Retail net absorption logged a 37.2% quarter-over-quarter leap in Q4 2023, growing to 17.6 million square feet, the highest level for the year. The fourth-quarter total was buttressed by a substantial jump in mall demand as such facilities have benefited from the rebound in physical retail post-COVID. According to a June report from Coresight, top-tier malls saw traffic grow from 2022 compared to 2019, while lower-tier mall traffic was up 10%—and mall absorption is starting to pick up in kind.

Meanwhile, overall deliveries of new retail space fell 5.1% quarter over quarter. The pickup in absorption coupled with the lack of offsetting supply pushed vacancy down 20 basis points to 4.0%, lowest since 2007. High costs are still holding back retail construction, presenting a challenge to retailers on the expansion track.

That challenge could turn out to be a big one if demand continues to outperform, with 2023 another active year for retail sector expansion. Per JLL’s figures, retailers announced 6,617 new store plans in 2023 (regardless of opening date). On the other end of the spectrum, just 4,412 store closures were announced.

Discount retailers are among the most active among expanding tenants, with Dollar Tree, Five Below, Burlington and TJ Maxx all among the top 10 retailers in new square footage signed. Dollar Tree tops the list by a considerable margin with 1.27 million square feet leased in 2023, handily exceeding second-place Target’s 761,800 square feet of new commitments.

Discounters are benefiting from bargain-hunting Americans’ response to ongoing inflation, with the Consumer Price Index (CPI) some 19% above its level in 2019. Discount retailers — chiefly dollar stores — announced  over 2,300 store openings in 2023.

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According to the latest iteration of First American’s Home Price Index (HPI) report, prices increased 0.3% month over month, hitting a 10^th consecutive peak in January. But Mark Fleming, chief economist at First American, appears confident that while more new highs may be on the way, the rate of gains is cooling.

“The pace of annualized home price appreciation peaked in December, as buyers rushed to take advantage of falling mortgage rates,” he explained. “In January, the preliminary estimate of annualized appreciation cooled modestly by half a percent and is likely to slow down further in the coming months. Despite concern that house prices could decline significantly at the beginning of 2023, rate-locked potential home sellers kept supply tight, maintaining pressure on prices. Optimism that mortgage rates will fall in 2024 may incent more homeowners to sell, boosting supply and, in turn, improving affordability for buyers.”

Annual price growth in January was at a rate of 7.2% — down, as Fleming mentioned, by 0.5% from December’s 7.7% peak.

The deceleration in home price gains is evident in First American’s metropolitan-level data. None of the 30 core-based statistical areas (CBSAs) tracked by First American posted a year-over-year decrease in HPI. Of the markets within those CBSAs, Nassau County saw the largest annual HPI increase at 10.7%, followed by Anaheim, California, at 10.2%; Warren, Michigan at 9.6%; and Miami at 9.4%.

But the vast majority of those CBSAs have already left their price peaks in the rearview, Fleming noted.

“While house prices increased in all 30 markets tracked by our index over the last year, this rising tide hides the change in market prices since their peak,” he said. “Measuring the price change in each market from their post-pandemic peak reveals that house prices are below their prior peaks in 23 of the top 30 markets. Notably, house prices are currently 6% or more below their prior peak in six markets, with the largest price declines from peak in Oakland (-13.5 percent); Austin (-9.9 percent); and Seattle (-9.2 percent).”

Fleming projected hope that, after a few turbulent years, discovery of the housing market’s elusive Goldilocks price point isn’t too far at hand.

“While more supply and improved affordability should cool post-pandemic hot house price appreciation, 2024 may still be the year that house price appreciation doesn’t get too cold, but closer to just right.”

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According to Yardi Matrix, the average asking rent for the month was $1,710, flat from December and up 0.5% year over year. It’s a tepid annual gain, but one that remains nonetheless notable given the recent surge of new apartment space in many areas, an influx attributed in large part to multifamily’s resilience even in the choppy commercial real estate environment of the past few years.

With more deliveries set to hit the market soon, Yardi anticipates another weak rent growth year in 2024. The analytics company is forecasting 540,000 deliveries this year, which would be a new record high if realized. Completions are expected to peak in 2024, though the pipeline remains busy with another 460,000 deliveries predicted in 2025.

The ongoing surge of supply, however, isn’t geographically consistent. Expanding secondary markets in the West and Sun Belt, like Austin, Miami, Charlotte, Denver, Nashville and Phoenix, are seeing the largest number of deliveries, as are fast-growing tertiary cities in the same regions, like Huntsville, Alabama; Port St. Lucie, Florida; Colorado Springs, Colorado; and Boise, Idaho. Even with absorption sturdy in such markets, their rent growth projects most weakly while tenants lease up the newly added space. Charlotte, Nashville, Phoenix and Austin all saw year-over-year decreases in rent, with Denver and Miami logging gains below the national 0.5% figure.

