$32 trillion in home equity

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Americans have more than $32 trillion in home equity —  link

• U.S. homeowners now hold a record $32 trillion in home equity, with the average homeowner having $214,000 in tappable equity. About 60% of homeowners have at least $100,000 in equity available.

• Borrowing costs are high due to Federal Reserve rate hikes, with current home equity loan rates averaging 8.52%. Despite this, mortgage refinance demand has more than doubled from last year as rates slightly ease.

• Home equity lines of credit (HELOCs) have an average interest rate of nearly 10%, far lower than credit card rates, which exceed 20%. However, taking on this debt risks foreclosure if repayments are missed.

Commercial Real Estate is Poised to Benefit from Rate Cuts link

• The recent 50 basis point rate cut will help ease financing challenges for commercial real estate, but it won’t be enough to fully resolve the sector's deeper issues. Price discovery will still take time as buyers and sellers adjust after years of significant rate hikes.

• The gap between public and private real estate valuations has narrowed, partly due to REIT market recovery. As of mid-2024, the spread between public REIT implied cap rates and private appraisal cap rates had shrunk to 120 basis points from 244 basis points in 2022.

• Investment in non-traded REITs has dropped sharply in 2024, signaling a shift in investor sentiment. By July, fundraising totaled $3.4 billion, a steep decline compared to $33.2 billion in 2022.

The commercial-property market is coming back to life link

• Commercial real estate prices have fallen 19% since their 2022 peak, prompting lenders and owners to cut losses and make new investments. Sellers have been offloading properties at steep discounts, like a NYC office building that sold for 67% less than its 2018 price.

• Transaction volumes through July were down 5% year-over-year but have shown steady improvements. Some properties, particularly older downtown offices, still face uncertainty due to shifts in tenant demand from remote work.

• Lenders like Parkview Financial are seeing increased activity, with multiple offers for loan sales averaging 95% of face value. More firms, like Goldman Sachs and Fortress, are raising funds for new commercial property loans at higher interest rates than a few years ago.

Industrial vacancies and rents look to stabilize eventually link

• Vacancy rates in the top 25 industrial metros surged by 202 basis points, reaching 6.4%, mainly due to a flood of new supply. This supply growth slowed significantly, with properties under construction dropping by half in the past year.

• Net absorption, a measure of demand, dropped 47% in the first half of 2024 compared to 2023, with only 71 million square feet absorbed. Chicago had the highest net absorption at 15.1 million square feet, while Phoenix and Dallas-Fort Worth followed with 9.8 and 9.5 million square feet, respectively.

• Asking rents for industrial properties increased by 5.3% year-over-year in the top 25 markets, averaging $11.07 per square foot in the first half of 2024. Rent growth was highest in Minneapolis-St. Paul at 24.9%, followed by Phoenix and Denver.

Rising populations aren't saving retail in Sunbelt, Inland Midwestern markets link

• Fast-growing Sunbelt cities like Austin and Myrtle Beach saw retail square footage per capita decline sharply. Austin's per capita retail decreased by 11 square feet, while Myrtle Beach experienced a drop of 26 square feet.

• Some Midwest markets with declining populations, like Flint, MI, and Youngstown, OH, saw increases in retail space per capita, contrary to population trends. Retail per capita grew by 8-11 square feet in these regions from the mid-2000s to 2024.

• Overall U.S. retail square footage per capita dropped only slightly from 57 to 56 square feet since the mid-2000s, suggesting that retail development has remained relatively aligned with population growth patterns.

As housing demand cools, don’t overlook foreign investors link

• International buyers spent an average of $780,300 per property in 2024, well above the U.S. median home price of $392.6K. About 18% of these buyers purchased homes valued at over $1 million.

• Florida remains the top destination for foreign investors, with 20% of international home purchases taking place in the state. This helps fill the gap left by a cooling domestic market.

• New construction and high-end properties attract significant foreign capital, boosting local economies in areas like Florida, Texas, and Arizona.

22 cities where renting is more expensive than owning link

• New Orleans ranks first, with homeowners saving $446 per month compared to renters. The average rent in New Orleans is $1,652, while a typical mortgage costs $1,206.

• Chicago ranks second, where renting costs $434 more per month than owning. Monthly rent averages $2,074, and the typical mortgage payment is $1,640.

• Pittsburgh is in third place, with residents saving $321 per month by owning instead of renting. The average mortgage payment is $1,092, significantly lower than the $1,413 average rent.

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Vidit

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