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:
- "Restrictive and exclusionary zoning
, artificial barriers, and NIMBY opposition have combined to create an unprecedented and persistent housing shortage," said Mike Kingsella, CEO of Up for Growth. "Failure to address these issues will create lower economic output and fewer opportunities for everyone. Families and individuals will be forced to pay higher rents, the equity gap will widen, and transportation costs will rise as people are forced to travel greater distances for work and education."
- Homebuilder sentiment improved
in February, with an index from the National Association of Home Builders and Wells Fargo increasing to a reading of 44, above analysts' expectations. Meanwhile, both single-family and multifamily housing starts increased last month, according to the Commerce Department. Starts for projects involving five or more units reached their highest point since last April.
- A brief drop in mortgage rates and a pullback in home prices boosted existing home sales in February
, according to the National Association of Realtors (NAR). The 30-year mortgage rates averaged less than 6.3% in February per Freddie Mac and the median sales price in February posted the first decline since February 2012.?
- New home sales
reached a seasonally adjusted annual rate of 640,000 units in February, gaining 1.1% to reach the highest mark since August, according to the Commerce Department
. February was the third straight month of gains.?
- February 2023: +1.1* % Change
- January 2023 (r): +1.8* % Change
- Sales of previously owned US homes rose by the most since mid-2020
.
- Home prices fell
on a year-over-year basis for the first time in more than 10 years in February, according to data from the National Association of Realtors. Meanwhile, sales of previously owned homes increased 14.5%, the first month-over-month gain in 12 months.
- “Fundamental to understanding real estate operations is knowing that NOI is a function of income and expenses.
Focusing exclusively on income, or solely on expenses, misses the mark. While income ran up over the past two years, expenses, many of which are difficult for an operator to control, started taking big bites out of NOI.”?
- “It’s impossible to look at multifamily independent of single-family homes because the two markets are intertwined with household formation
. Between 2012 and 2022, there were 15.6 million household formations in the US, according to NAR, with nearly 2.1 million last year.”
- “In a market that’s been disrupted by rising interest rates and unsteady financial markets, Reddy and other single-family rental investors and developers haven’t lost sight of the bigger picture. Demand for housing still exceeds supply
, especially from millennials raising young families who want a home with a backyard in the suburbs.”
- There is a deficit of about 4 million units in the US housing market
, according to research by the National Multifamily Housing Council and other organizations, and the need for affordable housing is particularly acute, according to President Sharon Wilson Géno. "The bottom line is, the demand for more housing in this country is as far as the eye can see," said Wilson Géno, who also discusses policies such as the Biden administration's Housing Supply Action Plan.
- The typical rent for a single-family home climbed
5.7% on a year-over-year basis in January, marking the ninth month single-family rent gains have moderated, according to Corelogic. It also noted that all 20 major metro areas it monitors registered single-digit annual rent increases, marking the first time that has happened since 2020.
- Forty-four percent of consumers believed February was a bad time to sell a home
, up from 39% the prior month, according to Fannie Mae's Home Purchase Sentiment Index. Economic uncertainty and concerns around job security are contributing factors.
- Sixty percent of all mortgages outstanding
were issued in the past four years at much lower mortgage rates than today, making the US housing market less vulnerable to rising interest rates than in other countries, see chart below. The implication for markets is that the Fed may have to raise interest rates more to get housing inflation under control and get overall inflation back to the FOMC’s 2% inflation target.
- A continued slowdown in housing sales this spring could ripple through real estate-related industries, including sales of furniture and appliances. 40% of the share of homes sold per year are typically sold between the months of March and June
, according to the National Association of Realtors.
- “A monthly gauge of builder confidence
in the market for newly built single-family homes rose in March, even though analysts expected a drop. The National Association of Home Builders/Wells Fargo Housing Market Index rose two points to 44. Anything above 50 is considered positive.”?
- The NAHB recently published its latest Cost of Construction Survey
. Results show that 60.8% of the average home sale price consisted of construction costs, essentially unchanged from the 61.1% posted in 2019.?
- Concerns are rising that the $8 trillion agency mortgage bond market
might come under strain as a result of increasing interest rates and the possibility that holdings from Silicon Valley Bank and other regional banks could be sold, increasing supply. Franklin Templeton's Paul Varunok noted that the market is deep enough to handle large liquidations, but he noted that further stress in the banking system could add to volatility.
