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Record number of 65-year-olds reshaping the market:WSJ

Plus, More real estate agents are switching brokerages and 6 more RE insights

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A Quote

"The secret of happiness, you see, is not found in seeking more, but in developing the capacity to enjoy less." - Socrates

Highlight Story

Record number of 65-year-olds will reshape the age milestone: WSJ link

  • The demographic shift is significant, with 4.1 million Americans turning 65 this year, a number expected to rise until at least 2027. This marks a significant increase from the previous decade's daily average, highlighting the growing population of older Americans and its implications for society and the economy.

  • Today's 65-year-olds are healthier, wealthier, and working longer than previous generations. Nearly 20% of Americans aged 65 were employed in 2023, with their median net worth at $410,000 in 2022, up 45% from 2010. This shift is redefining retirement, with many choosing to work due to financial needs or personal fulfillment.

  • The wage gap between older workers and those aged 25 to 64 has narrowed significantly. Older workers now earn $22 per hour on average, up from $13 in 1987, contrasting with the stagnant wage growth for younger workers. This trend underscores the changing dynamics of the workforce and the economic power of older generations.

Macro Trends

Today’s Rates

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Mortgage demand takes a massive hit as interest rates cross back over 7% link

  • Mortgage applications plummet to their lowest level in 25 years as interest rates soar past 7%. This dramatic decrease highlights the sensitivity of the housing market to interest rate fluctuations, significantly impacting affordability for prospective homebuyers.

  • The rise in interest rates has not only cooled demand for home purchases but also virtually halted the refinancing market. With rates now higher than many existing mortgages, the incentive for homeowners to refinance has disappeared, leading to a sharp decline in refinancing applications.

Commercial Real Estate Lending Market Shows Signs of Stabilization in Q4 2023: CBRE link

  • The commercial real estate lending market saw signs of stabilization at the end of 2023, with the CBRE Lending Momentum Index recording its first quarterly increase since Q1 2022. Despite this growth, the index was still down 38.1% from Q4 2022, indicating a cautious recovery.

  • Banks remained the largest contributors to CBRE's non-agency loan closings for the seventh consecutive quarter, accounting for 39.5% of the total in Q3 2023. This demonstrates the banking sector's continued dominance in commercial real estate lending amidst a challenging economic environment.

  • Alternative lenders, including debt funds and mortgage REITs, increased their share of the loan volume to 30% in Q4 2023, up from 27.4% in Q3 2023. This shift highlights the growing role of non-traditional lenders in providing liquidity to the commercial real estate market, especially for multifamily assets.

Real Estate Trends

More real estate agents are switching brokerages: Relitix link

  • The real estate market is seeing an increase in agents switching brokerages, driven by growing confidence in the 2024 housing market. The Relitix Agent Movement Index (AMI) indicates a rise in such movements, with the index reaching a seasonally adjusted value of 91.5 in January, up from December's revised values.

  • Seasonality plays a significant role in agent movement, with peak activity typically occurring in March, following the slower holiday season. This trend is closely monitored by brokerage and franchise leaders as a strategic consideration, reflecting the relative mobility of experienced agents.

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Commercial Real Estate Faces Sharp Valuation Declines in 2023 link

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  • The average decline in property values across 556 reappraised properties in 2023 was a staggering 42%. This consistent drop reflects broader market challenges and underscores the need for investors to recalibrate their expectations.

  • Office properties experienced the most significant valuation drop at 50%, with retail not far behind at 49%. These sectors, particularly hard hit by changing market dynamics, indicate a shift in investment focus and potentially, recovery strategies.

The 20 best states for retirees 

  • States were ranked based on affordability, overall well-being, quality and cost of healthcare, weather, and crime, with affordability being the most heavily weighted category at 40%.

  • The overall ranking of each state was determined by assigning a relative ranking in each category and then applying the weightings of the different categories to come up with a final score.

