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Search A A A REAL ESTATE RESEARCH ABOUT August 27, 2015 REAL ESTATE RESEARCH SEARCH Real Estate Research provided analysis of topical research and current issues in the fields of housing The Multifamily Market: Is a Hot Market Overheating? and real estate economics. Authors for the blog included the Atlanta Fed's Moody's/RCA National commercial property price index, which is based on repeat-sales transactions, has risen 36 percent over the past two years. Such RECENT POSTS Jessica Dill, Kristopher Gerardi, Carl Hudson, and analysts, as well as the increases in commercial real estate (CRE) prices have raised concerns that the market is overheating (see here). Multifamily is one CRE property type that for a Assessing the Size and Spread of Vulnerable Renter Households in Boston Fed's Christopher Foote and Paul Willen. couple of years has been attracting a great deal of lender interest and thus growing concern regarding potential overheating (see here). the Southeast What's Being Done to Help Renters In December 2020, content from Real Estate Research became part of Looking around Midtown Atlanta, it is easy to wonder if multifamily housing during the Pandemic? An Update on Forbearance Trends Policy Hub. Future articles will be released in Policy Hub: Macroblog. construction is getting ahead of itself. According to the Midtown Alliance, within just a 0.5-square-mile portion of Midtown Atlanta, 981 units have been recently Examining the Effects of COVID-19 on the Southeast Housing Market Disclaimer delivered, 3,392 units are under construction and 4,732 are in various stages of planning. Dodge Pipeline reports that the entire Midtown/Five Points submarket Southeast Housing Market and COVID-19 has 4,865 units under way. For reference, peak activity in the Midtown/Five Points area from 2003 to 2007 was 4,636 units under construction with a total of Update on Lot Availability and Construction Lending 10,831 units completed. The question arises as to what extent are happenings in Midtown indicative of the broader market trend. Tax Reform's Effect on Low-Income Housing Yield spreads—the capitalization rate on recent apartment transactions (current Housing Headwinds Where Is the Housing Sector rental income divided by sales price) minus the yield on Treasury bonds—serve as one indicator of optimism in a market. A narrow spread is consistent with Headed? Did Harvey Influence the Housing reduced pricing for risk, which is associated with “frothiness.” According to Real Capital Analytics, apartment yield spreads in the second quarter of 2015 stood at Market? CATEGORIES 366 basis points (bps), which is around 250 bps higher than prerecession lows and in line with 2003–04 levels (see chart 1). So by this measure, apartment Affordable housing goals Email Me Subscribe by E-mail Subscribe by RSS Other Fed Websites Comment Standards: Comments are moderated and will not appear until the moderator has approved them. Please submit appropriate comments. Inappropriate comments include content that is abusive, harassing, or threatening; obscene, vulgar, or profane; an attack of a personal nature; or overtly political. activity does not appear too frothy on a nationwide market basis. Search Credit conditions Expansion of mortgage credit Federal Housing Authority Financial crisis In addition, no off-topic remarks or spam is permitted. Foreclosure contagion Foreclosure laws Governmentsponsored enterprises GSE Homebuyer tax credit Homeownership House price indexes Household formations Housing boom Housing crisis Housing demand Housing prices Income segregation Individual Development Account Loan modifications Monetary policy Mortgage crisis Mortgage default Mortgage interest tax deduction Mortgage supply Multifamily housing Negative equity Positive demand shock Positive externalities Of course, yield spreads vary significantly by market area and by property type. Rental homes Securitization Breaking the U.S. market into six major markets (Boston; New York; Washington, D.C.; Chicago; San Francisco; and Los Angeles) and all others reveals that the Subprime MBS Subprime mortgages major markets have seen yield spreads fall relative to all other markets. (The major markets account for 36 percent of transaction dollars with New York and Supply elasticity Uncategorized San Francisco alone accounting for 20 percent of the U.S. total.) Though shrinking during the last several quarters, the current 150 bps gap between the Upward mobility Urban growth major and non-major markets is wider than at any time since 2002. One possible explanation is that the anticipated rent growth of the projects sold in the major markets is higher than in nonmajor markets. So what to make of this? While multifamily markets have been active during the postrecession period, this activity is not necessarily unjustified. Given that the population of 20- to-34-year-olds will continue to grow, demographics point to greater demand for rental property (see chart 2). Supply has not yet shown signs of deteriorating fundamentals since vacancy rates have remained low as new product has been delivered, and rent growth has held steady (see chart 3). How long will preferences for renting persist? How long can real rents continue to grow? How is this new activity being financed? If new projects are penciled out using unrealistic rent growth assumptions and demand falls, rent growth expectations won't be met and the projects may look overdone in retrospect. Regardless of whether current activity indicates overheating, it seems important to keep a close eye on demand. By Carl Hudson, director for the Center for Real Estate Analytics in the Atlanta Fed's research department August 27, 2015 in Housing boom, Housing demand | Permalink
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