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Apartment rent growth slows in the United States
Apartment rent growth in the United States has slowed nationwide over the past year, with the higher end of the market most affected, new research shows. After growing at a blistering pace for much of 2015, apartment rents across the county are growing at a slower pace thus far in 2016, according to the data from real estate firm Zillow. Overall, apartment rents nationwide grew by 3.6% for the year ending in April 2016, almost 2% points slower than the 5.4% pace reported for the year ending in April 2015. And in 23 of the nation’s 35 largest housing markets, the slowdown in rent appreciation has been more acute in luxury ZIP codes area than metro-wide. In four additional markets of Washington D.C., Sacramento, Miami-Fort Lauderdale, and Kansas City broader apartment rent growth has accelerated from 2015, but it has accelerated less in luxury ZIP codes than in the metro as a whole. Aaron Terrazas, a senior economist at Zillow, said that substantial investment in new construction, particularly at the high end of the market, has contributed to some of this pattern, although in some areas weak labour markets may also be a contributing factor. The research also shows that in the Houston metro, essentially all ZIP codes where the median rent per square foot is above $1.10 have experienced a deceleration in apartment rents. In the New York metro, the natural cut off appears to be closer to $2.30 per square foot and in the San Francisco metro, it appears to be around $3.80. The exception is the Seattle metro, where higher apartment rent growth continues to accelerate in luxury ZIP codes, although the acceleration has perhaps not been as dramatic as lower priced ZIP codes. Terrazas explained that part of this is due to rapidly rising rents in neighbourhoods north of Seattle’s Lake Washington Ship Canal. Meanwhile, the latest national index produced by Florida Atlantic University and Florida International University shows that housing market as a whole is moving deeper into buy territory, suggesting that, on average, residential housing markets around the country are sound. The Beracha, Hardin & Johnson Buy versus Rent (BH&J) Index measures the relationship between purchasing property and building wealth through a build-up in equity compared renting a comparable property and investing in a portfolio of stocks and bonds. It says that in terms of wealth creation the US housing market, when considered as a whole, has swung marginally more in favour of home ownership over renting a comparable property and investing monthly rent savings in a portfolio of stocks and bonds. Overall, 16 of the 23 metropolitan markets investigated moved in the direction of buy territory. The metro areas of Boston, Chicago, Cincinnati, Cleveland, Detroit, Milwaukee, Minneapolis, New York, Philadelphia and St. Louis remain solidly in buy territory. ‘These cities should have room for price growth without much worry of overheating,’ said Eli Beracha, co-author of the index and assistant professor in the T&S Hollo School of… Continue reading
US rents starting to outpace house price growth, new analysis shows
Residential rents in the United States are continuing to rise, up 3.7% year on year to $1,362 a month and keeping pace with house price growth of 3.9% over the same period. The latest data from real estate firm Zillow shows that in 17 of the nation’s 35 largest metro areas, annual rental growth exceeded annual house price growth in March. This is in line with expectations as the firm predicted at the end of 2014 that annual rent growth would outpace house price growth by the end of 2015. It now says this will happen well before the end of the year. But while overall home values in the nation as a whole may still be growing more quickly than rents, in many large metro areas, rental growth has surged ahead over the past year. Of the 17 metro areas where rents are growing more quickly than home values, the biggest differences are in San Francisco with rents up 14.8% year on year and home values up 9.6%. While in Kansas City rents are up 8.6% and price up 4%, and Pittsburgh it is 6.3% and 4.3% respectively. March represents the first month in two years in which annual home value growth was less than 4%. For 24 months, home owners have watched their homes appreciate at a pace well above historic norms at around 3% annually. According to Zillow rising rents themselves are a double edged sword for the purchase market. As current tenants see more and more of their income going to landlords that keep raising the rent, many are likely to opt for the relative stability of homeownership. And home ownership, in addition to offering stable payments over many years, is also an incredible bargain right now. Current US renters making the median national income can expect to pay about 30% of their income to afford the median US rental property, up from about 25% historically. Buyers, on the other hand, thanks to very low mortgage interest rates and home values that, for most local markets, remain below their pre-recession peaks and should expect to pay only 15% of their income on a mortgage, down from about 22% historically. The Zillow analysis also points out that homes to buy remain scarce, and those homes being built are often focused at the high end, and not at current renters that are likely looking to buy more entry level homes. Continue reading
