6/16 Real Estate Market News and Trends

Build-to-Rent (BTR) Opportunity Link

Key Takeaways

• Demand Driven by Millennials and Empty Nesters: Millennials, who are reaching prime age for major life milestones but often cannot afford homeownership due to large college education loans, find Build-to-Rent (BTR) properties an appealing alternative. Similarly, empty nesters desiring the financial flexibility and lifestyle ease of renting versus owning are another major source of BTR demand.

• U.S. Housing Shortage: The U.S. has an estimated shortage of 3.1 million housing units, with the shortage being almost all single-family properties. BTR properties, as new residential communities, are helping to address this housing shortage.

• Investment Opportunities in BTR: The BTR sector, being relatively new, offers substantial opportunities for investors. The sector has been capturing significant attention from institutional investors due to its rising market demand, favorable market fundamentals, and lower resident turnover than traditional multifamily properties.

What Fed’s Pause on Rate Hikes Means for Home Buyers Link

Key Takeaways:

• The Federal Reserve has ended a cycle of 10 consecutive rate hikes, deciding to hold off on another increase to its key short-term interest rate. This decision could potentially lower borrowing costs for home buyers if the Fed continues to pause rate hikes.

• Despite an improved inflation rate, the Fed signaled that two more increases to its benchmark rate are likely this year as it continues to manage the inflation rate. This has led to concerns among some economists.

• Mortgage rates, which are more closely tied to the 10-year Treasury bond, could potentially decline as the year progresses. The 30-year fixed-rate mortgage averaged 6.71% last week, up from 5.23% a year earlier, significantly adding to home buyers' costs.

Messi's Presence In Miami Will Impact Its Real Estate Market. Here's How To Invest In It Before He Makes His Debut For Inter Miami Link

Key Takeaways:

• Lionel Messi's arrival in Miami is expected to give a boost to the already booming real estate market in the city. His presence will add a new layer of excitement, attracting more visitors and residents.

• The median price of a single-family home in the Miami metro area has increased by 80.44% in the last five years, and it is expected to continue rising, despite predictions of a wider U.S. real estate market downturn.

• Cityfunds, managed by Nada, offer an opportunity for both nonaccredited and accredited investors to invest in Miami's real estate market with as little as $100. These funds have returned an average of 12% annually and offer full liquidity, allowing investors to sell their shares at any time.

The housing market has about 40% fewer homes for sale than before the pandemic, and listings keep falling Link

Key Takeaways:

• The current housing market has 39% fewer homes for sale compared to the pre-pandemic era. The total number of homes for sale dropped 6% year over year in the four weeks leading up to June 11, marking the largest drop in 13 months.

• High mortgage rates, which are now close to 7%, have discouraged homeowners from selling or moving, leading to a tight inventory. A significant majority (91.8%) of homeowners in the US have mortgage rates below 6%.

• Despite the high mortgage rates and reduced inventory, there is still demand in the market. However, the lack of options for buyers could mean the home-price bubble will keep growing.

The Cost of Homeownership Still Higher Than Renting

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• The monthly premium to own versus rent a starter home has increased to $1,030 per month, up from $884 a month last year.

• The rise in homeownership costs is attributed to higher mortgage rates, elevated resale prices, and low for-sale inventory.

• Due to these high costs, a greater than usual number of home renters are choosing to stay in their rental homes longer.

Is Retail the New Darling of the CRE Industry?

Link

Key Takeaways:

• The recent panel discussion at ICSC Las Vegas covered the state of the capital markets, shedding light on the challenges and opportunities facing the market.

• The president and CEO of Marcus & Millichap, Hessam Nadji, compared the current situation to the financial crisis of 2008 and 2009, emphasizing that while the financial system was not on the brink of collapse this time, the impact on valuation and transaction velocity was similar.

• Retail has surprisingly emerged as the new darling of the industry, outperforming other property types.

The U.S. is Not in a Recession, but Growth is Slowing | Understanding the U.S. GDP Report and Why it Matters for CRE

Here is the link to the article.

Key Takeaways:

• Despite two quarters of negative GDP growth in H1 2022, the U.S. economy is not in a recession. The Business Cycle Dating Committee of the National Bureau of Economics (NBER) uses several variables, not just GDP, to determine if the economy is in a recession. Most other economic indicators still point to expansion.

• The U.S. labor markets remain strong with stable unemployment near a 40-year low and job openings near record highs. This makes it hard to see a recession.

• Commercial real estate (CRE) data supports the observation of no current recession. Demand for property remained strong in H1 2022. However, leading economic indicators do point to an economic slowdown.

Rescue Capital Lines Up for Opportunities on Multifamily Properties

Link

Key Takeaways:

• Private equity investors are providing "rescue capital" to apartment investors struggling with increased interest payments due to floating-rate construction or bridge loans. This capital is often offered as preferred equity with high interest rates.

• Borrowers who took out floating-rate, short-term debt just before rates began to rise are feeling the most pressure. Many of these loans are set to come due in the second half of 2023 and early 2024, and lenders are unlikely to offer extensions.

• ACRE, a private equity fund manager based in New York City, has raised $400 million for its Fund IV, which is ready to provide preferred equity loans to apartment properties that need to fill gaps in their financing.