US Apartment Completions at 35-Year High Bring Some Record Supply Surges

Mortgage Rates Now Well Into 7% Range link

• Surge in Rates: Mortgage rates are now well into the 7% range, a significant increase from the mid-to-upper 6% range.

• Historical Highs: The current rates are among the highest seen in recent times, with only a few days in late May showing similar figures. To find higher rates, one would have to go back to late 2022.

• Economic Resilience: The recent uptick in rates is attributed to a series of economic reports indicating more resilience than expected, which typically exerts upward pressure on rates.

Fewer Multifamily Developers Are Seeing Deals Reprice (link)

• Declining Trend: 47% of respondents in a National Multifamily Housing Council survey reported deal repricing upwards last month, a significant drop from 58% in December and 83% a year ago.

• Steady Downward Repricing: Only 20% of respondents reported deals repriced down, consistent with the last two quarters (21% in March and 18% in December).

• Yearly Comparison: The numbers have changed significantly from June a year ago when only 13% of respondents saw dollar repricing drop.

Housing affordability worsened in 98% of the US last quarter, data shows link

• Skyrocketing Prices: The price for a median single-family home rose by a staggering 10% from the first quarter to the second quarter, hitting $350,000.

• Wage Gap Widens: The ratio of wages to homeownership expenses escalated to 33%, marking the highest level since 2007.

• Mortgage Hurdles: Despite a slight retreat, mortgage rates remain high, discouraging homeowners from listing their properties for sale and exacerbating the affordability crisis.

Multifamily Demand Continues Its Climb link

• Rapid Turnover: The average vacancy duration for rental units dropped to just 26 days in May, the shortest span since August 2022.

• Lease Love: New lease applications per unit have seen an uptick in the last two months, with lease renewals per unit also on the rise.

• Landlord's Landscape: Demand for multifamily units remains robust, with emerging signs indicating a continued shift in favor of landlords.

Rents are now dropping in 57 out of 100 Large US Cities link

• Dramatic Dip: Rents in 57 of the 100 largest US cities have dropped compared to the previous year, with the most significant decreases seen in the Southwest, including Las Vegas, Phoenix, Austin, and Riverside.

• Construction Boom: Over 1.1 million new apartment units are under construction, a near-record high, which is expected to further drive down rents as supply increases.

• Housing Deflation: The decline in rents signals an ongoing "housing deflation" that could potentially lead to a drop in home prices in the second half of 2023.

Hotel Development Slows as Higher Interest Rates Take Toll link

• Rate Impact: Higher interest rates are slowing down hotel development, indicating a shift in the industry's growth trajectory.

• Construction Conundrum: The number of rooms under construction has decreased compared to 2022, reflecting the impact of financial factors on development projects.

• Market Watch: This trend underscores the importance of monitoring economic indicators for future investment and development decisions in the hospitality sector.

Asking Rent Growth Flat Year-over-year link

• Stagnant Surge: The surge in household formation, largely due to work-from-home trends, has slowed significantly in 2023, leading to flat year-over-year asking rents.

• Data Dive: CoreLogic's measure of rent growth is up 3.7% YoY in April, down from a peak of 13.9% in April 2022. Meanwhile, Zillow's measure is up 4.8% YoY in May, down from a peak of 17.0% YoY in February 2022.

• Pressure Points: With slower household formation and a rising vacancy rate, rents are expected to be under pressure throughout the year. Despite a slight increase in June, rent growth is gradually declining at a time when it typically accelerates.

Americans To Head Back to Many Major Metropolitan Areas in Next Five Years link

• Migration Reversal: Migration patterns are expected to revert to pre-pandemic norms over the next five years, with people moving back to larger metropolitan areas. This follows a surge in exits from these areas during the health crisis.

• Sun Belt Slowdown: Cities such as Dallas, Phoenix, Tampa, Austin, Charlotte, San Antonio, and Jacksonville experienced high levels of in-migration during 2020 and 2021. However, a slowdown in migration to these areas is predicted in the coming years.

• Job Growth Driving Recovery: Oxford Economics predicts continued job growth in larger metropolitan areas like New York and San Francisco to drive further recovery, even assuming a mild recession, between 2023 to 2027.

US Apartment Completions at 35-Year High Bring Some Record Supply Surges link