When you build “luxury” new apartments in big numbers, the influx of supply puts downward pressure on rents at all price points — even in the lowest-priced Class C rentals.

“In Florida — which continues to make itself a supply magnet with strong demand + the boost from the new Live Local legislation — three markets (Fort Myers, Sarasota, Daytona Beach) are seeing Class C rent cuts around 10-12%. “

via

Via Jay Parsons • Rental Housing Economist (Apartments, SFR), Speaker and Author

Yes, when you build “luxury” new apartments in big numbers, the influx of supply puts downward pressure on rents at all price points — even in the lowest-priced Class C rentals. Here’s evidence of that happening right now:

There are 12 U.S. markets where Class C rents are falling at least 6% year-over-year. What is the common denominator? You guessed it: Supply. All 12 have supply expansion rates ABOVE the U.S. average.

In Florida — which continues to make itself a supply magnet with strong demand + the boost from the new Live Local legislation — three markets (Fort Myers, Sarasota, Daytona Beach) are seeing Class C rent cuts around 10-12%. Not shown on this Top 12 list, but there are three large Florida markets with high supply also seeing Class C rent cuts of 4-5%: Orlando, Jacksonville and Tampa.

Other key markets nationally to highlight: Ultra-high-supplied big markets like Austin, Phoenix, Salt Lake City, Atlanta and Raleigh/Durham are all seeing sizable Class C rent cuts of at least 6%. Small markets on the list include Myrtle Beach, Wilmington NC, Boise and Colorado Springs.

Bear in mind that apartment demand is NOT the issue in any of these markets. They’re all demand magnets. Sure, they’ve seen some moderation / normalization for in-migration and job growth, but they’re still ranking among the national leaders for net absorption.

Simply put: Supply is doing what it’s supposed to do when you add an awful lot of it. It’s a process academics call “filtering” — which happens when higher-income renters in Class B apartments move up into higher-priced new Class A units … and then Class B units see vacancy increase, so they cut rents to lure up Class C renters. And down the line it goes.

But filtering works best when we build a lot of apartments. We didn’t see this phenomenon play out as clearly in past cycles when supply was relatively limited — and (crucially) failed to keep pace with demand.

Less anyone still in doubt, here’s another factoid: Where are Class C rents growing most? You guessed it (I hope!) — in markets with little new supply. Class C rent growth topped 5% in 18 of the nation’s 150 largest metro areas, and nearly all of them have limited new apartment supply. That list includes markets like: Midland/Odessa TX, Knoxville TN, Grand Rapids MI, Dayton OH, Wichita KS, Buffalo NY, Louisville KY, Little Rock AR, and Albany NY.

Among larger markets, Cincinnati and Chicago both saw Class C rent growth near 4% — and both ranked below the U.S. average for new supply.

Most new construction tends to be Class A “luxury” because that’s what pencils out due to high cost of everything from land to labor to materials to impact fees to insurance to taxes, etc.

So critics will say: “We don’t need more luxury apartments!”

Yes, you do. Because when you build “luxury” apartments at scale, you will put downward pressure on rents at all price points.

#multifamily #affordability #housing #rentsActivate to view larger image,

Tampa Retail Real Estate Market Report

Article via Bounat.com – Click Here for complete story and others similar to it.

The commercial real estate brokers at Bounat work diligently to compile a comprehensive list of the top commercial real estate activity in the Florida region on a frequent basis.

Retail leasing fundamentals in Tampa remain solid despite headwinds caused by continued disruptions in the supply chain and lingering concerns post-pandemic. However, these factors are being counterbalanced with the fact that Florida is the fastest growing state in terms of population in the country, and many people are moving to Tampa specifically.

In general, retail demand in Tampa has been consistently strong over much of the past decade, driven by solid population gains, wage growth, and steady consumer spending. Current vacancy is 3.3%, which is up +0.2% compared to Q3 2023, and the vacancy rate for retail real estate in Tampa remained steady over the past year and is well below the national average, estimated at around 4.5%.

Rent growth has accelerated in recent quarters due to strengthening overall leasing fundamentals following the lifting of some pandemic safeguards. Average asking rents as of Q4 2023 are at $25.56/SF, which is up $0.35 from Q3 2023 when the asking rate was $25.21/SF, up over 2% during the past 3 months (quarter to quarter).

