Location Strategy Chartbook 12.7.24

Heading in 2025, are you finding value in this economic and real estate news round up? If you are please reply back and let us know your thoughts.

We may entirely sunset this newsletter, run it monthly, or replace it with more in depth analysis with case studies and featuring real industry trends, opportunities, misses.

For example, I have been calling multifamily properties to gain insights into a market as the market data is largely absent. Repeatedly I have seen the trend of missing middle housing as an opportunity that isn’t being capitalized upon. Some apartment communities with private parking garages have long wait lists for garages. Renters today have active lifestyles, have families, have holiday decor and need places to store it. One apartment community has lower vacancy than its competition and also noted having a large number of corporate contracts.

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With a strong economy and an incoming president promising tax cuts and tariffs, investors and economists are rightly worrying that inflation might make a comeback. Unfortunately, one of the standard ways to guard against it—buying commodities, especially oil—offers less protection than usual.

The twin inflation risks are well understood: Supply shocks and demand surges. War in the Middle East has the potential to threaten energy supplies, while tax cuts into an economy with near-full employment ought to lift prices.

The extra threats to inflation don’t fit either model, though. Tariffs and deportations would both be likely to push up inflation, but would also hit the economy. “Commodities won’t protect you from that,” says Christian Mueller-Glissmann, head of asset allocation research at Goldman Sachs.

Inflation and the labor market are both cooling, but a subtle force has powered strong U.S. economic growth nonetheless: Americans keep finding ways to get more done at work. That helps businesses boost sales without passing on higher costs to customers.

There are 883,000 more Americans unemployed now than a year ago. The number of Americans unemployed for 6 months or longer has also increased by 441,000.

Growing investment in data centers and hardware for AI technology will provide a boost to US corporate spending next year, according to forecasts by Goldman Sachs Research.

Major U.S. apartment landlords say the cost of owning a home compared to renting is the greatest they've ever recorded. That difference has begun affecting consumer housing preferences, bringing about what multifamily investment firm Knightvest Capital calls a fundamental shift in how renters think about homebuying.

“For many, renting is no longer a temporary stop but a preferred, long-term lifestyle choice that offers flexibility and community — something we expect to continue shaping the market in the coming years,” David Moore, Knightvest’s founder and CEO, said in a statement.

That's what renters are telling multifamily lenders and investors. Roughly one-third of all tenants have decided to forgo homeownership altogether, while half view renting as a long-term choice, and fewer renters say they'd buy a home even if mortgage rates — near 6.8% — fall, according to a new Knightvest survey. A similar poll this year from Fannie Mae found about 33% of apartment tenants consider themselves permanent renters by choice or circumstance,

In Knightvest's survey:

• 63% of renters cited the high price of homeownership as a main driver of their decision — up from 41% in 2023.

• 59% said lower maintenance and repair responsibilities were a main factor, while 34% named the flexibility to relocate as influencing their housing choices.

• 48% of the more than 2,500 renters in the United States surveyed online in September said renting was a choice rather than a necessity, and 42% said they view renting as a long-term solution they expect to last longer than five years.

The national median rent dipped by 0.8% in November, as we get further into the slow season for the rental market. Nationwide rent fell $12 to $1,382, and we’re likely to see that number dip one more time before the year ends.

Since the second half of 2022, the seasonal declines in rent prices that take place during the fall and winter have been steeper than usual and seasonal increases of the spring and summer have been more mild. As a result, apartments are on average slightly cheaper today than they were one year ago. Year-over-year rent growth nationally currently stands at -0.6 percent and has now been in negative territory for nearly a year and a half. Despite this, the national median rent is still about $200 per month higher than it was just a few years ago.

Are you considering building multi-family or upgrading your existing MF assets knowing new housing will be lacking in the coming years?