Market about to cool down per this data

Read Time ~ 5 Minutes. Today is a long one but all good stuff. Enjoy!

Macro Trends

A Look at the Size of the Global Commercial Real Estate Market link

• The global professionally-managed commercial real estate market declined by 4.1% between 2021 and 2022, to $13.3 trillion, with varying growth and shrinkage across regions.

• The U.S. remains the largest real estate market at roughly $5.3 trillion or 40.3% of the global market, though growth was only $90 billion in 2022.

• Commercial real estate acquisitions fell globally by 20% year-over-year in 2022, with the U.S. and Asia Pacific lagging in valuation modifications.

Overall Real Estate Market

Single-Family Home Prices Had Record-High Increase in 53.8% of 221 Metro Areas in 2023 Q2 link

• Median home prices surged by 8.5% in Q2 2023 compared to Q1, but fell 2.4% year-over-year to $402,600. Simple, yet significant.

• Monthly mortgage payments on a single-family home rose to $2,051, up from $1,837 a year ago. The 30-year fixed mortgage rate jumped to 6.57%. Numbers don't lie.

• Qualifying income for a mortgage was $116,885 at the 5% down-payment threshold. The West led all regions with the highest qualifying income. It's all about location and numbers.

Data Points Towards Slight Cooling in the Market This Fall link

• Inventory Shift: Available inventory of unsold single-family homes ticked up by less than one percent to 492,000, indicating a seasonal gain. There are 10% fewer homes on the market now than last year, signaling slightly fewer buyers.

• Sales Rate Decline: There were 63,000 new pending single-family home sales this week, 11% fewer than last year at this time. Mortgage rates staying stubbornly around 7% have slowed the pace of sales.

• Price Stability with Signs of Cooling: Home prices are holding steady with the median price just under $450,000, unchanged for four weeks. However, 35.1% of homes on the market have taken price cuts, showing slightly more weakness than earlier in the year.

The Price of Opportunity: Homes Cost 38% More in Neighborhoods That Offer the Best Shot at Upward Mobility link

• Homebuyers are shelling out 17% more for homes in high-opportunity neighborhoods, a significant jump from the 14% premium last year.

• The median home-sale price in high-opportunity areas is $429,000, compared to $365,000 in low-opportunity areas.

• The price gap is widening, reflecting a growing inequality in housing opportunities. It's simple, but not easy, to bridge this divide.

Younger Households Propel Surge in US Homeownership link

• US homeownership rate has risen to 65.9%, exceeding pre-pandemic levels, with a significant increase in the last five years.

• Households under 35 years old experienced a 3.7% increase in ownership, and those between 35 and 44 years old saw a 3.2% jump.

• The surge in homeownership since 2016 has been driven by younger households, with a notable uptick in 2020 due to low mortgage rates and pandemic-related shifts in living arrangements.

Luxury Apartment Demand Steady Amid Overall Multifamily Pressures link

• Luxury apartments remain resilient with Class A rentals' vacancy rates jumping only 30 basis points (bps) in 2023, compared to 40-80 bps for Class B and C apartments, despite nearly 200,000 units delivered in the first half of 2023.

• The difference between a Class A apartment rental and a typical monthly mortgage payment on a median-priced U.S. house rose sharply by about $660 a month in Q2, causing an increasing share of millennial renters to abandon homeownership plans.

• Luxury rental vacancy has been stable in gateway metro markets like Boston, Chicago, New York City, Seattle-Tacoma, and Washington, D.C., with changes of 120 bps or less over the past 12 months, aided by factors such as extreme homeownership barriers and discounted rents.

The Most Expensive US Homes Continue to Hold the Most Value link

• Since 2000, the most expensive U.S. homes have nearly quadrupled in value, while homes in the lowest tier have not kept pace with inflation. The highest-price decile increased by 6.9% per year, while the lowest-price decile lost value at a rate of -0.8% per year.

• The gap between property values and housing wealth has widened significantly. By June 2023, the gap between the highest and bottom deciles reached 251.1%, with properties in the highest decile nearly quadrupling in value since January 2000.

• The income gap between top-earning households and those in the bottom income quintile has also grown since the mid-1990s. The gap between the highest- and lowest-income households is now at its highest level since the mid-1960s, at 20.6%.

Where Are People Moving Today and Why? link

• Affordability Drives Choices: People are relocating to areas with less expensive housing options, making small cities thrive. It's all about getting more bang for the buck.

• Vacation Spots as Homes: Many are moving to areas once considered vacation spots, like beach suburbs or mountain towns. The dream of waking up to a lakeside sunrise is becoming a reality.

• Remote Work Flexibility: With 55% of people moving farther from the office during the pandemic, ongoing remote work is shaping where people choose to live. Proximity to the office is less of a concern, allowing for more personalized location choices.