Mortgage Rates Climb: What’s Next for Homebuyers and the Housing Market?

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!

Quote of the day - Property isn’t just land; it’s the foundation of your future.

In today’s edition - Rising mortgage rates reach 6.44%, impacting homebuyers amid economic resilience. Netflix maintains U.S. prices despite strong subscriber growth. A quarter of first-time homebuyers plan to wait until after the 2024 election. Builders pivot toward condos and townhomes, addressing the affordability crisis, while controversial multi-family developments spark community opposition in Hoover, Alabama. Finally, commercial real estate shows mixed signals, with signs of recovery in the office sector despite declining transaction volumes. Stay informed on these trends shaping the housing and economic landscape!

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Rates & REITS

Average going rates as of Oct 17 2024

Numbers as of Oct 17 2024 closing

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🏛️ Economic & Market Sentiment

Rising Rates Challenge U.S. Homebuyers, Signaling Economic Resilience.

• 30-year mortgage rate climbs: The average rate reached 6.44%, the highest in eight weeks, up from 6.32% last week, but down from last year's peak of 7.63%.

• Rising bond yields: The 10-year Treasury yield jumped to 4.09%, driving mortgage rate increases, partially due to strong economic data like the September jobs report and consumer prices.

• Impact on buyers: Mortgage applications fell 17%, and refinancing applications dropped 26%, highlighting affordability struggles as higher borrowing costs reduce purchasing power.

Economists expect rates to remain near current levels this year, with potential declines in 2025.

Netflix Holds Off on U.S. Price Hikes as Subscriber Growth Surges

• No U.S. price hike yet: Despite competitors like Disney+ and Peacock raising prices, Netflix plans to keep U.S. rates stable for now, focusing on the value offered to its members.

• Strong Q3 performance: Netflix added 5 million+ subscribers in Q3, beating expectations and boosting its stock by nearly 5% in after-hours trading, nearing record highs of $730.

• Potential future hikes: Analysts predict a possible 12% U.S. price hike in 2025, with Netflix's Standard plan currently priced at $15.49, its lowest-priced ad-free option after recent plan changes.

Netflix remains committed to balancing engagement and accessibility while keeping its offerings competitively priced across global markets.

🎢 Impact on Real Estate

Nearly A Quarter of Prospective First-Time Homebuyers are Holding Off Until After the Election

• Election-driven delays: 23% of first-time homebuyers are waiting until after the 2024 election, as concerns over the economy and future policy changes weigh heavily on their decisions.

• Housing plans in focus: 26.1% of buyers are awaiting Kamala Harris' $25,000 downpayment assistance plan, while 15.9% are eyeing Donald Trump’s affordable housing initiatives.

• Other reasons for waiting: 30.3% of buyers cite personal finances and timing, while 18.3% are holding out for potential interest rate cuts by the Federal Reserve.

First-time homebuyers are navigating economic uncertainty, with many waiting to see how housing affordability plans from candidates will unfold before making their move.

🎙️ RE Spotlight

Amid Affordability Crisis, Builders Continue Pivot Toward Condos and Townhomes

1. Decline in construction activity: Single-family home starts fell by 7.1% in 2023 compared to 2022, but the pace remains 11% higher than pre-pandemic levels, signaling continued efforts to close the 4.5 million home shortage in the U.S.

2. Shift toward high-density housing: Builders are leaning into townhomes and condos as attached single-family home starts rose 3.2% and new condo starts increased by 8.1%, while detached homes fell by 8.9%.

3. Permitting hotspots: Metro areas like Pittsburgh, Indianapolis, Dallas, New York, and Las Vegas lead in issuing permits compared to pre-pandemic levels, with high growth in employment and housing demand.

Context: Builders are adapting to affordability constraints by focusing on denser housing options. Although overall construction has declined, many metros continue to issue more permits than before the pandemic, particularly in areas with high demand and growth in jobs and income.

Home Construction Cools in 2023, But Builders Shift Focus to High-Density Housing

1. Decline in construction activity: Single-family home starts fell by 7.1% in 2023 compared to 2022, but the pace remains 11% higher than pre-pandemic levels, signaling continued efforts to close the 4.5 million home shortage in the U.S.

2. Shift toward high-density housing: Builders are leaning into townhomes and condos as attached single-family home starts rose 3.2% and new condo starts increased by 8.1%, while detached homes fell by 8.9%.

3. Permitting hotspots: Metro areas like Pittsburgh, Indianapolis, Dallas, New York, and Las Vegas lead in issuing permits compared to pre-pandemic levels, with high growth in employment and housing demand.

Context: Builders are adapting to affordability constraints by focusing on denser housing options. Although overall construction has declined, many metros continue to issue more permits than before the pandemic, particularly in areas with high demand and growth in jobs and income.

🏕️ Niche-RE

Controversial Tattersall Park Development: Over 300 Multi-Family Units, Hotel, and Retail Proposed

1. Tattersall Park Village Center: The proposal includes 300+ multi-family units, a 125-room hotel, 23,000 square feet of retail space, a 12,500-square-foot restaurant, and green space on 33 acres of undeveloped land in Hoover, Alabama.

2. Community opposition: Over 1,100 Greystone residents have signed a petition opposing the development, citing concerns over traffic, resource strain, and potential disruption to their lifestyle and neighborhood values.

3. Planning Commission review: The Hoover Planning and Zoning Commission will review the proposal, with residents urging for an entertainment district instead, as they did successfully in 2019 when the community opposed turning the land into an automobile dealership.

Context:
The proposed Tattersall Park Village Center is set to transform an undeveloped area next to Greystone into a mixed-use hub. However, local residents are pushing back, concerned about the impact on traffic, local resources, and the character of their neighborhood. The tension between development ambitions and community values will come to a head as the Hoover Planning and Zoning Commission deliberates on the project.

August Shows Mixed Signals for Commercial Real Estate, with Signs of Recovery on the Horizon.

1. August gains, annual declines: While all commercial real estate asset classes saw increased activity in August, transaction volumes were down 15% year-over-year, according to Colliers’ report by Aaron Jodka.

2. Outlook for recovery: Future transaction volume is expected to rebound as the Federal Reserve is anticipated to further reduce rates following a 50 bps cut in September, potentially boosting market confidence.

3. Office sector stabilization: The office market may have found its floor, posting back-to-back months of stronger volume, with August transactions totaling $4.2 billion. The sector is seeing increased activity in higher-value deals, particularly above $100 million.

Context:
Commercial real estate showed resilience in August, with prices rising despite fewer property trades and a cyclical low in transactions. As the Fed continues to adjust interest rates, the outlook for the remainder of the year points to a potential recovery, particularly in larger-scale office deals.

🖼️ Chart-Tastic

Big Tech Turns to Nuclear Energy to Power AI boom, Is Nuclear Waster Next Plastic for Climate Change?

🌍 Dwelling of the Day

NFL Wide Receiver DJ Moore Lists Charlotte, North Carolina, Home for $5 Million

Link to Listing

And…that's a wrap on this edition!

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