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A Look at the Tightest Apartment Market in the US

Plus, New Report Ranks Best Counties for Buying Single-Family Rentals in 2024 and 5 more RE insights

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A Quote

“I’ve missed more than 9000 shots in my career. I’ve lost almost 300 games. 26 times I’ve been trusted to take the game-winning shot and missed. I’ve failed over and over and over again in my life. And that is why I succeed.”

—Michael Jordan

Today’s Rates

Macro Trends

Economic Watch: Persistent Inflation Likely Delays Rate Cut to June link

  • February's CPI increased by 0.4% monthly and 3.2% year-over-year, slightly above forecasts. Shelter and gasoline were the main drivers of this increase, highlighting the ongoing challenges in managing inflation.

  • Core inflation rose to 0.4% for the month and 3.8% over the past year, exceeding expectations. This suggests that inflationary pressures remain persistent, especially in sectors excluding food and energy, indicating a cautious approach from the Fed towards rate cuts.

  • Real estate investment activity is expected to remain sluggish in the first half of 2024, due to volatility in the bond market and high interest rates. However, activity is anticipated to pick up in the second half as the Fed begins cutting rates, supported by a resilient economy.

Real Estate Trends

Nearshoring Will Impact All CRE link

  • Nearshoring is becoming a major trend, fueled by various factors including geopolitical forces and shipping costs. For the first time since 2002, annual imports from Mexico have surpassed those from China, highlighting a shift towards closer manufacturing hubs to the US.

  • This trend is reshaping the commercial real estate (CRE) landscape, indicating significant changes ahead for US manufacturers. Rising shipping and freight insurance costs are key drivers behind this pivot towards localization.

  • The implications of nearshoring for the CRE industry are profound and wide-reaching. As manufacturers look to move operations closer to home, we can expect a ripple effect across all aspects of commercial real estate, influencing everything from industrial logistics to office locations.

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More than a third of American homeowners plan to stay in their current homes forever link

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  • A third of homeowners in the U.S. aim to remain in their homes indefinitely, with Hawaii and New York leading in long-term home tenure. In these states, homeowners enjoy lower housing costs due to earlier purchases at lower prices, possibly influencing their decision to stay put.

  • The desire to stay varies significantly by age, with 54% of baby boomers intending to keep their current home forever. This trend decreases with younger generations, showcasing how tenure intentions change across different age groups.

  • Short-tenure states include Arizona, Nevada, and Florida, popular among retirees for their tax benefits on Social Security payments. This contrast highlights the mobility of younger homeowners and the appeal of certain states for retirement living.

Over 1.1M More Occupied Apartment Units Since COVID link

  • The U.S. saw a substantial increase in occupied apartment units, with more than 1.1 million additional units occupied since the start of the global pandemic in early 2020. This growth has kept occupancy rates near all-time highs despite the continuous supply of new apartments.

  • As of February 2024, the occupancy rate for market rate, professionally managed apartments in the U.S. stands at 94.1%. This is slightly down from the 95.4% occupancy rate recorded in February 2020, yet represents a significant increase in the number of occupied units.

  • Approximately 1.5 million new apartment units have been delivered across the U.S. since early 2020. This surge in supply has not dampened the demand for apartments, indicating a robust and sustained interest in apartment living.

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Off Topic

The World’s Biggest Stock Markets, by Country

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Something I found Interesting

Young Adults Living with Parents by State link

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  • The share of young adults aged 25-34 living with their parents or parents-in-law dropped to 19.1% in 2022. This continues a post-pandemic trend of moving out of parental homes.

  • Southern and Northeastern states exhibit the highest shares of young adults living at home. The variation across states shows substantial differences in living arrangements.

  • The trend of young adults living at home varies significantly by region, with the South and coastal areas showing higher incidences. This data highlights the diverse socio-economic factors influencing young adult living situations across the U.S.

Location Specific

A Look at the Tightest Apartment Market in the US  link

  • New York City has rebounded strongly post-pandemic, recovering jobs lost during the crisis. The city's population aged 20 to 34 years old stands at 22.4%, indicating a vibrant demographic interested in apartment living.

  • Despite being perceived as in decline due to high living costs, crime, and the rise of remote work, demand for apartments in NYC has outpaced new supply. Over the past five years, 51,242 units were demanded versus 46,682 units supplied, showcasing a tight market.

  • The tight apartment market in NYC underscores the city's resilience and attractiveness. This robust demand amid challenges points to a sustained urban appeal, especially among younger demographics.

Pro Member Only Content Below

New Report Ranks Best Counties for Buying Single-Family Rentals in 2024 

(This content is restricted to Pro Members only. Upgrade)

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  • The average annual gross rental yield is projected to be 7.55% in 2024, marking a slight increase from 7.39% a year ago. This comes after three years of declining yields, indicating a positive shift for investors in single-family rentals.

  • In about two-thirds of the analyzed markets, rental incomes are rising faster than home prices. Specifically, in 216 out of 341 counties, median rents for three-bedroom homes increased more than median single-family home prices, pushing rental yields upward.

  • High potential rental yields are noted in specific counties, including Indian River County, FL, and St. Louis City, MO, both projecting around 14.6% yields. These areas stand out for their significantly higher returns compared to the national average.

  • Rental returns are on the rise across the majority of the nation, with 216 out of 341 counties showing increased potential annual gross rental yields for 2024 compared to 2023. This reflects a broader trend of strengthening rental markets.

  • Counties with the lowest potential annual gross returns include Santa Clara County, CA, and San Mateo County, CA, highlighting the geographical disparity in rental investment returns. These areas, primarily in the Western U.S., present less favorable conditions for investors.

  • Rents are rising faster than wages in 58% of the analyzed counties, underscoring the growing affordability challenges for renters. This trend is particularly pronounced in major urban centers like Los Angeles and Houston.

That's all, folks.

Cheers,

Vidit

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