How surging home prices could benefit one candidate on Election Day

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Home equity gains level off as U.S. housing market cools down during third quarter of 2024 link

• The percentage of equity-rich mortgaged properties in the U.S. stood at 48.3% in Q3 2024, slightly down from a recent high of 49.2% in Q2 2024. However, it remains higher than last year’s 47.4%, showing sustained equity strength.

• States in the Midwest and Northeast saw the biggest annual growth in equity-rich properties, with Vermont leading at 86.4%. In contrast, western states like Utah and Arizona saw annual declines in equity-rich levels.

• Seriously underwater mortgages rose to 2.5% in Q3 2024, up from 2.4% in Q2 but stable compared to the previous year. The South and Midwest regions recorded the highest rates of seriously underwater properties, with Louisiana at 10.1%.

CRE investors brace for impact as Walgreens plans 1,200 store closures link

• Walgreens will close 1,200 underperforming stores, with 500 planned closures in 2025, representing about 14% of its U.S. locations. The closures aim to boost long-term viability, though they present short-term financial challenges.

• Walgreens' closures are part of a broader decline in the retail pharmacy sector, with CVS down 28% in stock value and Rite-Aid restructuring post-bankruptcy. Rising pressure from pharmacy benefit managers and competitive retail markets is impacting profitability.

• Walgreens is a major tenant in commercial mortgage-backed securities (CMBS), backing $3.69 billion in loans across 853 properties, causing concern among CRE and CMBS investors. Rising CMBS delinquency rates—Walgreens at 5.46%, CVS at 4.35%, and Rite-Aid at 11.82%—highlight ongoing industry instability.

Natural disaster risks push CRE insurance rates to new heights link

• Insurance rates for commercial real estate doubled from 2019 to 2024, with a notable 35% increase in the past year. Florida saw dramatic cost surges, with Jacksonville up 238%, Orlando 223%, and Miami 191%.

• Insurance expenses now account for over 16% of total apartment costs in Miami, 14% in Jacksonville and Tampa-St. Petersburg, and more than 12% in Orlando and Fort Lauderdale. Nationwide, insurance represents roughly 9% of expenses for apartments.

• CRE investors are advised to consider diversification, as regions prone to hurricanes and wildfires face higher insurance costs, potentially complicating underwriting and valuations.

Manufactured homes in 2023 link

• Manufactured home shipments dropped significantly in 2023, with about 89,000 units shipped—a 21% decline from 113,000 units in 2022. This reflects a notable slowdown in this segment.

• Of the homes shipped, 70% reached their final placement, with a notable 29% ending up in manufactured housing communities. The rest were individually sited.

• Within these placements, 21% were titled as real estate, while a substantial 76% were classified as personal property. This division highlights differing uses and potential tax implications across regions.

How surging home prices could benefit one presidential candidate on Election Day link

• National home prices have climbed 47% over four years, largely due to a housing shortage. Freddie Mac estimates at least 1.5 million new units are needed to address the chronic undersupply.

• Rising home values tend to benefit the incumbent party in presidential elections, with “swing counties” showing a strong correlation between home price gains and support for the ruling party. Harris, as a non-incumbent, may see a smaller benefit than Biden would have.

• With 66% of homes owner-occupied and owners more likely to vote, swing states with high home appreciation could sway election outcomes.

Bay Area life science vacancy surges in flood of new supply link

• The San Francisco Peninsula’s life science vacancy rate rose to 34% in Q3 2024, up 470 basis points from the previous quarter, with 547,000 square feet of negative net absorption. The Bay Area’s overall life science market vacancy reached 27.7%, reflecting ongoing challenges from high new supply.

• Deliveries of new life science space hit 2.6 million square feet year-to-date, double 2023's total, and include 1 million square feet from conversions. Leasing activity is down 31% below the 10-year average, with 38 unique tenant requirements in Q3 totaling 1.8 million square feet.

• Despite reduced demand, the average direct lease rate in the Bay Area increased to $6.29 per square foot, up from $6.10 in the prior quarter. The highest submarket rate, $7.74, comes with a vacancy rate exceeding 56% for San Francisco’s 1.4 million square feet of life science inventory.

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Vidit

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