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The Most Affordable Apartment Markets in the US

Plus, Here Is Another Trend Driving Housing Prices and 6 more Real Estate Insights

Welcome to Zero Flux - A daily real estate newsletter of 5-10 market trends handpicked from > 100 sources, including paywalled articles.

No opinions, just data and facts.

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Macro Trends

Homebuying Demand Shows Early Signs of Rebound Following Weeks of Declining Mortgage Rates and Increasing Listings link

  • Mortgage rates have declined, leading to a resurgence in homebuying interest. The average 30-year fixed mortgage rate dropped to its lowest level since May, sparking an increase in mortgage-purchase applications and homebuyer demand.

  • The housing market is witnessing a significant rise in new listings, with the biggest increase since June 2021. This surge is partly because new listings were falling around this time last year, indicating a shift in market dynamics.

  • Despite the uptick in activity, the market still faces challenges. Pending sales are down 4% year-over-year, and the median sale price has seen its biggest increase since October 2022, reflecting ongoing affordability concerns.

Real Estate Trends

The Most Affordable Apartment Markets in the US link

  • The South and Midwest regions of the United States dominate the list of most affordable major apartment markets. RealPage's research highlights that out of the nation's 50 largest markets, six of the most affordable are in the Midwest and four in the South.

  • The top three most affordable markets are located in the South. This trend aligns with the general apartment trends pointing towards the South, indicating a significant regional shift in affordability.

Here Is Another Trend Driving Housing Prices link

  • Out-of-town homebuyers are earning significantly more than local residents in some U.S. metropolitan areas. This income disparity, with out-of-towners earning at least 60% more on average, is exacerbating the affordable housing crisis.

  • The trend poses a major challenge for local residents seeking affordable housing options. They are increasingly finding themselves priced out of their own communities, unable to compete with the higher incomes of out-of-town buyers.

November Pending Home Sales Unchanged, Despite a Sharp Drop in Mortgage Rates link

  • Pending home sales in November remained steady compared to October, despite a significant drop in mortgage rates. The average rate on the 30-year fixed mortgage peaked over 8% in mid-October, then fell to around 7.25% by the end of November.

  • The unchanged sales figure was unexpected, as analysts predicted a slight increase due to the lower mortgage rates. However, high home prices and limited supply may have deterred potential buyers.

  • Regional variations were notable: Sales increased slightly in the Northeast and Midwest, surged by 4.2% in the West, but fell by 2.3% in the South. Overall, pending sales in November were 5.2% lower than the same month last year.

Home Prices Overvalued in 88% of the U.S. link

  • From the end of 2019 to the third quarter of 2023, the median national price for a sold home soared from $327,100 to $431,000, marking a significant jump of 31.8%. This steep increase highlights the escalating overvaluation of homes across the United States.

  • Fitch Ratings anticipates this trend of overvaluation to persist, driven by the continuous rise in home prices. This projection suggests a sustained imbalance in the housing market, potentially impacting affordability and market stability.

  • The article underscores the rapid escalation in housing costs, raising concerns about the long-term implications for buyers and the overall health of the real estate market. The data points to a challenging environment for prospective homeowners, with prices far exceeding historical norms.

Investors May Increase Capital Allocations to Retail link

  • Retail investment is expected to grow in 2024, as historical trends show an increase in retail's share of transaction volume during broad market pullbacks.

  • This shift in investment strategy could be a significant change from previous years, where other sectors like office and industrial properties dominated the market.

  • Investors are likely to diversify their portfolios by increasing allocations to retail, potentially leading to a more balanced and resilient investment landscape.

Opportunities

Home Prices Grew, but Mobile Home Prices Grew Faster link

  • Mobile home values have increased significantly, nearly matching the rate of single-family homes. Between 2016 and 2021, the median value of mobile homes rose by 34.6%, compared to 35.4% for single-family homes. However, this increase in value doesn't necessarily benefit current residents.

  • Residents face challenges such as deteriorating conditions and low resale offers. Mobile homes often become more burdensome over time, and owners may receive lowball offers from landowners. For example, a resident in Michigan was offered less than $10,000 for her home, originally purchased for $28,000.

  • The rising cost of living in mobile home parks adds to residents' woes. Large companies buying out parks have increased land rents, impacting low-income and elderly residents. Some have had to cut back on essentials like food and medicine, with the average new mobile home price reaching $124,900 in May.

Proptech

Venture Proptech Funding Drops 42.4% Year Over Year link

  • Venture capital funding for proptech significantly decreased in 2023, with a 42.38% drop from the previous year, totaling $11.38 billion. This decline follows a period of intense growth and high investment during the pandemic.

  • The reduction in funding is seen as a market normalization, returning to pre-pandemic levels. It reflects a shift in investor sentiment towards caution, moving away from the bullish investment behavior seen in the pandemic years.

  • The proptech sector's investment peak was in 2021, with a staggering $32.0 billion. The current funding levels indicate a significant retraction of 64.44% from this peak, highlighting the changing dynamics in the proptech investment landscape.

One Cool Chart

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Top 10 Trends of 2023

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  • Millennial Homeownership: Over half of Millennials (52%) now own homes, a significant shift from renting, while Gen Z remains predominantly renters with a 74% share.

  • Millionaire Renters: There's an 82% increase in millionaire renters since 2015, especially among Millennials and Gen X, indicating a preference for rental flexibility over homeownership.

  • Apartment Construction: In 2023, the U.S. saw 460,860 new apartments, led by New York, but anticipates a 15% decrease in new constructions by 2025.

  • Top Cities for Renters: Charleston, SC, Plano, TX, and Scottsdale, AZ, emerged as the best cities for renters, offering affordable housing, job opportunities, and quality lifestyle amenities.

  • Office Space Conversion: 37% of future adaptive reuse projects involve converting office spaces into apartments, reflecting changing urban dynamics.

  • Multigenerational Living: 20% of Millennials and 68% of Gen Zers live with family, with many expecting to continue this living arrangement for at least two more years.

  • Solo Renters: The number of Americans renting alone has risen by 1 million since 2016, with Baby Boomers and Millennials leading this trend.

  • Build-to-Rent Homes: The build-to-rent sector is booming, with a record 14,541 new homes for rent opened recently, indicating a growing preference for single-family rentals.

  • Apartment Size by Budget: An analysis of how far $1,700 stretches in apartment size across various zip codes, showing significant variations in space offered.

  • Year-End Rental Market: High competition in the U.S. rental market, with 94% occupancy and limited options, and Miami emerging as the hottest rental market in 2023.

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Vidit

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