Each week on the Gray Report, we review the most important news and research on housing, multifamily, CRE, and the economy. Here's what we covered last week:
- Housing crisis partly caused by zoning laws, regulations, and empowered local opposition, preventing new construction.
- Rent growth slowed due to increased apartment construction, but single-family home prices skyrocketed, driven by regulatory barriers.
- The author argues that NIMBYs (Not In My Backyard) aren’t the core issue; it's the laws that give small groups the power to block housing development.
- These barriers create stasis in housing markets, with local politics insulated from democratic accountability.
- The article calls for reform, suggesting state-level changes to strip away unnecessary local interference and streamline development.
- Mortgage rates remain high, and this won’t change quickly even if the Federal Reserve cuts interest rates.
- First-time homebuyers remain active due to existing homeowners locked into lower rates and unwilling to sell.
- Loan-to-value (LTV) ratios have decreased slightly, but debt-to-income (DTI) ratios have risen due to high home prices.
- Housing demand remains strong, as reflected in a 10% increase in both median list and sold prices in July 2024.
- Nearly all homeowners (92%) hold mortgages with rates below 6.5%, reinforcing the "lock-in effect."
- Multifamily REITs saw stronger-than-expected apartment demand, driven by stable employment and household formation.
- Renters are staying put due to the high cost of homeownership, with renting being significantly cheaper than owning in some markets.
- REITs reported high occupancy rates, with some companies like Equity Residential maintaining over 96% occupancy.
- Disciplined balance sheets and resource-sharing among properties are helping REITs manage operational costs.
- Multifamily REITs increased their forward guidance for 2024, citing a slowdown in new apartment supply and strong market fundamentals.
- Rent growth has slowed or become negative in some cities, but rents remain much higher than pre-pandemic levels.
- High rent growth during the pandemic fueled a surge in apartment construction, particularly in the Sunbelt region.
- The variation in rent growth across different U.S. cities suggests regional trends rather than a national pattern.
- The South saw the highest rent growth post-pandemic but the lowest rent growth in the past year, while the Midwest now leads in rent growth.
- The article highlights how different markets, such as the West and Northeast, are experiencing divergent rent growth patterns.
