Executive Summary

With official information from the Federal Reserve of the United States and Zillow.com, from January 2019 to December 2021, we analyze the behavior of inventory, prices and rental value of housing in the cities of Miami, Dallas, Houston, Austin, Denver, Phoenix, Los Angeles and San Diego.

The following pages will illustrate how:

Context

Considerable improvements in world’s connectivity and trade as well as in computing power, along with recent sanitary contingencies, have enhanced value of residential real estate assets (the oposit to office real estate assets). Also, since the earlier 2000’s the inception of what is called “Sharing Economy” started to shine bringing also value benefits for idle residential assets. The advent of the Internet—and its use of big data—has made it easier for asset owners and those seeking to use those assets to find each other, optimizing and monetizing the usage of underused assets. In a sharing economy, idle assets can be rented out when not in use. In this way, physical assets are shared as services.

The U.S. real estate and rental and leasing sector anticipates stable annualized growth – exemplified by impressive 5.3% recovery growth in 2021 alone following the brunt of the COVID-19 pandemic. During the pandemic, increasing numbers of housing starts and rising house prices have contributed to positive real estate industry outlooks and industry confidence. Other industry-specific macroeconomic factors (e.g., declining urban rental vacancy rates), along with growing home ownership levels, have also helped boots performance. While this has led to some counter movement in the U.S. real estate industry, with rising home prices and catch up rents, the overall industry outlook appears generally optimistic. The U.S. real estate industry – along with ancillary institutions and funds (e.g., REITs) – will benefit in the intermediate and long-term as housing starts increase across the United States. This, combined with growing demand, ensures a robust mixture of demand and supply-side engagement.

The following analysis will focus on comparative measures of some of the most attractive USD Urban Markets.

Variables

Metros of Interest

Inventory

  • Miami, Dallas and Houston are (individually) more than 10 times the size of Denver in terms of units.

  • The average inventory reduction for these cities is 66% between January 2019 and January 2022. In the last quarter, Inventory reduction average for 40% reduction with Denver heading the list.

Inventory reduction has been diminishing with inventory in historical minimums, particularly for Miami and Denver.

Prices

  • Since 3rd quarter of 2021, all metros have stabilized price increases, except for Miami which trend remains solid upward.
  • Houston started its downward trend since the end of 2021, and becomes the only Metro facing price decrease in the last 6Mo
  • Major increases are in Denver, reaching a 30% price increase. No appreciation opportunities remain possible for Denver, although Dallas and Miami prospects remain promissory for appreciation opportunities.

Rents

  • Taking price dynamics into account, we might expect price increases to translate into rent increases.
  • Most metro areas present sustained rent increases since the 3rd quarter of 2020
  • Miami seems to lag more in rent increases. While Dallas, Houston and Denver rents have increased 25% since 2019 (vs Prices 26%), Miami rents have increased only 15%.
  • 10% catchig’up for rents is possible in the following months.

  • As an indicator of investment recovery, we obtain the portion that represents 12 Mo of rent over prices. - We observe that Price Increases have not been fully reflected in Rent Increases.
  • While Miami present the smallest ratio among studied metros, it is also smaller than 3 years ago. On the other side Houston and Dallas seem to have reached their top.
  • The above confirms Rent opportunities mainly for Miami and Denver.

Conclusion