Ivy Zelman, Executive Vice President and Co-Founder of Zelman & Associates
Jul 11, 2024
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Ivy Zelman of Zelman & Associates discusses rising home prices, multifamily inventory outlook, rate cuts, housing supply constraints, affordable housing crisis, and overallocation of capital in multifamily sector with Willy in a dynamic conversation about the future of housing market.
Rising home prices challenge affordability, multifamily sector faces inventory concerns, and land prices impact housing developments.
Deep dives
General Sentiment on the Housing Market
There are concerns about slow growth in the housing market across single-family and multifamily sectors. New construction for single-family homes initially showed resilience despite rising rates, but challenges in sustaining sales pace have emerged. Existing home inventories are rising, affecting transactions. In the multifamily sector, there is caution due to significant supply completing soon, leading to a potential need for more supply by late 2025 or early 2026, particularly for Gen Z demographics.
Affordability Concerns and Impact of Mortgage Rates
Affordability concerns are increasing as the housing market experiences challenges. Rising mortgage rates are impacting the market, especially the sensitivity to rates. The potential impact of rate cuts on purchase activity is questioned, considering stable economic conditions. Despite affordability challenges and rising prices, the market faces record cash purchases, particularly affecting lower-priced segments.
Single-family Rental vs. Homeownership Comparison
An analysis of single-family rental versus homeownership across metropolitan areas highlights a 9% difference in rental and ownership costs, favoring the build-for-rent model. Factors influencing this include insurance and other associated costs. The trend suggests slight favor towards build-for-rent models, with potential for further advantage due to controlled new home price increases.
Rent Growth Trends and CPI Discrepancies
Rental and homeownership affordability issues are observed, with rental growth rates showing discrepancies compared to CPI data. Rental growth trends are influenced by various economic factors and industry data. Despite inflation concerns, stabilizing rent rates and potential future pressures in the market are highlighted.
Land Market Dynamics and Future Housing Developments
The land market presents challenges with increasing prices and labor costs impacting housing developments. Delays in construction timelines and supply chain issues affect housing completions. There is optimism in absorbing high delivery volumes projected for 2024 and 2025, considering market dynamics. The overall macro outlook and population growth forecasts highlight opportunities in rental markets and multifamily developments.
Willy was once again joined by one of the most respected voices in the housing industry, W&D’s Hall of Fame housing market analyst and executive vice president and co-founder of Zelman & Associates, Ivy Zelman.
She and Willy discussed rising home prices and affordability challenges, her outlook on multifamily inventory and rent growth, rate cuts, widening spreads, land prices and accessibility, housing supply constraints, the role of manufactured housing in the affordable housing crisis, her overall macro-outlook on housing over the next 5-10 years and where she’s seeing real opportunity, the overallocation of institutional capital to multifamily and industrial, and much more.