July 23, 2024 - This Week in Real Estate

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Headlines

What’s new in the world of Real Estate
  • Retail vacancy at a 20-year low

  • Foreign buyers are pulling back

  • Housing inventory grows

  • Multifamily construction surging

Plus: The most affordable walkable cities, Sunbelt evictions, why culture boosts real estate, and more.

Listing of the week: The southernmost house in the U.S.

Performance

Freddie Mac 30 Year Fixed
6.77% (-0.12% weekly)
Dow Jones Real Estate Index
359.40 (+1.8% weekly)
S&P U.S. REIT
352.91 (+2.1% weekly)
Zillow Home Value Index
$362,482 (+0.6% monthly)

as of market close on July 22

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Market Updates


Retail vacancies dropped to 5.3%, a two-decade low. The turnaround is due to construction levels remaining at historic lows, particularly for higher-end shopping centers, combined with increased consumer spending. The South led the way in leasing demand, with the West actually showing a decrease. Overall, quality retail space has become more difficult to find, which in turn could send rent prices higher, as demand is unlikely to decrease anytime soon.

Annual foreign investment in U.S. existing homes dropped by 21.2%. Foreign buyers bought $42 billion of existing homes in the period between April 2023 and March 2024, a drop-off from the prior year stemming from a strong U.S. dollar, decreased inventory and higher rates. Internationals bought 54,300 properties, a 36% drop and the lowest total since 2009, when tracking this data began. That said, the average price of $780,300 and median price of $475,000 were the highest ever recorded, indicating that international buyers have shifted focus to more expensive properties.

Total homes on the market is 23% above last year’s level. Zillow’s latest Housing Market Report showed that inventory increased 4% in June. This supply expansion is a step in the right direction for potential buyers, though levels remain 33% below where they were before the pandemic. As supply has increased without a corresponding spike in demand, the rate of price appreciation has slowed. Annual appreciation came in at 3.2%, and the monthly appreciation of 0.6% was the slowest June result since 2011. Zillow now forecasts home prices to rise by only 1% in the coming 12 months.

New multifamily construction rose by 19.6% in June. Data from the U.S. Department of Housing and Urban Development and Census Bureau showed that overall construction starts were up 3% in June, with multifamily leading the charge, as single-family starts fell by 2.2%. Multifamily completions also reached their highest total since 1986, bringing more supply to the market. The rise in supply could lead to a slowdown in rent growth in the short-term, but the amount of apartment buildings under construction is still down 11.4% from last year.

Smart Humans Podcast

In the latest episode of Smart Humans, Slava Rubin talks with Hiive CEO and Founder Sim Desai about trading private securities and launching a new private market index.

Listing of the Week

A property that caught our eye

(Sotheby’s International Realty)

Located in Key West, right where the Atlantic Ocean meets the Gulf of Mexico, is the southernmost house in the United States. The 4,008 square foot home has 5 bedrooms, 5.5 bathrooms and is on the market for the first time since 1994 - when it sold for $1.55 million. The asking price for this landmark oceanfront property today? A cool $18.5 million.

Explore

  • Best (affordable) walkable cities: Often, the most walkable cities are the most desired and most expensive — this list of “affordable” locales with good walkability scores and a median house price under $450,000 includes Philadelphia, Baltimore and Hartford.

  • Rising eviction rates: In cities like Phoenix, Houston and Las Vegas, eviction rates are up 35% or more compared to where they were pre-pandemic, as renter protections are relatively weak and rents keep rising.

  • Culture boosts values: Museums, parks, festivals and a thriving arts scene are strongly associated with rising property values, particularly for luxury real estate, according to Sotheby’s Mid-Year Luxury Outlook.

  • Blackstone looking to buy: Jon Gray, the president of the largest alternative asset manager in the world, sees an impending cycle of increasing real estate values coinciding with anticipated Fed rate cuts, and the firm is looking to make deals.

  • Prologis’ outlook improves: The world’s largest industrial REIT showed better-than-expected earnings last quarter, due largely to increased demand in the sector, particularly in its data center and energy businesses.

  • Follow the U-Haul: Pretium Partners closed an oversubscribed $1.5 billion single-family rental fund, focusing on build-to-rent developments and the Southwest and Southeast, where population is growing the fastest.

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