Meanwhile, rents in large hubs in the Northeast and Midwest are seeing the strongest gains. New York (up 5.5% annually); New Jersey (4.4%); Columbus, Ohio (4.2%); Kansas City, Missouri (3.4%); and Indianapolis (3.0%) posted the largest annual increases in January, while Columbus (up 0.8% from December), Indianapolis (0.6%) and Minneapolis-St. Paul (0.5%) saw the largest upticks month over month.

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American Financial Resources (AFR) has announced that it completed the sale of 100% of the company to an investment group led by Proprietary Capital.  The transaction was previously announced in August, and the transaction was completed on Feb. 8.  AFR is a full-service mortgage banking company with direct, wholesale and correspondent lending divisions that offer products ranging from agency, non-agency, and government lending, with a niche in construction and manufactured home mortgage programs. Proprietary Capital is a fund manager based in Denver, providing an institutional platform for investors to gain exposure to the residential mortgage market and housing-related assets.

Better has announced the launch of Better Mortgage VA Loans, a fully digital VA loan program available to eligible veterans, service members, National Guard and Reserve members, and, in some cases, veterans’ spouses. The offering, available in all 50 states, allows qualified individuals to secure a primary residence mortgage for up to 100% of the purchase price with no downpayment requirement.

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At a seasonally adjusted annual pace of 1.33 million units, January’s rate of starts was down 14.8% from December and 0.7% from January 2023. The slowdown was likely propelled in large part by the frigid weather that gripped much of the country during the month, making it harder to break ground on new construction. Economists polled by Reuters had predicted a rate of 1.46 million starts, leaving January’s actual figure far short of expectations.

Both single-family and multifamily starts declined, although the month-over-month single-family backtrack of 4.7% paled in comparison to the stark 35.6% plummet in multifamily building. Multifamily starts are notoriously volatile on a month-to-month basis, but Robert Dietz, chief economist at the National Association of Home Builders (NAHB), said that the sector looks due for more of the same throughout the year.

“Multifamily construction is forecasted to post a large decline in 2024 as the number of units currently under construction is near the highest level since 1973,” Dietz said. “Meanwhile, single-family production, which is currently running at a 1-million-unit annual rate, is roughly in line with builder sentiment that remains right below a breakeven level, according to our latest surveys.”

The NAHB/Wells Fargo Housing Market Index, which tracks builder confidence in the market for new single-family homes, rose four points to a reading of 48 in February — the index’s highest level since August of last year. The stubborn shortage of listings that has held back the resale market continues to boost new home demand, and expectations of an eventual interest-rate lowering cycle are fueling optimism.

“The improvement in builder sentiment has been driven by the gradual decline in mortgage rates since the fall of last year,” said Odeta Kushi, deputy chief economist at First American Financial Corp. “Additionally, builders continue to benefit from a lack of resale inventory. They also can offer incentives, such as mortgage rate buydowns or even price cuts, to entice buyers. When there are no suitable existing homes for sale, a new home at the right price can be a good alternative.”

The NAHB forecasts a “modest” gain in single-family starts for full-year 2024, Dietz said. Thus far, that prediction is supported by early-year permitting data, with authorizations of new single-family construction at a pace of 1.02 million units in January, up 1.6% from December.

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A&D Mortgage has announced the appointment of Rebecca Chaney as its new general counsel. Chaney brings over 17 years of experience to her new role at A&D Mortgage, including previous roles as general counsel at Atlantic Coast Mortgage; senior vice president of mortgage regulatory compliance and administration at LenderSelect Mortgage Group; and senior executive vice president of legal affairs, regulatory compliance and administrative control at Atlantic Bay Mortgage Group. Her role will involve overseeing all legal, regulatory, and compliance aspects of A&D Mortgage’s operations. Chaney holds a juris doctor degree from The Catholic University of America.

Logan Finance Corporation has announced a pair of leadership additions: Sarah Gonzalez as chief operating officer (COO) and Ryan Rathert as chief of staff. Gonzalez, who will lead corporate strategy and national fulfillment as well as spearhead corporate initiatives, was previously at Panorama Mortgage, where she held the positions of president and COO. Prior to Panorama, she also served as COO at First Guaranty Mortgage Corp.; senior vice president of strategic business operations at Stearns Lending; and vice president of correspondent operations at Nationstar Mortgage. Rathert’s background includes eight years with Stearns Lending in a variety of positions, most recently as chief financial officer of Panorama and COO/CFO of the company’s wholesale mortgage channel. He was also previously production CFO an head of private label operations with Stearns Lending, Wells Fargo and Mr. Cooper.

