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Fastest Growing Cities in 2023 per U-Haul data

Plus, Brokers Expect 2024 Uptick in Multifamily Investment - Poll Finds and 6 more RE insights

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Real Estate Trends

Fastest Growing Cities for 2023 per U-Haul data link

  • Florida dominates U-Haul's annual Growth Index in 2023, with Palm Bay-Melbourne leading. This marks the seventh consecutive year Florida has had the most cities in the top 25 growth cities.

  • The U-Haul Growth Index is based on net gains of one-way equipment transactions. Over 2.5 million one-way U-Haul truck, trailer, and U-Box container transactions across the U.S. and Canada contribute to this data.

  • Migration trends in 2022 mirrored those of 2021, with Texas, Florida, the Carolinas, and the Southwest continuing to see significant growth. Despite a record-breaking migration in 2021, there remains a high demand for one-way rentals to top growth cities.

Home prices are surging — and Detroit gained the most in November, beating Miami for the first time link

  • Home prices in the U.S. jumped 5.2% in November 2023 compared to the previous year, marking a significant increase from the 4.7% annual gain in October. This surge is driven by a decline in mortgage rates, with Northeastern states like Rhode Island, Connecticut, and New Jersey experiencing the highest growth.

  • Detroit experienced the largest annual price gain among cities at 8.7%, surpassing Miami's 8.3%. This shift is attributed to Detroit's catch-up in appreciation post-pandemic and its relative affordability compared to other Mid-west areas. However, despite being one of the most affordable markets, Detroit's home prices are considered overvalued relative to local income levels.

  • Approximately 82% of the 397 metropolitan housing markets surveyed are deemed overvalued, indicating a disparity between home prices and local household incomes. Major cities like Boston, Chicago, Los Angeles, and Washington, D.C., are exceptions, being considered "normal" in valuation. The future of home prices hinges on supply levels and mortgage rates, with expectations of a slight softening in prices later in the year.

Apartment Supply to Thin Out Dramatically After This Year link

  • The U.S. has seen the highest number of apartments available for rent in 36 years, leading to a drop in rents in high-growth markets. Despite a rebound in demand, the fourth quarter of 2023 marked the strongest absorption in 25 years, excluding 2020 and 2021.

  • In the fourth quarter of 2023, 58,000 apartments were absorbed, surpassing the average since 2000. This surge in absorption indicates a significant shift in the rental market, reflecting changing dynamics in supply and demand.

  • The current trend suggests a dramatic thinning out of apartment supply after this year. This shift could lead to changes in rental prices and availability, impacting both renters and the real estate market as a whole.

Rising Sun Belt Apartment Supply Holds US Rent Growth Below 1% link

  • In 2023, despite a strong rebound in U.S. apartment demand, the Sun Belt's increased supply kept national rent growth minimal, at just 0.9%. Austin, Texas, experienced the most significant decline, with rents dropping 5.1% year over year.

  • Oversupply in the South and West led to negative rent growth in these regions, contrasting with stronger performances in the Midwest and Northeast. The U.S. vacancy rate increased to 7.5%, marking the ninth consecutive quarter where supply exceeded demand.

  • The luxury apartment sector saw more move-ins than move-outs in 2023, but an influx of new units led to a 0.4% decline in rents. Mid-priced properties, however, rebounded with a 1.4% year-over-year rent growth, attributed to increased consumer confidence and lower inflation.

Home-equity lending blossomed in 2023 link

  • In 2023, home-equity lending significantly grew as independent mortgage banks expanded their product lines. This growth occurred despite a challenging third quarter when mortgage rates exceeded 7%.

  • The surge in home equity lines of credit (HELOCs) and closed-end second mortgages was evident in the secondary market, where securitization volumes increased sevenfold from 2022. This expansion in the private-label securities market is crucial for the future of home-equity lending.

  • Despite the overall growth, HELOC loan originations actually decreased by 7% in the third quarter of 2023 due to rising interest rates. The rates for 30-year fixed mortgages reached the mid-7% range but started to decline below 7% by mid-December.

Opportunities

Brokers Expect 2024 Uptick in Multifamily Investment Sales, Poll Finds link

  • The Berkadia 2024 Powerhouse Poll reveals that 72% of brokers anticipate a stronger year for multifamily sales above $50 million, driven by the Federal Reserve's interest rate policies. Despite 50% expecting continued impact from higher rates, there's optimism for increased activity in 2024.

  • Multifamily investment sales and lending saw a significant drop between 2022 and 2023, with sales falling 70% and lending decreasing by 50%. This downturn reflects broader trends in the market, but there's potential for recovery with the anticipated stabilization of long-term interest rates.

  • Distressed properties are expected to be highly sought after in 2024, with 44% of respondents predicting institutional investors will target them. The multifamily market is likely to focus on Class A properties, with Class B and affordable housing also attracting investor interest.

Risks

U.S. Office Vacancies Reach Record High link

  • In the fourth quarter of 2023, an average of 19.6% of office space in major U.S. cities was unleased, surpassing previous records set in the 1980s and 1990s. This marks the highest vacancy rate since at least 1979, according to data from Moody's Analytics.

  • The increase in office vacancies is attributed partly to the remote working trend. However, the root of the current vacancy issue dates back to the office-market downturn of the 1980s and 1990s, following years of overbuilding.

  • Today, the highest office-vacancy rates in the U.S. are found in Houston, Dallas, and Austin. This shift in vacancy rates reflects a change from the early 1990s when cities like Palm Beach and Fort Lauderdale in Florida, and San Antonio, experienced high vacancy rates.

Something I found Interesting

Formula 1 Impact on Hotel Performance and What It Says About the Racing Sport's Future link

  • Formula 1's popularity is rising in the U.S., with viewership exceeding 1.1 million per broadcast, challenging NASCAR's dominance. The Miami race in 2022 attracted 2.96 million viewers and generated $350 million in revenue, showcasing the sport's growing appeal.

  • European and Middle Eastern markets have long embraced Formula 1, with hotel occupancy in host markets jumping 73.1% in 2022. This surge in interest boosted hotel average daily rates by 71.9%, indicating a strong correlation between F1 events and local hospitality sector growth.

  • The Las Vegas Formula 1 Grand Prix in 2023 faced challenges, including traffic issues and high ticket prices, leading to lower hotel occupancy and forced rate reductions. Despite these setbacks, the event's potential remains high, underscoring the need for better planning and execution in future races.

That's all, folks. If you enjoyed today's issue, please reply (it helps with deliverability)

Cheers,

Vidit

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