The United States Supreme Court has chosen not to take up two lawsuits that were brought challenging New York’s rent stabilization laws. The lawsuits would have, if successful, potentially undermined the state’s regulations on rent stabilized apartments, potentially allowing landlords to increase the rates on regulated apartments dramatically. However, their rejection means that these laws will remain in place, at least for now.
Mortgage demand has begun to flatten out after several weeks of growth, thanks to interest rates once again rising above seven percent. This increase in the mortgage interest rate is, ironically, fueled by positive economic data that increased the yield on 10-year Treasury bonds. However, this still bodes poorly for the normally robust spring season, where higher interest rates could place a hindrance on home sales.
Affordability remains a major issue throughout the real estate sector, but a recent report from the Joint Center for Housing Studies of Harvard University emphasizes the issue. According to the report, approximately one half of all renters across the United States are considered “cost-burdened,” meaning they are spending more on rent than they can afford. It is a sign of the need to bring housing costs under control, as more and more people struggle simply to afford basic expenses.
A Hong Kong court ordered real estate giant Evergrande to liquidate its assets, ending a long legal battle over the fate of what has been described as “the world’s most indebted property developer.” The company filed for bankruptcy in the United States in 2023 after it was found that it was unable to meet its obligations, resulting in it defaulting on its debts. Though Evergrande primarily operated in China, the effect of its liquidation in bankruptcy is likely to reverberate throughout the global economy, and in particular in the real estate sector.
The second week of January saw a substantial increase in mortgage demand, with the total number of applications for mortgages increasing by approximately 10%. This rise in mortgage demand affected both refinancing and new mortgages, which both went up during that same time period. This is largely attributed to declining interest rates, helping to bring the price of mortgages into more affordable levels for potential buyers.
Both the commercial and residential real estate sectors are facing serious troubles, albeit for almost entirely opposite reasons. The residential real estate market has been significantly hampered due to high housing prices and a lack of available inventory, while commercial real estate is facing a potential crisis from a glut of available properties that no one seems to want to buy. In both cases, however, high interest rates have proved to be an aggravating factor, but fortunately that may be getting better in the near future.