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The U.S. Housing Market Gained $2 Trillion in Value Over the Last Year

Plus, Restaurants Sales Projected to Rise 6% and 5 more RE insights

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A Quote

I'll repeat something you might consider tattooing on your forehead: What we fear doing most is usually what we most need to do - Timothy Ferriss

Macro Trends

Today’s Rates

Homebuyer mortgage demand down for 5th consecutive week link

  • Homebuyer demand for purchase loans has declined for the fifth consecutive week, with mortgage rates remaining above 7 percent. This trend reflects a 5 percent week-over-week decrease in purchase loan requests and a 12 percent drop from the previous year.

  • Applications to buy new homes saw a 19 percent increase in January from the previous year, suggesting a shift towards new construction due to the existing home shortage. This shift is occurring despite the overall sluggish demand in the housing market.

  • Mortgage rates have been on the rise, with 30-year fixed-rate mortgages reaching 6.93 percent, up 43 basis points from a recent low in February. This increase in rates is contributing to the ongoing decline in homebuyer mortgage demand.

Highlight Story

The U.S. Housing Market Gained $2 Trillion in Value Over the Last Year link

  • The U.S. housing market experienced a significant value increase, gaining $2.4 trillion over the last year, bringing its total value to $47.5 trillion. This growth represents a 5.3% increase from the previous year, marking the largest gain in 11 months.

  • Affordable metros in the East Coast and Midwest saw home value gains of over 10%, while more expensive metros and pandemic boomtowns witnessed declines. This trend highlights the varying impact of economic factors across different regions.

  • Elevated mortgage rates and affordability challenges have slowed housing demand, yet home values continue to rise due to a shortage of homes for sale. Many homeowners are reluctant to sell because they secured low mortgage rates in recent years, contributing to the supply constraint.

  • New construction has slightly alleviated the housing shortage, contributing to the overall gain in home value. Approximately 96 million homes were included in Redfin's analysis, up from 95 million in December 2022.

  • The average U.S. home was valued at $495,183 as of December, up from $474,740 a year earlier. However, not all homeowners have seen their property values increase, with average home values peaking in the summers of 2022 and 2023 before experiencing declines.

  • Newark, NJ, New Haven, CT, and Camden, NJ, led the metros with the largest year-over-year increases in home value. These areas are becoming more attractive due to their affordability compared to nearby major cities like New York.

  • Urban home values grew by 3.6% year over year, while suburban and rural areas saw increases of 5.6% and 6.3%, respectively. The shift towards remote work and the search for affordability have driven growth outside of urban centers.

Real Estate Trends

Restaurants Sales Projected to Rise 6% link

  • The food and drink industry, a significant segment of net lease, is expected to see a 6% increase in restaurant sales. This projection is based on a review of industry trends from 2023 by Citizens, a banking company with expertise in the restaurant sector.

  • Increased menu prices and strong demand are the primary drivers behind the projected sales growth. This trend reflects the industry's resilience and adaptability in response to economic challenges.

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Commercial Foreclosures Increasing link

  • Commercial foreclosures have seen a significant rise, escalating from 141 in May 2020 to 635 in January 2024. This sharp increase reflects a 17% jump from January and a 97% surge from the previous year.

  • California, New York, and Texas are leading the states with the highest number of commercial foreclosures as of January 2024. This trend indicates a nationwide challenge in the commercial real estate sector.

  • The increase in commercial foreclosures is not just a rebound to pre-pandemic levels but also highlights the sector's ongoing adjustments. These adjustments are in response to changing business practices and consumer behaviors

Risks

Bulk Warehouse Space Sees Significant Drop in Occupancy link

  • Occupancy rates for bulk industrial spaces dedicated to warehouse and distribution plummeted nearly by half in 2023 compared to 2022. This decline was anticipated following two years of exceptionally high and unsustainable demand.

  • Vacancies increased across all regions of the U.S. and nearly every market, influenced by 607 million square feet of new development. Remarkably, about 85% of this new development was speculative.

  • Some emerging markets saw vacancy rates surge by several hundred basis points over the year, with figures nearing or surpassing 10%. The report suggests it might take a while for these rates to stabilize back to historical norms

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Off Topic

The State of Global Fertility

Pro Member Only Content

Charted: U.S. Median House Prices vs. Income

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  • The gap between median incomes and median house prices in the U.S. has been widening, with data from the Federal Reserve highlighting this trend from 1984 to 2022. The disparity indicates a growing challenge for Americans in affording homes based on their income.

  • From December 2019 to November 2021, house prices surged by nearly 24%, marking the fastest rate on record. This increase was partly attributed to the rise in remote work, which led to higher demand in areas conducive to this lifestyle.

  • The national average for down payments on houses more than doubled from $13,250 in Q1 2020 to $31,500 in Q3 2023. This reflects the escalating costs of entering the housing market.

  • States like Washington D.C., Florida, and Hawaii have the highest median down payments, each at $98,670, showcasing the significant financial barriers to homeownership in these locations.

  • The commercial real estate market has faced challenges, including falling demand and rising interest rates, contrasting with the residential market's price increases. This dynamic shift underscores the broader impacts of economic and work-life changes on real estate sectors.

Mapped: Inflation Projections by Country, in 2024

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  • Global inflation is expected to decrease to 5.8% in 2024, down from an estimated annual average of 6.8% in 2023. This decline is attributed to tighter monetary policies, falling energy prices, and a cooling labor market.

  • Venezuela is projected to experience the highest inflation rate at 230%, despite a dramatic fall from hyperinflation levels due to U.S. sanctions being lifted and increased dollarization of its economy. This highlights the extreme economic volatility in countries with significant political and economic challenges.

  • In the United States, inflation is forecasted to reach 2.6% in 2024, with potential risks including unexpected economic momentum and $290 billion in excess savings held by households. These factors could continue to fuel consumer demand and impact inflation rates.

  • Europe's inflation rate is anticipated to average 3.3% across advanced economies, influenced by lower natural gas prices and subdued GDP growth. This suggests a more stable inflationary environment compared to previous years.

  • China faces a forecasted inflation rate of 1.7%, impacted by troubles in the property market and a manufacturing slowdown. This reflects broader economic challenges and low consumer confidence in the world's second-largest economy.

That's all, folks.

Cheers,

Vidit

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