What I’m Reading
Terminal Velocity: Zillow’s latest forecast predicts that the year-over-year rate of home price growth will hit 22% in May before gradually slowing to 17.8% in February 2023. This despite a dramatic rise in mortgage rates and decline in household affordability. Zillow It’s almost as if people who are locked in at 2.5% wont’ sell when when it would require buying a new house at a 4.5% rate or something. The other drama could be in the new construction market. At some point, affordability gets so bad that we see cancellations. I would imagine that this plays into the hands of the large SFR platforms who can still access very low cost capital and will pick up the slack so long as the can bank on rent increases. Rents, btw will continue to rise as marginal buyers continue to rent – at least until we get a recession. TL/DR: pitchforks could be coming….
On Watch: US recession risks are on the rise with interest rates increasing and growth decelerating – albeit from high levels. However, a high level of economic uncertainty means that it does not yet rise into the territory of being a high confidence forecast. Capital Spectator
Diverted Flow: In theory, opportunity zones were created as an incentive for investors to pay closer attention to economically disadvantaged communities. In practice, program loopholes that allow zones to include affluent and already gentrifying areas mean that the areas often attracting the most OZ capital don’t need it. Bisnow
Talking Books: CRE industry professionals tend to be positive about the benefits of in-person office work – connections, collaboration, mentorship, tired of Zoom, etc. However, this sentiment isn’t widely shared outside of CRE where employees are generally happy with remote work and not commuting. Commercial Property Executive
Turbulence: The Freddie Mac Multifamily Apartment Investment Market Index fell at the end of last year, signaling that it may become increasingly difficult to find multifamily investment opportunities. The index fell 4.8% in the fourth quarter of 2021 and was down 2.4% year-over-year. The index incorporates multifamily rental income growth, property price growth and mortgage rates to measure investment conditions. Globe Street
Chart of the Day
Rates have been in a downward trend since the the early 1980s. Whenever rates spike a meaningful amount, something tends to break. What will it be this time around?
Source: TS Lombard
WTF
Exposed: An intoxicated, pantsless woman was arrested in a church after getting into a car accident because Florida. Villages News
Basis Points – A candid look at the economy, real estate, and other things sometimes related.
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