THE BIG SPLASH

How Remote Work Reshaped City Rent Prices

The COVID-19 pandemic caused remote workers to leave big cities, leading to an abundance of empty apartments and plummeting rents. However, rents quickly started rising again, leaving tenants wondering why their rents remained high despite the exodus.

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• New research suggests that the desire for more space played a significant role in this phenomenon. Remote work allowed people to move to cheaper locations or seek larger dwellings, resulting in a surge in household formation and increased competition for housing in cities.

• While some cities experienced a rebound in population, it was not enough to explain the high rents. The imbalance between supply and demand, along with the increased desire for more space, contributed to the persistent high rental prices.

• Despite the recent slowdown in rent growth and the potential for roommates to stay together due to financial considerations, there is still a need for more housing units to meet the ongoing demand.

• Experts remain optimistic that the rental market will eventually find a balance as supply catches up with demand. While there are currently imbalances and challenges, the long-term outlook suggests that the increased demand for housing due to remote work can be addressed through adequate supply.

A SCOOP OF MARKET DATA

These 14 Metros Will Have You Regretting Not Investing Sooner

While the average growth rate for home prices in the United States is projected to be 1.7% over the next year, there are specific cities where the real estate market is booming.

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• Columbia, Missouri, for example, where home prices are expected to grow at a staggering rate of 6.4%—more than three times the national average.

• To identify the most promising cities for real estate investment in the next decade, GOBankingRates analyzed homes priced below the national median of $333,910 with growth rates surpassing the projected national rate.

• It's important to note that home prices don't always follow a linear path, but the one-year growth rate was used as an indicator of positive market movement.

• If you're thinking about entering the real estate market, keep an eye on these cities—they're expected to outperform the national average and reach prices higher than the median in the coming years.

A SCOOP OF STUDENT HOUSING

Student Housing Developers Think Outside the Box to Tackle High Interest Rates

Colleges and universities are facing a tough situation as they strive to expand housing options for growing student populations and address the issue of affordability, all while grappling with soaring interest rates that haven't been seen in 15 years.

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• To combat these challenges, investors and educational institutions are coming up with innovative solutions. One approach is to structure bond debt with longer amortization periods, extending repayment to 35 years or more instead of the typical 20 to 30 years.

• While this means more interest payments in the long run, it allows project sponsors to offer more affordable rents. Another popular strategy is to secure long-term debt based on 20- to 30-year treasury rates, taking advantage of lower yields compared to short-term rates.

• In an effort to control costs, institutions and investors are reevaluating their construction plans. They are scaling down projects by reducing the number of beds, eliminating certain amenities, or optimizing the construction budget through value-engineering techniques.

• Additionally, acquiring off-campus housing is becoming an attractive alternative to constructing new facilities, particularly for properties near campuses.

• Public-private partnerships (P3s) continue to be an option, albeit with additional financial support needed from universities and municipalities due to the high cost of debt.

• Despite the challenges, higher education institutions and investors are determined to find creative financing and project management approaches to expand student housing availability. When faced with a difficult environment, exploring all alternatives becomes crucial.

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