US Housing Outlook: New Report

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Private Equity Dry Powder Declining link

• Global private equity dry powder peaked in 2023 but is now starting to decline, signaling reduced availability of uninvested capital. This could indicate tighter investment conditions or increased deployment in deals.

• The decline in dry powder aligns with market shifts as firms face higher interest rates and stricter valuation environments. These factors challenge the previous momentum in private equity fundraising.

• Data as of November 2024 shows a trend reversal that may impact the speed and volume of private equity deals globally. Major shifts are being observed across the U.S. and European markets.

Retail and multifamily sectors lead in Crexi's October CRE update link

• Retail saw stable vacancy rates at 4.1%, with asking rents rising to $19.40 per square foot annually. Despite minor fluctuations, pricing and leasing activity show consistent demand in the sector.

• Multifamily rent growth hit 2% year-over-year, while vacancy rates held steady at 8.7%. However, this growth is still below pre-pandemic averages, reflecting affordability challenges and higher interest rates.

• Industrial lease rates show tenant bargaining power, with effective rents at $12 per square foot. High warehouse supply from new construction dampens demand slightly, impacting absorption rates.

US Housing Outlook: Apollo link

• High mortgage rates are dampening homebuyer demand, but inventory levels remain historically low. This dynamic is creating persistent upward pressure on home prices despite reduced sales volume.

• Wage growth, strong stock market performance, and high cash flows for fixed-income owners are supporting housing demand. These factors provide a cushion against the affordability challenges posed by rising borrowing costs.

• The outlook highlights sustained challenges in balancing demand and supply, with limited inventory as a key constraint. This imbalance suggests continued resilience in housing prices in many regions.

Nearly half of senior living investors expect more moderate rent increases in 2025 link

• 48% of investors anticipate rent increases of 3% to 7% for senior living communities in 2025, a drop from 63% earlier this year. About 20% expect no rent change, reflecting growing caution in the market.

• Cap rates for senior living showed minimal shifts, declining by an average of 8 basis points over six months. Active adult communities saw an 11-basis-point decrease, reversing gains from the prior period.

• No respondents predicted rent growth above 7%, highlighting a trend towards restraint. Operators are wary of imposing large increases, aiming to balance market pressures with affordability.

Mob investment volume climbs for second consecutive quarter link

• Medical outpatient building (MOB) investment rose by 1% quarter-over-quarter to $2.51 billion in Q3 2024, totaling $8.5 billion over the last year. This marks sustained growth in a specialized real estate sector amidst broader market fluctuations.

• Average sale prices for MOBs were $281 per sq. ft., 41% higher than traditional office buildings but $10 lower than Q2 levels. Cap rates slightly increased to 7.0%, maintaining stability within a narrow range over four quarters.

• Net absorption was 707,000 sq. ft., a 70% drop from Q2, with 8.9 million sq. ft. under construction across 59 markets, down 22.5% from the previous quarter. The decline highlights a pullback in new developments despite demand stability.

Un-affordability is growing even more link

• Mortgage payments for median-priced homes are now exceeding 2023 and 2024 levels, driven by high home prices and climbing mortgage rates. This trend signals increasing affordability challenges for buyers entering 2025.

• U.S. housing inventory saw a slight seasonal dip this week, with 719,000 single-family homes unsold. However, inventory levels remain 27% higher than last year, indicating potential momentum for inventory growth in 2025 if affordability worsens.

• Median home prices have risen by 1-5% year-over-year, with newly pending homes priced at $385,000 and new listings averaging $397,000. Elevated asking prices persist despite signs of buyer resistance, including a 39.1% increase in price reductions.

Supply/demand delta smallest in the Desert/Mountains region link

• The Desert/Mountains region, including cities like Phoenix, Denver, Las Vegas, and Salt Lake City, absorbed over 72,000 units in the past year. This represented 4.7% of the region's total stock, the highest absorption rate among major U.S. regions.

• The 5% gap between demand and supply in this region was the smallest nationwide, showcasing balanced growth. By comparison, Texas had a 19% gap, and Florida showed a 13% lag behind its supply volume.

• The region is recovering from the supply-demand shock caused by 2022's demand drop and 2023-2024's supply surge. This recovery pace outperformed other supply-heavy regions, reflecting strong market resilience.

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Would be hard to beat this Art Deco!

Link to the listing

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Vidit

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