August 6, 2022 Weekly Investor Update

Life Bridge Capital Weekly Investor Update

August 6, 2022

The Latest in Commercial Real Estate (CRE), Economy & Markets





Mortgage Rate (30-Year Fixed): 4.99% (as of 8/4)


Existing Home Sales: -5.4% (June 2022)

New Residential Sales: +17.4% (June 2022)

Median Sales Price for New Houses Sold: $402,400 (June 2022)

Construction Spending: -1.1% MoM (June 2022)

New Residential Housing Starts: 1.59 million (June 2022)

New Residential Housing Completion: 1.34 million (June 2022)


Homeownership Rate: +65.4% (2Q22)

Rental Vacancy Rate: +4.5% (2Q22)


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. Multifamily market remains hot in Nashville

Speakers who come from a variety real estate companies at the recently concluded 3rd Nashville Commercial Real Estate Summit all agreed that the Nashville multifamily real estate market is on a streak. The market has survived the impact of COVID-19 and the rise in interest rates. The panelists also noted the changing demands of consumers that has been met by the developments in the metro area. Aside from multifamily developments, they also noticed a resurgence in industrial space and medical centers in the area.


9. Multifamily lenders achieve historic levels of activity 

The Mortgage Bankers Association (MBA) announced a banner year for multifamily lenders in 2021, thanks to strong demand from property investors. Multifamily lending was up 35% or $487.3 billion, a record-breaking value after 2020’s $359.7 billion. A total of 32% of the more than 2,000 lenders that were surveyed successfully transacted five or fewer multifamily loans over the year. The MBA cited last year’s low interest rates, strong property fundamentals, rising property values, and ample capital sources as contributors to the growth in lending. Although lending is expected to fall by 10% this year, the group expects it to rebound by 2023 and 2024.


8. Some metro areas have higher multifamily vacancies – but not because of migration

Data from the National Association of Realtors (NAR) revealed that Huntsville, AL had the highest multifamily vacancy rate in the previous quarter at 14.1%. This was followed by Coeur D’Alene, ID (13.9%), Corpus Christi, TX (11.7%), Beaumont/Port Author, TX (11.6%) and Augusta/Richmond County, GA (10.6%). The report indicates that among the metros in the survey, several locations such as Coeur D’Alene, Huntsville, Augusta, Reno, NV and Pensacola, FL experienced vacancy rate hikes not because of outmigration but due to the increase in new apartment construction. On the other hand, some areas experienced lower vacancy rates since the pandemic began. This includes cities such as South Bend, IN (-6.6%) and Baton Rouge, LA (-4.8%).


7. More office-to-multifamily conversions in downtown Dallas needed

Dallas needs more office adaptive reuse development, according to Adolfson & Peterson Construction’s Will Pender. This was announced after the firm noticed data pointing to the necessity of converting offices into multifamily properties. As of March 2022, 29.3% of 40.9 million sq ft of downtown office market space is vacant, as reported by JLL. The metro is currently ranked 11th in the country by RentCafe for office-to-residential adaptive reuse after 27 buildings were converted to apartments that created 4,797 units. JLL also reports that 1 million sq ft of CBD office space is currently being redeveloped into luxury apartments and hotels to accommodate the growing demand.


6. Multifamily owners forecast more rent growth

Real estate executives recently interviewed by Bisnow revealed that despite the red-hot inflation and worries over the recession, multifamily real estate investment trusts remained stable. Several multifamily REITs, for instance, performed exceptionally in 2Q22, such as Essex which grew 20.6%. In addition, the executives opined that the continued home price growth and mortgage rates make it favorable for the multifamily market to stay resilient in 2H22. 


5. Austin vacancy rates continued to drop in 1H22 

Austin’s very strong renter demand pushed vacancy rates in 2Q22 to 4.6%, which further emphasized its decline in 1H22. Rents continue to climb in the metro with asking rents already at 15.7% higher compared YoY. This translates to $1,516 per month in 2Q22. On the other hand, investment activity rose in the same quarter at more than 40% from 1Q22. The median price in 2022 has reached $260,400 per unit, with cap rates averaging 3.7%. Most of the drop in vacancy rate was observed in Class B and C properties, ending 2Q22 at 4.3%,100 basis points below YoY.


4. Cost of rent in Austin to keep on surging recently tracked rental costs in Austin and reported that a one-bedroom unit is already on average at $1,525 per month while a two-bedroom rental will cost $1,800 a month. According to the company’s Vice President, Cindi Reed, these rents are higher than what has been recorded in San Antonio, Dallas and Houston. She is calling for a faster completion of apartment constructions to meet the high demand. Within last year, a total of 56 new apartments were built, contributing more than 15,000 units. As of this year, a total of 48 apartments are in the pipeline, expected to deliver more than 13,000 units.


3. Denver rental market heats up even more

There’s no stopping Denver’s hot rental market this year, even at the threat of interest rate hikes. Apartment List’s Rob Warnock opined that the intense competition among potential renters is largely felt in the city and has brought about the very low vacancy rates. In addition, Warnock observed that the current vacancies are scarce compared to pre-pandemic levels, and more people are stuck renting because of the high cost of owning a home. 


2. DFW needs 19,000 new apartments each year

According to The Dallas Morning News, Dallas-Fort Worth now has a deficit of 600,000 apartments. This means that to meet the surge in demand for rental properties, the metro has to produce 19,000 new apartments annually for the next 13 years. Paula Munger, assistant vice president of industry research and analysis with the National Apartment Association (NAA), opined that the financial crisis today has just started to pick up but it’s not yet enough to accommodate demand. The Dallas Morning News also reported that North Texas’ apartment vacancies are less than 4%, while median rent is already at $1,536 in Dallas and $1,374 in Fort Worth.


1. Apartment rents across the U.S. surging in almost 400 metro area’s list of the highest rent increases in the country is topped by the New York City metro area, followed by Boston, Miami, San Francisco, Seattle and Austin, where rent was up 100% YoY. A total of 400 cities have experienced rent increases. The company projects that first-time homebuyers will be paying $2,400 a month on average, which is far from the $1,876 rental in a typical apartment. The rise in rents is attributed to shortage of affordable housing, soaring inflation and general rise in home prices that makes affordability out of reach.



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