• Zero Flux
  • Posts
  • Top 10 Counties with the Highest Rental Rates in 2024

Top 10 Counties with the Highest Rental Rates in 2024

Plus, nearly 1 million units underway at the start of 2024 and 6 more real estate insights

Macro Trends

Mortgage rates dip to 6.6% to mark the lowest level since May 2023 link

  • Mortgage rates have fallen to 6.6%, the lowest since May 2023, offering relief to prospective homebuyers. The 30-year fixed-rate mortgage saw a slight decrease from last week's 6.66%, according to Freddie Mac.

  • The decline in mortgage rates coincides with a jump in mortgage applications, rising over 10%. Both refinancing and home purchasing applications saw significant increases, indicating renewed interest in the housing market.

  • Despite the positive trend in mortgage rates, housing starts dropped by 9% in 2023. This decrease suggests ongoing challenges in new construction home availability, potentially impacting the housing market's recovery.

Pending Home Sales Rose 4% in December—Biggest Jump in Over Two Years link

  • December 2023 saw a significant 4.1% month-over-month increase in pending home sales, the largest since September 2021. This surge is attributed to the steep drop in mortgage rates, which fell to 6.82% from 7.44% in November.

  • Home prices also jumped by 4% year-over-year to $403,714, marking the most substantial annual increase since October 2022. This rise in prices is driven by the persistent shortage of homes for sale, fueling competition in certain areas.

  • Despite the uptick in buyer and seller activity, the overall housing supply remains below pre-pandemic levels. Active listings increased by 3.1% month-over-month but were still down 5.1% from the previous year, indicating a continued tight market.

Real Estate Trends

Nearly 1 million units underway at the start of 2024 link

  • The U.S. is witnessing a boom in apartment construction, with nearly 1 million units underway at the start of 2024, a figure close to all-time highs. In 2023, over 670,000 units were projected to be delivered, indicating a significant increase in new housing options.

  • Several Sunbelt markets, including Dallas and Phoenix, are experiencing a surge in apartment development. Dallas leads with about 75,000 new units, while Phoenix has over 67,000. This rapid growth is affecting market fundamentals, leading to rent losses and increased concessions in some areas.

  • The future of apartment construction shows a temporary surge, with 2024 and 2025 expected to be record years. However, a slowdown is anticipated post-2025 due to reduced development financing and a decline in multifamily permits, signaling a shift in the housing market dynamics.

Top 10 Counties with the Highest Rental Rates in 2024 link

  • Collier County, Florida, leads the list with a staggering 3-bedroom rental price of $8,000 in 2024. Despite high rental costs, buying is more favorable here, with home prices increasing faster than rents.

  • Santa Barbara County, California, follows with a 3-bedroom rental rate of $6,950. Similar to Collier County, it's more economical to buy than rent, as home prices are rising more rapidly than rental rates.

  • full list: Collier County, Florida; Santa Barbara County, California; Marin County, California; Westchester County, New York; Orange County, California; Los Angeles County, California; Monterey County, California; San Mateo County, California; San Francisco County, California; Riverside County, California.

Prime Multifamily Metrics Continue to Increase in Q4 link

  • Despite steady interest rates since July, prime multifamily assets' internal rate of return (IRR) targets, going-in cap rates, and exit cap rates have slightly increased in Q4. This trend is expected to reverse with anticipated Federal Reserve rate cuts by midyear.

  • The average prime multifamily going-in cap rate rose by 170 basis points to 5.06% since Q1 2022, surpassing the pre-pandemic average by 85 basis points. The spread between going-in and exit cap rates is now at its narrowest since 2014, indicating a stable yet cautious market outlook.

  • Unlevered IRR targets for prime multifamily assets climbed by 18 basis points to 7.68% in Q4, marking the widest spread over going-in cap rates since 2014. This increase reflects heightened investor caution and expectations of rental growth moderation, with a 2.4% annual asking rent growth forecast over the next three years.

Seniors want to stay near home link

  • Seniors are increasingly choosing to stay in their home regions rather than relocating for retirement. This trend is particularly noticeable around old-growth Eastern cities.

  • The article suggests a growing demand for home care services in these regions. This shift could impact the senior living and care facility market, adapting to the needs of aging residents who prefer to stay in familiar surroundings.

College Towns Outperform Nation on Rents and Occupancy link

  • College towns have shown remarkable resilience during economic downturns, like in 2020 and early 2021. They tend to have steadier apartment market performance and higher occupancy rates compared to the national average.

  • As of the fourth quarter of 2023, occupancy in college towns was 150 basis points above the national norm. This gap has widened significantly since the pandemic, indicating a growing preference for college town living.

  • The construction of new units in college towns is generally lower than the national average. Over the last five years, the construction inventory ratio in these towns averaged around 2.9%, compared to 4.5% nationwide, contributing to their market stability.

One Chart

Pro Member Only Content

Latest Proptech Funding Rounds

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

That's all, folks. If you enjoyed today's issue, please reply (it helps with deliverability)

Cheers,

Vidit

If you are finding value, please consider helping the newsletter by becoming a paying subscriber

A subscription gets you:

✓ Content delivered 5-6 days a week

✓ Exclusive insights that are usually tucked behind paywalls (which I cover the costs for)

✓ Curated Top 10 lists

✓ The latest updates on prop-tech funding rounds

Subscribe for free to keep reading

This content is free, but you must be subscribed to Zero Flux to continue reading.

Already a subscriber?Sign In.Not now

Join the conversation

or to participate.