10 Cities With the Largest Jump in Listings

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Macro Trends

Gas prices nearing $4 a gallon rekindle fears of inflation rebound link

• US gas prices hit a 10-month high, trading at $3.86, nearing $4. A significant surge that's fanning the flames of inflation fears.

• Global oil prices climb, spurred by supply cuts from key producers like Saudi Arabia and Russia. Brent crude and West Texas Intermediate trading above $80 a barrel.

• Inflation ticked up to 3.2% in July from 3% in June, despite aggressive interest rate hikes by the Federal Reserve. More rate hikes could be on the horizon to target 2% inflation.

Costs for lumber and plywood continue to decrease significantly this year. Single-family housing and the U.S. South continue to dominate permit approvals. link

• Costs for lumber decreased by 24% YTD in the U.S. and 26% YTD in Canada as of August 2023.

• Residential reconstruction costs in the U.S. and Canada changed by less than 1% from May to August 2023.

• The South leads the U.S. in building permit approvals this year, mainly in Texas and Florida, with most permits for single-family housing.

Overall Real Estate Market

Commercial Mortgage Lending Index Down 52.2% link

• Commercial real estate lending tightened in 2023, with the CBRE Lending Momentum Index down 5.4% from Q1 and 52.2% from the same period in 2022.

• The current value of the index is under 200, nearing the low point since June 2016, reflecting strong volatility in the market.

• The high point of activity in early 2022 was nearly 550, showcasing a significant decline in commercial mortgage lending.

Institutional Investors Are Primed to Buy Apartments in H2 link

• Transaction velocity in the $15 million-plus category during the first half of 2023 was down about 65% from the same period last year, but institutional investors are expected to return in force in the latter half of 2023.

• Locations with increased or stable investment include New York City, Chicago, Riverside-San Bernardino, Calif., San Jose, and Seattle-Tacoma, due to factors like moderate supply pressure and elevated barriers to homeownership.

• Some metros like Charlotte, Dallas-Fort Worth, Houston, Las Vegas, and Salt Lake City saw steep contractions in trading, with notable supply pressures and cap rate compression during the pandemic potentially stalling deal flow.

Retail Openings Have Eclipsed Closings So Far This Year | link

• Retail tenant move-ins outpaced move-outs by 21 million square feet in the first half of the year. A trend that's been growing for 10 consecutive quarters.

• Malls are the exception, with demand for space continuing to drop, especially in Class B and C properties.

• For the fourth consecutive quarter, there's been a rise in demand for space in single-tenant properties, strip, power, and neighborhood centers.

Surviving non-QM lenders are gaining business now link

• Non-QM lender Acra Lending projects mortgage originations to increase to about $2.6 billion in 2023, up from $2.1 billion last year.

• Acra's success in the challenging market is attributed to efficiency and foresight in keeping rates aligned with Federal Reserve's interest rate hikes.

• The current uncertainty in the banking industry and pullback from the origination market has benefited non-QM players, despite creating liquidity woes and profit-margin challenges.

Where Are All the Homes? See the 10 Cities With the Largest Jump in Listings—and 10 With the Biggest Drop link

• Inventory Tightening: In July, there were 6.4% fewer listings on Realtor compared to a year earlier, exacerbating the existing shortage of homes for sale. However, 31 of the 100 largest metropolitan areas experienced an increase in listings.

• Impact on Buyers: With mortgage interest rates around 7% and near-record-high home prices, the low inventory has led to bidding wars and offers over the asking price. The lack of homes for sale has made it more difficult for buyers to find and afford a place.

• Regional Variations: The largest drops in inventory are seen in more affordable destinations or places that became popular during the COVID-19 pandemic. Conversely, more affordable Southern and Midwestern markets are seeing the biggest increases in homes for sale, such as Cape Coral, FL, with a 51.1% year-over-year change in active listings.

Opportunities

Ground Leases Attracting a Bigger Following link

• Unlocking Capital: Ground leases are gaining traction as property owners use them to unlock capital in a tight liquidity market. For instance, selling off ground leases and mortgaging the building can lead to better overall blended rates on capital costs.

• Price Dynamics: Ground leases are trading at favorable pricing, with cap rates close to 6% in prime locations like New York City. This has attracted ultra-high net worth investors and family offices looking for long-term stable cash flow.

• Investment Opportunities: The market for ground leases varies widely, with smaller deals attracting all-cash buyers and larger transactions offering opportunities for alternative financing. Ground leases are seen as conservative investments with steady cash flow, and new opportunities are emerging in shopping centers and redevelopment projects.