Wall Street says homes are overpriced

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Wall Street thinks U.S. homes are overpriced link

• Shares of Invitation Homes and American Homes 4 Rent are trading at 35% and 20% discounts to their net asset values, respectively. This reflects Wall Street's belief that U.S. homes are overvalued by significant margins.

• Wall Street investors need cap rates of 5%-6% to justify purchases, but current market rates for homes average only 4%. Rising interest rates and tight markets make buying from existing stock financially unviable for institutional investors.

• A 10%-15% decline in U.S. home prices might attract institutional buyers again, showing how overpriced homes are in today's market. Meanwhile, some investors focus on building new homes or renovating cheaper properties needing work.

Redfin says America’s renters are moving less than ever link

• Over a third (33.6%) of renters in the U.S. have stayed in the same home for at least five years, a significant increase from 28.4% a decade ago. Baby boomers lead in staying put, with more than a third renting the same place for over a decade, while Gen Z renters move the most, with half relocating within a year.

• Rising mortgage rates and flat rent trends have made renting a more stable option. A surge in apartment construction has increased rental supply, keeping rents relatively affordable and encouraging renters to stay longer.

• Renters in Denver, Austin, and Salt Lake City move the most, while those in New York, Los Angeles, and Riverside tend to stay in their homes longer. The U.S. renter market is poised for stability in 2025, with more people choosing to rent long-term.

HOA fees are rising—and getting harder for homebuyers to avoid link

• In 2024, 41% of homes listed on Realtor.com had HOA fees, up from 39% in 2023, with the median fee rising 14% to $125 per month. HOA fees add a significant financial burden, especially with already high mortgage rates and property taxes.

• Newly built homes are more likely to have HOA fees, with 70% of new builds compared to 38% of existing homes carrying such fees. However, existing homes had a higher median fee at $148, compared to $71 for new builds.

• Condos and townhomes face the highest HOA fees, with 84% of listings charging dues and a median monthly fee of $375, compared to $58 for single-family homes. Popular HOA-heavy areas include Edwards, CO (90% of listings), and Myrtle Beach, SC (85%).

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Investors bring bullish outlook to U.S. CRE link

• Investors are planning to deploy more capital into U.S. commercial real estate in 2025, with 70% expecting to acquire more assets than in 2024. The pricing reset is seen as a major opportunity to secure deals ahead of the broader market recovery.

• Dallas remains the top market for investment for the fourth straight year, with Miami in second place. Multifamily continues to dominate as the preferred asset class by a wide margin.

• 75% of investors expect their own activity to rebound by mid-2025, showing more confidence in their individual prospects than the broader market. More than half already report signs of recovery in their portfolios.

Multifamily occupancy is increasing link

• The U.S. multifamily vacancy rate dropped to 4.9% in Q4, falling below the long-term average of 5.0%. Renter demand outpaced new supply, driving occupancy gains.

• Net absorption hit 183,600 units in Q4, the highest for any Q4 since tracking began in 1985 and 12 times higher than the pre-pandemic average. This was the first year on record where all markets had positive Q4 net absorption.

• Multifamily investment volume rose by 19% in 2024 to $142.6 billion, with Q4 alone surging 59% year-over-year to $43.4 billion. Construction completions reached a record 450,400 units, 8% higher than in 2023.

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Vidit

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