RealEstateNews 12.16.24

Weekly News Roundup

• Millennials Renting Not Buying Homes
• Hottest Real Estate Markets
• Chicago Luxe Real Estate Problems

Millennials Renting Not Buying Homes

As more millennials enter their prime home-buying years and start families, many are finding themselves priced out of the most coveted suburban neighborhoods with top-flight schools. A growing number their age, or even older, are turning instead to upscale single-family rentals nearby. From 2021 to 2023, the share of build-to-rent housing starts doubled to 10% of overall single-family housing, according to the National Association of Realtors’ analysis of U.S. Census Bureau data. For the first time in more than two years, the growth of the U.S. renter pool has outpaced that of homeowner households for the past four quarters, according to a Redfin analysis of U.S. census data. 

In the third quarter, the formation of renter households increased 2.7%, three times faster than homeowner households and the second fastest rate for renters since 2015. The rapidly expanding renter pool is a direct response to the widening gap between how expensive it is to rent versus own a home in the U.S., especially as mortgage rates stay heated at nearly 7% with no immediate signs of cooling. Home prices hover near record highs and the average monthly mortgage payment for a new home is 38% more expensive than apartment rents, according to a CBRE report from earlier this year. 

Sunbelt states are emerging as the hottest build-to-rent markets, due to more land availability and an influx of workers fueling demand. Even AvalonBay, which houses much of its portfolio in coastal areas, said it is focusing its build-to-rent expansion in Sunbelt regions such as Raleigh-Durham in North Carolina and Austin, Texas. Developers and investors say their build-to-rent communities offer a solution to the country’s persistent housing shortage. And they say their rental homes allow tenants to live in the sort of desirable neighborhoods where they often can’t afford to buy. Source: Wall Street Journal

Hottest Real Estate Markets

• According to Realtor.com data, the hottest real estate markets all have something in common: low prices and high inventory.
• Springfield, Massachusettes is the sixth most popular real estate market at the end of 2024. Homes here are still well below the national average, despite the state’s higher taxes and excellent school systems.
• Kalamazoo is located in Southern Michigan, just east of the eponymous Great Lake’s shores. Here homes boast an average selling price of $360,000.
• Not only is the Manchester-Nashua area of New Hampshire the fourth hottest real estate market in the country, but it’s also where homes sell the fastest, nationwide.
• A beloved midwestern city, it’s no wonder why the greater Milwaukee area always makes the list of hottest markets to buy a home. Located on Lake Michigan, this area offers a great balance between urban life and easy access to nature.
• Akron, Ohio, ranks number two on the most popular real estate markets right now. Here, many different styles of homes are easily affordable, including townhomes and single-family units.
• This quarter’s top market, the greater Canton area in Ohio, is affordable and in demand. Here, homes are well below the national average in price, some even boasting listing prices of $165,000 or lower.

Chicago Luxe Real Estate Problems

Chicago’s luxury real-estate market has seen a precipitous drop in recent years. In the third quarter, there were 28 Chicago home sales of $4 million or more, plummeting 28% from 39 in the same period of 2021, according to data from BrokerMetrics. The median price of those sales was $4.625 million, down from $5 million in 2021’s third quarter. Luxury condos in Chicago’s downtown and Gold Coast neighborhoods have been particularly hard-hit, local real-estate agents said. The median price of Chicago condos above $1 million dropped 9.1% in the third quarter from the third quarter of 2021, according to a recent report by brokerage @properties.

By comparison, Chicago single-family homes, as well as prices in suburbs such as Evanston and Naperville, haven’t seen those types of declines. The median price of Chicago single-family homes above $1 million in Chicago rose 14% in the third quarter from the same period of 2021. But older homes that need work are lingering on the market, agents said. Real-estate agents say the beginnings of the downturn stem from 2020, when Chicago was in lockdown at the peak of the pandemic. Following protests related to the killing of George Floyd, the city saw unrest and a dramatic spike in violent crime. There were violent clashes between police and protesters throughout that summer, and mass looting caused stores in the downtown area to be boarded up.

While other major cities like New York and San Francisco have rebounded from periods of strife in the wake of Floyd’s killing, Chicago has seen its overall crime rate remain high. Overall crime in the city has climbed 36% year-to-date compared with the same period 2020, thanks in large part to major spikes in theft and carjackings, although murders in Chicago have declined by 26%, according to statistics from the Chicago Police Department. The spike in crime—along with higher interest rates—has hurt the market downtown. Source: Wall Street Journal