Odd Lots What Rising Rates and Surging Insurance Prices Are Doing to Real Estate
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Sep 11, 2023 David O'Reilly, CEO of Howard Hughes Holdings, discusses the evolving real estate market amid rising interest rates and insurance costs. He highlights the surprising resilience of homebuilders but acknowledges that some projects are no longer feasible. O'Reilly delves into the anxieties faced by buyers and the impact of inflation on construction costs. He also examines trends in competitive markets like Arizona and Texas, and emphasizes the importance of strategic, community-focused development in adapting to current economic challenges.
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Pandemic Housing Boom
- Initially, the pandemic shocked the real estate market, causing widespread uncertainty.
- However, demand rebounded quickly as people sought better quality of life and lower costs.
Long-Term Vision
- TerraVallis, a new development near Phoenix, is a long-term project unaffected by short-term rate fluctuations.
- The project's rationale lies in strong demographic trends and housing affordability.
Development Challenges
- Increased construction and operating costs have outpaced rental rate growth, impacting returns on new developments.
- Despite this, opportunities remain in multifamily housing where demand is strong.