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Top 10 ZIPS with Highest Foreclosure Rates in 2023

Plus, 6 Markets that had most net move ins in 2023 and 6 more RE insights

Macro Trends

Number of price cuts drops as housing inventory rises link

  • Housing inventory is growing while the number of price cuts is falling, a trend typical for this time of year. In the first week of January, inventory rose from 499,143 to 505,223, compared to a smaller increase in the same week last year.

  • The percentage of homes taking a price cut before selling is decreasing. In 2024, 32.2% of homes took a price cut, down from 35.8% in 2023, indicating a more stable housing market compared to the volatility seen in 2022.

  • Mortgage rates and the 10-year yield are key indicators for housing in 2024. The forecast suggests a 10-year yield range between 3.21%-4.25%, which could result in mortgage rates between 5.75%-7.25%, assuming spreads remain wide.

Real Estate Trends

Top 10 ZIPS with Highest Foreclosure Rates in 2023 link

  • Foreclosure filings in the U.S. increased to 357,062 in 2023, up 10% from 2022 and 136% from 2021, but still 28% lower than pre-pandemic levels in 2019. This reflects a significant shift in the housing market, with foreclosure rates still below the peak of nearly 2.9 million in 2010.

  • The highest foreclosure rates were observed in New Jersey, Illinois, Delaware, Maryland, and Ohio, with New Jersey leading at 0.46% of housing units. Metro areas like Cleveland, Ohio, and Atlantic City, New Jersey, also reported high foreclosure rates, indicating regional variations in housing market stress.

  • Among larger ZIP codes with 20,000 or more housing units, Chicago, IL (60628), and Edinburg, TX (78542) topped the list with foreclosure rates of 1.46% and 1.25%, respectively. This data highlights specific areas where housing market challenges are most acute, offering insights for potential market interventions and policy responses.

The Lock-in Effect: 89% of People With Mortgages Have an Interest Rate Below 6%, Down From a Record 93% in 2022 link

  • The majority of U.S. homeowners with mortgages, 88.5%, have rates below 6%, a decrease from the mid-2022 peak of 92.8%. This trend is influencing many to stay in their current homes, a phenomenon known as the "lock-in effect."

  • Despite the lock-in effect, the share of homeowners with rates below 6% is declining. Some are moving due to life events or desires for change, even if it means giving up lower rates. This shift is occurring as new homebuyers enter the market with rates above 6%.

  • The housing market is still constrained by a shortage of listings, but there's a gradual increase in home listings. This change is partly due to a slight dip in mortgage rates and homeowners' acceptance that rates won't return to the lows of around 3% soon.

6 Markets That Evaded Net Move-Outs in 2022 and 2023 link

  • Despite widespread net move-outs in the U.S. during 2022 and 2023, six markets remarkably avoided this trend. These markets include Charleston, Madison, Sioux Falls, Huntsville, Provo-Orem, and Boise City, each demonstrating unique strengths in maintaining apartment demand.

  • Charleston led with exceptional job growth, increasing its workforce by 5.9% by November 2023, while Madison relied on moderate supply and steady demand. Huntsville and Sioux Falls stood out for their significant apartment inventory growth, with Huntsville's inventory expanding by 15.6% in 2023.

  • Provo-Orem benefited from a growing young adult population, supported by local universities, and Boise City attracted both remote workers and significant job growth, with its employment base growing by 4.2% in the year ending November 2023. These markets exemplify resilience and adaptability in challenging economic times.

Survey: Most Young Adults Live Near Their Hometown link

  • A significant 62% of young Americans choose to live in or near their hometowns. The main reasons include the need for family support, especially amidst high housing costs, and the comfort of familiar surroundings.

  • The pandemic has influenced family dynamics, with many young adults moving closer to their parents. In 2023, the median distance moved by sellers dropped dramatically from 50 miles to just 20 miles, emphasizing a trend towards proximity to family and friends.

  • Young parents and high-income individuals prioritize living near family. Nearly three-quarters of young parents cite childcare support as a key reason, while 64% of men are more likely to live near their hometown compared to 50% of women.

Opportunities

Prime-Age Renters Are Heading to These Areas link

  • Cities in the Southeast are attracting a significant influx of people aged 20 to 34. This demographic shift is making these areas particularly appealing for apartment markets.

  • From 2021 to 2022, there was a 1% increase in this age group, amounting to 700,000 new residents. The spike was even more pronounced in several key apartment markets.

  • The trend highlights the growing appeal of the Southeast for younger renters. This shift could have lasting impacts on real estate dynamics and urban development in these regions.

Something I found Interesting

Apartment starts hit a 40-year high in 2023. link

  • In 2023, the U.S. experienced the highest number of rental units delivered since the 1980s, leading to a decrease in rental price growth and an increase in the national rental vacancy rate. However, 2024 is projected to see a 25% reduction in new rental units, from 565,000 in 2023 to around 444,000.

  • The multifamily vacancy rate rose from 7.3% in September to 7.5% in December 2023, marking the ninth consecutive quarter where supply exceeded demand. This oversupply particularly impacted Sun Belt markets like Austin, Texas, where rents fell by 5.1% year-over-year in the fourth quarter.

  • Demand for rental housing varied across different markets and price points in 2023. While luxury rental markets experienced negative rent growth, mid-market rentals saw a 1.4% increase in rent. This divergence in demand levels is historically unique, with mid-market units being somewhat insulated from the oversupply affecting the luxury sector.

One Interesting Chart

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