Real Estate Headline News 2.13.24

Weekly News Roundup

• Rents Drop for Wealthy, Rise for Everyone Else
• Home Sales Pickup in 2024
• Global Impacts of Chinese Property Crisis

Rents Drop for Wealthy, Rise for Everyone Else

At penthouse apartments and sprawling single-family homes, property owners are offering big discounts and move-in deals to keep units full. These price cuts follow the largest wave of apartment construction in decades. The surplus of new housing is driving down prices at the top of the market, which is reflected in the nation wide rental figures. But high-end rent cuts mask how much the cost continues to rise to lease less-lofty residences.

Rents at middle- and lower-tier apartments were up about 2% nationally in December, compared with a year earlier, according to Yardi, which tracks prices for a cohort of tenants it calls “renters by necessity.” Steady demand, especially at middle and lower price points, continues to support rent growth, analysts said. But with construction and labor costs high, relatively little of new rental supply targets lower tiers of the market, so those renters are less likely to be on the receiving end of price cuts.

The share of American renters who spend at least 30% of their income on rent has been rising over the past two decades. It is now half of the renter population, according to a report published last month by Harvard University’s Joint Center for Housing Studies, which analyzed census data from 2022. Source: Wall Street Journal

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Home Sales Pickup in 2024

Falling mortgage rates boosted home-shopping activity in January, luring the first wave of opportunistic buyers back to the market after last year’s epic collapse in home sales. A number of home seekers who paused when borrowing rates marched higher last year have resumed their search, real-estate agents say. Real-estate showings in the week ended Jan. 31 were up 9.9% from the first week of the year, according to ShowingTime, a subsidiary of Zillow Group.

Buyers are seizing on the recent reversal in mortgage rates, which hit a 23-year high of 7.79% in October. The average rate on a 30-year fixed mortgage has fluctuated between 6.6% and 6.7% this year and was at 6.63% last week, according to Freddie Mac. That recent drop looks poised to bolster sales activity in 2024. Mortgage purchase applications rose in the week ended Jan. 19 to the highest seasonally adjusted level since April, before falling the following week, according to the Mortgage Bankers Association. Source: Wall Street Journal

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Global Impacts of Chinese Property Crisis

Chinese investors and their creditors are putting up “For Sale” signs on real estate holdings across the globe as the need to raise cash amid a deepening property crisis at home trumps the risks of offloading into a falling market. Now, a new batch of overseas assets acquired in a decade-long Chinese expansion spree are starting to hit the market as landlords and developers decide they want cash now to shore up domestic operations and pay off debts — even if that means taking a financial hit.

Beijing’s crackdown on excessive borrowing has left few developers unscathed, even those once considered major players. A unit of Guangzhou-based China Aoyuan Group Ltd., for example, which is in the middle of a $6 billion debt restructuring plan, sold a plot in Toronto at about a 45% discount to the 2021 purchase price late last year, according to data provider Altus Group.

While so far there has only been a trickle of Chinese-owned sales in Europe — last year a London office building linked to Shimao Group Holdings Ltd. Chairman Wing Mau Hui sold for about a 15% discount to an earlier sale agreed in 2022 that did not close, according to a person with knowledge of the matter — the volume is starting to grow again. Source: Fortune

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