[Nationwide] Households are falling in love with their credit cards-The combination of growing household debt and higher costs of servicing that debt should be weighing on consumer sentiment and curtailing spending, but it isn’t happening yet. Household outstanding debt, including home loans, grew to $17.5 trillion in the fourth quarter of 2023, up 1.2% over the year and 3.6% higher than a year earlier, according to the Federal Reserve Bank of New York. Most of that is in mortgages which is less worrisome because of its physical collateral and because about 60% of home loans carry fixed rates below 4%. However, consumers are using credit cards and personal loans much more frequently as the excess savings from pandemic-era relief payments dwindles. Outstanding credit card debt grew by 14.5% over the past year, and debt from other personal loans increased by 9.3% over the same period.
(New York Fed)
[Nationwide] Built-to-rent projects draw $3 billion in fresh investment as homebuyers struggle- Built-to-rent projects are becoming attractive investments nationwide as the cost of buying a home remains elevated due to interest rates. Middleburg Communities, a Virginia-based property management company, has invested $500 million in its built-to-rent portfolio while Pretium, a New York-based alternative investment firm, has invested $2.5 billion in built-to-rent houses. According to the National Rental Home Council, close to 25,000 built-to-rent houses were completed in 2023, a 62% increase from 2022. Since 2019, the number of built-to-rent completions has increased 270%. At the same time, the National Association of Home Builders said 37.7% of home sales, either new or existing, were affordable to households earning the U.S. median income in the fourth quarter. (Costar 2/13/24)
[Nashville] Startup piloting ground lease home sales in Nashville market-Groundly is testing a new pilot program as a pathway to homeownership in the Nashville market. The startup is selling the homes while leasing the land to the homeowners with four active listings currently in Nashville, Antioch, Mt. Juliet and Madison. On each listing, Groundly claims that customers can save up to 30% on their down payment and 7% on their initial monthly payment, making the homes more affordable and reducing upfront costs. Tara DeSelms, Greater Nashville Association of Realtors president-elect, doesn’t think there will be a large market for this because the ground lease increases by 2% each year, meaning there aren’t as many benefits in the long term. (Post 2/14/24)
o Madison: Groundly purchased property for $745,000 and is under contract to sell a 3BR house for $530,000
o Sylvan Heights: Groundly purchased property for $1,350,000 and is listing the home at $960,000
o Antioch: Groundly purchased property for $430,000 and is selling the home for $305,000
[Nationwide] Nation’s largest single-family rental landlord to buy up to $1 billion in houses this year-Invitation Homes wants to increase the size of its 80,000 single-family rental portfolio by acquiring $600 million to $1 billion of houses this year, with an additional $100 million to $300 million in purchases through its joint ventures. In 2023, Invitation Homes and its joint venture partners bought $1.1 billion of houses totaling more than 3,200 units. In fiscal 2023, Invitation Homes’ portfolio was
97.4% occupied with comparable rental rates increasing 6.3%, including renewals and new leases, from the prior year. (Costar 2/14/24)
[Nationwide] When will interest rates fall – and how fast?-The Federal Reserve is expected to begin lowering interest rates this year as inflation further subsides. After reaching a high of 9.0% in June 2022, inflation has steadily declined, ending 2023 at 3.4%. Further progress is expected over the months ahead and inflation should near the Fed’s target of 2% by the middle of the year. This should enable Fed officials to begin lowering their overnight lending rate by the second quarter, however the first cut could come as early as March with a quarter-point decrease followed by five more quarter-point decreases by the end of the year, bringing the mid-point down to about 3.85%. Although Federal Reserve interest rate don’t always result in one-for-one changes in consumer borrowing costs, sectors of the economy that are sensitive to interest rates, particularly the housing market, should see the greatest benefit form the lower rates.
[Nashville] One-fifth of Nashville offices sit empty: the quest for solutions intensifies-In Nashville, nearly one out of five offices are sitting empty. Vacancy rates jumped from 10.5% at the end of 2019 to 18.2% in late 2023 leaving owners to seek long-term solutions. For example, two of Nashville’s large, aging office buildings are transforming into apartments. Old office owners aren't just constrained by lack of demand, their costs are also going up because of inflation. An estimated $871.6 million in
commercial real-estate mortgage payments in Nashville will be due this year, according to CommercialEdge, as leases end and higher interest rates increase pressure on owners. Banks have tightened lending standards, while investors hold onto their cash amid concerns about widespread defaults nationwide due to plummeting office values. "Loan extensions, workouts, defaults and foreclosures will all be more common this year," said Doug Ressler, a business-intelligence manager at real-estate data firm Yardi Matrix. "In 2024, we anticipate office utilization rates will slowly creep up, even if a full-scale return will never materialize." Although post-pandemic office vacancies have remained high, Nashville’s job growth remains a positive for the market. Nashville landed sixth on Milken Institute’s 2024 Best-Performing Cities list, with 14.2% job growth from 2017-2022, 48.2% wage growth and a "relatively affordable cost of living," among other leading metrics. (Tennessean 2/22/24)
"While it is possible we could have a CRE driven financial catastrophe, the evidence just isn’t showing
up in the property fundamentals." -Marcus & Millichap