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10 Takeaways & Real Estate Market Trends You Need to Know About for Q3

By July 11, 2017 January 21st, 2020 No Comments
real estate market trends

Even though most of us know how important it is to stay on top of real estate market trends, actually doing so tends to be something that slips down and down a to-do list. That’s exactly the reason that we’re moving it to the top of ours. As a top appraisal management company, MountainSeed is researching and summarizing today’s real estate market trends, then placing them in one easy to read round-up for you. Rely on our quarterly trend reports to keep you on top of your residential CRE game.

 

Lifestyle renters dominate apartment trends

Yardi: Rents Rise by 1.5% Nationwide in May – Multifamily Executive

 

While the average U.S. monthly rent is on the rise, rent growth continues to decelerate. Rents rose by 1.5% year over year (YOY) nationwide, but the last time the YOY increase in rent growth was as low as 1.5% was in April 2011. Experts attribute the deceleration to several factors including an increase in apartment supply, affordability, demand, and what has been dubbed as “lifestyle” renters. Those in the lifestyle class are renters that can afford to buy but choose to rent instead. Supply is estimated to peak this year, however, experts agree that new apartment construction will remain steady.

 

April 2011 was the last time YOY increase in rent growth was as low as 1.5%. Get the full recap of #realestate trends from @mountainseed

 

national average rents

 

Taking the office sector by the horns in 2017

Three Strategies for Navigating the Office Market in 2017 – NREI

 

In the past year, the office market has quickly become one of the top sectors, especially with a strong job market and high demand for space. In fact, high demand has created a boom in construction which is setting the market up for a record in new office deliveries. Experts say that in order to stay competitive and find desirable opportunities, there are a few key strategies to put in place. First, target emerging markets surrounding urban areas to capitalize on spillover growth. Second, invest in value-add and amenities. Look for opportunities for collaborative environments or in areas with cafes, gyms, and alternative transportation. Finally, seek long-term investments. Evaluate demographic trends, housing developments, and strong infrastructure.

 

Since Millennials are now the largest demographic in the workforce, they are the primary segment impacting #housing & #office sector growth.

 

Rising interest rates? Keep calm and carry-on.

Another Rate Hike Causes Little Concern in CRE Circles – REIS & NREI

 

Earlier this summer, the Federal Reserve raised target interest rates by 25 basis points to a range of 1.0-1.25 percent making it the second raise this year. However, CRE insiders say not to fear; the shift is unlikely to change market conditions. Instead of interest rates being the big bad wolf, experts say that we should keep an eye on what happens with the $4.5 trillion balance sheet. The sheet includes both Treasury bonds and mortgage-backed securities which total $2 trillion of the portfolio and can affect both commercial and residential sectors. As for the rising interest rates, current interest rates still remain at historic lows despite the increases.

 

Appraiser shortages solved by “temporary” solutions

Interagency Advisory on the Availability of Appraisers – OCC

 

An advisory released by The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the National Credit Union Administration discusses two options to help with appraiser shortages and timeliness for banks and credit unions. Temporary practice permits certified and licensed appraisers to provide services where shortages are peaking. These permits are particularly useful in rural areas. Some states are also allowing reciprocity. Additionally, temporary waivers circumvent certification or licensing requirements for individuals to perform appraisals under Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 in states or geographic political subdivisions when certain conditions are met.

 

Cities drowning in retail struggle to stay afloat

These Cities Have Too Many Stores, and They’re Still Building – Bloomberg

 

With retailers going bankrupt at a record rate, the changes in retail space and buying power are hard to miss. In San Francisco, San Diego, and Seattle, buying power outpaced demand. However, in the remaining top 13 large U.S. metro areas, new development outpaced local demand. Experts accredit the changes to online sales which now make up 8% of the market (up from 1% in 2000) and a competitive brick-and-mortar market. With stores competing against each other for customers, metro areas are seeing area malls shut their doors. Despite these closings, developers continue to build. In fact, a collection of 55 U.S. metros will add 831 million square feet of retail space in the next five years.

 

A collection of 55 U.S. metros will add 831 million square feet of #retail space in the next five years.

 

Retail Development Supply and Demand

 

Slow and steady REITs win the race

Industrial REITs Post Soft Performance Despite Surging Demand – Urban Land Institute

 

Despite being one of the top performing sectors’ in 2016,  industrial real estate investment trusts (REITs) have had a slow start this year. REIT returns are at 4.72% year-to-date. To put that in perspective, data centers are at 18%, infrastructure REITs are at 15.7%, and single-family homes are at 13.7%. Industrial real estate has more opportunities because there’s a higher demand for logistics infrastructure and efficient distribution networks. Since REITs rely on GDP and global trade, the slowdown might be a result of 2017’s political uncertainty and tensions. However, skyrocketing e-commerce sales continue to push demand for warehouse space. Last year, over 200 million square feet of industrial space was delivered.

 

CRE in stable recovery

Commercial Composite Price Indices Advance 1.4% – CoStar

 

Influenced by lower-value properties, the general commercial segment increased 1.4% in April 2017 and is up to 15.9% throughout the 12-month period ending in April 2017. Influenced by higher-value properties, the Investment-Grade segment of the U.S. Composite Index rose 1.3% in April 2017 and 6.5% in the 12-month period ending in April 2016. What does it all mean? The gains indicate a pricing recovery for CRE.

 

Commercial Real Estate Indices

 

Commercial banks tighten their grasp on multifamily mortgages

Commercial/Multifamily Mortgage Debt Tops $3 Trillion For First Time – MBA

 

Total debt for the commercial/multifamily sector rose to $3.01 trillion at the end of Q1. Specifically, commercial/multifamily mortgage debt that’s outstanding rose by $37.6 billion in Q1, a 1.3% increase over Q4. Three of the four major investor groups increased their holdings. Commercial banks continue to hold the largest share of commercial/multifamily mortgages with 41% of the total.

 

Gentlemen (and women), check your CRE engines

Q1 Benchmark Report – MountainSeed

 

Check that everything is running smoothly with MountainSeed’s Q1 Benchmark report. Learn how you compare across each state, region, or even the entire country. You’ll discover turn times and fees for commercial appraisals, appraisal fees by appraised value, turn times for various property types, appraisal increases quarter by quarter, and a four-year trend analysis.

 

U.S. housing market hits a record-setting May

May Housing Market Set New Records for Low Supply, Speed and Competition – RedFin

 

With more than a quarter of homes selling for above asking price, May was certainly a good month for residential real estate. Home sales increased 7.5% compared to May last year which is a strong gain despite a severe shortage in home availability. In fact, the number of homes for sale fell 10.9% giving fewer opportunities for buyers to make purchases. The average home went under contract in 37 days, setting a record for home-selling speed. In a recent study of more than 1,000 homebuyers, respondents said a hypothetical rate hike of 5% would have little to no impact on their buying decision while 23% said it would increase their urgency to buy before another hike occurred.

 

In May, the average home went under contract in 37 days, setting a record for home-selling speed.

 

National Median Sale Price

 

 

Take a breather knowing you’re up to date with the latest real estate market trends. Keep an eye out next quarter for our next trend report edition. In the meantime, visit our blog for the latest in regulations, appraisal management, and industry news.