Understanding Real Estate Market Trends

🌃 Great visualization of New York City building ages. Looking at this map holds an important truth for the future of the real estate industry: The future of real estate is all about retrofitting existing assets. The majority of real estate in the U.S. that will exist in 2050 is already built. A wave of climate regulation is coming for the real estate industry in major cities across the country, with the goal of net zero emissions by 2050. The vast majority of real estate value is concentrated in cities. So there are a lot of old buildings that will be subject to carbon fines and taxes, if they don't invest in retrofits to improve their energy-efficiency and reduce reliance on on-site fossil fuel use. While we may think the future of "sustainable real estate" looks like shiny, metallic buildings with trees growing on them...sure, that might be the case for new builds. But those are the exception, not the rule. (Look at the Empire State Building...looks just the same as it always has, but through retrofitting they've achieved 80% less energy usage in the last decade! That's the kind of forward-thinking that needs to happen in the world of Local Law 97.) Image source: George Koursaros #realestate #locallaw97

The Evolving Face of the US Homebuyer The National Association of Realtors' (NAR) 2024 report provides a fascinating snapshot of the US housing market’s buyer profile that looks significantly different than it did just a few years ago. The data reveals a changing homebuyer. The average buyer age has climbed to a record 56, underscoring the impact of high housing costs and rising interest rates that have sidelined younger would-be buyers. For first-time buyers, the average age is now 38, nearly a decade older than it was in the early 1980s. These changes signal a more mature buyer who brings accumulated wealth and likely more significant financial security to the table. Additionally, a fifth of all home purchases were made by single women, a notable demographic shift reflecting both a societal change in homeownership goals and an economic shift in who can afford to buy. By contrast, single men comprised only 8% of recent buyers. This snapshot highlights what many are calling a “bifurcated housing market,” where those able to buy homes are increasingly established, wealthier individuals, often using home equity from previous properties to secure cash purchases or make substantial down payments. This market has been largely inaccessible to younger buyers, who continue to face affordability challenges, limited savings, and reduced opportunities for financial support in the form of lower mortgage rates. With affordability gauges near record lows, first-time homebuyers hold a mere 24% share of the market, down dramatically from the 40% share held in pre-Great Recession years. Rising prices and interest rates have compounded these barriers, leading to a market where nearly three-quarters of all buyers have no children under 18 at home, reflecting an older and more established buyer profile than in decades past. While this report offers a look back, the trends it captures underscore a potential turning point. Recent mortgage application data suggests that prospective buyers who had previously been priced out or sidelined may begin to re-enter the market as interest rates stabilize. If these sidelined buyers do return, particularly younger and more diverse demographics, the profile of the typical buyer could again start to shift, gradually increasing diversity in age, household composition, and race among homebuyers. At Havas Edge, we’re continually analyzing these demographic shifts to support brands in delivering timely, targeted strategies that meet the realities of today’s buyers and the anticipated resurgence of those who’ve been waiting on the sidelines. #RealEstate #Homebuyers #MarketTrends #HousingEconomics #ConsumerInsights

The housing market is shifting. Nearly 15% of U.S. home purchase agreements fell through in June, according to Redfin—up 1% from a year ago and the highest June figure since tracking began in 2017. At first, this stat might seem puzzling. After all, isn't there supposed to be pent-up demand, especially among Millennials and Gen Z? So, what’s behind this? Well, according to the report... • Some buyers are using inspection contingencies to walk away after spotting an issue or discovering a better home • Mortgage rates remain stuck in the upper mid-6% range, and some buyers are hoping for a drop • And in some cases, shoppers are simply more cautious amid economic uncertainty Still, the Redfin data isn’t revealing a sudden change—it’s part of a broader trend I’ve been tracking throughout 2025: the shift to a buyer's market. In my latest Housing Market Predictions piece, I covered how home price growth has been slowing and inventory has been steadily improving since the start of the year. That extra supply, combined with sticky mortgage rates, has given buyers a little more breathing room and negotiating power in a still-pricey housing market. Even so, it's important to remember that housing trends remain deeply regional. For example, affordable markets in parts of the Midwest and Northeast, which didn’t experience the extreme price surges of the pandemic years, are seeing strong buyer demand and competitive conditions. In contrast, areas like Florida and parts of the West, where insurance costs and high home prices are causing concern, and where rapid home building in recent years is now offering buyers more choice, are experiencing more deals falling through. If you’re wondering where the housing market is headed for the rest of 2025, here’s the breakdown of the trends I’m watching: https://lnkd.in/eAfHPdQn Forbes Advisor

