Los Angeles Launches 'Small Lots, Big Impacts' Initiative for Affordable Housing

Good morning, Dwellers! Welcome to another edition of Dwellings Digest, a realtor and investor driven newsletter simplifying real estate, exploring the economy-stock-real estate link, adding a fun twist with niche topics and more. Enjoy!

In today’s edition - Foreclosure filings increased by 5% month-over-month in February 2025, signaling potential financial pressures in the housing market. While REOs declined, foreclosure starts surged by 8%, with New Jersey and Colorado seeing sharp increases. As economic turbulence looms, rising tariffs and job cuts may contribute to continued market instability. Buyers and investors should monitor distressed property opportunities as market dynamics evolve. Stay informed to navigate potential shifts in real estate this year.

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🏛️ Economic & Market Sentiment

Trump promised a boom. Now he's bracing Americans for economic turbulence

• Economic Warnings: Despite Trump's campaign promises of "extraordinary" economic growth, his administration acknowledges the risk of economic turbulence, with stock market declines, rising job cuts, and increasing concerns about a potential recession.

• Tariff Impact: Trump's escalating trade war with Canada, including a 50% tariff on Canadian metals, adds uncertainty for businesses and investors, with concerns about price hikes for consumers and retaliatory tariffs.

• Job Market Strain: U.S. employers added only 151,000 jobs in February, falling short of expectations, while the unemployment rate inched up, signaling a possible slowdown in job market growth amid broader economic challenges.

President Trump's policies spark debate as economic turbulence looms, with tariffs and job cuts signaling potential short-term disruption.

🎢 Impact on Real Estate

U.S. Foreclosure Activity Increases Monthly in February 2025

• Foreclosure Activity Rises Slightly: February saw 32,383 foreclosure filings, up 5% month-over-month but down 1.7% year-over-year, signaling mixed market conditions.

• Foreclosure Completions Decline: Lender repossessions (REOs) dropped 11% YoY, with New York (-49%), South Carolina (-44%), and New Jersey (-43%) leading declines. However, Chicago (154 REOs) recorded the highest volume.

• States with the Highest Foreclosure Rates: Delaware (1 in 2,278 homes) led the nation, followed by Illinois and Nevada. Major metro areas with the worst rates included Modesto, CA and Lakeland, FL.

• Foreclosure Starts Climb: Lenders initiated 22,730 new foreclosures, up 8% MoM and 1% YoY, with New Jersey (+78%) and Colorado (+58%) seeing the sharpest increases.

Market Takeaway: A small seasonal rise in foreclosures is expected, but the increase in foreclosure starts hints at evolving financial pressures. Watch how economic shifts impact distressed properties in coming months.

🎙️ RE Spotlight

Major Texas markets grew faster than the national average in 2024

San Antonio and Austin continue to post outsized job gains

Rise of the Patient Renter: Why 59% of Apartment Hunters Are Taking Their Time

• 59% of renters now search with low urgency, the highest rate ever recorded by Apartment List, signaling a major shift in leasing dynamics. Property managers must adapt to extended decision cycles to maintain occupancy.

• Vacancy timelines have stretched to 37 days on average, the longest since 2019, as renters meticulously compare options. Traditional urgency-based marketing is losing effectiveness.

• Rental budgets have grown 15-20% over the past few years, but today’s renters demand clear value justification before committing. Flexible lease terms, smart concessions, and tech-driven engagement are key to closing deals.

A Slight Rise in Single-Family Starts as Economic Uncertainty Persists

• Single-Family Housing Production to Rise: In 2025, single-family housing starts are projected to increase by 0.2% to an annual rate of 1.01 million units, followed by a 4% rise in 2026. Builders are navigating complex market conditions, including regulatory changes and tariff impacts.

• Multifamily Housing Stabilization: Multifamily housing construction is expected to decline by 11% in 2025, with a forecasted recovery of 6% in 2026, driven by lower short-term interest rates improving financing conditions.

• Homeownership Demand Strong Despite Affordability Challenges: Zonda surveys reveal that 20% of renters are willing to pay up to $500 more monthly for a mortgage, highlighting strong demand for homeownership, despite high interest rates and market lock-ins.

🏰 RE State Zone

Los Angeles Launches 'Small Lots, Big Impacts' Initiative to Encourage Affordable Housing

• Innovative Housing on Small Lots: LA’s new initiative, Small Lots, Big Impacts, promotes the construction of affordable, smaller homes on underutilized lots, with the city planning to sell 10 vacant lots to developers as part of the pilot project.

• Targeting Affordability: The design competition encourages architects to create homes that are smaller and more affordable than traditional large single-family homes, with future projects expected to range from 4 to 20 units on lots previously limited to larger builds.

• Government-Backed Development: The initiative partners with UCLA’s cityLAB and aims to demonstrate that smaller, denser developments can be both economically viable and desirable, with plans to use proceeds from lot sales to fund down payment assistance for buyers.

Discover how LA's new plan to build affordable starter homes on small lots is reshaping housing options without the need for skyscrapers.

🏕️ Niche-RE

Owner-user office deals boosted New Jersey sales volume in 2024

Momentum accelerated further this year with flurry of deals in January and February

Self-Storage Development Slows, Expected to Drop to 2% by 2027

• Decline in Development: Self-storage construction starts are projected to drop by 20% in 2024 compared to 2023, with the inventory share expected to fall to 2% by 2027 and 1.5% by 2030, according to Yardi Matrix.

• Slower Planning and Completion Times: Projects that started in Q4 2023 averaged 583 days in planning, reflecting a significant increase in planning time during the post-pandemic boom, while average construction times for completed projects rose to 413 days in Q4 2024.

• Contracting Pipeline: The prospective self-storage pipeline declined by 25.3% year-over-year, indicating fewer developers are pursuing new sites and entitlements due to financial and labor constraints.

Explore how slowing self-storage development, rising planning times, and financial constraints impact the industry's future growth.

Wildfire Risks in California: Navigating Insurance Challenges and Coverage Gaps

The conversation highlights the increasing challenges insurers face in high-risk areas like California, where the concentration of properties in wildfire-prone zones makes it difficult to spread risk effectively. Companies like State Farm have pulled coverage from large portions of areas like Pacific Palisades, reflecting the growing financial strain caused by catastrophic events like wildfires. Homeowners in these regions often find themselves underinsured due to outdated coverage limits, as the cost of rebuilding homes has surged, outpacing traditional insurance policies.

Additionally, the California Fair Plan provides a safety net for high-risk areas, but it doesn’t automatically adjust coverage to match rising rebuild costs. This leaves many homeowners vulnerable, especially when tariffs and inflation are driving construction prices higher. The conversation underscores the importance of regularly reviewing policies to ensure they keep up with the changing landscape of insurance and construction costs, especially as wildfire risks grow in multiple states beyond California.

Protect your home from rising wildfire threats—understand insurance limitations and secure the right coverage today

🖼️ Chart-Tastic

🌍 Dwelling of the Day

And…that's a wrap on this edition!

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