There is currently 563,141 SF of new retail space underway, and nearly 1 million SF has been delivered in the trailing 12-month period. While the pace of new development is falling short of previous years, an uptick in demand bodes well for future development.

Retail investment sales activity over the last year has totaled roughly $1.6 billion in total transaction volume, fueled by considerable investment volume in Q4 and Q2 2022. Q1 2022, from a little over a year ago, still holds records for transaction volume with nearly $600M in retail property sales. It was the second highest quarter of retail real estate sales in the area, illustrating just how feverish investor appetite has been over the last year.

Retail investors continue to target deals in secondary markets like Tampa and Orlando as they seek higher yields, which is becoming harder and harder to achieve. Increased competition for assets is forcing an acceleration in overall retail pricing with the average price per SF growing by 10% year over year and by nearly 15% in the last two years. CoStar’s forecast calls for pricing to continue to rise through 2023 before beginning to level out in early 2024.

The most significant single-property trade over the last year took place in Q2 2023 when the Brandon Town Center (303 – 675 Brandon Town Court) sold for $220M at a price of $296/SF with a vacancy rate of 0% at the time of sale. The Tampa shopping center was built in 1995.

If you would like to discuss the Commercial Real Estate Markets or discuss your asset and its future, let’s connect.

http://www.DP-CRE.com

The sobering message from the Fed: Interest rate cuts aren’t coming soon

A string of discouraging inflation reports since the start of the year keeps pushing the timeline back

By Rachel Siegel

April 16, 2024 at 2:19 p.m. EDT

Federal Reserve officials signaled a more sober tone this week, emphasizing that they’re in no rush to cut interest rate cuts this year.

On Tuesday, Fed Chair Jerome H. Powell laid out his case for why borrowing costs could stay higher for longer than the central bank expected just a few weeks ago. Since the start of the year, Powell and his colleagues had said they were looking for more assurance that inflation was ticking steadily down. Instead, they’ve gotten the opposite.

“The recent data have clearly not given us greater confidence, and instead indicate it’s likely to take longer than expected to achieve that confidence,” Powell said Tuesday at a panel discussion on the U.S. and Canadian economies.

Plus, the rest of the economy has stayed remarkably resilient after interest rates climbed to the highest rate in decades. The job market continues to grow at a surprising clip. And that means the Fed can stay focused on zapping inflation, without worrying that its fight is eroding business’ willingness or ability to hire, or people’s ability to find stable jobs. Put together, the data on inflation and jobs mean it is “appropriate to allow restrictive policy further time to work,” Powell said.

The message was echoed earlier in the morning by Powell’s No. 2. In a speech, Fed Vice Chair Philip Jefferson said that if upcoming data suggests inflation is “more persistent” than he expects, it would make sense to keep rates higher for longer.

Powell and Jefferson did not get specific on the timing of upcoming cuts or exactly how many there will be. Last month, when central bankers sketched out their expectations for the path ahead, they penciled in three cuts before the end of the year.

But Fed watchers and the financial markets are now questioning not just when cuts will happen, but also if the Fed will be able to eke out even one or two cuts. The outlook shifted considerably last week after March inflation data came in hotter than expected, cementing fears that a new trend had taken hold.

Now that Fed officials have gotten three months of disappointing news, economists assume they’ll need as much encouraging news — at the very least — to put them back on track to cut rates. That means even the most optimistic scenarios don’t include a cut before late summer.

“There’s absolutely, in my mind, no urgency to adjust the policy rate,” San Francisco Fed President Mary Daly said last week. “Policy is in a good place right now, and I need to be fully confident that inflation is on track to come down to 2 percent — which is our definition of price stability — before we would consider a rate cut.”

For the complete article and similar stories, CLICK HERE <—–

Important inflation report

A closely watched Labor Department report due Wednesday is expected to show that not much progress is being made in the battle to bring down inflation. The consumer price index, which measures costs for a wide-ranging basket of goods and services across the U.S. economy, is expected to register an increase of 0.3%. The ‘core’ inflation gauge, which excludes the volatile price changes of food and energy, is expected to increase by the same amount.

The reports are important as the inflation prints for March and April will play an outsized role in determining whether the Fed proceeds to cut rates in June. Markets have grown nervous about the state of inflation and how it will affect rate policy. Moving towards the Fed’s 2% target doesn’t just mean hitting 2% for one month – it means hitting 2% or less for several months in a row and the Fed needs to be certain this is under control ahead of pivoting monetary policy.

