[User] Private Property Elsewhere Subdivision/PUD Land-Leased/MHC Location of New Manufactured Homes Shipped (for Residential Use Only) Source: U.S. Census Bureau and U.S. However, not all purchasers of manufactured homes can afford to purchase the land needed to situate their new home, and some prefer to avoid the maintenance associated with owning that land. Manufactured Housing Communities (MHCs), also known as land-lease communities, address this need. For those residents who own their manufactured home, these communities offer pad sites for rent, which are spaces where owners can place their homes that also provide access to utility hookups. MHCs can also have a limited number homes for rent. According to information from Datacomp Appraisal Systems, Inc., which verifies the existence and location of MHCs, as of second quarter 2023, there were just under 44,000 MHCs providing land for lease to owners, as well as rental of both the pad site and the manufactured home itself. While the manufactured housing sector has remained steady over the past couple of years, rising interest rates have begun to impact production of manufactured homes. However, demand for MHC pad sites remained high in the first half of 2023. Construction of Manufactured Homes Slowing According to the U.S. Census Bureau’s Manufactured Housing Survey, from 2018 to 2020, the total number of manufactured homes completed averaged about 95,200. Pent-up demand, along with rising housing prices and low interest rates, increased interest in manufactured homes as a more affordable source of housing. A recent study, from the Harvard Joint Center for Housing Studies, Comparison of the Costs of Manufactured and Site-Built Housing, calculated the nationwide cost to build a 1,568 square-foot home to be just over . As a result, the number of factory-built homes sold recently broke through the threshold for the first time since 2006. The number of homes sold in 2021 rose by 12.1% to and rose by another 6.7% in 2022 to . There were only three MHCs under construction as of mid-August 2023, representing under 450 pad sites, according to data from , Inc. This represents a fraction of new MHCs that were produced 20 years ago. In comparison, Dodge Data & Analytics estimates that there were new multifamily rental units under construction as of the end of July that are scheduled to be delivered by year-end 2023. MHCs Completed and Expanded in a Variety of States According to , in addition to the three MHCs under construction, about 21 MHCs have been built or expanded since the start of 2022. As shown in the left map below, while they are in a variety of states, most are in the South and West, which have traditionally seen greater investment in MHCs. 4 Multifamily Economic and Market Commentary Age 55+ - MHC Occupancy and Pad Site Rents for Select Regions* Occupancy Q2 2023 Occupancy Q2 2022 Change Rent Q2 2023 Rent Q2 2022 Change Midwest Northeast Pacific South Southwest West National Two Types of MHCs Roughly one-third of MHC are Age 55+ MHCs, targeted to older adults. Two-thirds are All Ages MHCs, which tend to attract families and residents of all ages, including those older adults that do not want to live in an Age 55+ community.

[Assistant] Fundamentals in both segments of MHC appear to have weathered the pandemic, recent inflationary trends, and now elevated interest rates – at least so far.


[User] Occupancy Remains High in Age 55+ MHCs Some older residents prefer purchasing homes in Age 55+ MHCs due to the ease of maintenance and enjoyment of the amenities that are usually offered. This trend has not changed over the past several months, despite recent inflation levels. Nationally, the occupancy rate in Age 55+ MHCs remained high with just a 0.4% uptick in occupancy year over year to 97% as of second quarter 2023, as shown in the table below. Occupancy in five of the six regions tracked remained stable, with the Southwest region recording just a 0.6% increase. Source: Datacomp/JLT * As of July 5, 2023, Based on Trailing 12-month average. Note: Pad Site rents exclude utility payments Southeast: 13 states including Florida, Georgia, and the Carolinas. Northeast: seven states including Pennsylvania, New York, and New Jersey, Pad Site Rents Record Strong Growth in Most Regions As shown in the table above, pad site rents vary widely among regions. The Pacific region, which is comprised of the high-cost coastal states of California, Oregon, and Washington and has a 99% occupancy rate, had the highest monthly rent at $854 per month, as of second quarter 2023, according to Datacomp. By contrast, the large Midwest region, which is comprised of 12 states including Michigan, Illinois, and Indiana, had an average pad site rent that was more than $330 lower at $523 per month. Low vacancies and ongoing job and wage growth led to pad site rents across all regions growing by 7.5% year over year on average as of second quarter 2023, more than double the 3.0% non-seasonally adjusted inflation rate and the estimated 1.3% average national increase in apartment rents. Pad site rents in the Southern region, which continues to see significant population growth in many states, recorded the highest growth rate at 9.5% year over year, bringing the average monthly rent to $694. Pad site rents in the Northeast region, which has the fewest MHCs, recorded a lower growth rate of 4.4% year over year, bringing the average monthly rent to $570.

