Tackling Housing Costs with $5.1 Billion Investment

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 - In real estate, every “no” brings you closer to a “yes”!

In today’s edition - Consumer confidence fell to a two-year low in September, dropping to 98.7, as economic concerns grow. Meanwhile, U.S. home affordability saw its first decline since 2020, with buyers needing $115,454 annually to afford a median-priced home. Texas leads in affordability gains, particularly in Austin. Zillow forecasts modest home value growth and a slight uptick in existing home sales for 2024. Renters are now seeking perks like pet areas and community events over traditional amenities. Multifamily sales surged in Q2 2024, doubling from last year, driven by high-dollar deals and stable interest rates.

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🏛️ Economic & Market Sentiment

Consumer Confidence Dips to Two-Year Low Amid Economic Concerns

• Consumer Confidence Index Falls to 98.7: The Conference Board’s consumer confidence index dropped to 98.7 in September, the lowest since June and a sharp fall from 105.6 in August, marking the largest decline since August 2021.

• Americans' Economic Outlook Worsens: A rising percentage of respondents expect worse business conditions and fewer job opportunities, while fewer anticipate higher incomes, indicating growing unease ahead of the election.

• Impact on Global Markets: China's efforts to boost its slowing economy include reducing reserve requirements and slashing interest rates, lifting the Hang Seng index by 4.1% and Shanghai Composite by 4.2%, signaling potential recovery in global markets.

🎙️ RE Spotlight

U.S. Home Affordability Sees First Decline Since 2020: A Look at Metro Trends

• Home Affordability Sees First Decline Since 2020: U.S. homebuyers now need an annual income of $115,454 to afford the median-priced home, down 1.4% year over year, driven by a decline in mortgage rates to 6.09% from 7.07% in August 2023.

• Texas Leads in Affordability Gains: In Austin, TX, homebuyers need $133,346 to afford a home, a 7.9% drop year over year—the steepest decline among major U.S. metros, as Texas continues to build more homes than any other state.

• Affordability Challenges Persist: Despite improvements, the typical American household earns 27.4% less than needed to afford a home, as less than one-third of U.S. home listings remain affordable, down from over half pre-pandemic.

Zillow Forecasts Modest Home Value Growth and Sales Uptick for 2024

• Home Value Growth Slows, But Steady: Zillow projects home values to increase by 2.1% in 2024, up from the previous forecast of 1.8% growth, with a 1.4% rise expected over the next 12 months.

• Existing Home Sales See Small Gains: Existing home sales are forecasted to reach 4.1 million in 2024, a 0.4% increase from last year, with an anticipated rise to 4.3 million by 2025, reflecting a 5.3% improvement.

• Inventory Rises, Giving Buyers More Power: The number of homes for sale is up 22% compared to last year, offering buyers more options and potentially greater bargaining power amid easing inflation and favorable mortgage rates.

Renting

Renters are Looking for Perks Like Pet Areas and Happy Hours Over Gyms and Pools

• Pet Areas and In-Unit Laundry Top the List: Listings with off-street parking see an 85% boost in saves and a 103% increase in shares. In-unit laundry results in 76% more saves and 92% more shares, making them essential for attracting renters.

• Community Perks Gain Popularity: Pet-friendly turfed areas drive 76% more saves and 91% more shares, while tenant happy hours contribute to 50% more saves and 67% more shares, reflecting a shift toward community-focused living.

• Unique Features Still Stand Out: Rentals with bowling alleys increase daily saves by 30% and shares by 37%, while listings showcasing modern farmhouse features like butcher block countertops boost saves by 58% and shares by 69%.

🏕️ Niche-RE

Massachusetts’ Landmark Affordable Homes Act: Tackling Housing Costs with $5.1 Billion Investment

• $5.1 Billion Investment to Address Housing Crisis: The Affordable Homes Act allocates an unprecedented $5.16 billion to create or preserve 65,000 homes over five years, focusing on affordability and public housing modernization.

• Boosting Homeownership and Rental Affordability: Key policies include statewide Accessory Dwelling Units (ADUs) up to 900 sq. ft. by right, projected to add 8,000-10,000 ADUs in the next five years, plus new incentives for affordable housing construction.

• Revamping Public Housing and Commercial Conversions: Massachusetts will invest $2 billion in public housing rehabilitation, while the Commercial Property Conversion Program aims to repurpose vacant spaces into housing, supported by a new tax credit.

Multifamily Sales Surge in Q2 2024, Led by High-Dollar Deals and Stable Interest Rates

• Multifamily Sales Double in Q2 2024: Multifamily sales saw a sharp increase, with transaction levels doubling compared to Q2 2023 and up 67% from the previous quarter, led by the $74.3 million sale of NordHaus.

• Rising Property Values and Rent Growth: The median price-per-unit for multifamily properties rose 6% year-over-year to $122,900, while average rent in the Twin Cities increased 3% to $1,556, outpacing operational costs for landlords.

• Vacancy Rates and Development Outlook: Vacancy rates across the metro sit at 4.9%, and while new developments have slowed with a 19% drop in deliveries from 2023, activity in the west and south metros remains strong.

🖼️ Chart-Tastic

🌍 Dwelling of the Day

Not AI, Trinity College Library, Dublin, Ireland

And…that's a wrap on this edition!

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