Redfin released its monthly data showing that nationwide rents remained flat in October, sitting at $1,978, a year-over-year drop of 0.3%. This is down 3.7% from the $2,054 record-high set in summer 2022. This is the seventh straight month where rents were relatively flat.
Source: Redfin (November 2023)
“The rental market has cooled in part because there’s a lot of new inventory, which means landlords are grappling with rising vacancies and have less leverage to raise rents. That’s the reverse of what’s happening in the for-sale housing market, where prices are rising due to an inventory shortage. Listings in the for-sale market have plunged because surging mortgage rates have prompted many homeowners to stay put, as moving would mean trading in their low rate for a much higher one.”
CoreLogic reported recently that single-family rent growth is also slowing, decreasing to 2.9% annual growth in August, the 16th consecutive month of rent moderation. That said, since February 2020, single-family rents have jumped 30% nationwide. According to the report, St. Louis and Chicago saw the highest annual rent growth in August.
Zumper released its October National Rent Report, highlighting the flattening of rent growth across almost all markets. “At $1,505, the national median rent for one-bedrooms is down 0.4 percent over last month; that’s the most significant month-over-month decline we’ve seen this year. At $1,862, the national median rent for two bedrooms is down 0.2 percent over last month. Of the 100 cities on our list, 59 have one-bedroom medians that are down over last month, 16 are flat and just 25 are up month-over-month.”
Similarly, Apartment List released its monthly report showing that nationwide rents fell by 0.7% last month. Year-over-year growth now sits at negative 1.2%, but this is more reflective of seasonal trends than a more pronounced downward trend.
Source: Apartment List (November 2023)
Investor purchases decrease
Lily Katz of Redfin released interesting data last week highlighting that real estate investors purchased fewer rental properties in Q3 of 2023. Due to high housing prices and rising mortgage costs, investor purchases dropped 30% year-over-year in Q3, the lowest level seen in seven years. In all, investors bought $36 billion worth of real estate in Q3, which is down almost 20% from this time last year.
Source: Redfin (November 2023)
The biggest decreases were seen in Atlanta (-49.7%), Charlotte, NC (-49.6%), and Jacksonville, FL (-48.2%). Whereas the smallest decreases were seen in Montgomery County, PA (-0.7%), Sacramento, CA (-6.2%), and Oakland, CA (-6.3%). The markets with the highest share of real estate investor activity are as follows:
Source: Redfin (November 2023)
“Investors piled into the Sun Belt during the pandemic to profit off of surging housing and rental values as scores of remote workers moved in. Because investor purchases in the region jumped so dramatically, they now have relatively more room to fall. Appetite for homes in many Sun Belt metros has also cooled because so many buyers have been priced out.”
We may see investment activity tick up with recent mortgage rate decreases, according to Jiayi Xu of Realtor.com. Reportedly, Freddie Mac’s 30-year fixed rate dropped 0.26% to 7.5 percent last week, which was the biggest one-week drop since November 2022. This drop was influenced primarily by slowing bond issuances, a pause in Fed hikes, and a slowing job market.
Source: Realtor.com (November 2023)
Hannah Jones also of Realtor.com highlighted housing data pointing to the hottest real estate markets currently in the U.S. “The Manchester-Nashua, NH metro area ranked as September’s hottest housing market. Manchester has been a mainstay of the hottest markets list, ranking first a total of 20 times. This is the third time the area has ranked number one in 2023, but the area has been in the top 3 each month since February 2021.”
Source: Realtor.com (November 2023)
Commission lawsuit fallout
Anna Bahney of CNN reports on the follow-up to the bombshell verdict last week in a Missouri court that “found NAR and two brokerage firms, Homeservices of America and Keller Williams Realty, were liable for $1.8 billion in damages for conspiring to keep commissions artificially high.” This is just one of many lawsuits currently being filed against NAR and other brokerages, which are also under scrutiny from the US Department of Justice.
Alexis Keenan of Yahoo! News reports on another class-action lawsuit filed in South Carolina that “alleges that the powerful National Association of Realtors (NAR) and real estate brokerage firm Keller Williams Realty violated federal antitrust laws, and in turn, artificially inflated home prices in the state.”
Brooklee Han of HousingWire reports on a recently filed lawsuit in Manhattan, accusing REBNY and 26 other brokerages of conspiring to inflate agent commissions. According to the report:
“The 105-page complaint takes aim at a REBNY Listing Service rule called the Buyer Broker Commission Rule, which states that the brokers “shall each be paid an equal share of the commission as specified in the Exclusive Listing.” In the complaint, March, who sold a home in Manhattan and is the only named plaintiff, states that REBNY’s Universal Co-Brokerage Agreement forced him to pay an allegedly inflated commission fee to the buyer’s broker.”
Han also reports on another Missouri lawsuit, called Gibson, which Is being handled by the same judge who oversaw the above-noted Sitzer/Burnett real estate commission lawsuit.
“The class action-seeking Gibson case was assigned to Judge Stephen Bough, whose forthcoming injunctive relief ruling in the Sitzer/Burnett case is keeping the real estate industry rapt. Damages for the Gibson suit could exceed $200 billion before automatic trebling.”
Megan McArdle of the Washington Post published an op-ed highlighting that these cases likely mark the “beginning of the end of real estate commissions as we know them.”