The headlines suggest recovery, but the data points to a slow reset. According to Emerging Trends in Real Estate 2025, inflation is expected to rise over the next five years. Over 70 percent of respondents believe commercial mortgage rates will stay flat or increase. Capital markets may have stabilized, but financing pressure remains high. Many owners face difficult refinancing decisions ahead. Cap rates are expected to climb further. Office values are already down over 35 percent. Multifamily and industrial are showing weakness as well. Return expectations are rising, not because of rent growth, but because pricing is falling. For Family Offices, this creates a clear opening. Forced sales, stalled refinancings, and repricing across sectors are producing actionable opportunities. These are not short-term flips. These are long-term positions built on strong basis and cash-flow resilience. This is when patient capital performs best. The Family Offices prepared to underwrite, move quickly, and structure for income will shape the next real estate cycle. We are not in a rebound. We are in a recalibration. And those who act now will control assets others are still waiting to price.

I just spent 3 days uncovering trends by analyzing CRE transactions. Here’s what I found 👇🏾 Reflecting on the past few years in commercial real estate, it’s clear that transaction volumes have mirrored the shifting economic landscape. After a steep decline in 2023, we saw a slight rebound in 2024, with volumes reaching $392 billion—an 8% increase. Why does this matter? Because it signals a market that’s finding its footing again. As brokers, it’s our responsibility to not just track the numbers, but understand the story behind them. Several factors are setting the stage for a stronger 2025: - Debt Maturities: Around $600 billion in CRE loans will mature in 2025, pushing many owners to refinance, sell, or restructure. - Easing Interest Rates: Expected cuts will lower borrowing costs, making deals more financially feasible. - Pent-Up Demand: After two years of caution, investors are ready to re-engage, driven by stabilizing fundamentals and better financing options. 2025 could see a continued recovery, with projected volumes reaching $425 billion. Now is the time to position ourselves and our clients to capitalize on the opportunities that lie ahead. What are your thoughts on how 2025 will unfold? Drop your insights below! #CommercialRealEstate #CRE #MarketOutlook #Investment #2025Trends

BR is Bullish on Resi Credit: The U.S. residential mortgage market is $14T. When a mortgage is out-of-the-money, the loan trades below par and the prepayment rate is ~3% CPR which means only 3% pre-pay per annum (i.e., owner moves, extra cash flow, death), a low prepayment rate. When mortgage rate fall, homeowner who are in-the-money by 75bs are likely to refinance, CPR jumps to 20%+ given homeowners seek to lower their monthly payment. It’s wonderful news for homeowners, but for those who own premium coupon MBS they are subject to negative convexity. Convexity measures the sensitivity of a bond's price to changes in interest rates. Bonds with positive convexity benefit commensurately to a decline in rates as future cash flows are discounted at a lower rate, making them more valuable. MBS on the other hand have negative convex when the price approaches par as the investment doesn't increase as much from this inflection point due to prepayment risk rising as the bondholder loses the opportunity to earn the higher interest payments and then must reinvest at lower rates. The bar chart below shows the rate distribution for the mortgage universe. As the mortgage rate is now 6.1%, mortgages >6.5% are highly susceptible to early pre-payment. MBS between 5% - 6%, might see prepayments inch up marginally from 3% CPR to 4% as these slightly out-of-the-money homeowners who have felt trapped, now have more flexibility to move since the cost to do so is marginalized. Note that in the U.S., 30-year fixed rate mortgages are priced at spread to 10-year UST (not SOFR or Fed Funds); I expect the 10-year UST rates will decline less than the front end of the curve as the yield curve steepens as the Fed cuts rates. New home sales will benefit in this lower rate environment as will existing homes sales. Be Bullish: lower mortgage rates are net-positive for homeowners/residential credit, home builders, building materials, and mortgage originators.

