New: 🧠 Market Minds Issue #018

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The Long-Term Shortage

A new report from Realtor.com highlights the current housing shortage in the U.S. The report reveals that there is a shortfall of 7.2 million homes due to more than a decade of underbuilding. However, when multi-family home construction is taken into account, the gap reduces to 2.5 million homes. This shortage has significant implications for the housing market and renters across the country.

And other sources seem to agree. Here are just a few shortage estimates:

• Fannie Mae: 4.4M units

• Zillow: 4.3M units

• Bank of America: 4M units

• Freddie Mac: 3.8M units

• J.P. Morgan: 2-2.5M units

The increase in multifamily construction has led to more rental units being available on the market. This has put downward pressure on rents, providing some relief for renters. The uptick in single-family construction also means that there are more options for home shoppers, particularly in certain U.S. markets.

Kiavi Closes on $350M Securitization

Kiavi, one of the nation's largest private lenders for residential real estate investors, recently announced the closing of a $350 million unrated securitization of residential transition loans (RTLs). This marks Kiavi's 16th such transaction and brings their total issuance to over $4 billion since launching their securitization program in 2019.

The securitization consists mainly of investment property loans used for fix-and-flip transactions. Despite the challenging housing market, Kiavi funded $4 billion in fix-and-flip loans in 2023, setting a company record for a calendar year.

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Rent is Falling!

Touching more on this from the section above - rent is falling fastest in markets that added the most new supply, according to a new report from Zumper. The report shows that for the second time in three years, the monthly cost of a one-bedroom rental was lower than it was a year ago. The national price of a one-bedroom rental fell 0.7 percent in February, while two-bedroom rentals saw a 0.7 percent increase.

Markets that added the most supply are experiencing the fastest decline in rent. These markets are primarily located in the Sun Belt and across the West. On the other hand, markets in the Midwest and Northeast that didn't add as much supply are still seeing rent continue to rise.

The added supply in many markets has shifted the leverage from property managers to renters when it comes to negotiating rent prices. While it's common for tenants to face rent increases when renewing their leases, the abundance of supply has given renters more bargaining power.

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TL;DR (Too Long; Didn’t Read)

A new report from Realtor.com highlights a housing shortage in the U.S., with estimates ranging from 2.5 to 7.2 million homes. Multifamily construction has helped alleviate this shortage to some extent, resulting in more rental units and lower rents in certain areas. Kiavi, a major private lender, closed a $350 million securitization of residential transition loans, reflecting continued activity in the housing market despite challenges. Additionally, markets with increased housing supply are experiencing rent declines, giving renters more negotiating power.

Have a great weekend - we’ll see you next Saturday.

Cheers 🍻

-Market Minds Team