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Chart of the week

Rising home prices support multifamily market

Home prices are rising again, despite elevated mortgage rates. This week’s chart looks at declining home inventories and rising home prices.

July 28, 2023

Declining home inventory, rising home prices

Source: Home prices based on S&P CoreLogic Case-Shiller U.S. National Home Price Index. Home inventory based on Zillow For-Sale U.S. Inventory data. As of July 27, 2023.

  • The commercial real estate (CRE) market has undergone a significant correction over the past year as pricing and transaction volume have slowed considerably, driven by a sharp rise in mortgage rates. Multifamily—the largest and generally most interest-rate-sensitive of all major CRE sectors—has seen the sharpest price decline (-11.7%) following several years of meteoric price growth.1
  • Despite the recent recalibration, the secular shortage of U.S. housing continues to be a strong tailwind supporting apartment demand, property price and net operating income growth.
  • The chart highlights the declining inventory of new homes (black line) for sale as many homeowners locked themselves into low mortgages and have been hesitant to sell. In turn, home price growth (orange line) has reaccelerated following a brief, rate-driven decline.2
  • The S&P CoreLogic Case-Shiller National Home Price Index has risen each of the past four months and is again nearing its all-time high of June 2022, likely keeping potential new home buyers out of an increasingly expensive market.2
  • While the near-term price backdrop remains uncertain, the fundamentals backing the largest CRE sector remain healthy. Within this environment, CRE debt may offer an attractive risk-return profile that combines healthy yields and a senior position in the capital structure. 

  • MSCI Real Capital Analytics, as of June 30, 2023. Latest data available.

  • Home prices based on S&P CoreLogic Case-Shiller U.S. National Home Price Index. Home inventory based on Zillow For-Sale U.S. Inventory data. As of July 27, 2023.

The chart of the week and any accompanying data is for informational purposes only and shall not be considered an investment recommendation or promotion of FS Investments or any FS Investments fund. The chart of the week is subject to change at any time based on market or other conditions, and FS Investments and FS Investment Solutions, LLC disclaim any responsibility to update such market commentary. The chart of the week should not be relied on as investment advice, and because investment decisions for the FS Investments funds are based on numerous factors, may not be relied on as an indication of the investment intent of any FS Investments fund. None of FS Investments, its funds, FS Investment Solutions, LLC or their respective affiliates can be held responsible for any direct or incidental loss incurred as a result of any reliance on the chart of the week or other opinions expressed therein. Any discussion of past performance should not be used as an indicator of future results.

This information is educational in nature and does not constitute a financial promotion, investment advice or an inducement or incitement to participate in any product, offering or investment. FS Investments is not adopting, making a recommendation for or endorsing any investment strategy or particular security. All views, opinions and positions expressed herein are that of the author and do not necessarily reflect the views, opinions or positions of FS Investments. All opinions are subject to change without notice, and you should always obtain current information and perform due diligence before participating in any investment. FS Investments does not provide legal or tax advice and the information herein should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially impact any investment result. FS Investments cannot guarantee that the information herein is accurate, complete, or timely. FS Investments makes no warranties with regard to such information or results obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information.

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