UPDATE 2-U.S. Midwest Farmland Prices Soften In Q3-Chicago Fed
Thu Nov 14, 2013 By Christine Stebbins Nov 14 (Reuters) – Farmland prices in the heart of the U.S. Corn Belt softened in the third quarter from the prior three months and overall values in the top corn-producing state of Iowa eased, tracking grain prices lower, the Federal Reserve Bank of Chicago said on Thursday. For the district overall – which stretches across Iowa, northern Illinois and Indiana, as well as Wisconsin and Michigan – farmland prices were up 1 percent in the July-September quarter from the previous quarter and up 14 percent year-on-year, according to the Fed’s quarterly survey of farm bankers. “While district farmland values increased on the whole in the third quarter of 2013, this upward trend was not expected to continue: the respondents’ expectations leaned toward a decrease in farmland values in the fourth quarter of 2013, as only 4 percent anticipated an increase and 21 percent forecasted a decrease and 75 percent foresaw stable farmland values,” the Fed said. “That’s a change,” David Oppedahl, a Chicago Fed senior economist and author of the survey said. “Also there could be some credit conditions shift as we may have a larger volume of operating loans in the coming quarter than a year ago.” The Kansas City Federal Reserve will release its farmland survey on Friday U.S. central bank policymakers, farm bankers, sellers of seed and feed and equipment to farmers and the farmers themselves have been watching farmland auctions in the Midwest carefully this autumn to pick up any pronounced weakness in the market after the sharp decrease in grain prices from last year’s record highs. Farmland is the basic collateral for farmer loans and economists have expressed concern for months that a farmland “bubble” may pop as it did in the 1980s, hurting what has been one of the healthiest sectors of the U.S. economy. The Chicago Fed survey, which sorted responses from 195 district farm bankers, confirmed that as harvest got under way and the autumn auction season began, the prices for prime crop land were mostly steady from three months earlier. Illinois and Iowa, for instance, which produce about one-third of all U.S. corn and soybeans, saw prices gain 1 percent and fall 1 percent from the prior three months, the Fed data showed. “After leading the district in terms of year-over-year gains in farmland values from the first quarter of 2010 until earlier this year, Iowa felt the impact of renewed drought conditions and had the lowest year-over-year increase in agricultural land values among district states, as well as the only quarterly decrease,” the Fed said. A positive sign was that the farmland values held up so well in the third quarter despite the drop in grain prices. The Fed said corn prices averaged $6.13 per bushel in the third quarter – down 12 percent from the previous quarter and down 15 percent from a year ago. Soybeans averaged $14.23, down 3.8 percent from the previous quarter and off 7 percent from 2012. “Better-than-expected crop yields for the district may have contributed to the momentum of its rising farmland values; however, in areas affected by back-to-back droughts, the loss of revenue from declines in crop prices and yields may have constrained farmland value gains,” the Fed said. The bank noted that the U.S. Department of Agriculture predicts that the five district states’ harvest of corn will be 38 percent higher than the drought-reduced production of 2012. District soybean production was projected to rise 8.5 percent in 2013, boosting farmer revenues despite the lower prices. FARM BANK CONDITIONS IMPROVE The softening but steadiness of the red-hot farmland market carried over to farm bank credit conditions. “In the third quarter of 2013, the District’s agricultural credit conditions saw improvement relative to a year ago, although it was generally narrower than in the previous quarters of this year and the past few years,” the Fed said, adding that bankers expected agricultural credit conditions to shift in the fourth quarter. Bankers surveyed also expected loan repayment to worsen, with 17 percent forecasting the volume of farm loan repayments to rise in the next three to six months relative to a year ago and 26 percent expecting this volume to fall, the Fed said. However, significantly, “Forced sales or liquidations of farm assets among financially stressed farmers should decline in the next three to six months relative to a year earlier, except in Wisconsin,” the Fed said. That outlook for less liquidation was tied, ironically, to the fall in grain prices which, for the first time in years, was suddenly brightening business for livestock and dairy producers. Grain farmers have been cutting debt sharply in recent boom years. USDA currently estimates in prices for corn at $4.10 to $4.90 and for soy $11.15 to $13.15 for 2013/14 crop year. “Thirty-seven percent of the respondents expected higher net earnings for cattle and hog operations over the next three to six months relative to a year ago,” the Fed said. Prospects for dairy producers were not as rosy since milk prices in October were off 6 percent from October 2012. Continue reading
