Multifamily logs biggest jump in distress in 18 months

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“There is no greater sorrow than to recall in misery the time when we were happy”

— Dante

Multifamily logs biggest jump in distress in 18 months link

• The multifamily sector saw an 80 basis point increase in distress rates in February, marking the largest jump in 18 months. This rise outpaced all other commercial real estate sectors, reaching more than 3%.

• Despite the sector's distress, the overall commercial real estate (CRE) distress rate slightly fell, from 7.39% to 7.35%. This was partly due to a large self-storage portfolio's status changing from delinquent to current.

Home price growth is back at pre-pandemic levels link

• Home prices are increasing at a pre-pandemic pace of about 0.6% monthly, signaling a return to the normal growth trend despite higher mortgage rates. This rate aligns with the 5% to 6% annual increase observed in the eight years before the COVID-19 pandemic.

• The housing market faces a paradox of stable price growth but recession-level transaction lows, largely due to high mortgage rates and an extremely limited supply of homes. Mortgage rates, having peaked at nearly 8% last year, still hover over 6%, significantly impacting the number of transactions.

• Inventory is showing slight improvement with a 5% climb in new listings, the largest year-over-year jump since May 2023. However, the market is far from a full recovery, and the supply issue is exacerbated by the mortgage rate lock-in effect, which is gradually loosening its grip, potentially leading to a modest increase in available homes.

Home Sales Are Growing link

• The housing market is showing a strong upward trend in new supply and sales numbers, outpacing the previous year. Inventory has seen a 24% increase compared to last year, suggesting a shift towards a buyer's market with more options available.

• Despite the growing inventory and sales, home prices are expected to remain flat towards the end of 2024 and into 2025. The current balance of supply and demand, with inventory 25% greater than a year ago, indicates softening future sales prices, though current prices are holding steady.

• New listings have surged by 14% compared to last year, pointing to a healthier housing market with more sellers entering the market. This increase in listings suggests a lift on the sales constraints experienced last year, potentially easing the affordability crisis with greater supply.

Home Affordability Improves Slightly Across U.S. During First Quarter link

• U.S. home affordability saw a slight improvement in the first quarter of 2024, but purchasing a home remains a distant dream for many. Median-priced homes are still not affordable in over 95% of counties when compared to historical averages.

• Major home ownership expenses took up 32.3% of the average national wage, significantly above the preferred 28% threshold by lenders. Despite this being a small improvement, it's one of the worst levels in 15 years, with home prices near all-time highs.

• Mortgage rates dipping below 7% and a less than 2% increase in the national median home price this quarter offer a glimmer of hope. Yet, with expenses outpacing wage gains, the dream of homeownership continues to be challenging for average earners.

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G20 Inflation Rates: Feb 2024 vs COVID Peak

Home flipping cools at fastest pace in 15 years link

• Home flipping ROI and activity saw a significant downturn in 2023, marking the steepest decline in over a decade. Gross profits for fix-and-flip transactions averaged $66,000, with an ROI of 27.5%, down from previous years and the lowest since 2007.

• The median price of flipped homes dropped by 4.4% annually, while the overall flipping activity plunged by 29.3% from the previous year. This significant reduction in the number of homes flipped, down to 308,922 from 436,807, highlights the growing challenges within the flipping market.

• Texas markets experienced the lowest returns on investment, with Austin flippers even facing losses. Conversely, California markets, especially San Jose and San Francisco, saw the highest profits, showcasing a stark regional disparity in flipping success.

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That's all, folks.

Cheers,

Vidit

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