Ranked: Global Real Estate Bubbles

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A lot of money on the sidelines coming out

• US households rapidly increased TreasuryDirect accounts from 700,000 to 4 million as the Fed raised rates. This trend reversed as rates began to stabilize, signaling households' adaptability to shifting financial conditions.

• Currently, $6.5 trillion sits in money market funds, highlighting substantial capital awaiting deployment into higher-yield opportunities. This capital shift will likely intensify as the Fed starts cutting rates.

• With a steeper yield curve anticipated, households may redirect funds from short-term holdings to credit and higher-yield fixed-income assets, seeking better returns in a lower-rate environment.

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Weekly housing trends —data for week ending Oct. 26, 2024 link

• The median listing price fell by 1.1% year-over-year, marking the 22nd consecutive week of lower or stable prices compared to 2023. When adjusting for a shift towards smaller homes, the price per square foot actually rose by 2.0%.

• New listings saw a slight increase of 0.7% from last year, but high mortgage rates are discouraging many potential sellers, with over 75% of existing mortgages locked in at rates of 5% or lower.

• Active inventory is up 27.6% from a year ago, although the growth rate has been slowing for five consecutive weeks, signaling reduced activity from both sellers and buyers as rates remain high.

Zombie foreclosures remain sparse around U.S. in 4th quarter link

• About 215,601 residential properties in the U.S. are in foreclosure as of Q4 2024, marking a 3.3% decrease from Q3 2024 and a significant 32.8% drop from Q4 2023. This decline aligns with the nation's sustained housing market strength and historic high home-equity levels.

• Zombie foreclosures represent only a small fraction, with 7,100 abandoned properties nationwide, slightly up quarterly but down 20.2% from a year ago. Connecticut, Iowa, and North Carolina saw some of the biggest drops in zombie properties year-over-year.

• Vacancy rates remain steady, with an overall 1.3% of U.S. residential properties vacant. States with the highest vacancy rates include Oklahoma, Kansas, and Missouri, while New Hampshire and Vermont report the lowest.

In these booming Midwest markets, it’s locals—rather than outsiders—buying up mansions link

• St. Louis and Detroit lead luxury markets with relatively affordable luxury home prices, at $699,000 and $750,000 respectively, attracting strong local demand. Local buyers make up over 50% of demand in these metros, contrasting sharply with markets like Santa Barbara, where only 7% of luxury buyers are local.

• The average listing price for the broader market in both St. Louis and Detroit is under $300,000, allowing increased demand from a range of buyers. This low barrier is pushing up sales, particularly in historic neighborhoods seeing record prices.

• Midwestern markets like Minneapolis also rank highly, with median luxury home prices nearing $1 million, supported by economic growth and lower exposure to natural disasters.

Sales Volume By Asset Class link

• Investment sales volume in Q3 remained stable compared to 2023, with office and multifamily leading in year-over-year growth, while retail saw a 27% decline. Steadying trends suggest the market may be at a turning point.

• Office investment rebounded strongly with a 13% year-over-year increase, driven by suburban steadiness and a 79% spike in CBD sales. CBD volume had been at cycle lows, resembling post-Global Financial Crisis recovery.

• Multifamily investment stayed robust, with sales up 9% year-over-year and notable activity in San Francisco and Boulder, CO.

Worcester apartment supply hits record high link

• Worcester saw over 1,160 new apartment units delivered in the past year, increasing its total apartment inventory by 2.2%. This marks the highest volume on record for Worcester according to RealPage Market Analytics.

• With around 55,000 total units, Worcester’s apartment supply is growing, even as the city’s population fell nearly 12% between 2021 and 2022. Despite this, the region's job market showed a 1.7% employment growth over the last year.

• Located about an hour from Boston, Worcester has a population nearing 800,000 and has maintained a steady rise in apartment supply since 2000.

Global Real Estate Bubbles by Change in Home Prices (2014-2024)

• Miami home prices have surged by 106% over the past decade, marking it as the world's leading housing bubble city. This rapid growth is driven by high luxury property demand and limited beachfront supply.

• Tokyo has experienced substantial growth in home prices due to foreign investment spurred by low interest rates and a weak yen. This has made Tokyo the second most unaffordable city globally, just behind Hong Kong.

• San Francisco saw a 10% drop in real housing prices since mid-2022 as remote work trends and high living costs pushed residents out. Over the last decade, the city's annual price growth rate has lagged behind other major metros at 1.9%.

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Vidit

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