40% chance Fed will raise interest rates in 2025

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40% probability that the Fed will raise interest rates in 2025 link

• The Atlanta Fed projects Q4 GDP growth at 3.2%, surpassing the CBO's long-term US growth estimate of 2%. This follows two strong quarters with growth at 3.0% and 2.8%.

• Rising economic risks include potential interest rate hikes in 2025, with a 40% chance predicted. Factors like lower taxes, higher tariffs, and immigration restrictions could amplify these pressures.

• Investors face challenges similar to 2022, with high inflation, rising rates, and falling stock prices posing risks. The classic 60/40 portfolio may struggle as downside risks increase heading into 2025.

Quarterly construction insights – Q4 2024 link

• Lumber costs fell by 6% in the U.S. and 5% in Canada in 2024, but prices for carpet surged over 20%, and clay bricks rose by more than 12%. This highlights divergent trends in material costs within the construction industry.

• Residential reconstruction costs increased by 2.8% in the U.S. and 0.9% in Canada during late 2024, with Minnesota seeing the highest growth at 3.7%. Rising costs reflect inflationary pressures and regional market activity.

• The South dominated 2024 building permit approvals, led by Texas and Florida, primarily for single-unit housing. This growth underscores the region's robust demand for housing.

Short term rentals weekly insights

• U.S. hotel RevPAR increased by 4.3% during the week, driven mainly by ADR growth of 3.8%, while occupancy rose slightly by 0.3 percentage points. The latter half of the week saw significant double-digit RevPAR gains across markets, offsetting earlier declines post-Thanksgiving.

• Events like the AWS conference in Las Vegas and the RSNA conference in Chicago fueled RevPAR surges of 36.7% and 42.9%, respectively. Other cities, including Tampa and St. Louis, also saw boosts from events and hurricane recovery efforts.

• Global RevPAR outside the U.S. grew by 9.1%, led by Japan (+26.6%) and Canada (+24%). In Vancouver, ADR soared 125.2% during Taylor Swift's Eras Tour finale, with weekend rates peaking at $625.

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The worst might be behind drug stores link

• Nearly 30% of U.S. drug stores closed between 2010 and 2021, driven by financial challenges on the pharmacy side rather than retail sales. Competition from big retailers like Walmart and Amazon has intensified the pressure.

• Industry experts believe closures may have peaked, as major chains like CVS and Walgreens take steps to reorganize or restructure. Walgreens, for instance, is considering selling its brand to private equity, signaling a shift in business strategy.

• Rural areas are hit hardest by pharmacy closures, leaving communities without essential health services. Urban areas also feel the impact, as longer travel distances to pharmacies create significant inconveniences.

Mapped: Remote workers by U.S. city

Here’s how the Trump administration could tackle affordable housing

• The Low-Income Housing Tax Credit (LIHTC), which supports 32.1% of federally subsidized rentals, faces uncertainty as fiscal conservatives push to reduce tax expenditures. Advocates warn this could slow development in high-demand areas with rising housing costs.

• Housing Choice Vouchers (HCVs) now account for 53.7% of federally subsidized rentals and have bipartisan support for their market-driven approach. Proposed funding increases may expand access but risk overshadowing new affordable housing construction.

• Affordable housing shortages are expected to deepen after 2025, despite progress in preserving existing units. Advocates are urging action to avoid production declines as federal funding peaks next year.

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High-rise apartment projects proliferate in Berkeley link

• Developers are planning multiple high-rise towers in Berkeley, driven by the urgent need for student housing. Major projects include 23- to 28-story towers on University Avenue, Oxford Street, and Shattuck Avenue, utilizing state density bonuses to include affordable units.

• UC Berkeley's expansion includes commitments to build 11,730 beds over 15 years, with recent projects like Anchor House and a 23-story dorm at Bancroft Way. The university provides housing for only 20% of its enrollment, intensifying demand.

• Southern California universities are also addressing student housing shortages, with 15 projects underway to add over 12,000 beds. A $2.2 billion state grant program is supporting these efforts, including UC San Diego’s $2 billion Pepper Canyon East District.

Rents in small Carolina markets fall under the weight of new supply link

• Charleston, Myrtle Beach, and Wilmington saw rent cuts from October to November, ranging from -1.0% to -2.7%, significantly sharper than the national average decline of 0.4%. On a yearly basis, rents fell 2.2% to 2.6% in Myrtle Beach and Wilmington, while Charleston experienced only a 0.1% drop.

• Myrtle Beach’s inventory expanded 10% in the year ending Q3 2024, with another 12.2% growth expected by year-end, marking an unprecedented supply surge. Similarly, Charleston’s inventory grew 4.8% with further expansion expected to reach 8.3% by Q1 2025, while Wilmington is on track for an 8.2% peak in Q3 2025.

• All three markets are grappling with high apartment supply, outpacing demand and pushing rents downward. Myrtle Beach alone added 5,731 units in 2024, while Charleston and Wilmington are seeing peak supply additions of over 6,000 and 2,400 units, respectively.

This will be the most preferred CRE asset class in 2025

Self storage national report – December 2024

Life science trends to watch in 2025

Renters’ favored amenities trends

List of Proptech Startups That Just Got Funded

2024 in Google Searches

You never know what’s going on inside a home

Link to the listing

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Cheers,

Vidit

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