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Where Homeowners Feel the Itch to Move the Most

Plus, 2023 Job Growth Ranked by State and 6 more RE insights

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A Quote

"I am an old man and I have known a great many troubles, but most of them never happened."- Mark Twain

Macro Trends

Today’s Rates

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2023 Job Growth Ranked by State link

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  • Nevada led the United States in job growth in 2023, with a 3.8% increase in total employment, adding 57,700 jobs, largely concentrated in the Las Vegas metro area. The Leisure/Hospitality Services sector was a significant contributor to this growth, highlighting the state's dependency on tourism and hospitality industries for job creation.

  • Idaho and South Dakota followed Nevada, both experiencing a 3% job growth rate, showcasing the diverse economic expansions beyond traditional coastal powerhouses. Boise City, Idaho, and Sioux Falls, South Dakota, were pivotal in their states' job growth, emphasizing the role of smaller metro areas in driving state-wide economic development.

  • Texas, California, and Florida were the top three states in terms of the total number of jobs added in 2023, collectively accounting for 35% of the nation’s total net job gains. This underscores the significant role these large states play in the national economy, with Texas leading by adding 369,600 jobs.

Real Estate Trends

High Supply Markets Cut Rents Most Often in 2023 link

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  • In 2023, the U.S. saw a significant addition of 440,000 apartment units, leading to a modest 0.2% increase in rents and a 90 basis point dip in occupancy. This influx of new supply demonstrates the inverse relationship between apartment rent growth and inventory growth, with high supply markets experiencing the most substantial rent reductions.

  • Markets like Salt Lake City and Nashville, which saw inventory growth of 7% or more, faced the steepest rent cuts, averaging a 2.2% decrease across 17 high supply markets. This trend underscores the pressure on rent prices in areas with rapid expansion of apartment inventory, contrasting with the marginal growth seen nationally.

  • Conversely, markets with below-average inventory growth, particularly in the Midwest, witnessed rent increases above the national norm, with cities like Cincinnati, Chicago, Milwaukee, and Cleveland experiencing rent growth of 3% or higher. This pattern highlights the regional disparities in inventory growth and rent adjustments, with the Sun Belt region generally adding more inventory than other parts of the nation.

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National Office Vacancy Rate Climbed in 2023 to Record 19.7%: Trepp link

  • The national office vacancy rate surged to an all-time high of 19.7% in 2023, up by 200 basis points from 2022, signaling a widespread challenge across the U.S. office market. Class-A buildings, however, fared slightly better, with a vacancy rate nearly 300 basis points lower than the national average, demonstrating a preference for newer or recently renovated spaces.

  • Smaller markets experienced declines in their vacancy rates, indicating a varied impact of the office space crunch across different regions. For instance, Binghamton, New York; Omaha, Nebraska; Savannah, Georgia; and Tucson, Arizona saw significant reductions in their vacancy rates, showcasing resilience or growth in certain locales.

  • Major markets like midtown Manhattan, Los Angeles, and San Francisco were hit hard, with San Francisco recording the highest vacancy rate at 32.5% and significant negative absorption. This trend highlights the challenges faced by larger markets in adapting to post-pandemic shifts in office space demand, with San Francisco experiencing the most substantial negative absorption nationally.


Self-Storage Construction to Drop Sharply, Report Finds link

  • The building of new self-storage spaces is expected to significantly decrease by the end of this decade. Predictions show a fall from 54 million square feet of new space in early 2024 to 29 million by 2028, mainly because many projects are being stopped or delayed.

  • After a period of rapid building in 2021 and 2022, and reaching a high point in late 2023, the industry is slowing down. The report suggests the self-storage market is moving from a growth phase to a more stable phase, with less new building happening and investors becoming cautious due to too much available space.

  • There's been a big increase in the number of self-storage projects that have been stopped or not completed. In November 2023 alone, 44 projects were abandoned, and over the whole year, 245 projects were stopped. This is more than double the number from the previous year, highlighting the difficulties the industry faces, such as higher building costs and changes in where people are living and moving to.

Hotels: Occupancy Rate Decreased 2.5% Year-over-year link

  • The national hotel occupancy rate fell by 2.5% compared to last year, reaching 59.2%. This decline indicates a mixed performance in the hotel industry, with some areas experiencing more significant drops than others.

  • Despite the decrease in occupancy, the average daily rate (ADR) for hotels increased by 4.2% to $162.24, and revenue per available room (RevPAR) saw a slight rise of 1.6% to $96.10. These figures suggest that while fewer rooms were filled, hotels managed to increase their pricing and maintain some revenue growth

Risks

Big Banks Are Low on Reserves for Delinquent CRE Loans link

  • Commercial banks are increasingly vulnerable due to pressures from commercial real estate (CRE) loans, exacerbated by difficulties in refinancing, sinking valuations, and reduced demand for space due to the rise of hybrid work. These factors contribute to lower revenues and potential financial instability for lenders.

  • The gap between bad property debt and reserves at major banks is widening, with the Financial Times reporting that the average reserves at top banks like JPMorgan Chase, Bank of America, and Wells Fargo have dropped significantly. Specifically, reserves have fallen from $1.60 to 90 cents for every dollar of CRE debt that is at least 30 days overdue.

  • This decrease in reserves against delinquent CRE loans indicates a growing risk within the banking sector, particularly for big banks with substantial CRE loan portfolios. The situation underscores the need for increased caution and potentially more stringent regulatory oversight to mitigate the impact of these vulnerabilities on the broader financial system.

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U.S. Commercial Foreclosures Increase in January 2024 link

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  • Commercial foreclosures in the U.S. saw a significant rise, reaching 635 in January 2024, marking a 97% increase from the previous year. This surge contrasts sharply with the low of 141 foreclosures recorded in May 2020, highlighting a dramatic shift in the commercial real estate sector.

  • The increase in commercial foreclosures signals a market adjustment, with states like California, New York, and Texas experiencing notable changes. California led with 181 foreclosures in January 2024, a substantial rise from previous periods, indicating the dynamic nature of its economic climate.

  • The report suggests a long-term trend of declining new construction in the commercial sector, attributed to a combination of abandoned projects and deferred developments. This trend reflects the commercial real estate market's ongoing adaptation to post-pandemic economic conditions and changing business practices.

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Off Topic

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Something I found Interesting

Where Homeowners Feel the Itch to Move the Most link

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  • Homeowners in Arizona, Nevada, and Florida tend to move within five years or less, the shortest duration in the U.S. This trend is attributed to the states' appeal to retirees, lack of Social Security tax, and warm climates.

  • The study found that 68% of homeowners have no plans to move, valuing affordability, community, and family. However, over a quarter are considering moving, driven by the desire for profit, with expectations of a 53% return on investment from selling their current homes.

  • The highest homeowner tenure is in places like Johnstown, PA, and Weirton-Steubenville, WV-OH, where 40% or more residents have stayed in their homes for 24 years or more. Factors that could prompt a move include financial reasons, high cost of living, lifestyle changes, job relocation, and the desire to upsize or downsize.

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