WEEKLY
Mortgage Rate (30-Year Fixed): 3.76% (as of 3/3)
MONTHLY
Existing Home Sales: 6.7% (January 2022)
New Residential Sales: 16.2% (January 2022)
Median Sales Price for New Houses Sold: $423,300 (January 2022)
Construction Spending: +1.3% MoM (January 2022)
New Residential Housing Starts: 1.6 million (January 2022)
New Residential Housing Completion: 1.2 million (January 2022)
QUARTERLY
Homeownership Rate: +65.4% (3Q21)
Rental Vacancy Rate: +6.4% (4Q21)
Sources: NAR, BLS, Federal Reserve Bank, MBA
Note: Rates listed are estimates and may not reflect actual rates depending on term, sponsor location, and other factors involved.
10. Deal flow for multifamily market hits record-high values
The multifamily asset class broke its previous record level in terms of deal flows in 2021, according to real estate brokerage research firm Marcus & Millichap. Apartments’ deal velocity reached $1 million, higher by 50% YoY, while rents surged by 200%. According to the firm’s analysts, rents are projected to continue rising this year but will eventually temper. Investors are also most likely to look for other opportunities in markets where there are lower entry costs but higher yield, aided by migration to non-primary metros and better apartment operations.
9. Remote work changes multifamily renters’ needs
Better mobile phone service and internet connectivity, sound-proof walls and flexible apartment design — these are just some of the evolving needs and desires of multifamily renters as a result of remote working arrangements since the pandemic began. According to the 2022 National Multifamily Housing Council (NMHC)/Grace Hill Renter Preferences Survey Report, which interviewed 221,000 renters in 4,564 communities across the country, 25% of renters have shifted to remote work over the past 18 months and are anticipating continuing to work from home for the foreseeable future. They are willing to pay more than $42 a month for faster internet services and around $36 a month for rentable co-working space. Apartment developers have since improved their building design and amenities to accommodate renters’ requests.
8. Multifamily building growth surges; SFH fall
According to the National Association of Home Builders Home Building Geography Index (HBGI), multifamily construction growth in large metro core counties surged from 1.2% in 2Q2021 to 21.8% in 4Q2021. Likewise, large metro suburban areas and small metros experienced the same increase. Among these, construction growth in small metro outlying counties reached 70.4% in 4Q2021, from only 23.7% in 2Q2021. On the other hand, single family home construction fell in all regional markets with large metro core counties suffering 13 percentage points in 4Q2021 from the previous two quarters.
7. Strong multifamily lending to remain stronger in 2022
The Mortgage Bankers Association’s (MBA) Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations revealed this week that multifamily loan originations were 79% higher in 4Q2021 compared YoY, and even increased 44% from the previous quarter. The MBA expects the momentum to be sustained as multifamily lending is projected to reach $493 billion in 2022, surpassing 2021’s record by 5%.
6. Flexible space will be a key factor office growth demand
Almost half of all tenants are expected to increase their use of flex space as part of a new normal working strategy, according to JLL’s 2021 Global Flex Space Report. The study expects more than 30% of current office space to embrace flexibility in design by 2030 to accommodate tenants’ hybrid workplace needs, and landlords’ better revenue streams with this setup. Currently, more landlords are partnering with flexible space operators to meet such growing demand.
5. Office vacancy rates to linger for select buildings
Wharton real estate professor Joseph Gyourko cautions investors that the real impact of remote working to office space demand vacancy will be determined in five or seven years as commercial leases will be set to expire. In an interview with Knowledge@Wharton, Gyourko predicts that the office market will never be the same, as commercial renters will seek out better office buildings with hybrid or flexible configuration, which will put inferior office spaces in “trouble.” He also projects cities will be affected by such change, as retail and shopping centers will eventually lose foot traffic.
4. Renters spending a lot more of their household income on rent
In January, renters spent 29.7% of their income to lease a typical apartment unit, up from 24.8% YoY according to the latest research from the National Association of REALTORS (NAR). It is the eighth consecutive month where rent growth has reached double digits for multifamily properties with two bedrooms. The median apartment rent in the 50 largest metro areas is now at $1,789, according to NAR. The Miami-Fort Lauderdale-Palm Beach, Florida was the least affordable rental market in the country where renters spent 59% of their income on rent. On the other hand, Kansas City was the most affordable with only 20% of income allotted to apartment rent.
3. Demand for senior housing reach record high
Senior housing demand achieved an all-time high in 2H2021, according to the National Investment Center for Seniors Housing & Care (NIC). This indicates continued growth in the market despite the impact of the COVID-19 pandemic. From the 31 primary metropolitan markets surveyed, San Jose, San Francisco, and Boston ranked the highest in terms of occupancy rates in the last six months of 2021. More than a third of these cities’ properties have occupancy rates above 90 percent. The NIC noticed a reversal in demand during 2020 compared to last year as markets absorbed more than 20,000 units in 2H2021.
2. Millennials driving homeownership rates
Millennials are now entering the peak age for homeownership and have accounted for the largest share of first-time home buyers in the past year, according to financial advisory services firm, BGL. In its BGL Insider-Consumer report, its investment banking team expects homeownership rates will continue to increase this year driven by millennials. However, COVID-19 introduced new trends in home purchases as remote work shifted urban demand to suburban options, which the group expects to continue for several more years.
According to Tom LaSalvia, senior economist at Moody’s Analytics, should the Russia-Ukraine conflict linger, it will further accelerate the rise in crude oil prices and potentially impact the housing market in terms of consumers’ apprehension to invest in big purchases. On the supply side, the unabated rise in oil costs will affect shipping and distribution and lead to higher prices for construction materials, where the industry has been suffering for the past months due to supply chain constraints brought by the pandemic. However, analysts are not expecting to change their forecasts for the spring housing market, despite a more unpredictable future brought by the conflict.
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