What Trump means for CRE

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Commercial real estate under Trump 2.0: opportunities and challenges ahead link

• Streamlining regulations and releasing federal land could speed up construction timelines, potentially improving housing supply. However, demand-side subsidies may lead to price increases if supply constraints remain.

• The Trump administration’s tariffs on imports could raise construction costs for CRE by increasing the price of essential materials like steel and lumber. This would likely delay projects, inflate tenant costs, and slow down new developments.

• Banking regulations may ease under Trump, potentially increasing CRE lending. However, a lighter regulatory touch may also increase financial vulnerabilities in an economic downturn.

Multifamily absorption hits second-highest level on record link

• The U.S. multifamily market recorded 153,000 net apartment absorptions in Q3, a 72% increase from pre-pandemic levels for the same quarter. Vacancy dropped 20 basis points to 5.3%, nearing the long-term average of 5.0%.

• Despite high demand and a reduced vacancy rate, rents largely remained flat, with 26 of 69 tracked U.S. markets experiencing negative rent growth. Rent increases were seen mainly in the Northeast, Pacific, and Midwest, contrasting declines in the Southeast and South Central regions.

• Declining new construction and slower transaction volumes are putting pressure on rental markets, particularly in areas with growing inventories. Markets with limited new apartments saw modest rent increases compared to regions with high completion rates.

Multifamily boom, high home prices drive surge of renters across U.S. link

• In Q3, renter households grew by 2.7%, reaching 45.6 million, a rate nearly three times faster than homeownership growth. This shift represents 1.18 million new renters, the second-highest growth since 2015.

• Median asking rents rose a modest 0.6% from last year, while home prices surged 6% over the same period. As only 2.5% of homes have sold in 2024 so far, homeownership is increasingly out of reach for many.

• Apartment completions reached 647,000 units in 2024, the highest number since 1994. Elevated mortgage rates and high home prices are pushing more young people and families toward long-term renting.

Rising costs slow migration to southern states link

• Rising housing costs in previously popular Sun Belt cities like Orlando, Tampa, Austin, and Phoenix have reduced their affordability advantage, leading to slowed in-migration or even population loss. High insurance costs in climate-vulnerable areas are also deterring new residents.

• Remote work is shifting migration patterns, with 30% of households moving for remote work choosing new cities, and 13% moving out of state. Meanwhile, apartment lease renewals have surged in 2023 and 2024 as high home prices discourage buying.

• Immigration is now the main driver of U.S. population growth, accounting for 75% of growth in the 2020s, up from 45% in the 2010s. Major cities on the East and West Coasts have seen population boosts from international migration, helping stabilize workforce numbers and real estate demand.

Home prices are rising in 87% of metro areas, but growth is slowing link

• Home prices increased in 87% of metro areas in Q3 2024, a slight decline from 89% in Q2. Only 7% of these areas saw double-digit growth, down from 13% the previous quarter.

• The typical mortgage payment dropped 2.4% year-over-year, aided by falling mortgage rates. The median home price saw a modest 3.1% increase.

• Regional trends show the Northeast leading with a 7.8% price rise, while the South saw the most transactions, though prices there grew just 0.8%. The top growth rate was in Racine, WI, with a 13.7% increase.

Housing supply will be impacted as more Americans age in place link

• The Mortgage Bankers Association (MBA) projects around a quarter million homes will enter the market annually due to demographic changes, though demand will still exceed supply. This effect on housing supply and prices is expected to be modest over the next decade.

• Since 2015, homeownership among Americans 70 and older has surged, slowing the release of homes for sale. Aging baby boomers are holding onto properties longer, leading to a demographic-driven shortage in available inventory.

• Over the next 10 years, an estimated 9 million homes will transition from older Americans through death or relocation, with about 1 million homes expected to enter the market annually from mortality. Despite this supply, aging-in-place trends suggest an overall limited impact on housing prices.

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Just a modest $65M home. The views though

Link to the listing

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Cheers,

Vidit

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