Embrace Home Loans has promoted Buddy Hardiman from senior vice president of retail and direct sales to president. Hardiman, who is based in Middletown, Rhode Island, will oversee the company’s lending operations and fulfillment areas, as well as continue to head Embrace’s financial services division. He joined Embrace Home Loans in 2008 as a project manager, holding various roles before being promoted to vice president of sales strategy and recruiting in 2016 and senior vice president of retail and direct sales in 2019.

The Money Store has announced that Coleen Bogle has joined its team as chief marketing officer. Bogle has more than 15 years of experience leading marketing departments in the home financing industry, and in her new role, she will focus on enhancing the brand, expanding marketing services and attracting mortgage origination talent to the organization. Prior to joining The Money Store, Bogle served as the chief marketing officer at Draper and Kramer Mortgage Corp. for over eight years.

FirstFunding has announced the appointment of Matt Coles as national sales manager. Coles will lead the company’s sales strategy and operations, seeking to enhance the value FirstFunding delivers to existing customers and grow the sales team. Prior to joining FirstFunding, Coles led the sales organization at a national wholesale and correspondent lender.

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Twenty percent of commercial and multifamily mortgage balances are set to mature in 2024, the MBA reported in its latest Commercial Real Estate Survey of Loan Maturity Volumes. The organization revealed the data at its annual Commercial/Multifamily Finance Convention and Expo in San Diego.

That figure equates to roughly $929 billion of the $4.7 trillion in outstanding commercial property loans, a 28% increase from the $729 billion that matured last year. Many of the loans that were originally set to see maturation in 2023 were instead pushed to this year, ballooning the 2024 estimate.

“The lack of transactions and other activity last year, coupled with built-in extension options and lender and servicer flexibility, has meant that many loans that were set to mature in 2023 have been extended or otherwise modified and will now mature in 2024, 2026, 2028 or in other coming years,” said Jamie Woodwell, the MBA’s head of commercial real estate research.

“These extensions and modifications have pushed the amount of [commercial real estate] mortgages maturing this year from $659 billion to $929 billion.”

Some investor groups are set to see a large fraction of the outstanding balances they hold reach maturation this year. For example, 25% of the outstanding commercial property loan balances held by depository institutions — a share that equates to some $441 billion — will mature in 2024. So will 31% of balances (approximately $234 billion) in commercial mortgage-backed securities, collateralized loan obligations or other asset-backed securities, as well as 36% ($168 billion) held by credit companies, in warehouse or by other lenders. On the other end of the spectrum, just 3%, or $28 billion, of outstanding balances held or guaranteed by Fannie Mae, Freddie Mac, the Federal Housing Administration or Ginnie Mae are set to mature this year.

When it comes to property types, hotels have the largest share of loans coming due at 38%, followed by 27% of industrial loans and 25% of office mortgages. Just 17% of retail property balances and 12% of multifamily-backed loans are set to mature in 2024.

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The Seattle-based national real estate brokerage reported that investors bought 46,419 homes in the fourth quarter, down 10.5% year over year to reach the lowest fourth-quarter level since 2016. Home purchases by investors have ebbed because high capital costs have combined with a lethargic rental market to depress investment returns, with many investors instead putting their money toward lower risk, higher return arenas such as Treasury bonds.

But among homes priced among the bottom third of local sale prices, investors remain active. Real estate investors purchased 26.1% of such homes sold in the fourth quarter, up from 24% in the same period one year prior and the highest percentage on record.

The investing appeal of more affordable homes in an environment with high prices and high interest rates is obvious, but Redfin noted another advantage: the lowest price tier also offers more potential for home value increases and therefore more potential for building equity.

Notably, while investors acquired a larger share of low-priced homes in the fourth quarter, the share of low-priced homes as a percentage of all investor purchases has actually gone down. Homes priced in the bottom third of local sale prices made up 46.5% of all investor buys in Q4 2023, down from 47.2% year over year.

Investors also acquired a larger share of high-priced homes during the fourth quarter than they did one year earlier (15.9% of homes in the top one-third of local sales prices in Q4 2023, compared to 15.4% in Q4 2022). The share of high-priced homes as a percentage of investor purchases was also up, growing to 28.8% in the last three months of 2023, up from 26.5% in the same period of 2022.

Investors bought 13.6% of mid-priced homes sold in the fourth quarter, down from 14.3% one year prior. Mid-priced homes made up 24.6% of all investor buys, down year over year from 26.4%.

