CRE Loan Distress Up 70%, 50-year peak in apartment deliveries

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Just 1% of the Nation’s Homes Have Changed Hands This Year, the Lowest Share in at Least a Decade link

• Dwindling Supply: Only 14 of every 1,000 homes changed hands in the first half of 2023, a significant drop from 19 of every 1,000 during the same period in 2019. The pandemic-induced homebuying boom has led to a depletion of supply, with homeowners clinging to their low mortgage rates.

• Suburban Stagnation: The turnover rate for large suburban houses has seen an even greater decline. Only 16 of every 1,000 suburban homes with at least four bedrooms have found new owners in 2023, down from 24 of every 1,000 in 2019.

• California Crunch: California, particularly the Bay Area, has the slimmest pickings with just about 6 of every 1,000 homes in San Jose selling in 2023. This is similar to the low turnover rates in Oakland, San Diego, and other California metros.

Examining Apartment Rent Growth Year-to-Date in Mid-2023 link

• Growth Gauge: YTD rents have grown 1.9% across the U.S. through June 2023, indicating a strong demand in the market.

• Supply Surge: The U.S. is on the brink of a 50-year peak in apartment deliveries, with new deliveries in the year-ending 2nd quarter 2023 marking at least a 30-year high.

• Regional Rundown: Regions with the highest supply, primarily the South and West, are seeing less YTD rent growth momentum than the Midwest and Northeast regions.

US Rent Growth Returns to Pre-Pandemic Level in May, CoreLogic Reports link

• Rising Rents: Single-family rental cost gains rose by 3.4% year over year in May, returning to the historical rate recorded in the decade before the pandemic.

• Price Tier Disparity: Rent growth for the lowest price tier was more than double that of the highest price tier. Since the start of the pandemic, single-family median rents increased by $470, or 30%.

• Chicago Leads: Chicago posted the highest annual rent growth of tracked metro areas, at 6.6%.

Median sale price climbs to $426K for only second time in US history link

• Skyrocketing Prices: Despite elevated mortgage rates, homebuyers pushed June's median sales price to the second-highest level in history, reaching $426,056, just 1.5% away from the all-time high of $432,397 in May 2022.

• Inventory Drought: The total number of homes for sale declined 15% year over year, marking the largest annual decline in two years. New listings fell 30.6% year over year to 450,000, leaving homebuyers battling over 1.8 months of supply.

• Market Heat: Despite the lack of inventory, homebuyer demand is steadily ticking up, fueling the resurgence of bidding wars. The fight for housing is most intense in affordable markets, with Rochester, NY (+13.1%); Milwaukee, WI (+11.6%); and Omaha, NE (+10.4%) leading the way in annual median sales price gains.

Household Formation Growth Poised to Slow Significantly link

• Shift in Housing Trends: After three years of robust household formation growth, a slowdown is expected, as per Harvard University's The State of the Nation’s Housing report.

• Rising Rents Impact: The slowdown is most noticeable in professionally managed apartments, partly due to increasing rents.

• Income Transition: More households with higher incomes are transitioning to homeownership, contributing to the changing dynamics.

CRE Loan Distress Up 70% of Largest Metro Areas in June link

• Minneapolis Meltdown: The city saw a 10.6% increase in distressed commercial real estate loans, leading the pack with a whopping 33.6% of its CRE loans in distress. This is nearly three times higher than Chicago, the city with the second-highest level of distress.

• St. Louis Success: The city saw a significant decrease in distressed rates, thanks to a $155 million mortgage modification. This change led to a 2.7% drop in distress, the sharpest decline among the 15 markets that showed improvement.

• Chicago's Challenge: The city's office market sector had over $450 million in newly distressed CMBS loans as of June 2023. This included a $310 million mortgage secured by River North Point, a key office property in Chicago's central business district.

Colorado Springs Apartment Inventory to Surge in Next Four Quarters link

• Swell in Inventory: Colorado Springs is set to receive 6,700 new apartment units in the next four quarters, marking a 12.5% increase in inventory - the largest annual net inventory increase in the nation.

• Submarket Expansion: Each of the market’s four submarkets will see significant expansion. North Colorado Springs will grow by 15.6% with 2,450 units, and East Colorado Springs will grow by an astounding 18.7% with just over 2,000 units.

• New Deliveries: Central Colorado Springs will grow by about 1,280 units (9.2% annual inventory jump), and West Colorado Springs will see about 950 new units delivered, growing inventory by 7.2%.