  • Article has the full list in pictures. Could not extract it easily so here is a link

Risks

Construction Costs Expected to Increase as Much as 6% This Year link

  • Construction costs are on the rise, with projections indicating an increase of up to 6% in 2024. This trend is driven by various factors including labor shortages and the rising prices of materials.

  • The impact of these cost increases is significant for both ongoing and planned construction projects. Developers and investors are advised to adjust their budgets and timelines accordingly to accommodate these changes.

  • Strategies to mitigate the impact of rising construction costs include early procurement of materials and exploring alternative building methods. These approaches can help lock in prices and potentially reduce overall project expenses.

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Proptech

Airbnb plans to use AI, including its GamePlanner acquisition, to create the 'ultimate concierge' link

  • Airbnb acquired GamePlanner.AI, a stealth AI firm co-founded by Siri's co-founder, for around $200 million, aiming to revolutionize its service interface with AI. This move indicates Airbnb's commitment to leveraging cutting-edge technology to enhance user experience.

  • CEO Brian Chesky envisions using AI to transform Airbnb into a platform that offers a highly personalized and adaptive user experience, akin to an "ultimate concierge." This strategy underscores the potential of AI to create more intuitive and responsive digital services.

  • Despite the ambitious plans, challenges such as AI's tendency to produce inaccurate information, known as "hallucinations," could pose hurdles to achieving a seamless AI-powered interface. Airbnb's approach will test the practical limits of current AI technology in improving user interactions.

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One Cool Chart

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Pro Member Only Content

Beyond the Classroom: 2024's Top College Towns Where Good Life Meets Academia 

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  • Bozeman, MT, home to Montana State University, leads as the best college town in 2024, excelling in education quality, affordability, and quality of life. The town is celebrated for its natural beauty, cultural richness, and the high percentage of young, educated residents, making it an ideal place for college students.

  • Western college towns dominate the list with 8 entries in the top 20, highlighting the region's appeal due to its young, educated populations and natural amenities. Towns like Pullman, WA, and Clemson, SC, follow Bozeman in the rankings, offering a blend of academic excellence and vibrant student life amidst scenic landscapes.

  • The ranking criteria included 12 different metrics such as cost of living, tuition fees, graduation rates, and natural amenities. This comprehensive approach ensures that the towns listed offer a balanced experience for students, combining academic opportunities with an enjoyable and affordable lifestyle.

  • link

Build-to-Rent is Attracting Powerhouse Investors: Here’s What’s Next for the Sector 

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  • The Build-to-Rent (BTR) sector is experiencing a surge in interest from institutional investors, driven by the growing demand for single-family rental homes. This trend is fueled by a combination of factors including affordability issues, changing lifestyle preferences, and the desire for more space, which has been particularly amplified by the pandemic.

  • BTR developments are designed to offer the benefits of single-family living without the commitment of homeownership. They often feature amenities similar to those found in traditional multi-family apartment complexes, such as pools, gyms, and community spaces, but with the added privacy and space of a standalone home.

  • The sector's growth is not just a temporary response to the pandemic but is seen as a long-term investment strategy. Analysts predict that the BTR market will continue to expand, with an increasing number of projects being developed to meet the sustained demand for rental homes that offer the feel of a traditional single-family residence.

  • link

US States With The Biggest Increase In Home Prices, Ranked 

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  • Idaho leads the nation with a staggering 53% increase in home prices since 2017. The average home price in Idaho now stands at $429,000, challenging the notion of affordable living in the state.

  • Utah, Arizona, and Washington follow closely behind, with home prices soaring by 49%, 45%, and 42% respectively. Georgia breaks the pattern as the only East Coast state in the top five, witnessing a 41% jump in home prices.

  • North Dakota and Washington, D.C., show the smallest increase at 12% over five years. Alaska and West Virginia are slightly ahead with a 15% increase, while New York, Connecticut, and Illinois are tied with a 17% rise, indicating a more stable but still increasing housing market in these areas.

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That's all, folks.

Cheers,

Vidit

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