[Assistant] Occupancy Q2 2023 Occupancy Q2 2022 Change Rent Q2 2023 Rent Q2 2022 Change Midwest Northeast Pacific South Southwest West National All Ages MHC - Occupancy and Rents for Select Regions* MHC Cap Rates Tick Up After declining significantly in recent years, capitalization rates for institutional-quality MHCs have started to increase, as shown in the adjacent chart. According to MSCI Real Assets, the average cap rate for MHC property sales fell from an average of 6.8% in second quarter 2013 to an estimated 4.7% as of second quarter 2022. Since then, however, the average MHC cap rate has increased slightly to 5.0% as of second quarter 2023. data, which includes smaller transactions for which cap rates can vary more, shows a similar trend: Cap rates rose to 7.8% as of second quarter 2023 from 7.2% a year earlier. Source: , MSCI Real Assets Note: MSCI data is quarterly based on a trailing 12- month average. Includes property or portfolio sales of $2.5 million or greater.


[User] 6 Multifamily Affordable Housing Market Commentary Sales Decline Following a Strong 2021 According to MSCI Real Assets, sales of MHCs totaled an estimated $6.3 billion in 2022. As shown in the lower left chart, this is the second-highest volume recorded in the last six years. data is similar but with an estimated $5.3 billion in sales in 2022. We believe that sales remained elevated due to a several factors.

[Assistant] For one, investors realized that demand fundamentals for MHCs would likely remain positive due to a lack of affordable housing across the country. In addition, interest rates appeared poised to rise further in 2022, enticing investors attempting to avoid higher interest rates in the near future.


[User] However, during the first half of 2023, sales of MHCs totaled just $1.0 billion, which is about 58% lower than the sales activity for the first half of 2022, according to MSCI Real Assets. This is also lower than the $1.8b in sales recorded for the first half of 2020, during the height of the pandemic. We believe that the rapidly rising interest environment, which started in March 2022 and continued into 2023, increased borrowing costs, pricing some would-be buyers out of the market. 7 Multifamily Economic and Market Commentary MHC Loan Volume by Type of Lender Jan. 1, 2018 – June MHC Sale Prices-Per-Site Increased According to data from MSCI Real Assets, MHC sale prices-per-site totaled an estimated $77,000, as of second quarter 2023. In comparison, as of first quarter 2017, the average price-per-site was $47,000, indicating that the MHC price-per-site has risen 63% over the past six years. This is higher than the 55% increase in price- per-unit of sales of multifamily properties over the same timeframe. 2023 Overall Lending Volume Declining Although not a complete market view, publicly available data combined with third-party vendor data provides insight into financing trends. As shown in the chart to the right, total lending volume declined to an estimated $5.6 billion in 2022, from a record $11.0 billion in 2021. The total lending volume for the first half of 2023 totaled $2.4 billion, which means that lending volume could fall even further to $4.8 billion for all of 2023. However, we believe these estimates for 2023 are likely on the low end. Refinances More Prevalent than Sales Refinances of MHCs remain more prevalent than financing for acquisitions, accounting for about 75% of financing volume since the start of second quarter 2022, according to data from MSCI Real Assets.

[Assistant] 1, 2017 – June More MHC Needed Despite the rising prices of new manufactured homes, vacancies remain low at many MHCs, indicating that demand is outstripping supply. However, development of MHCs has not kept up with demand. Many local jurisdictions have zoning restrictions against MHCs, creating barriers to the development of new MHCs. As a result, building new communities takes a long time, when they can be built at all. The current Administration recently sought to ease regulatory barriers and zoning laws through new incentives. However, we expect the development of new MHCs will remain limited over the next few years, as it will take some time for local jurisdictions to change zoning laws, even with the new incentives.


