RealEstateNews 11.11.24
Weekly News Roundup
- Hottest Real Estate Market
- Mortgage Rates are Rising
- Empty Apartments Filling Up
Hottest Real Estate Market
Dallas-Fort Worth is expected to be the nation’s hottest real estate market for investment and development next year. The annual forecast from PriceWaterhouseCoopers and the Urban Land Institute dubbed D-FW as the best place to buy, build and finance property in the year ahead. The report, Emerging Trends in Real Estate, compiled data from more than 2,000 industry experts, and their insights were used to provide an outlook on real estate investment, development trends and other real estate issues across the country.
D-FW earned its ranking as the top market to watch thanks to its “enviable” post-pandemic recovery, its size and its continued demographic growth, according to the report. The region’s total employment has grown 11.2% since February 2020, the fourth-fastest among metros in the nation. D-FW trails only Sunbelt peers in Raleigh, N.C.; Charleston, S.C.; and Austin. The report also touts D-FW’s economic diversity. North Texas is home to 23 Fortune 500 companies, the fourth largest concentration in the country.
Despite the growth, D-FW has remained relatively affordable. Moody’s Analytics rates Dallas’ relative cost of doing business at 102% and cost of living at 113% of their national averages. Median home prices in Dallas have increased almost 38% since the first quarter of 2020 to $382,000. That’s roughly in line with the national median sales price at just under $400,000, according to real estate company Redfin. However, the report warns that heat stress and fire may challenge the area in the coming years. Source: Dallas Morning News
Mortgage Rates Rising
In September, the Federal Reserve lowered its benchmark interest rate for the first time since 2020, giving hope to prospective home buyers that mortgage rates would follow suit. But instead of declining, home loan costs marched higher. The average rate on a 30-year home loan rose to nearly 7.5% after earlier falling below 7%. Strong economic data is a big reason for the rise in rates.
Empty Apartments Filling Up
The biggest apartment construction boom in four decades flooded the market with new supply over the past two years. Apartment owners had to contend with a surge in empty units. That is starting to change. The vacancy rate, or the share of apartment units that are empty, stopped rising for the first time in three years last quarter, as demand for apartments rose to its highest levels since 2021, according to CoStar.
The more than 1.2 million new apartment units that were built during the past two years are filling up. If that demand is sustained, if the economy remains strong and if housing prices remain near record highs, landlords likely will have more pricing power starting sometime next year. That could allow building owners to raise rents more than they have recently. Some 672,000 new apartment units will have been completed by the end of this year, but only about half that number is expected in 2025, and even fewer in 2026, CoStar said.
Rents for new leases nationwide have held close to flat for more than a year. That is due in part to a big split between supply-heavy Sunbelt cities, some of which have seen rent cuts, and the rest of the country, which hasn’t. Throughout this year, the places with the highest renewal rent growth have been on the coasts and in the Midwest. New York City, Los Angeles, Indianapolis and Columbus, Ohio, saw renewal rent increases of 5% or more in July, according to Yardi. Increased return to office orders in major employment hubs may also start translating into even more urban rental demand soon, especially in coastal cities. Source: LA Times