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- U.S. Foreclosure Activity is RIsing
U.S. Foreclosure Activity is RIsing
Plus, The Latest Expert Forecasts for Home Prices in 2023, Which Student Housing Markets are Growing and more
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Estimated read time: 3 minutes 30 seconds.
Macro Trends
Why US consumers are souring — and what it means for housing link
The recent household sentiment report by John Burns Research and Consulting surveyed 1,364 homeowners and renters with incomes of at least $50,000. The findings revealed insights into the priorities and concerns of U.S. consumers regarding the housing market.
Younger prospective buyers, especially singles and couples, are showing a preference for new construction over resale homes. The primary reason is to avoid unexpected maintenance costs and to have a clear understanding of the total cost upfront.
Despite the decrease in inflation since last year, consumers still feel the pinch in their budgets. Many believe that the current high mortgage rates are temporary and expect them to drop below 5% in the next five years. The "magic" mortgage rate that would entice potential buyers to enter the market remains at 5.5%.
Real Estate Trends
U.S. Foreclosure Activity Shows Continued Rise In Third Quarter, Approaching Levels Seen Before Pandemic link
Foreclosure filings for Q3 2023 were reported at 124,539 U.S. properties, marking a 28% increase from the previous quarter and a 34% rise from the same period a year ago.
Foreclosure starts in Q3 2023 reached 68,961 U.S. properties, showing a slight 1% decrease from the previous quarter but a 3% increase year-over-year, nearing pre-pandemic levels.
The states with the highest foreclosure rates in Q3 2023 were New Jersey, South Carolina, and Delaware, with one in every 595, 730, and 739 housing units respectively having a foreclosure filing.
The Latest Expert Forecasts for Home Prices in 2023 link
Despite speculations of a home price crash this year, data and experts indicate that prices will finish the year strong. The low supply of homes for sale and high demand from buyers have prevented prices from falling.
The majority of industry experts project positive home price appreciation for 2023. Forecasts from six different organizations show that all but one predict national prices will net positive this year.
The Home Price Expectation Survey (HPES) from Pulsenomics, which combines survey results from over 100 experts, projects an average of 3.3% price growth for the year. This aligns with the average of the forecasts from the six organizations.
Submarkets With Low Inventory Growth Maintaining Rent Increases link
U.S. absorption rates remain strong with steady occupancy, yet rent growth has disappeared. The influence of supply on rents is evident when analyzing year-over-year rent growth in various submarkets based on their annual inventory growth.
Submarkets in the U.S. that expanded their base by less than 2.5% continue to experience positive rent growth. However, as inventory growth increases, rent growth diminishes. Submarkets with over 7.5% inventory growth, such as Dallas/Fort Worth areas Frisco & Keller, Round Rock in Austin, and downtown Salt Lake City, are reducing rents significantly despite their inventory growing by more than 10%.
The underlying principle is straightforward: an increase in supply leads to more available units in a region, causing a shift in the supply/demand curve. This results in reduced pricing power, even if demand remains unchanged.
Rates Drive Increase in ARM Application Volume link
A reduction in adjustable mortgage rates led to an increase in mortgage application volume by 0.6% during the week ended October 6, following a 6.0% drop the previous week.
The level of ARM (adjustable-rate mortgages) applications surged by 15% over the week, marking the ARM share at 9.2% of all applications, the highest since November 2022.
The 30-year fixed mortgage rate reached 7.67%, the highest since 2000, with application activity nearing multi-decade lows; purchase applications are almost 20% behind the previous year's pace.
Investment Sales Jump 20% After Weak Summer link
August showed a promising sign for CRE sales in the U.S., indicating a potential upswing. However, the market is yet to fully recover, with deals over $100 million being rare.
Sales surged by 20% in August, reaching $23.5 billion. However, on a yearly basis, the market witnessed a 61% decline compared to the previous year. Prices also dropped, except for the hospitality sector, which saw a 1% improvement.
Multifamily led all other asset classes, recording deals worth $8.2 billion.
Opportunities
Fall 2023 Student Housing Rent Growth Leaders link
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Across the core 175 universities tracked by RealPage, annual effective rent growth in purpose-built student housing reached a record high over the last year, with a growth rate of 9% as of September 2023.
Arizona State University led the nation in student housing rent growth for the year-ending September 2023, with an impressive 24.5% increase. Rent growth rates at Arkansas and New Mexico were close to 20%.
College towns like Asheville (UNC), West Lafayette (Purdue), and Knoxville (Clemson and Tennessee) have shown to be attractive student housing markets. However, RealPage predicts a slowdown in student housing rent growth for the Fall 2024 pre-lease season.
Data Center Sector: Increased Supply, Much-Higher Demand link
During the first half of 2023, the North American data center market saw significant growth and construction, but demand continues to surpass supply.
CBRE's report highlighted that supply in primary markets increased by 12% in H1 2023 compared to H2 2022, and a record-high 2,287.6 MW was under construction in primary markets.
JLL's report emphasized that most major and secondary markets face a supply and demand imbalance, with most of the upcoming supply for late 2023 and 2024 already pre-leased or under exclusivity.
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