The national average mortgage rate is now 6.1%, the lowest in 2 years, and down from 7.2% in May, per a report from Freddie Mac. However, as of July, the average outstanding mortgage rate was 3.9%, barely budging from where it has been for years - per a Weekend WSJ report. In other words, nearly every borrower is sitting on 30-fixed rates they obtained when rates were very low in 2020-2021 or before. So in other words, the September rate cuts are likely to do nothing for the mortgage market. The dynamic hasn't changed; the current (marginal) mortgage rate is over 200 bps higher than the average outstanding mortgage rate. Thus the affordability of housing, which has been a major factor in the increased inflation rates since 2021, is unlikely to be affected - yet - by rate cuts. Your guess is as good as mine as to when it will have an impact. But if I had to guess, I would say that once the 30-fixed hits about 5.25% (i.e., the 10y UST goes down another 50-75 bps), we could see the animal spirits released in the housing market again. It's still 135 bps above the national average outstanding rate, but Americans are optimists. Once the monthly payment feels doable, more people will start to move around again, and do their cash-out re-fi's. And even then we will likely see serious price adjustments along the way both up and down as the supply curve and demand curve dynamic seeks a new equilibrium. The other complication with our housing stock is the lack of supply. Lower rates will drive both home building as well as simply trading up and re-fi's. That is the real need now - more housing supply. Luckily, there has been no uptick in mortgage delinquencies, as we have seen in auto loans and credit cards. Banks learned their lessons in 2008 and underwriting has continued - for the most part - to be strong and generally on the conservative side. For most Americans, home ownership is their greatest source of wealth. So it's an important market to watch, particularly as the Fed continues its rate-cutting cycle into 2025. #fedpolicy #interestrates #riskmanagement

Over the past year, we've written 100+ deep dives into real estate topics. But 2025 is about to rewrite the real estate rulebook. Here's are 6 themes we're watching: 1. The political wild card • Trump's potential policies could completely reshape the industry • Threats to Federal Reserve independence • Immigration changes that could transform who we're building for If investors and lenders lose faith in the Fed's independence, we'll see fewer long-term real estate bets. 2. The housing market pressure cooker • Shrinking young population • Record number of new apartments hitting the market • Potential immigration shifts creating massive market uncertainty Shifting demographics and mass deportation plans mean a rough year for multifamily owners. 3. The energy problem • AI and electric vehicles are straining the electrical grid • Developers scrambling to secure power for new projects • Energy connectivity is becoming a make-or-break factor for developers Developers need to treat energy connectivity like any other risk factor. 4. The autonomous vehicle impact • Self-driving cars are no longer sci-fi • This could redesign cities and real estate investments • Major players are betting big on this technology The shift to autonomous vehicles may start quietly. But it will transform city design and real estate investing when it tips. 5. The year of foreclosures could be here • Years of "playing nice" with loans might finally end • This will create a wave of foreclosures and market reshuffling • Investors are closely watching and waiting for the right moment Investors may hope for clean market distress, but that's rare. 6. The rise of alternative investment • Investors hunt for riches in the niches • Traditional investment models are losing popularity • Emerging sectors like data centers and glamping could be the solution Institutional investors have billions ready to invest in alternative sectors. But they need enough pipeline to justify writing big checks What will you be watching in 2025? Drop them in the comments below. Read the letter here: https://lnkd.in/ecHkJnCs

