Real Estate Updates // June 19

Greetings,

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:

• Housing affordability is plummeting. It's not just interest rates that are going up, everything else in the economy is getting more expensive as pandemic-era wage increases taper off. The National Association of Realtors affordability index has cratered nearly 40 points this year.

• Homelessness has long been a challenge of epidemic proportions throughout the world, even before it was exacerbated by the COVID-19 pandemic. We see technology disrupting and transforming other sectors all around us. Technology can be applied to help agencies apply a more hopeful, sustainable, and strategic approach, that’s focused sharply on early intervention and prevention before homelessness even happens.
• Read the top three takeaways from the New Markets Tax Credit (NMTC) 2022 Annual NMTC Summit in Miami Beach.
• Read Houston's approach to Homelessness and how they moved 25,000 people into their homes.
• Parking requirement has been notoriously one of the main challenges in new developments. Eliminating the minimum parking requirements can ease development and improve growing [affordable] housing crisis. Read how Oregon and California have initiated the effort.?
• Residential rents continued to rise in May, notching a 0.6% increase compared with April and gaining 5.2% so far this year. Rents, which are expected to continue to rise, will push inflation upward, as housing costs account for a significant part of the overall inflation index.
• A monetary policy report delivered by the Federal Reserve to Congress said that the central bank has an "unconditional" commitment to "restoring price stability." Meanwhile, Fed officials have started to discuss their outlook for future rate hikes, with St. Louis Fed President James Bullard arguing that "a soft landing is feasible in the US and the euro area if the post-pandemic regime shift is executed well." Read how higher rates influence real estate investment sales.

• The national median home list price was $425,000 in April, while some states scattered through the Midwest and South are far less expensive than the national average with median home price tags below $300,000. Cities in some of these states have even offered financial incentives for people to move to the area. Among those include Bentonville, Arkansas; Lincoln and Topeka, Kansas; Morgantown, West Virginia; Tulsa, Oklahoma, and West Lafayette, Indiana.
• The housing market is quickly cooling off after years of price gains and bidding wars. The landscape looks very different all of a sudden, as mortgage rates spike and the soaring market sputters.
• According to Census Bureau, the number of housing starts, or new houses on which construction started, plunged 14.4% to about 1.5 million last month from 1.8 million in April, sharply below economic projections calling for nearly 1.7 million starts. Could "reset" cool prices?
• The residential construction costs climbed 1.8% in May (19.4%, year-over-year) according to the latest Producer Price Index (PPI) report.

• Single-family landlords in the US are eyeing opportunities in the slowing housing market, betting lower demand from consumers will lead builders to offer discounts. The pool of homebuyers is dwindling, with an estimated 9 million potential buyers priced out of the market so far this year.
• Watch Sam Zell interview with CNBC discussing inflation and how the Federal Reserve should respond to rising prices.
• Read how rate hike impacts Multifamily and the mechanics of interest rate swaps and caps to [partially] hedge against such climbs.

• The average rate on a 30-year fixed-rate mortgage has reached 5.78%, the highest level since November 2008, according to Freddie Mac. The surge stands to add pressure on U.S. home prices, which remain strong despite rising rates and tumbling affordability.