CRE in Trouble

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Simple can be harder than complex: You have to work hard to get your thinking clean to make it simple. But it's worth it in the end because once you get there, you can move mountains.

― Steve Jobs

The U.S. added 272,000 jobs in May, well above expectations of 190,000 link

• Job gains were widespread, with significant contributions from health care, government, leisure & hospitality, and professional services. This broad-based growth indicates resilience across various sectors.

• The unemployment rate edged up by 10 bps to 4.0%, while the labor force participation rate slightly decreased to 62.5%. Average hourly earnings surpassed expectations, growing by 4.1% year-over-year.

• Strong job growth in May suggests the Federal Reserve will likely refrain from lowering interest rates until at least September. This decision aligns with ongoing economic stability and growth.

• Real estate investment activity is expected to stay subdued before picking up in Q4. Despite this, leasing activity will retain momentum thanks to stronger-than-anticipated hiring trends.

Homeowners sitting on a pile of cash with $17T in home equity: CoreLogic link

(There are now only 1 million homes underwater in the U.S.)

• The average U.S. homeowner with a mortgage gained $28,000 in equity over the year ending March 2024. California, Massachusetts, and New Jersey saw increases more than double the national average.

• U.S. home equity surged by $1.5 trillion, bringing total net equity to over $17 trillion at the end of Q1 2024. Mortgaged properties make up 62% of all U.S. residential homes.

• Higher home prices have lifted 190,000 homeowners out of negative equity, leaving only 1.8% of mortgage holders underwater. This equates to about 1 million homes nationwide.

• Negative equity decreased by 2.1% in Q1 2024. If home values rose by 5%, 111,000 homes would gain positive equity; a 5% decline would push 153,000 homes underwater.

• Home equity serves as a financial buffer for mortgage holders facing rising costs like insurance and taxes. Low negative equity rates in Florida and Texas could prevent more homeowners from losing equity amidst price declines.

CRE in Trouble link

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Mortgage Rates Can Vary Significantly by State. Here's Why—and Which States Have the Lowest Rates. link

• Home prices are at an all-time high, and mortgage rates are above 7%, making it tough for buyers. Mortgage-rate quotes can differ by state, sometimes up to 38 basis points.

• Rates vary significantly by location; for example, Hawaii offers rates as low as 6.49%, while Vermont rates can reach 6.88%. On a $400,000 home with 20% down, this can mean nearly $30,000 more in interest over the loan's lifetime.

• Borrower credit quality impacts state mortgage rates; higher credit scores lead to better loan terms. Consumers' savviness in shopping around also plays a role, with substantial savings possible.

• The number and competitiveness of lenders in a market influence rates. More financial institutions competing can result in lower rates.

• Regulatory differences between states, such as foreclosure processes, affect mortgage rates. Judicial foreclosures take longer, increasing lender risk and leading to higher rates.

States Where Homebuyers Could Save More Than $100K by Comparison Shopping for a Mortgage

The Number of U.S. Homes for Sale Is Slowly Returning to Normal: An 'Incredible Trend,'

America’s 20 Hottest Housing Markets Are So In Demand, They’ve Just Hit a New Record 

Large Apartments Make a Comeback 

The World’s Best Restaurants in 2024

That's all, folks.

Cheers,

Vidit

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