[User] The economy appears poised to end 2024 on solid footing: Consumer spending has been resilient and, while the labor market is slowly cooling, unemployment remains low, and job growth is currently at a healthy pace based on demographic trends. Combined with inflation measures remaining stickier than markets expected earlier in 2024, we forecast no meaningful decline in the 10-year Treasury rate in 2025, which will keep mortgage rates elevated and home sales suppressed. This dynamic is occurring with a backdrop of uncertainty over whether solid labor productivity can continue to fuel growth next year, whether inflation will come in for a soft landing, or, if not, whether interest rates will remain structurally higher for longer. Changes to immigration, trade, fiscal, and regulatory policies could all materially impact our outlook for economic growth, inflation, interest rates, and housing, though we have not incorporated any explicit policy changes in our forecast at this point as we await further details. Quick Links Economic Forecast Table Housing & Mortgage Forecast Table 1. Average mortgage rates will decline modestly but remain above 6 percent, with likely bouts of volatility We forecast the average mortgage rate to remain above 6 percent in 2025. Sticky inflation and an apparent stabilization in job market gains have lowered market expectations for future interest rate cuts.

[Assistant] Unless economic growth starts to slow significantly, we expect mortgage rates to remain elevated relative to pre-pandemic levels, moving only slightly downward to around 6 percent by the end of 2025.


[User] However, given ongoing uncertainty over the resilience of economic growth, the stickiness of inflation, and future policy changes, we expect bouts of volatility in mortgage rates next year. As seen over the past six months, the 10-year Treasury yield has oscillated greatly as stronger and weaker economic and inflation data were reported. Financial markets are trying to determine what the ultimate “neutral” rate for the fed funds rate will be, as well as navigate uncertainty over current and future economic growth.

[Assistant] As more data is reported, and news around potential policy changes develops, we expect bouts of financial market volatility as bond markets reprice interest rate expectations.


[User] Our baseline expectation is for economic growth and employment gains to slow modestly next year and for core inflation to continue to ease — but not to reach the Fed’s target until 2026. Still, there is considerable upside risk to our economic forecast stemming from the potential for continued resilience in consumer spending and stronger-than-anticipated productivity growth. However, a meaningful slowdown in immigration flows or significant tariffs point to downside risk to economic growth and upside risk to inflation measures. Potential tax and regulatory policy changes present both upside and downside risks that may also impact interest rates. 2. Existing home sales will remain near 30-year lows, but location matters We forecast existing home sales to total 4.25 million in 2025, an improvement of 4.8 percent compared to our expected 2024 sales pace of 4.06 million, but still down 20.3 percent compared to 2019. We expect the increased inventory of homes available for sale will drive a modest improvement in existing home sales next year. According to the National Association of Realtors, the total number of homes available for sale at the end of November was 1.37 million units, up 19.1 percent from a year prior. However, given our mortgage rate outlook for rates to stay above 6 percent in 2025, we expect both constrained affordability conditions and the lock-in effect will continue to be the dominant themes limiting the recovery of existing home sales in 2025.

[Assistant] Affordability conditions remain at the most constrained levels since the mid-1980s. Additionally, we expect the lock-in effect to remain prominent, even if mortgage rates move closer to 6 percent. The downward slope in the share of single-family loans with a rate below 4 percent and the upward slope in the share with a rate greater than 6 percent shows that, as expected, the lock-in effect will fade over time, but we believe the process is likely to be a slow one.


[User] Even when interest rates briefly declined to around 6 percent in September, only a limited and brief pickup in mortgage applications and home sales occurred. Due to this muted response, we believe that mortgage rates near 6 percent are likely insufficient to spur enough additional demand or to encourage enough homeowners to sell, which is needed to thaw the housing market.

[Assistant] As discussed previously, though, there is significant regional variation in the number of homes available for sale, and some regions are likely to see more elevated sales in 2025 than in 2024. The comparatively loose markets tend to be those with strong homebuilding in recent years. Many of the Sun Belt states, including Florida and Texas, and parts of the Mountain West region and Pacific Northwest have inventory levels near or above pre-pandemic norms, according to Realtor.com. In contrast, the Midwest and Northeast have significantly fewer homes available for sale relative to 2019. In general, we expect that inventory levels will continue their gradual rise nationwide, with inventories in the Sun Belt remaining looser relative to inventories in the Northeast and Midwest.


