Distress on the rise

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S&P CoreLogic Case-Shiller Index—Home Prices Up 5.4% in June link

• Home prices rose 5.4% nationally in June 2024, showing a slower growth rate compared to May's 5.9%. Despite the deceleration, both the 10- and 20-city composites reached new highs.

• The 20-city composite saw the highest price increases in New York (9.0%), San Diego (8.7%), and Las Vegas (8.5%). Portland and Denver had the lowest gains, with 0.8% and 1.9%, respectively.

• The forecast for 2024 predicts a continued slowdown in price growth to 4.6%, as sluggish demand and increasing for-sale inventory contribute to a more balanced market.

Map Shows Worst Housing Affordability In America During Biden-Harris:  link

• Housing affordability has significantly worsened under the Biden-Harris administration, primarily due to high mortgage rates and record-high home prices. The affordability crisis has left many Americans stuck renting, unable to buy homes.

• Kamala Harris' recent housing plan focuses on subsidizing demand, such as providing $25,000 to first-time homebuyers, but does not address high construction costs. Experts believe this approach could exacerbate the crisis by further increasing housing prices.

• In states like California, residents now need an income of over $200,000 annually to afford an average home. Massachusetts is also facing similar affordability challenges, highlighting a broader national issue.

Industrial real estate is experiencing a strong demand link

• Industrial real estate is experiencing strong demand, especially for last-mile distribution centers. However, rent growth has slowed down due to rising construction costs and economic uncertainty.

• Despite the need for more space, developers are hesitant to start new projects because of the current economic environment. This has led to a tighter supply, particularly in major markets like Los Angeles and Chicago.

• Investors are becoming cautious, with some re-evaluating their portfolios and focusing on existing assets rather than new developments. This shift is expected to keep market dynamics tight in the near term.

How Five CRE Segments Have Fared Over Five Challenging Years 

• The industrial segment thrived, with warehouse demand surging due to e-commerce and supply chain shifts. Vacancy rates for industrial properties remain low, reflecting strong tenant demand.

• The office sector struggled, especially in major cities, as remote work trends continued. Vacancy rates in downtown areas reached historically high levels, impacting rents and property values.

• Retail faced mixed outcomes; essential services like groceries and pharmacies performed well, while malls and non-essential retail saw significant declines. Many retailers shifted to smaller footprints or closed stores altogether.

• Multifamily housing remained resilient, driven by demand in suburban and secondary markets. Rising interest rates, however, have tempered new development projects.

• Hospitality experienced severe challenges but has begun to recover, especially in leisure destinations. Business travel lags behind, impacting urban hotel occupancy and revenues.

Distress Not Widespread Yet, But on the Rise link

• Commercial real estate distress is increasing but hasn't yet reached critical levels. This is due to factors like higher interest rates and tighter lending standards impacting refinancing options.

• Office properties are the most affected, with rising vacancies and declining values contributing to growing financial stress. Retail and hospitality sectors also show signs of distress, though to a lesser extent.

• The situation varies by region, with some cities seeing more pronounced distress due to local economic challenges. However, the overall market remains resilient for now, preventing a widespread crisis.

Which of the primary multifamily markets is the most oversupplied?

Where Billionaires Continue To Buy Homes—Despite Climate Disasters, High Mortgage Rates, and Other Real-World Problems

National Student Housing Report – August 2024

Homes Sales Are Down, So Why No Recession? A thesis

Top 10 Cities Near Houston Texas to Live in 2024

How Kamala Harris' $25K Down Payment Assistance Plan Could Work

Mapped: U.S. Obesity Rates, by State

Those carpets though!

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Vidit

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