Mixed bag of tenants and landlords

Trump takes aim at housing market

Fed signal potential rate cuts ahead

rates drop but sales slow

U.S Banks Q2 results show CRE challenges

and more

Rents on the rise: The typical U.S. rent hit $2,054 in June, marking a 3.5% annual increase - the fastest growth since July 2022. This uptick signals a potential shift in the market's trajectory.

Concessions plateau: After reaching a three-year high this spring, landlord concessions (like free parking or reduced rent) have leveled off at 33% of listings. This suggests growing landlord confidence in filling vacancies.

Single-family vs. multifamily trends: Single-family home rents are outpacing multifamily units, with a 4.7% annual increase compared to 2.7% for apartments. This highlights evolving renter preferences post-pandemic.

Affordability challenges persist: The median household now spends 30% of its income on rent, up from pre-pandemic levels of 28.4%. Miami leads as the least affordable market, with renters spending a staggering 43.4% of income on housing.

Inflation Impact: While Trump exaggerated grocery and gas price increases, his comments highlight real pain points for consumers. Actual increases (21% for groceries, 35% for gas) still represent significant challenges for many households.

Mortgage Rate Reality Check: Trump's claim of quadrupled mortgage rates is an overstatement, but rates have indeed more than doubled since Biden took office. This surge has dramatically affected home affordability and buyer behavior.

Young Homebuyers' Struggle: Despite Trump's assertion that young people "can't get any financing," data shows the under-35 homeownership rate remains above pre-pandemic levels. However, high prices and interest rates continue to pose significant hurdles.

Political Implications: As housing becomes a central campaign issue, both parties are crafting strategies to address affordability concerns. Trump's focus on the topic signals its potential importance in the upcoming election.

Inflation Decelerates: June's Consumer Price Index (CPI) rose just 3% year-over-year, the smallest increase in 12 months. Core inflation, excluding volatile food and energy prices, hit its lowest level since April 2021 at 3.3%.

Fed's Changing Stance: Fed Chair Jerome Powell indicated that the labor market is no longer a major inflation concern, suggesting the central bank may be ready to ease monetary policy. This marks a significant shift from the Fed's previous focus on fighting inflation.

Market Reaction: Bond yields declined and the dollar weakened following the inflation news. The futures market now implies a 92% probability of a September rate cut, up from 72% previously.

Economic Implications: While inflation in goods has moderated or even declined, services inflation remains high at 5% year-over-year. However, with labor costs rising more slowly, services inflation is expected to recede in the coming months.

Mortgage Rates Ease: Daily average mortgage rates have fallen to their lowest level since February, boosting affordability. A buyer with a $3,000 monthly budget can now afford a $450,000 home, up from $425,000 in April.

Supply Increases: New listings are up 6.4% year-over-year, with total inventory nearing a four-year high. This offers more options for buyers who have been waiting on the sidelines.

Demand Remains Sluggish: Despite lower rates and more inventory, pending sales have dropped 5.6% year-over-year - the largest decline in eight months. Redfin's Home buyer Demand Index is down 15%.

Market Outlook: Experts suggest now might be a good time for serious buyers to act, as further significant rate drops are unlikely. However, factors like extreme weather in some regions are also impacting buyer behavior.

Rising Credit Loss Provisions: Banks are increasing their allowances for credit losses, particularly in the CRE sector. Office loans are hit hardest, with vacancy rates soaring due to post-pandemic remote work trends.

Multi-family Loan Concerns: Smaller lenders are seeing strain in multi-family commercial loan portfolios, especially in markets like New York and Florida, due to rent control regulations.

Measured Approach to Asset Management: Despite concerns, banks are not engaging in panic selling of CRE assets. Instead, they're allowing loans to naturally run off balance sheets and waiting for potential Fed rate cuts to optimize asset prices.

Regulatory Attention: Fed Chair Jerome Powell has acknowledged that CRE risks will persist for years, with regulators closely monitoring smaller banks' risk management strategies.

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