Fed still sees rate cuts in 2024

By Cate Chapman, Editor at LinkedIn News

The Federal Reserve maintained its outlook for three interest-rate cuts this year and, as expected, left its key rate unchanged Wednesday at a 23-year high. Some economists had foreseen fewer cuts for 2024 amid a recent pickup in consumer-price growth. But, in a sign of confidence that inflation will resume its downward path, the Fed also projected slightly stronger growth in the economy and prices. It forecast unemployment of 4% by 2025, slightly below a December forecast of 4.1%.

• The Fed’s preferred inflation gauge declined one tick to an annual rate of 2.8% in February, compared with a target of 2%.
• It has held its key rate at an average 5.3% for five consecutive meetings.
• About 70% of traders expect cuts to begin in June, compared with 60% prior to this week’s announcement.

Bitcoin bubblin’

via Chartr.co

Having endured the “crypto winter”, Bitcoin has once again climbed over the $69,000 threshold, trading at a new record high on Tuesday — a milestone mirroring a number of major stock indices in the US, Europe, and Japan, all of which have reached new peaks in 2024.

Part of the recent surge is attributed to the approvals of Bitcoin exchange-traded funds, greenlit by US regulators in January, which have widened access to the world’s largest cryptocurrency, with the 10 US Bitcoin funds currently available ballooning in size to nearly $50 billionsince then. Another potential factor is the upcoming “halving” — a predetermined schedule that cuts the reward for mining the cryptocurrency in half approximately every 4 years, limiting the growth of new supply of Bitcoin.

Rising tide lifts all coins

Whether it’s the ETFs, the halving event, or just a renewed enthusiasm for digital currency, Bitcoin continues to drive the wider crypto economy. Indeed, the 15-year-old coin remains by some distance the largest in the crypto universe, with its market capitalization exceeding the value of the 99 next most valuable cryptocurrencies combined, most of which have also gained in value during the latest surge.

The argument for Bitcoin playing the role of “digital gold” as a store of value gains credence with each year that the asset remains relevant. But, as though a reminder of how volatile it can be, Bitcoin suffered a mini crash after reaching its new peak, slipping more than 10% in the space of a few hours.

State of the Union : A review of 4 economic measures

Story via Chartr.co

State of the (economic) union

President Biden delivered a surprisingly fiery State of the Union address yesterday, as he ramps up efforts to secure a second term in office. But, politics aside, what is the current state of the economic union? Here are 4 datasets we’re watching:

1. Inflation. The Big I — the economic elephant in every room for the last 3 years is finally shrinking, with the latest BLS data showing that prices were up 3.1% in January, down substantially from the ~9% annual increases seen in mid-2022.
2. Housing affordability. As interest rates rose, so did mortgage rates. However, house prices in most towns and cities have continued to soar, leaving first-time buyers facing high borrowing costs and steep prices — combining for one of the least affordable housing markets in modern history.
3. Stocks. Repeat after me: stock markets are not the economy… but that doesn’t mean they aren’t important. With the S&P 500 Index already climbing ~9% this year, millions of Americans might be feeling a little more secure in their savings or retirement plans (particularly if they own Nvidia stock).
4. Wages. Getting a 5% raise when inflation is hitting nearly double that figure left many of us still finding our larger paychecks don’t stretch as far as they once did. This was the case in 2021 and 2022 when wages struggled to keep up with inflation; however, as the rate of price increases began to slow last year, real hourly compensation finally turned positive.

With every passing month, the US economy appears to have increasingly pulled off the “soft-landing” that economists so desired when the Federal Reserve began its battle against inflation back in March 2022. Interestingly, the economy is no longer seen as the most important issue facing Americans, having been overtaken by immigration in the latest Gallup survey.

Keeping an eye on Banks… again

via Titan news blast <— Click here to sign up and get news along with research their other products

Shares of New York Community Bancorp sank by double digits for the fourth time in five days, extending a collapse that was triggered by a surprise quarterly loss and move to slash its dividend. The bank indicated that it is shoring up its balance sheet following the acquisition of failed Signature Bank and trouble in its large books of commercial real estate.

Given the banking instability we saw in early 2023 (a la Silicon Valley Bank, Signature Bank, and First Republic), investors are selling first and asking questions later. Sharp stock sell offs added to a crisis of confidence that ultimately led to fatal deposit runs at those aforementioned banks. Could the recent moves in stock price suggest a need for caution?

