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Hotel Conversions Reach All-Time High

Plus, Weekly Housing Trends Summary, Distress Upcoming Amid Wall of Loan Maturities and more

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A Quote

“You are what you do, not what you say you'll do.”

Carl Jung

Latest Rates

Type

Current

1 day

1 week

1 mon

1 yr

30 Yr. Fixed

7.15%

-0.05%

-0.22%

+0.09%

+0.47%

15 Yr. Fixed

6.63%

-0.03%

-0.19%

+0.05%

+0.58%

30 Yr. FHA

6.61%

-0.03%

-0.21%

+0.06%

+0.32%

30 Yr. Jumbo

7.39%

-0.02%

-0.16%

+0.04%

+1.03%

7/6 SOFR ARM

7.34%

+0.01%

-0.08%

+0.56%

+0.56%

30 Yr. VA

6.62%

-0.03%

-0.22%

+0.06%

+0.34%

Macro Trends

Mortgage Rates Drop to 7.09% After 5 Weeks of Gains link

  • Mortgage rates fell to 7.09% this week after consecutive increases, marking the largest weekly decline since mid-March. The rate drop is linked to the recent Federal Reserve meeting, where future rate cuts were hinted at due to improving inflation expectations.

  • April's jobs report revealed slower job growth and wage increases, along with a rise in unemployment, suggesting a cooling economy. This weaker-than-expected job growth has led investors to reduce long-term interest rates, further influencing the dip in mortgage rates.

  • Home affordability remains a significant challenge despite the rate drop, as home prices stabilize but remain high. To afford 80% of a typical home listing in 34 of the 50 largest markets now requires an income exceeding $100,000, with even higher demands in the priciest markets.

Real Estate Trends

Some Distress Will Emerge Amid Wall of Loan Maturities link

  • A significant portion of commercial real estate loans due this year will be deferred to 2025 or later, addressing the immediate pressure of maturities. This shift is expected as defaults rise, particularly affecting office spaces with high vacancy rates and the multifamily sector, where financing conditions have tightened.

  • Nearly $2 trillion in commercial real estate loans are set to mature in the next three years, creating a substantial challenge for the market. The largest impacts will be felt in the office and multifamily sectors, which constitute a significant portion of this debt, with office spaces experiencing the most stress due to decreased demand post-pandemic.

  • Regulatory pressures and a cautious approach from banks are expected to keep lending subdued, shifting the opportunity to private lenders and investors less reliant on traditional bank financing. This environment will favor entities equipped to deal with higher risk, potentially leading to more favorable terms for opportunistic investors.

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Hotel Conversions Reach All-Time High | link

  • In 2023, hotel conversions created 4,556 new apartment units, marking a record year with a 38.8% increase from the previous year. Class B hotels were the most commonly converted, making up 60% of the total.

  • The trend of converting hotels into apartments is part of a broader move to repurpose buildings including offices and warehouses. Overall, 12,713 apartments were created from such conversions last year.

  • A significant surge in conversions is ongoing, with 151,000 new apartments currently being developed from old structures. This represents a 24% increase from the 122,000 conversions projected in 2022.

Weekly Housing Trends —Data for Week Ending May 4, 2024 link

Image

  • Rising mortgage rates have chilled the housing market as of early May 2024, leading many would-be sellers to postpone their plans. Active listings remain high, up 35.1% from last year, indicating more choices for buyers but also more hesitance among sellers.

  • Despite overall sluggishness in new listings, which saw only a 3.6% increase compared to last year, homes are selling slightly faster. The average time on market has decreased by one day from last year, suggesting some buyers are eager to close deals quickly amid rate uncertainties.

  • The median home price dipped slightly by 0.2% year-over-year, reflecting a market adjustment to higher mortgage rates and shifting buyer preferences. On a per-square-foot basis, however, prices are still on the rise, increasing by 3.8% from last year, driven by a demand for smaller, more affordable homes.

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Location Specific

NYC Apartment Rents Grew Seven Times Faster Than Wages Last Year  link

  • In New York City, the gap between rent and wage growth was the largest in the nation last year. Rents increased by 8.6% while wages only grew by 1.2%.

  • This disparity was more pronounced in NYC than in any of the other top 50 US metro areas. The city saw rents growing seven times faster than wages, highlighting a significant affordability challenge.

  • The data used in this analysis was sourced from Zillow and StreetEasy for rental information and the Bureau of Labor Statistics for wage figures. These sources revealed that, unlike NYC, wages grew faster than rents nationally and in nearly half of the major metro areas.

Pro Member Only Content Below

Where the Richest of the Rich Live: The 10 Most Expensive ZIP Codes for Homebuyers (and the Top Listing in Each)

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Expect Long-Term Demand for Cold Storage Along the Southern Coast  

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These States Saw a Spike in Commercial Foreclosures

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Off Topic

Visualizing the Tax Burden of Every U.S. State

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