[User] 3. New home sales will remain a bright spot in the housing market (where they can be built) With the continued limited supply of existing homes for sale and favorable demographic-based demand for housing, we expect 2025 to be another solid year for new home sales. New home sales have averaged an annualized sales pace of in 2024 through October, compared to an average sales pace of from . We expect a similar trend in 2025. In the face of elevated mortgage rates, homebuilders continue to show a willingness to offer incentives like interest rate buydowns to move their inventories of new homes available for sale and to change the products offered to be smaller, more affordable homes. Whereas historically the median sales price on new homes has far exceeded the median sales price on existing homes, that gap has narrowed in recent years. The price premium between the median price on a new vs. existing home sold has averaged about 4 percent in 2024, compared to an average of 28 percent between 2015 and 2019. Admittedly, this measure does not consider the difference in the geographic distribution of new homes sold, but part of the lower price premium is due to a decline in the median square footage of new homes from a peak of 2,519 square feet in the first quarter of 2015 to 2,158 square feet as of the third quarter of 2024.

[Assistant] New home sales, however, vary greatly by region. The South and Mountain West are places where land and zoning allow for more construction and thus make up the bulk of sales. Of the roughly single-family housing permits year-to-date through October, 20 percent were issued in the metropolitan statistical areas of Houston, Dallas, Phoenix, Atlanta, and Charlotte. In 2025, we expect the Sun Belt region will continue to see significant homebuilding activity. 4. National home price growth will decelerate While the continued lack of inventory for homes available for sale has helped to keep home price growth robust, we expect a continued deceleration in home price growth into 2025. While mortgage rates will continue to present an affordability challenge, softening home price appreciation in 2025 could allow for nominal wage growth to exceed home price growth for the first time since 2011, helping to start a gradual improvement in homebuyer affordability conditions. That said, there will likely be considerable regional differences. Regional variation in for-sale inventories is currently driving a diverging home price story. Of the FHFA top 100 metros, 75 experienced positive seasonally adjusted quarter-over-quarter home price growth in both the second and third quarters of 2024, a relatively small share historically outside of the Great Financial Crisis and the third quarter of 2022 when home prices declined nationally. We believe it is likely that regions with a greater inventory of homes available for sale will continue to experience weaker home price dynamics relative to the national average in 2025. 5. Multifamily housing will remain in a holding pattern In the multifamily space, we expect 2025 to look a lot like 2024. While longer-term demographic trends remain supportive of multifamily construction over the next decade as the prime renter-aged population is expected to continue to grow, we expect below-average rent growth in the near term as additional units are completed. Depending on the measure, we expect rent growth to be between 2 and 2.5 percent in 2025. This will be helpful for renter affordability as it will represent the second-consecutive year of nominal wage growth exceeding rent growth in certain metros. However, slower rent growth will contribute to fewer new construction projects, especially in light of continued high longer-term interest rates.


[User] Economic Forecast Changes Economic Growth We’ e u graded our 2024 gross domestic product (GDP) growth expectation to a seasonally adjusted annualized rate (SAAR) of 2.3 percent, up three-tenths from the prior forecast, as consumption indicators remain robust. Our GDP forecast for total yearly growth in 2024 and 2025 on a Q4/Q4 basis was unchanged at 2.4 percent and 2.1 percent, respectively. Our forecast for 2026 is for growth of 2.1 percent Q4/Q4, one-tenth below the prior forecast. The unemployment rate rose one-tenth to 4.2 percent. The jump in payroll employment growth is due to an end in strike activity and a rebound from disruptions caused by Hurricanes Helene and Milton. Our unemployment forecast was essentially unchanged from the last forecast. Inflation & Monetary Policy Core inflation remains sticky. Recent inflation indicators have come in largely in line with our expectations, therefore our outlook for year-over-year change in inflation is little changed.

[Assistant] Housing & Mortgage Forecast Changes Mortgage Rates Our mortgage rate forecast is largely unchanged compared to last month. We expect the 30-year fixed mortgage rate to average 6.7 percent in 2024 and 6.4 percent in 2025 (both unchanged from the prior forecast). We expect mortgage rates to average 6.1 percent in 2026, one-tenth lower than we forecast last month. However, interest rates remain volatile, particularly as the market attempts to adjust to changing expectations around Fed policy, which adds risk to our outlook.


[User] Existing Home Sales Existing home sales rose 3.4 percent to a SAAR of 3.96 million in October. Our outlook for existing home sales was revised upward modestly in 2024 and 2025, but notably downward in 2026. The near-term upward revision is due to a slightly lower near-term rate outlook and recently stronger purchase applications.

