4 shakeups coming for the US housing market in 2024

Welcome to Zero Flux - A daily real estate newsletter of 5-10 market trends handpicked from > 100 sources, including paywalls. No opinions, just data and facts. 🙂 

Mortgage rates back under 7% link

• Mortgage rates have dipped below 7% for the first time since August 2023, marking a significant retreat from the 2023 peak of 7.83% in October. This decrease is influenced by investor expectations that the Federal Reserve will lower rates in the spring to avoid a recession.

• Despite the drop in mortgage rates, the demand for purchase loans remained relatively flat last week, with a 0.3% decrease from the previous week and a 17% drop from the previous year. This trend is attributed to tight for-sale inventories and high prices that are still out of reach for many potential buyers.

• Refinancing requests have seen a 14% increase from the previous week and a 10% increase from the previous year, as lower mortgage rates make refinancing more appealing. Economists predict that mortgage rates will continue to fall, potentially reaching the mid-6% range by the end of next year and dropping into the mid-5% range by the end of 2025.

Insights from the Zumper National Rent Report link

• Nationwide, renting is now more affordable than buying a home. The national median rent for one-bedroom homes has decreased to $1,499, a 0.4% drop, while two-bedrooms are at $1,856, down by 0.3%.

• Renters are experiencing less competition and more options. This shift is due to easing inflation, slowing migrations, and a record number of new multifamily buildings, making the rental market less stressful compared to last year.

• Significant rent declines are observed in Sun Belt areas like Austin and Phoenix. These declines are more pronounced than the national median, reflecting a normalization of pandemic-era price hikes in these regions.

Remote Work Sparks Rise In “Bi-Residential” Living link

• Bi-residential living is transforming the concept of a second home, elevating it to a status equal or near-equal to the primary residence. This lifestyle allows individuals to split their time between two distinct communities, often enjoying urban life in one and a relaxed, country setting in the other.

• The rise of remote work has been a key driver in this trend, enabling people to live and work in two different locations without the constraints of traditional office jobs. Communities like Martis Camp in Truckee, California, and Suncadia in Cle Elum, Washington, are becoming popular for those seeking a bi-residential lifestyle, offering a mix of urban and outdoor recreational activities.

E-commerce Continues to Fuel Industrial Expansion link

• The pandemic-induced e-commerce boom has significantly increased the demand for industrial real estate. E-commerce sales have surged by 74% since early 2021, with a substantial part of this growth occurring in the second quarter of 2021.

• This surge in e-commerce has led to a threefold increase in the demand for logistics space. Both large facilities and smaller, localized centers are needed to facilitate efficient last-mile deliveries, with traditional retailers like Walmart adapting by incorporating automated fulfillment centers.

• Industrial investment reached $40.3 billion year-to-date through September, with properties trading at an average of $135 per square foot. Despite challenges, the average sale price increased by 9% this year, and certain markets continue to see rapid price increases since the pandemic's onset.

Self-Storage Rental Rates Continue To Drop link

• Self-storage investment, once a booming sector during the pandemic, is now facing a downturn. Rental prices for new storage tenants have dropped significantly, with a 10% decrease in the first quarter, marking the most substantial decline since 2013.

• The decline in self-storage demand is impacting major players in the industry. Blackstone Inc. sold its Simply Self Storage for $2.2 billion, and Extra Space Storage missed its earnings estimate, with its shares dropping about 7% since the beginning of the year. Public Storage is now offering incentives to attract new renters.