Real Estate Wrap Up & Week Ahead for June 23, 2024

This past week in real estate saw critical updates spanning residential housing, multifamily, commercial real estate (CRE), mortgage financing, and REIT markets. Let's dive into a comprehensive summary of the events that took place, and a look at key factors poised to impact the sector in the week ahead.

The Week in Review

Residential Housing

Persistent Decline in Existing-Home Sales: Data released on June 21st indicates that U.S. existing-home sales fell for the third consecutive month in May, reaching a seasonally adjusted annual rate of 4.11 million, down 0.7% from April and a significant 2.8% from the previous year. Notably, median home prices surged to a record $419,300, a 5.8% year-over-year increase source.

Key factors include:

• Elevated mortgage rates near 7% creating affordability challenges.
• Inventory rise to 1.28 million units in May, an 18.5% annual increase.

Market Balance and Buyer Activity: The existing homeowner reluctance to move due to historically low mortgage rates has balanced supply and demand, yet continued high home prices place pressure on first-time buyers. First-time buyers made up 31% of sales in May, up from 28% last year, suggesting some optimism as the market looks for a seasonal dip in competitiveness towards year's end source.

Multifamily and CRE

Increase in Mortgage Debt: The Mortgage Bankers Association (MBA) reported a 0.9% increase in commercial/multifamily mortgage debt in Q1 2024, up $40.1 billion to a total of $4.7 trillion. Multifamily mortgage debt specifically saw a $23.7 billion increase to $2.10 trillion source.

Moderate Growth in Rents and Investments:

• Monthly asking rents for multifamily properties were up 18% since 2019, though recent growth has been sluggish source.
• Investments in multifamily properties improved, driven by contractions in property prices and enhanced net operating incomes, as highlighted by a recent analysis source.

Significant Decreases in New Construction: May saw a substantial drop in multifamily housing starts, down nearly 49.5% year-over-year, reflecting tighter financing conditions and higher interest rates impacting the construction pipeline source.

Mortgage Financing

Volatile Mortgage Rates: Freddie Mac reported mortgage rates fluctuating around 7%. Despite moderating from earlier highs, the 30-year fixed-rate average remains high, contributing to an overall decline in mortgage application activities, with a noted decrease of 8.5% month-over-month in May source.

REIT Markets

Mixed Performance but Stability: The performance of REITs varied across sectors:

• Office REITs faced ongoing challenges due to a 44% decline in loan value relative to property worth.
• Despite headwinds, overall REIT investments added value, with sector analysts projecting stability in areas like industrial and logistics properties source.

Investment Trends and Data:

• FTSE Nareit's Composite REIT Index and Dow Jones U.S. Select REIT Index data highlighted dividend yield trends, influencing investment decisions source.

Looking Ahead

The upcoming week is packed with significant reports and economic indicators:

• May New Home Sales Data: To be released on June 26. This data will give insights into the housing market dynamics for new constructions.
• Pending Home Sales Index: Set for June 27 release by NAR, this index serves as a forward-looking indicator of home sales based on contract signings.
• Personal Income and Outlays Report: The report on June 28 will reflect changes in income and spending, influencing consumer confidence and mortgage activities.
• Q2 GDP Estimate: To be updated on June 28, shedding light on overall economic growth that could impact real estate investments.

Trends to Watch

Based on the events and upcoming data, here’s what to anticipate:

• Residential Market: Expect further pressure on home prices due to constrained inventory and high borrowing costs. Watch for price shifts and regional sales data, particularly post-inflation adjustments.
• Multifamily Market: Regulatory adjustments and interest rate decisions will continue to steer construction starts and rent dynamics. Expect nuanced movements based on local zoning laws and financing availability.
• CRE Sector: Challenges in the office sector could spur opportunities in resilient subsectors such as industrial real estate. Look for trends in investment volumes and asset management.
• REIT Markets: Monitoring high-yield sectors and institutional investments will be crucial for tracking performance and sectoral stability.

Stay tuned for these developments and more, ensuring you stay ahead in the ever-changing real estate market landscape.

Please check out ALFReD for yourselves at www.impactcapitoldc.com?

SitusAMC Impact Capitol DC Mortgage Bankers Association The Mortgage Collaborative Mortgage Professional America Federal Home Loan Bank of San Francisco Federal Reserve Board Federal Reserve Bank of New York Federal Housing Finance Agency Fannie Mae Freddie Mac U.S. Department of Housing and Urban Development CNBC Fox Business Network Yahoo Finance