I would like to share a few headlines and brief analysis in Real Estate and [Housing] Development industry from the last few days. I hope you find them insightful:
- As high inflation and low apartment vacancies make housing increasingly unaffordable in many cities and has made homelessness worse
, Biden administration officials are pivoting to a new strategy to fight the deepening US housing crunch: expanding the supply of available homes
. The feds are urging more cities to ease local zoning codes that restrict or ban multifamily housing. To tackle a challenge that virtually every city and county faces, the White House just might need a "zoning czar
". Such an office could outlast the current presidency and help marshal bipartisan support for removing barriers to zoning reform and housing production. And unlike local elected officials, a zoning czar wouldn’t need to be popular to be effective.
- The Affordable New York tax provision (aka 421a) expired last month
when the state legislature ended its session, causing many affordable housing developers to rush to complete projects or begin developing other property types instead. Lawmakers have allowed the incentive to expire previously, but some lawmakers want to revamp the property tax system.?
- The average length of time to complete construction of a multifamily building in 2021
was 17.5 months slightly longer than 2020, decelerating the upward trend since 2013.
- The adaptive reuse
trend has been gaining steam, marked by a record year of apartment conversions from former offices, industrial buildings, and hotels. Read about the Urban Residential Conversions here
.
- Individuals across the income spectrum
(including those in the six-figure range) are affected by the country's affordable housing crisis. Elevated mortgage rates and high home prices pushed the housing-affordability index down to 102.5 in May
, its lowest mark since July 2006. Affordability could decline further in the future, as growth in home prices could surpass income gains. According to the latest Household Pulse Survey,?15% of US renters (8.4 million Americans) are not current on their rent payments
.
- While the rental market in some of the hottest U.S. cities
is showing early signs of cooling down
, rental rates were at record highs in May, reflecting rising costs for landlords and developers as well as the difficulty of financing home ownership. According to the New York Times article
, in many Americans cities including Nashville, residents are increasingly being buffeted by economic tides that push them into neighborhoods that are either much richer or much poorer than the regional norm. A smaller share of families are living in middle-class neighborhoods, places where incomes are typically within 25% of the regional median.
- "In recent years, large corporations have taken a chunk out of the inventory
of for-sale homes in the United States, investors bought more than 18% of all homes sold nationwide during the last three months of 2021, a record high".
- As renters continue to seek out ideal places to live
, they are finding certain markets to be highly competitive, led by Miami-Dade County, FL. The list of the most competitive apartment markets also includes areas such as Harrisburg, Pa.; North and Central Jersey, and Milwaukee. Meanwhile, data from RealPage Market Analytics shows that average rents nationally were up $251 in the second quarter compared with the previous year.
- The average interest rate on a 30-year fixed-rate mortgage has fallen
from 5.7% to 5.3% in the past week, according to Freddie Mac, representing the sharpest fall since 2008, but the mortgage demand has reduced
.
- More interest-rate increases are on the horizon, with the Federal Reserve working to tame inflation
and to ensure potentially problematic changes in consumer psychology do not take hold. Some traders expect the Fed could be forced to cut interest rates next year in response to deteriorating economic conditions.
- Watch Nareit interviews with?Mahbod Nia
, CEO of Veris Residential. Nia said Veris is seeing “very strong operating fundamentals really across the board”, demonstrating a real resurgence in occupancy since the trough of covid. The REIT has seen 20% same store NOI growth in the first quarter on a year-over-year basis, and 16% blended net rental growth.
- Listen to Leading Voices interview with Mark Parrell
, President & CEO of Equity Residential, discussing different aspects of [institutional] real estate investments in apartment sector and a deep dive into the operational aspects of the business.
- Watch
Hessam Nadji, Marcus & Millichap's CEO, interview with CNBC, discussing how certain commercial real estate assets are doing well, with investors looking to the sector as an inflation hedge. New work models could lead companies to lease less office space, but once the economy recovers "new office demand should begin to offset the reduction of footprint because of the hybrid environment."
- The Green Street Commercial Property Price Index declined by 3.7% in June
. The all-property index is down 4.9% from its March high. “Price discovery is still taking place, and economic uncertainty and interest rate volatility make that challenging, but prices of most properties are down 5%+ from recent highs. In a few sectors, pricing has held up better.”