Carrie Caruthers, a Redfin agent in California’s Inland Empire, said that investors remain active — in fact, while the 10.5% annual drop in investor home purchases during the fourth quarter was the sixth consecutive decrease, it’s the smallest downshift since investor activity first began falling during Q3 2022.

“I get tons of emails every day from investors looking for properties, but of course, they only want homes that are under market value, which are hard to come by,” Caruthers said. “When they find those properties, they pile in. I’ve recently seen an uptick in foreclosures, which investors are interested in because they often sell at a discount.

“I just sold one foreclosed house to an investor for $400,000. It probably would’ve sold for around $500,000 if it hadn’t been a foreclosure, but the investor got a deal because foreclosure purchases come with risks.”

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According to a statement from the company, Guild would rise from the 10^th largest nonbank retail mortgage lender to the eighth largest upon completion of the acquisition. The purchase would give Guild’s origination volume roughly a 25% boost, based on results from both companies through the third quarter of 2023.

Both Guild and Academy are licensed to originate loans in 49 states, as well as the District of Columbia.

“Guild and Academy share a commitment to the purchase mortgage market and believe in local sales and fulfillment that builds on our customers for life strategy,” said Terry Schmidt, CEO of Guild. “Our aligned core values attract employees dedicated to serving their communities and delivering on the promise of homeownership.”

Per Guild’s statement, Academy has about 200 branches, which will transition to the Guild brand and operate as a division within Guild.  More than 1,000 employees, including over 600 mortgage originators, will transition to Guild, including Academy CEO Adam Kessler, who will join the newly combined company’s senior leadership.

“Joining forces with Guild Mortgage will allow us to accelerate our collective desire to preserve and promote [our] vision as we work together to become the nation’s best independent mortgage lender,” said Kessler. “I’ve known Terry and the Guild team for a long time, and our common mission, vision, and values made it clear joining forces would be a win-win for both companies.”

“This transaction represents two like-minded organizations joining forces to continue to grow stronger together,” Schmidt added. “Each acquisition we’ve completed has brought new talent to Guild, making us a better company. We’re excited to extend a warm welcome to our new Academy teammates and build on their talent with the support of Guild behind them.”

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The Consumer Price Index (CPI), a broad-based metric gauging the changes over time in prices paid by consumers for goods and services, rose 0.3% in January on a seasonally adjusted basis, according to the U.S. Bureau of Labor Statistics.

That’s up from 0.2% in December and marked the largest pickup in consumer prices in four months. The CPI’s growth actually slowed year over year, gaining 3.1% in the 12 months through January after picking up 3.4% in the year trailing December. Both monthly and annual CPI gains, however, exceeded expectations, with economists polled by Reuters anticipated a 0.2% CPI increase month over month and a 2.9% increase year over year.

The core CPI, which excludes volatile food and energy prices, grew by 0.4% monthly and 3.9% annually.

Much of the increase from December to January was driven by shelter costs, including rents, which are weighted to account for roughly one-third of the CPI calculation. The price sub-index for shelter rose 0.6% month over month and comprised more than two-thirds of the overall gain from the previous month.

Food prices also saw a notable uptick, increasing 0.4% in January, per the CPI. The food-at-home sub-index rose 0.4% during the month, while the food-away-from-home sub-index was up 0.5%. At the other end of the spectrum, the sub-index for energy dropped 0.9% in January, chiefly due to the decrease in the price of gasoline (which fell 3.3% month over month).

“Markets expected headline inflation to fall below 3% year over year for the first time since March 2021, which didn’t happen,” said Ksenia Potapov, economist at First American Financial Corp. “Prices on energy and goods other than food and energy have been pushing inflation down, but services inflation (which includes shelter) remains high.”

The role of stubbornly buoyant shelter costs in January’s higher-than-expected inflation reading isn’t as gloomy as it appears at first glance, Potapov continued.

“Shelter inflation lags observed prices by approximately 6-12 months, so slower rent growth over the past year is expected to drag headline inflation down over time,” she explained. “For comparison, annual rent growth slowed from 7% in January 2023 to 3.5% in January 2024, according to Zillow.”

As for how, if at all, the report will impact the Federal Reserve’s monetary policy, it likely slams the door shut on a March rate cut and, in all probability, deepens the central bank’s wait-and-see stance before it takes any interest-cutting actions.

“Today’s CPI results suggest a continued slowdown in the Fed’s inflation target,” said CoreLogic chief economist Selma Hepp. “While there is a softening in rents, there are still some stubbornly high prices, which is balancing the nation’s economy on its path to a so-called soft landing. Overall, the nation’s economy remains strong, so don’t expect an interest rate cut this half of the year unless consumer prices take a larger, downward trajectory.”

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