Recent Trends in Real Estate Development (Spring 2024)
Source: stock.adobe.com (Editorial Use License) <p>This blog post is part of a regular series on recent trends in private real estate financing. These posts are meant to inform local governments about current conditions facing private developers and real estate development projects in their communities.</p> Lending for real estate development projects <p>Towards the end of 2023, some market watchers were cautiously optimistic that the Federal Reserve would begin to cut interest rates in 2024. However, stronger than expected inflation data has shifted those expectations over the past few months. In January, Fannie Mae forecasted that the interest rate on 30-Year Fixed Mortgages would drop below 6% by the end of 2024. But in their most recent forecast, Fannie Mae now expects interest rates to remain above 6% through the end of 2025. (Figure 1)</p> Source: Fannie Mae <p>Developers continue to report challenges caused by high interest rates. For example, in September 2023, an affordable housing developer in Wilmington requested $1.25 million in additional gap funding from the city and county to help cover rising interest rate costs.</p> <p>According to one survey of the nation’s 30 leading apartment developers conducted by the National Multifamily Housing Council, 79% of those surveyed reported delays in starts for new projects.[1] Of those delays, 74% were because the project was not economically feasible in March 2024. For instance, Kane Realty – a commercial real estate development company – reported in December that future progress on the mixed-use “Downtown South” project in Raleigh is contingent on “interest rates going down”.</p> Source: National Multifamily Housing Council <p>In September, the [...]</p>
