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The most competitive rental markets list has some surprises

Plus, A Significant Share of Banks Are Overexposed to CRE and 5 more RE insights

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A Quote

“Tension is who you think you should be. Relaxation is who you are.”

Today’s Rates

Real Estate Trends

The most competitive rental markets link

  • Miami leads the U.S. rental market with Milwaukee rising as a competitive contender. The national Rental Competitive Score (RCS) is 73.4, with Miami scoring 91.9 and Milwaukee closely following with an 87.

  • The Midwest is gaining traction, securing seven spots among the top 20 hottest rental markets. This shift is attributed to its affordability and a reinvented economy focused on tech and manufacturing.

  • Comparing 2024 to 2023, there's a slight decrease in rental market competitiveness. The average number of renters competing for a vacant apartment dropped from eight to seven, and the average occupancy rate decreased from 94.2% to 93%, indicating a slight cooling in the rental market heat.

  • The full list:

    1. Miami-Dade

    2. Milwaukee

    3. North Jersey

    4. Suburban Chicago

    5. Grand Rapids, Michigan

    6. Oklahoma City

    7. Bridgeport-New Haven, Connecticut

    8. Cincinnati

    9. Lansing-Ann Arbor, Michigan

    10. Orlando, Florida

    11. Orange County, California

    12. Brooklyn, New York

    13. Omaha, Nebraska

    14. Southwest Florida

    15. Eastern Virginia

    16. Kansas City, Kansas

    17. Tampa, Florida

    18. San Diego

    19. Suburban Philadelphia

    20. Silicon Valley, California

Opportunities

High-Flying Single-Tenant Sector Expected to Extend Its Performance link

  • The single-tenant sector remains robust and resilient as it enters 2024, with a positive outlook bolstered by the potential for interest rate cuts. This sector has demonstrated remarkable stability and continues to attract investment interest.

  • Vacancy rates in the single-tenant sector are at a record low of 4.3%, matching the previous record set in 2018. This tight vacancy underscores the high demand and limited supply within the market.

  • Mean asking rents for single-tenant properties have reached an all-time high, indicating strong market conditions and the sector's ability to command premium pricing. This trend reflects the ongoing strength and appeal of single-tenant investments in the current economic climate.

Risks

CRE CLO Distress Rates More Than Quadruple in Last 12 Months link

  • Distress rates in commercial real estate collateralized loan obligations (CRE CLOs) jumped from 1.4% to 8.6% between January 2023 and January 2024. This significant increase highlights growing financial strain within the sector.

  • Arbor Realty Trust reported a notable rise in non-performing loans, from twelve loans valued at $150.5 million in September 2023 to sixteen loans valued at $262.7 million by the end of the year. The situation indicates a broader trend of distress among CRE CLO issuers.

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A Significant Share of Banks Are Overexposed to CRE link

  • A third of commercial banks currently have commercial real estate (CRE) exposures that are at least three times their total capital. This indicates a significant level of risk, as these banks have a large portion of their resources tied up in CRE loans.

  • The concern over banks' CRE loan exposure is not about predicting massive bank failures. Instead, it highlights the potential financial strain and challenges banks could face if the CRE market experiences downturns.

  • The article suggests that while the situation is concerning, it does not imply an immediate crisis. However, it underscores the importance of monitoring and managing CRE loan exposures to mitigate potential risks to the banking sector.

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Off Topic

Proptech

New startup building $5M homes and they are selling link

  • Aro Homes is pioneering carbon-negative homebuilding. These homes are designed to be environmentally friendlier, aiming to offset all carbon used in construction within 16 years.

  • The startup uses sustainable materials and offsite production for quality control. Homes incorporate solar panels with battery backup, emphasizing low carbon footprint materials that are practical and reliable.

  • Despite the high cost, with the latest homes nearing $5 million, investors see potential for mass-market affordability. Aro has raised $21 million in funding and plans to build 36 homes per year by the end of 2024.

Pro Member Only Content

Home-based care may lead more people to age in place

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  • Seniors using home-based health care services are more likely to adopt home-based hospice, aiding end-of-life care at home. Rutgers University's study highlights a higher acceptance among these individuals, easing the transition into hospice care.

  • Nearly half of Medicare decedents in 2019 utilized home health care in their last three years of life, with almost 30% starting before their final year. This trend suggests a strong link between home health care and hospice use, especially significant in non-dementia patients.

  • Financial motivations may influence hospice referrals, raising concerns about the integrity of care transitions. The study notes a potential conflict between the financial aspect and the quality of end-of-life care decisions.

  • The majority of seniors prefer aging in place, and home-based care supports this desire by facilitating continuity of care. It reduces the need for burdensome transitions, offering a pathway to age at home with dignity.

  • Recent regulations aim to support aging in place by updating the Older Americans Act (OAA). Initiatives by the Administration for Community Living (ACL) focus on enhancing home-based care options, reflecting a growing trend towards home-centric elderly care.

  • link

The Hottest Housing Markets for the Super Rich in 2024 

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  • One-quarter of American ultrahigh-net-worth individuals plan to buy a home this year. They prioritize lifestyle and investment above all, followed by taxes and safety.

  • Miami and New York lead as the top US luxury markets for 2024, with expected price growth of 4% and 2%, respectively. Globally, Auckland, New Zealand, tops the list with a projected 10% price increase.

  • Despite market pressures, the luxury real estate sector has fared slightly better than the broader market. Last year, the US saw 34 sales over $50 million, a slight decrease from 45 in 2022 but still significantly higher than pre-pandemic levels.

  • Ultrawealthy American buyers are increasingly purchasing properties overseas, notably in London, Italy, France, and Portugal. They have become the leading foreign purchasers in ultra-prime London properties.

  • The value of $1 million in real estate varies significantly across global hotspots. Monaco remains the most expensive, where $1 million buys only 172 square feet, whereas in New York, it secures 367 square feet.

  • link

That's all, folks.

Cheers,

Vidit

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