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Daily Dose of Real Estate: July 9, 2024

Introductory Summary

Welcome to today’s edition of the Daily Dose of Real Estate. In this issue, we cover the latest developments in the U.S. residential housing market, mortgage rates, the CMBS sector, and REIT investments. Additionally, we provide insights from Federal Reserve Chair Jerome Powell’s recent testimony before Congress, highlighting key points relevant to the real estate and mortgage markets.

Residential Housing Market: High Prices and Inventory Challenges

The U.S. housing market continues to face significant challenges with rising home pricesand inventory shortages. Despite a slight increase in available homes, the market remains tight, with high mortgage rates exacerbating affordability issues. The average 30-year fixed mortgage rate has climbed to 6.95%, making it difficult for many potential buyers to enter the market. Analysts suggest that a reduction in mortgage rates and an increase in inventory are necessary for the market to stabilize source.

• Key Statistics:
  • Home Prices: U.S. home prices posted an annual 6.3% gain in April, according to the S&P CoreLogic Case-Shiller Home Price Index.
  • Inventory: The U.S. remains 4.5 million homes short, up from 4.3 million a year ago, according to Zillow analysis.

Mortgage Market: Rates Edge Higher

Mortgage rates have seen a slight uptick, with the average 30-year fixed mortgage rate now at 6.95%, up from 6.86% last week. This marks the first increase since late May, contributing to the ongoing affordability crisis in the housing market. The Federal Reserve’s cautious stance on rate cuts has kept mortgage rates elevated, with expectations that they will remain high through most of 2024 source.

• Current Rates:
  • 30-Year Fixed: 6.95%
  • 15-Year Fixed: 6.67%
  • Jumbo Mortgage: 7.40%

CMBS Market: Stability Amid Economic Uncertainty

The Commercial Mortgage-Backed Securities (CMBS) market has shown resilience despite economic uncertainties. Investors are closely monitoring the Federal Reserve’s policy decisions, as any changes in interest rates could impact the performance of CMBS. The market remains stable, with no significant disruptions reported in recent weeks source.

• Key Insights:
  • Investor Sentiment: Investors are cautiously optimistic, with a focus on the Federal Reserve’s upcoming decisions.
  • Market Performance: Stability persists, with no major disruptions reported.

REIT Market: Selective Opportunities Amidst Challenges

The Real Estate Investment Trust (REIT) market is facing challenges, but selective opportunities remain. Morgan Stanley’s Ron Kamdem advises investors to stay selective, focusing on high-quality REITs with strong fundamentals. High dividend REITs continue to attract investors looking for passive income, with some REITs offering attractive yields despite the broader market downturn source.

• High Dividend REITs: Some REITs are offering dividend yields of 4% or higher, making them attractive for income-focused investors source.

Jerome Powell’s Testimony: Key Points for Real Estate and Mortgage Markets

Federal Reserve Chair Jerome Powell testified before Congress on July 8, 2024, providing insights into the Fed’s monetary policy and its impact on the real estate and mortgage markets. Powell emphasized the Fed’s commitment to controlling inflation and indicated that interest rates would remain high until there is greater confidence that inflation is moving towards the Fed’s 2% goal source.

• Key Takeaways:
  • Interest Rates: Powell reiterated that the Fed is not in a hurry to cut interest rates, which means mortgage rates are likely to remain elevated for the foreseeable future.
  • Inflation Control: The Fed remains “strongly committed to returning inflation to our 2% goal in support of a strong economy that benefits everyone” source.
  • Economic Outlook: Powell’s testimony highlighted the Fed’s cautious approach, balancing the need to control inflation with the goal of supporting economic growth.

Key Takeaways

• Residential Housing: High mortgage rates and limited inventory continue to challenge the market.
• Mortgage Rates: Rates have climbed to 6.95%, impacting affordability and slowing sales.
• CMBS Market: Stability persists despite economic uncertainties.
• REIT Market: Selective opportunities exist, with high dividend REITs attracting investors.
• Fed Testimony: Jerome Powell’s testimony underscores the Fed’s commitment to controlling inflation, with implications for mortgage rates and the broader real estate market.

Stay tuned for more updates and in-depth analysis on the latest trends and changes in the real estate market! Please check out ALFReD for yourself at www.impactcapitoldc.com.