over-year.
• Investment sales volume showed signs of stabilization, coming in at $90 billion for the quarter.
• The largest share of loans (43%) came from life companies, followed by alternative lenders (34%) and banks (18%).
• Multifamily agency lending saw a significant boost, with agency origination volumes rising 40% quarter-over-quarter to $28 billion [Bisnow](https://www.bisnow.com/national/news/capital-markets/cbre-commercial-real-estate-lending-market-sees-strong-growth-in-q3-126718).

CMBS Market Revival

The commercial mortgage-backed securities (CMBS) market is showing signs of revival:

• The share of CMBS loans grew to 5% in Q3, up from 1% in Q2.
• Industrywide CMBS issuance, including single-asset single-borrower CMBS loans, totaled $29 billion in Q3, triple the amount of the previous year.
• This increase in CMBS lending is particularly crucial for the office market, potentially helping to boost liquidity and encourage transaction volume [Bisnow](https://www.bisnow.com/national/news/capital-markets/cbre-commercial-real-estate-lending-market-sees-strong-growth-in-q3-126718).

CMBS/REIT Markets

While specific recent data on CMBS/REIT markets was not provided in the search results, the information from the commercial real estate section indicates positive trends:

• The growth in CMBS loans and issuance suggests increasing investor confidence in commercial mortgage-backed securities.
• The tripling of CMBS issuance year-over-year points to a significant revival in this market segment.
• The opening of the CMBS market for the office sector is seen as a constructive development, potentially creating more liquidity for buyers [Bisnow](https://www.bisnow.com/national/news/capital-markets/cbre-commercial-real-estate-lending-market-sees-strong-growth-in-q3-126718).

Real estate investment professionals should continue to monitor REIT performance and CMBS issuance trends for a comprehensive understanding of these markets.

The Bottom Line: Navigating Uncertainty in a Changing Market

As we look ahead to 2025 and beyond, the real estate market faces a complex set of challenges and opportunities. The residential sector continues to grapple with affordability issues and changing demographics, while the commercial real estate market shows signs of renewed vigor, particularly in lending activity across various property types. The potential impact of political changes adds another layer of uncertainty to an already dynamic landscape.

As always, thorough research, diversification, and a long-term perspective will be crucial in navigating the complexities of the real estate market in the coming years. By staying adaptable and informed, industry professionals can position themselves to capitalize on emerging opportunities while managing potential risks in this evolving market.

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