Will the Fed hike in 2025?

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Will the Fed hike in 2025? link

• U.S. GDP growth in Q3 reached 2.8%, with Q4 projected at 3.3%—both figures exceeding the Congressional Budget Office's long-term growth estimate of 2%. This suggests strong economic momentum heading into 2025.

  

• Rising inflation trends increase the likelihood of the Federal Reserve hiking interest rates in 2025. This situation mirrors the mid-1990s when the Fed reversed course after initial rate cuts.

• Policy shifts under the incoming administration could further strengthen economic tailwinds. The combination of fiscal and economic signals may push the Fed to act despite earlier pauses.

Can the U.S. climb out of its ‘unprecedented’ housing crisis?

• The U.S. housing market in 2024 saw just four million home sales, marking the slowest year in three decades. High mortgage rates, limited inventory, and rising prices have locked buyers, sellers, and renters into place.

• The nation faces a housing shortage of 3.7 to 4.5 million homes, as new builds struggle against high costs for materials and labor. Single-family housing starts in October dropped 6.9% from September.

• Renters and buyers alike are under pressure, with median rents up 20% since 2020 and house prices climbing 32% in the same period. Affordability challenges are particularly acute in cities like Portland, Maine, and Grand Rapids, Michigan.

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Assisted living and memory care sector making strides in 2024 link

• Occupancy in assisted living and memory care grew steadily in 2024, with average rents increasing by 5% year-over-year. Market leaders are commanding higher rents, while others face challenges meeting financial benchmarks.

• Labor market stabilization has provided more predictable operational costs, but compressed margins remain a challenge, with many below the historical 30% benchmark. Rising insurance and labor costs continue to eat into profitability.

• Financing hurdles persist as banks extend existing loan maturities but hesitate on new deals. HUD financing remains an option, though delays and lower loan-to-value ratios are complicating access to capital.

Record apartment supply compresses pricing across asset classes link

• Over 557,000 apartment units were delivered nationwide in the last 12 months, pushing vacancy rates higher and stalling rent growth. This increased supply has pressured pricing across all segments, not just luxury Class A units.

• The rent premium between Class A and Class B units shrank to 24.8% by Q3 2024, down from 32.2% during the 2010-2019 period. Similarly, Class C rents now trail Class B rents by just 19.5%, reflecting a compressed pricing spectrum.

• High-supply metros like Portland, Richmond, and Las Vegas saw some of the smallest Class A rent premiums, below the national average. Filtering effects allow renters to upgrade to better segments, increasing availability in affordable housing.

Retail and office spaces are being converted into healthcare

• Retail and office spaces are being converted into healthcare facilities due to their prime locations and existing infrastructure. Examples include a former Bed Bath & Beyond and a Crate & Barrel transformed into modern healthcare centers.

• The trend is driven by consumer demand for accessible care, hybrid work reducing office space usage, and rising outpatient care. Vacant spaces offer cost-effective solutions compared to new construction.

• These conversions create jobs, boost local economies, and enhance property values while revitalizing underutilized spaces. They also require upgrades for healthcare compliance, zoning, and infrastructure needs.

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Madison has so many cool MCM homes.

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Vidit

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