New home sales fall to 610k units, the lowest level since November 2022 and coming in well below consensus expectations of 725k. New home sales are down 17 percent from last month, and 9 percent from a year ago. Months' supply jumped to 9.5 months, the highest since 2022. There was significant regional variation this month. The South experienced the most severe decline in new home sales (-28 percent) followed by the West (-9 percent). Conversely, the Northeast and Midwest experienced monthly increases in new home sales. The sharp decline in the South may be due to hurricane disruptions. Of course, the other factor negatively impacting new home sales is the October rise in mortgage rates. The average 30-year fixed rate mortgage increased by 25 basis points from September to October, and has continued to increase since. The new-home market has been a relative bright spot in housing, but a combination of factors converged to sap its momentum in October. Weather-related disruptions and the surge in mortgage rates has dampened demand, even amid a rise in new-home inventory, which reached its highest point since 2008. New single-family home inventory is up 2 percent from last month and 8.8 percent from a year ago. The inventory of completed homes is up more than 50 percent from a year ago. Looking ahead, builders will continue to benefit from the lack of resale inventory and from their ability to use incentives such as mortgage rate buydowns to entice buyers off the sidelines. Builders have a competitive advantage over the resale market in this way. However, builders continue to grapple with supply-side challenges and “higher-for-longer than we expected” mortgage rates, which are a major headwind for builders and potential home buyers alike. Despite the challenges, the new-home market will likely continue to outperform the existing-home market over the near term because, unlike existing homeowners, builders are not rate locked-in.

The U.S. apartment market found its footing in 2024, and some of the early January & February 2025 data suggests momentum is continuing to build. Ultimately, 2025's early trajectory coming off 2024 comes down to a core truth in real estate, and that is that real estate is a cyclical industry. The analysis shared here is a working draft of a bigger project I'm working on in the background, but I thought I'd share one of the earlier findings. This chart takes a look at a few national KPIs which includes: - Vacancy: did vacancy increase or decrease in a given calendar year? - Construction: did construction increase or decrease versus the prior year? - Occupancy: is apartment occupancy above or below its long-term average? - Rent growth: did rents increase or decrease in a given calendar year? While perhaps overly simplistic, I think this chart does a decent job of showing where the industry is in the broader performance cycle. -----> Vacancy. Increasing vacancy can be seen within the broader cycle as an indicator of either A) recovery or B) expansion. In 2024, vacancy declined first he first time since 2021. To better understand whether this is indicative of recovery or expansion then, you can then turn your attention to... -----> Construction. Construction takes time to start up after a contractionary period, so there's typically a delay between supply/demand equilibrium. I would have initially thought 2024 was near the bottom for new construction, but looming tariff uncertainty may push 2025 construction down even further. That's another post for another day though. So for now, let's focus on the fact that construction and vacancy simultaneously declined in 2024. Those two factors overlap with a recovery cycle, teetering on expansion as again supply takes some time to recalibrate with demand. To better assess where things stand within that part of the cycle, we can then turn to... -----> Occupancy. More important than just occupancy though we can use occupancy relative to its long-term average (or equilibrium) to assess where things are at within the cycle. If occupancy is above a long-term average, then that suggests the market has achieved equilibrium. Full transparency here though, this is where no analysis is perfect. I arbitrarily chose 20 years as a long-term average. If you did a 15 year average though, 2024 occupancy is below that equilibrium. So my point here is that nuance matters. I think operators will focus on occupancy preservation in 2025 to get back to more recent (let's say 5 to 10 year) norms rather than a 20 year norm. -----> Then finally, rents. Rents simply respond to supply/demand (ergo, occupancy). Rents held flat in 2024 so again, I think the 2024 dot here could justifiably be left unfilled. But overall at its most technical level, rents did grow in 2024. All considered then, I think 2024 was the year where the market fully recovered and 2025 will be the year in which expansion (though modest) begins again.