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  • The Hottest Rental Markets in the U.S. in 2023 per the new report

The Hottest Rental Markets in the U.S. in 2023 per the new report

Plus Build-to-Rent Construction Ranked by Region and 6 more handpicked RE insights

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Estimated read time: 3 minutes 34 seconds.

Real Estate Trends

The delayed effect of mortgage rates means housing affordability is actually about to get worse link

  • Housing affordability is set to decline further due to the lagging effects of rising mortgage rates. The recent spike in mortgage rates will take time to reflect in housing purchases.

  • Mortgage rates play a significant role in housing affordability, which also considers home prices and buyer incomes. The monthly payment on a median-priced home has surged by 18% over the past year, marking the first acceleration in deterioration since October 2022.

  • Despite the tight housing supply, home prices are expected to climb. Morgan Stanley forecasts the Case-Shiller index to increase by 0.7% year over year, reaching a new all-time high.

The Hottest Rental Markets in the U.S. in 2023  link

  • Phoenix, AZ tops the list with a 9.1% YoY rent increase. The city's average rent now stands at $1,572.

  • San Jose, CA follows closely, witnessing an 8.7% YoY growth. Average rents here have reached $3,004.

  • Despite the pandemic, Tampa, FL saw a significant 8.5% YoY rise. The average rent in Tampa is now $1,789.

  • San Francisco, CA, known for its high living costs, recorded a 7.9% YoY increase. The city's average rent is a whopping $3,877.

  • Las Vegas, NV rounds up the top five with a 7.8% YoY growth. The average rent in Las Vegas stands at $1,467.

Top 10 U.S. Housing Markets Least At-Risk of Declines in Q2 2023 link

(This is a repeat piece from last week but with more in-depth details this time)

  • New Jersey and Illinois dominate the most-at-risk markets, especially in areas like New York City, Chicago, and Philadelphia. The South and parts of the Northeast are less exposed to market downturns.

  • The 50 most vulnerable counties include eight around New York City, six in Chicago, and three near Philadelphia. Six others are spread across California, with the majority in Indiana and the East Coast.

  • The least at-risk counties are primarily in the South and New England. Virginia and Massachusetts have significant representations, with counties like Fairfax, Loudoun, and Prince William in Virginia, and Middlesex and Norfolk in Massachusetts.

New Household Formation Driving Multifamily Demand  link

  • In 2Q 2023, U.S. household formation hit its peak since the onset of Covid, with a significant rise in new households.

  • A total of 1.2 million new households were established in this quarter, bringing the yearly total to 2.1 million.

  • Newmark's study indicates that household formation rates are surpassing pre-pandemic averages, suggesting a sustained demand for housing.

Return-to-office policies are driving people to sell their homes - even at a loss link

  • Return-to-office policies are influencing about 10% of home sales. Employees are selling due to the end of remote work opportunities.

  • During the pandemic, many employees moved away from cities, buying homes in remote areas. Now, companies are demanding in-office presence, causing a dilemma for these homeowners.

 link

  • The South dominates the build-to-rent (BTR) construction scene with over 61,200 units in progress. This number surpasses the combined total of the other three U.S. regions and doubles the next leading region, the West.

  • Nationwide, approximately 104,160 BTR units are under construction. These primarily consist of various housing types like single-family detached homes, row houses, and townhouses. The South and West regions are the primary hubs for these developments.

  • Factors like high interest rates and limited housing inventory are driving the BTR trend. Many potential homeowners are opting for rental properties, leading to a surge in developer and investor interest in BTR. Over 60 developers are behind the 100,000+ BTR units currently under construction.

What’s really going on with the market? JBRE(I trust them) link

  • The housing market deviated from its usual behavior this year. Instead of the expected spring surge, resale listings saw a decline. Existing home inventory dropped by -7% YOY in June, reaching near its 40-year low and far below the historical average of 2.3 million homes.

  • Home prices are on the rise again. From January to August, housing demand stabilized, leading to steady home prices. By August 2023, national resale home prices surpassed their April 2022 peak, showing a full recovery from the declines in the latter half of 2022.

  • The imbalance between demand and supply is evident. 77% of agents reported in July that buyers outnumber sellers. This imbalance has sparked bidding wars due to the limited home supply, establishing a price floor in most areas.

Risks

The Growing Commercial Real Estate Threat Facing Our Economy link

  • Landlords, excluding tier 1 property owners, are struggling to secure financing. When they do, it's at steep rates around 15%, more than double their current rates.

  • Despite major banks and tech firms pushing for a return to the office, national and New York attendance rates linger below 50%. If this persists, rising defaults could jeopardize banks, property owners, and city revenues.

  • Recent research challenges the notion that remote work boosts productivity. A study by Stanford's Nicholas Bloom suggests that fully remote work results in 10% lower productivity compared to in-person work.

Location Specific

Florida Apartment Supply Inspires Rent Cuts link

  • Florida is rapidly growing in the apartment sector, but this surge in supply is causing rents to decrease. The state has witnessed a net inventory growth of 3% by the end of the 2nd quarter in 2023.

  • Despite Florida experiencing some of the highest apartment demands in the country, the overwhelming new supply has outpaced absorption. This imbalance is leading to a reduction in rent prices.

  • A significant shift in rent growth has been observed. Just last year, the annual effective asking rent growth in Florida was in the double digits. However, as of August, it has decreased by 0.7% year-over-year.

Proptech

Will send all the new funding rounds in tomorrow’s send.

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Vidit

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