Top 10 cities where homes are selling for the most over asking

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Not All Inflation is Created Equally: Bigger vs. Smaller Cities

• In July, the national inflation rate was 2.9%, but this rate varies significantly between larger and smaller cities. Smaller cities, which have more exposure to industries like oil, gas, and manufacturing, experienced deflation in 2015 when these industries were weak.

• During the COVID era, smaller cities experienced faster price increases than larger cities due to in-migration and quicker lifting of public health restrictions. This led to a rapid revival of commerce, pushing prices up more quickly than in larger urban centers.

• Currently, consumer prices are decreasing slightly faster in smaller cities than in larger ones. Housing costs, a major component of the CPI, have shown more resilience in big cities, contributing to this difference.

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What’s behind the slowdown in resale home sales?

• The resale housing market has been slowing since April 2024, particularly in Texas and Florida. Economic pressures and an imbalance between supply and demand have led to declining resale activity and price reductions in some areas.

• Builder rate buydowns from mid-2022 are resetting, making it difficult for resale sellers to compete with builders' lower rates. This has increased financial pressure on homeowners and reduced the competitiveness of resale homes.

• In July 2024, the Resale Housing Market Index™ stood at 44, significantly lower than in July 2023. Nearly half of real estate agents reported that sellers outnumbered buyers, marking the weakest demand since November 2022.

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Medical outpatient building market update link

• Medical outpatient buildings experienced a decline in volume and pricing since their peak in 2020-2022, due to inflation, rising interest rates, and limited liquidity. Despite this, the asset class has shown resilience, with portfolio transactions rising from 32% in 2023 to 61% in H1 2024.

• Median cap rates for medical outpatient buildings have increased from a low of 5.6% in Q3 2022 to 6.9% in Q2 2024. This cap rate expansion is slowing, indicating market sentiment is shifting toward potential stabilization.

• Average price per square foot for these buildings has decreased by $52, from $397 in Q3 2022 to $345 now. Portfolio cap rate compression has narrowed significantly, from a 100-basis point difference in Q4 2021 to just 10 basis points in the first half of 2024.

Healthcare rents continue to rise link

• Smaller markets like Des Moines, IA, and Grand Rapids, MI, lead in rent growth, with increases of 9.6% and 6.1%, respectively. Larger markets like Miami, Boston, and Dallas are also seeing gains, but the most substantial rises are happening in tertiary markets outside the top 100 by inventory.

• Elevated construction and borrowing costs have resulted in fewer new medical outpatient developments. The average cost per square foot for medical development hit an all-time high of $528 in Q2, limiting new construction and contributing to continued rent growth.

• Medical outpatient buildings have a national vacancy rate of around 7.5%, much lower than general office spaces. Rent growth in this sector is up 2.2% year-over-year, showing strong fundamentals compared to the broader office market, which has generally flattened.

Top 10 cities where homes are selling for the most over asking

• Santa Clara, CA, saw a home sell for $200,000 over its $2.1 million asking price, despite being the site of a recent murder. This indicates extreme housing demand in certain markets, where even stigmatized properties can attract aggressive bidding wars.

• San Jose, CA, ranks No. 1 with homes selling for 6.2% over the asking price due to limited inventory and high competition among tech employees. Factors like geography, stock-based bonuses, and seasonality contribute to this competitive market.

• Connecticut cities are among the top markets where homes sell over asking, driven by proximity to NYC and Boston. Seven of the top 10 markets have median home prices below $500,000, highlighting that this trend isn't limited to traditionally expensive cities.

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Did Falling Mortgage Rates Prevent a Housing Recession?

• In May and June, four of the eight indicators used to identify a housing recession signaled potential downturns, indicating a risky period for the housing market. However, July showed signs of recovery, suggesting that the market may avoid a full recession.

• Historically, housing recessions have sometimes led economic recessions, but this isn't always the case. For example, the housing recession in 2022 did not lead to an economic recession, showing that the link between the two is complex.

• Falling mortgage rates in July and August improved housing affordability, offering a positive outlook for the housing market. Though this hasn't led to a major rebound in activity yet, it signals that the peak risk of a housing recession may have passed.

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Montana’s hot housing market heats up critical Senate race link

• Housing prices in Montana have surged by 66% over the past four years, significantly outpacing the national average increase of 50%. This sharp rise has made Montana the least affordable state for home buyers, with a median home price in Missoula at $568,377 compared to the state's median income of $67,631.

• An influx of out-of-state residents with cash from selling expensive homes elsewhere has driven up demand, pricing many locals out of their communities. Last year, 30% of homes in Montana were purchased with cash, often by people moving from states like Colorado and California.

• A labor shortage, particularly among subcontractors like plumbers and electricians, has further constrained the housing supply, contributing to high costs. Many tradespeople in the state are nearing retirement, and there are few younger professionals to replace them, which exacerbates the issue.

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All the angles for $749,000

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Vidit

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