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Home Prices Reach All-time High as For Sale Inventory, Mortgage Rates Challenge Affordability

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Home Prices Reach All-time High as For Sale Inventory, Mortgage Rates Challenge Affordability

Picture of Chris Nebenzahl

Chris Nebenzahl

Home prices rose to an all-time high in May according to data released by the National Association of Realtors last week. The median home price in the U.S. is $419,300, up more than 55% from its pre-pandemic level. Not only are prices at all time highs, but mortgage rates that have remained around 7% have made homebuying exceedingly difficult for many Americans. As such, existing home sales fell for the third consecutive month. Housing affordability and the undersupply of housing is becoming a growing issue as the election nears. Gen Z voters have voiced that housing affordability is the issue they care most about in the upcoming election, and it will be widely discussed on the campaign trail. Despite the boom in multifamily development, we remain in a housing shortage nationwide. As demand remains elevated, new apartment units will be absorbed, as the debate over housing affordability and development will continue to intensify.

The multifamily sector has seen firsthand how supply and demand impact pricing in housing. As supply has increased, rents and occupancy rates have fallen while concessions have increased quickly. The consumer has had the upper hand in many markets, especially in the sunbelt over the past 2 years. We can see the demand for housing very clearly, we just need to counter the demand with more housing supply. All types of housing will be needed to solve the affordability issue. Single family for sale, single family rentals and apartments will all contribute to easing the affordability challenges, and the onus is on local governments and communities to accept, approve and promote development of new housing.

Key Takeaways – Data as of 06/23/2024

Traffic and Leases:

  • Traffic and leasing were unchanged at the national level last week. The average community sees 8 tours per week and signs 2.7 leases each week.
  • Nashville and Huntsville, two markets that have struggled mightily over the past few years, saw the largest increases in traffic last week. Both markets are now back above the national average for weekly traffic.
  • San Diego, however, edged out Huntsville for the top spot in the leasing growth rankings. The Southern California metro added 0.3 new leases signed per property last week, and properties are averaging 2.5 new leases each week.
    • Boston and Chicago also had strong leasing weeks as their steady outperformance continues.

Occupancy and ATR:

  • Occupancy nationwide, fell one basis point last week and remains 28 basis points below its level from a year ago.
  • While the tiny drop in occupancy is not yet a cause for alarm, it marks the first time occupancy has fallen in a number of months. If occupancy begins to fall, rather than plateau as it normally does this time of year, it will indicate further challenges in other performance metrics in the second half of 2024.
  • The number of units available to rent continues to contract, showing the demand for housing, especially as new supply comes online. Nationwide, the average apartment has 12 units available to rent over the next 60 days.

Net Effective Rent:

  • The national net effective rent was unchanged last week, remaining at $1,824.
  • Detroit continues its strong performance as rents gained 70 basis points last week. Annual rent growth in the Motor City reached 4.5%, making it the second fastest growing market in the country.
  • New York also had a strong week last week. New York is the most expensive market in the nation by a comfortable margin, and average rents have increased more than $300 over the past two years.
  • Reno saw the largest weekly rent decline last week, however the market still maintains strong annual rent growth.

Revenue Per Available Unit:

  • RevPAU was also flat last week at the national level and remains down 1.8% year-over-year.
  • Aside from Detroit and New York, Albuquerque had a strong week, with both rent growth and occupancy increases contributing to its strong RevPAU growth.
  • Tampa rents continue to cool, putting pressure on RevPAU. The gulf coast metro has seen rents fall more than 4% over the past year, and RevPAU is down nearly 5%, as demand has been soft and absorption of new supply has been slow.

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Picture of Chris Nebenzahl
Chris Nebenzahl
Chris Nebenzahl is the Director of Economic Research at Radix, where he oversees all macroeconomic and multifamily market analysis. Chris has 15 years of multifamily experience in data analytics, research, asset management and acquisitions. Prior to his time in the multifamily industry Chris was a portfolio manager at Bank of New York, focusing in the government and commercial fixed income sectors.
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