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.

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