Real Estate Newsletter 4.15.24
Weekly News Roundup
- Housing Costs Skyrocket
- Blackstone Invests $10 Billion in Multifamily
- Record Immigration Impacts Housing
Housing Costs Skyrocket
Property taxes and home-maintenance costs are climbing in much of the country. Non-mortgage costs including property taxes, maintenance, utilities and insurance make up more than half of homeowners’ overall costs, according to a 2022 analysis by Fannie Mae economists. Worst of all, home insurance premiums are soaring. The average annual home insurance cost rose about 20% between 2021 and 2023 to $2,377, according to insurance-shopping site Insurify, which projects another 6% increase in 2024.
Almost 10% of homeowners surveyed by Fannie Mae last year were not confident they could afford their home insurance premiums at their next renewal. Plenty of homeowners are having to stretch financially to meet these home-related expenses. Nearly one in five said they couldn’t afford a $500 emergency repair without going into credit-card debt, according to a February online survey of 1,000 homeowners by tech company Clever Real Estate.
Escalating costs on multiple fronts mean that many first-time buyers will continue to find homeownership a financial stretch. Homeownership affordability fell to its lowest level since the 1980s last year as mortgage rates reached a 23-year high and home prices set new records. Borrowing costs have eased somewhat this year, with the average rate for a 30-year home loan down about a percentage point since October. But other prices related to homeownership keep rising and show little sign of abating. Source: Wall Street Journal
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Blackstone Invests $10 billion in Multifamily
Blackstone has agreed to acquire an owner of upscale apartment buildings for about $10 billion, signaling that one of the world’s largest real-estate investors is ramping up investments again after a period of moving more cautiously. Blackstone is taking private Apartment Income REIT, known as AIR Communities, which owns 76 rental housing communities that are primarily in coastal markets, including Miami, Los Angeles, and Boston, the companies confirmed Monday. Blackstone plans to invest another $400 million to improve the properties, the firm said.
The acquisition is Blackstone’s largest transaction in the multifamily market. It reflects the firm’s bullishness on rental housing and its belief that commercial real estate overall is bottoming and the time is ripe to step up investments. Numerous firms have been stockpiling cash for such opportunities.
Blackstone in recent months has begun to invest more aggressively in the commercial real-estate market, betting that interest rates are stabilizing and access to capital is becoming easier. The company considers multifamily, and rental housing in general, one of the best commercial property segments to invest in. Source: The Wall Street Journal
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Record Immigration Impacts Housing
The US population grew +3.8M in 2023 – the largest one-year increase in US history. This surge in immigration – especially prime working age immigration – is a boost for both the labor market, and for housing. However, frequently new immigrants double up on housing, so household formation will likely lag population growth. But this is important, especially for the multi-family market that is currently under pressure with mostly flat rents and rising vacancy rates.
Back in February, Eric Finnegan, VP, Building Products Research & Demographics, at John Burns Research and Consulting estimated that the US population grew +3.8M in 2023 – the largest one-year increase in US history. A recent Census estimate of +1.6M growth likely underestimated immigration flows. In a research note, Goldman Sachs economists estimated that net immigration surged to roughly 2.5 million in 2023, the highest level in the last two decades.
Data from the 2023 Current Population Survey suggest that recent adult immigrants are more likely to be young or prime age (90%) than the native-born adult population (62%) or adult immigrants who arrived earlier (64%). The surge is likely short-lived as its almost all from immigration, which is conditional on policy, legislation, regulations, etc. Even so, the surge will have important ripple effects for year through housing, the economy, and the rest of society. Source: CalculatedRisk Newsletter
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