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These Are the Riskiest Housing Markets in America Right Now

Top 10 most affordable metros for buying a home + 5 more handpicked RE insights

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Estimated read time: 2 minutes 44 seconds.

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Real Estate Trends

Data center construction activity in H1 2023 increased by 25% link

  • Data center construction in U.S. primary markets surged by 25% YoY in H1 2023, reaching a record 2,288 MW capacity due to heightened demand.

  • Rising costs, labor shortages, and limited power availability have prolonged project completion timelines, with some projects taking up to six years.

  • Northern Virginia, the world's largest data center market, witnessed a 284% increase in construction activity in 20 months, with under-construction capacity jumping to 918 MW in Q2 2023.

HELOC activity reached a 15-year peak in 2022 link

  • HELOC activity reached a 15-year peak in 2022, the highest since mid-2007, but has now returned to pre-pandemic rates.

  • The main use for HELOCs remains home renovation and remodeling, followed by debt consolidation, emergencies, and other significant expenses.

  • With trillions in untapped equity in real estate, the home equity market is expected to grow shortly.

The top 10 most affordable metros for buying a home link

  • Increasing mortgage rates and rising home values challenge affordability, yet some U.S. areas maintain a mortgage-to-income ratio below 30%. The national average stands at 30.2%.

  • In 2022, Zillow's research highlighted metros with housing costs below the national average. Notable mentions include Littlerock, Arkansas (27%), Harrisburg, Pennsylvania (26%), and Scranton, Pennsylvania with a mortgage-to-income ratio of approximately 22%.

  • On the flip side, San Francisco emerges as the least affordable metro, where homeowners allocate a staggering 83% of their monthly income towards housing.

 ✅ U.S. Multifamily Market Trends link

  • Multifamily properties have become a top target for investors, with 30% of global investors and 37% of Americas investors prioritizing them. In H1 2023, multifamily accounted for the largest share (32%) of U.S. investment.

  • Inflation predictions were off-mark. While many investors anticipated inflation peaking in 2023, the Consumer Price Index (CPI) peaked at 8.9% in June 2022 and currently stands at 3.7%. CBRE forecasts the year-end inflation rate at 2.9%.

  • Concerns from the end of 2022 included rising interest rates, credit availability, potential recession, and persistent inflation. As of now, inflation concerns have diminished, but the Federal Reserve is expected to cut interest rates in early 2024.

Risks

These Are the Riskiest Housing Markets in America Right Now link

  • New Jersey and Illinois dominate the list of most-at-risk housing markets in Q2 2023, with significant concentrations in New York City, Chicago, and Philadelphia areas. The South and parts of the Northeast are less susceptible to market downturns.

  • The vulnerabilities are based on factors such as home affordability, underwater mortgages, foreclosures, and unemployment rates. Specifically, New Jersey and Illinois had 23 of the 50 counties most vulnerable to potential market declines.

  • Despite the vulnerabilities, the overall U.S. housing market showed improvement, with the median home price rising by 10% from Q1 to Q2 2023 after a 7% dip in the previous three quarters.

Something I found Interesting

Why Is Housing Inventory So Low? link

  • Underbuilding has been a persistent issue. For 14 consecutive years, builders didn't meet the historical average for constructing new homes, leading to a significant inventory deficit.

  • Current mortgage rates have a lock-in effect. Many homeowners are hesitant to sell, fearing they'll end up with a higher rate on their next home.

  • Media misinformation is causing undue fear. Negative headlines predicting housing crashes or significant price drops have made potential sellers wary, even though these predictions haven't materialized.

Location Specific

Atlanta’s Apartment Performance Slows Notably link

  • Despite solid apartment demand in Atlanta, record-high new supply levels have led to a decline in occupancy and rent change.

  • New apartment deliveries in Atlanta reached an unprecedented high with 16,715 units in the year-ending 2nd quarter of 2023, surpassed only by Phoenix.

  • Effective asking rent in Atlanta dropped by 3.7% in the year-ending August 2023, marking the city's most significant decline in two decades.

Proptech

VC-backed Roam seeks to connect buyers, assumable mortgages link

  • Roam, aiming to aid homebuyers in finding homes with assumable mortgages, has secured $1.25 million in seed funding. Notable backers include the renowned San Francisco-based venture capital firm Founders Fund and Opendoor's ex-CEO, Eric Wu.

  • With mortgage rates at their lowest in 20 years and many potential buyers being priced out, the interest in assumable mortgages is on the rise. Roam is launching its services in several states, including Georgia, Arizona, Colorado, Texas, and Florida.

  • Roam's founder and CEO, Raunaq Singh, emphasizes the untapped potential of assumable mortgages, suggesting they could influence up to 30% of all U.S. real estate transactions, addressing the pressing issue of housing affordability.

That's all folks. Hope you found value.

Cheers,

Vidit

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