RealEstateNews 8.12.24
Weekly News Roundup
- Dying Department Stores
- Real Estate Deals Falling Through
- 15-Month Low in Mortgage Rates
Dying Department Stores
Department stores are bleeding customers, and landlords no longer view them as magnets for shoppers. Discounters are underpricing them. Specialty stores are outmaneuvering them. And luxury brands are sometimes bypassing department stores to open their own shops. The surviving operators are making big moves in hopes of turning things around. Saks Fifth Avenue’s parent company is buying rival Neiman Marcus. Nordstrom executives are exploring taking the company private. Macy’s new chief executive is closing stores while trying to improve the shopping experience at its leaner fleet.
But department stores’ long-term decline will be difficult to reverse. Their sales peaked just before the turn of the century and have been on a downward trajectory ever since, according to U.S. census data. Department-store sales bounced back somewhat in 2021 and 2022 after plunging at the start of the pandemic, but never recovered to 2019 levels. The sector’s sales fell last year and were basically flat in the first five months of 2024. Now, department stores are among the weakest drivers of mall foot traffic, with visits to these retailers down significantly compared with 2019.
Major department stores now occupy less than half of all anchor spaces at enclosed shopping malls, real-estate firm Green Street said. There are roughly 500 vacant department-store spaces nationwide, with more closures on the way as Macy’s shutters 150 underperforming stores over the next three years. Department stores’ decline is a primary reason why regional malls—originally designed to lure department stores out of America’s urban downtowns—continue to struggle even as other types of retail real estate are reporting record-low vacancy rates. Source: Wall Street Journal
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Real Estate Deals Falling Through
Buyers are backing out of home purchase deals at a record rate — but real estate agents say deals are falling through on flimsy grounds. “We’re seeing nightmare scenarios where deals are getting canceled at the last minute for the most minute reasons,” said Rafael Corrales, a Redfin Premier agent in Miami, where about 2,500 home purchases were canceled in June (or 17.6% of homes that went under contract). However, Corrales adds there’s a bigger problem that’s giving buyers cold feet. “Buyers often back out during the inspection period because they find something they don’t like, but affordability is really the underlying issue.”
A recent Redfin report reveals around 56,000 home purchases fell through last June — or, nearly 15% of homes that went under contract — marking the highest percentage of any June on record. Americans are thinking twice about purchasing property right now with the median home sale price climbing 4% since last year to a record $442,525 in June and the average 30-year mortgage rate at 6.92%. Some are also considering waiting it out a little longer in the hopes that the key rate could fall in September — even though policymakers just voted to hold it steady in July — and ease some of their affordability concerns.
With fewer takers, properties are languishing longer on the market, with the number of active listings climbing nearly 13% since last year, according to Redfin. As a result, desperate sellers trying to offload their homes are reducing prices to reel buyers back in. As a result, desperate sellers trying to offload their homes are reducing prices to reel buyers back in. Nearly one in five homes for sale in June had a price cut — also the highest level of any June on record, reports Redfin. That’s a jump from 14.4% the year prior and just behind the 21.7% record set in October 2022. Source: Yahoo Finance
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15-Montly Low in Mortgage Rates
Mortgage rates fell to the lowest level in more than a year, raising hopes for relief in the battered U.S. housing market. The average rate on the standard 30-year fixed mortgage fell around a quarter percentage point to 6.47%, according to a survey of lenders released Thursday by mortgage-finance giant Freddie Mac, a low not seen since May 2023 and the sharpest weekly decline in around nine months. If sustained, lower mortgage rates could help shepherd some Americans back into a market that they have been priced out of in recent years. Home sales last year fell to their lowest level in nearly three decades, and they have been similarly sluggish in 2024.
Rates add up quickly when it comes to mortgages: A difference of a few percentage points can translate to hundreds of thousands of dollars in interest over the life of a 30-year loan. Many would-be buyers have found themselves priced out of the market in recent years, while would-be sellers have been hard pressed to give up mortgages they locked in before rates went up. That has worsened supply challenges that have kept prices near record highs.
Mortgage rates have roughly doubled since the Federal Reserve began its campaign to curb inflation in early 2022, which has dramatically pushed up the monthly cost to borrow for a home. Inventory of homes for sale has been rising but it remains well below historic averages, which could keep a damper on sales activity unless supply picks up. But the past week’s big drop is raising hopes that it could spur more buyer interest. Source: Wall Street Journal
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