Mobile home values reaching new heights, multifamily construction softening.

Job market softens but not enough to hurt commercial leases

Based on the latest jobs report, it appears that the U.S. job market is continuing to weaken. The economy still shows signs of softening as companies slow or stop new hires. That said, the national unemployment rate remains extremely low – lower than what is usually considered full employment.

While economic growth may be slowing (and hiring with it), company layoffs and hiring freezes are not yet substantial enough to impact commercial real estate or lease rates. It’s unclear whether additional downsizing may be forthcoming, but this has the potential to impact office leases, as large-scale lay-offs may reduce working space needs typical for large or growing companies.

So far, significant layoffs have already occurred at Meta, Twitter, Lyft, Stripe, and Opendoor. Apple and Amazon have also initiated hiring freezes, with rumors of job cuts swirling around both. 

Mobile home values reaching new heights

A recent study has shown that mobile home values have risen 34% in the past five years. Many of these are homes in developed markets (where job opportunities abound) at the low end of regional price ranges. Prices have been driven higher due to considerable competition for the most economical housing in various markets. The market has also been fueled by investors looking for inexpensive rental units. 

Of course, mobile home parks have also appreciated considerably, as they have become extremely popular investments in recent years. Many parks have been acquired by large investment groups, with rent rate hikes making waves in regional housing markets.

Redfin shutters iBuying unit

Earlier this month, residential real estate brokerage Redfin announced that it would be shuttering its iBuying unit and laying off 13% of its staff. The company cited a cooling market and rising interest rates as key factors adversely affecting the profitability of its iBuying operations.  

This announcement follows real estate marketplace Zillow closing its own iBuying business – Zillow Offers – just over a year ago. Like Redfin, Zillow also found it increasingly difficult to turn a profit buying and selling properties, despite an overabundance of local property data.

While these moves are problematic for Redfin and Zillow staff, they may ultimately benefit individual and institutional property investors. The changes represent a reduction in competition when bidding for a limited number of properties being marketed for sale.

Multifamily construction softening

New data reflects a considerable slowdown in the construction of new multifamily units for sale. According to developers, many are finding the cost of construction (as well as holding costs) prohibitive to building new units. This remains true even after substantial abatement of the supply chain issues that formerly reduced the availability of critical construction materials.

Multifamily construction has also been impacted by a fall-off in demand for new units, with many would-be buyers opting to remain renters. While prices have largely remained stable in the face of rising rates, many renters have been discouraged from buying – at least partly by how these rising interest rates reduced their budgets.

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