Photo by Sean Dreznin

NYCB is fighting to assure investors and the markets that its ok and there is nothing to be concerned about…

New York Community Bank stock ticks up after lender says deposits increased

via CNN.com <— CLICK HERE for complete article

Troubled regional lender New York Community Bancorp attempted to reassure investors Wednesday that it has enough liquidity to stay afloat after the stock shed about 60% of its value over the past eight days and Moody’s Investors Service downgraded the bank’s credit grade to junk.

“The challenge today is not easy. But this company has a strong foundation, strong liquidity and a strong deposit base, which gives me confidence for our path forward,” Alessandro DiNello, the bank’s new executive chairman, said on a call with investors Wednesday morning.

The bank announced earlier on Wednesday that it had appointed DiNello, formerly the president of Flagstar Bank, to the position effective immediately. NYCB (NYCB) purchased Flagstar in December 2022. The Hicksville-based bank also said it has plans to bring in a new chief risk officer and chief audit executive.

Which smaller markets grew at the fastest rental rates in 2023?

It’s always nice to see my current and hometown of Sarasota, FL on the list!

– Jay Parson’s (Realpage) follow up to ‘Which (larger) markets grew at fastest rates’ <–Click on Jay’s name to visit this full article and heaps of juicy research!

Yesterday I shared the top U.S. markets for apartment demand in 2023. But since those types of leaderboards favor large markets, I wanted to follow up by sharing the size-adjusted version of the demand leaderboard: Which markets grew at the fastest rate in 2023? This version highlights the growth rate in the number of households renting apartments. Here are the top 15.

— Huntsville, AL, is in a category of its own with 15.1% more apartment renting households in 2023 versus 2022. Huntsville is no secret among apartment developers (as Huntsville also led the nation in supply growth rate for 2023), but it still flies below the national radar despite a well-balanced economy headlined by a boom in high-paying aerospace jobs.

— A trio of booming tertiary markets rank next: Sioux Falls, SD; Lakeland/Winter Haven, FL; and Port St. Lucie/Vero Beach, FL. All three benefited from pandemic-era migration booms, and while growth is moderating (as expected), these three appear to have staying power with different appeal in all three.

— But it’s not all about small markets. Bigger metros cracking the top 15 include Nashville, Salt Lake City, Charlotte, Raleigh/Durham, Austin and Jacksonville. Remember the bigger you are, the harder it is to grow at a fast rate, so growth rates of 4-6% are absolutely remarkable for this group. Analysts often bemoan the huge supply hitting all these markets, but let’s not forget what is driving all that supply: A LOT of demand. And while demand likely can’t keep pace in the short term, there’s little doubt demand will remain robust in these spots even once supply drops off in 2025-26. Cynics will say “but growth is slowing,” but that slowing is off the all-time highs of 2021. “Slowing” to pre-COVID levels in these markets still equates to huge growth.

— Others to highlight: Colorado Springs, CO; Pensacola, FL; Myrtle Beach, SC, Wilmington, NC; and Savannah, GA. And ranking right behind them are Sarasota, FL and Boise, ID. Takeaway: People like the beaches and the mountains. Some folks dismiss markets like these as “Zoom towns” that temporarily boomed only to bust. But they forget these were growing markets even prior to COVID. These aren’t merely seasonal spring break cities like some others. Moderating growth was inevitable, but these spots will remain migration magnets. Of course, smaller markets tend to be more prone to boom/bust cycles and most of these do have a lot of supply in the short term to work through, but they should do well over the longer term.

Supply shocks can cause short-term challenges. But over the long term? Follow the people.

#apartments #multifamily #rentersActivate to view larger image,

The Fed’s next decision looms.

Central bankers gather this week to assess the state of the economy and assess a path forward. Investors believe that the Fed is expected to keep its benchmark rate steady as they give themselves time to assess the impacts of rising rates. As central bankers gather Tuesday to begin two days of deliberations, they’ll have fresh inflation data in hand which may lead the officials to signal if they believe a rate cut is on the horizon.

With indications demand across the economy is cooling as the year draws to a close, all eyes will be on the Fed’s expectations for future policy. A future rate cut is, of course, bullish for stocks but the timing may be important as the balancing act of inflation and a soft landing embarks on its final chapter.

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