[Assistant] However, our longer-term outlook in 2026 has been revised downward due to a reassessment of the persistence of the lock-in effect, which we expect to continue to suppress home sales for the foreseeable future. New Home Sales New single-family home sales fell sharply in October, likely due to hurricane disruptions, falling by 17.3 percent to a SAAR of . We have downwardly revised our near-term new home sales outlook due to this decline. In 2025, our outlook is essentially unchanged as we continue to believe that the new home sales market will be a bright spot in the housing market in 2025, though we expect a leveling off in new sales in 2026. Single-Family Housing Starts Our forecast for single-family housing starts is slightly weaker in the near term following the October new residential construction report, which saw single-family starts fall 6.9 percent, though this was likely exacerbated by hurricane-related disruptions. We have revised downward our outlook for 2026 in line with our new home sales outlook. Single-Family Mortgage Originations We currently expect purchase originations to be $1.3 trillion in , essentially unchanged from last month’s forecast. In 2025, we expect purchase volumes to grow 12 percent to $1.4 trillion, representing an upgrade of $25 billion from the prior forecast as home sales are expected to be somewhat stronger in the near term compared to last month. However, our forecast for 2026 purchase volumes has been revised down by $54 billion from last month to $1.6 trillion, given the downgrades to the home sales path. In the refinance market, volumes have been revised up given the slightly lower expected path for the mortgage rate, though these changes are slight compared to the rior month’s forecast n articular, we e ect refinance volumes to be $360 billion in billion in 2025, and $724 billion in 2026, representing upgrades of about $ billion in total from the rior month’s forecast.


[User] 1 Multifamily Economic and Market Commentary DECEMBER 2024 Rising Number of Multifamily Properties Offering Concessions Multifamily market fundamentals in 2024 have remained soft but stable compared with last year because of consistent economic trends, including slowing but still-positive job growth, elevated single-family housing prices keeping many renters in place, and continued favorable demographics. Rent growth was exceptional in 2021 and 2022, but those levels have since slowed. Thus, the sector has seen lagged rent growth rates in 2024 similar to the prior year. A robust pipeline of new apartment rental projects are underway, particularly in the nation’s largest metros, and, as a result, there has been a rise in the number of rental units across the country offering concessions. Supply of New Units Remains High According to Dodge Data & Analytics Supply Track construction pipeline data, the number of apartment units completed across the country this year may exceed last year’s totals. According to Dodge, as of fall units underway are slated for completion in 2024, though actual inventory additions are likely to be significantly lower.

[Assistant] We expect completions will be in the -unit range this year. For comparison, full-year completion totals were units in 2023 and units in 2022. Looking forward, another units are underway for 2025 completion. 4 Multifamily Economic and Market Commentary New Supply Expected to Lead to More Concessions but Slightly Higher Rent Growth After exceptional rent growth rates in 2021 and 2022, it was generally expected that 2023 and 2024 would see easing rent growth and softening multifamily fundamentals, including vacancy rates — and that has generally been the case. Slowing demand in 2023 and during the first three quarters of 2024 resulted in below-average year-over-year rent growth of just 0.8% for the U.S. and a modest rise in vacancies. Some metros had slightly weaker results and experienced modest rent contractions, including Austin, Salt Lake City, and Charlotte. Because of the elevated level of new supply expected to complete and deliver over the next 12 to 18 months, the number of units offering concessions may rise over the short term. It is noteworthy that the value of concessions offered by property owners has increased alongside the total rate of concessions market-wide, which points to subdued absorption in many locations. With a robust pipeline of supply expected through 2025 and beyond, we believe there will continue to be pressure on owners to offer more generous concessions. However, rent growth is expected to increase slightly due to ongoing job growth and housing demand. Rent renewals are still seeing higher rent increases than new leases, allowing property owners to offset new concessions.


[User] Home Sales Expected to Rise Modestly in 2024, as Homebuyers Adjust to Mortgage Rates We continue to expect a modest recovery in home sales over the course of 2024 and for mortgage rates to drift downward. With recent home sales and mortgage application measures coming in near our expectations, we have made only modest adjustments to our housing outlook. We expect total home sales in 2024 to rise 5.0 percent to 5.00 million units, a slight upgrade from 4.96 million units in our prior forecast. We expect the 30-year fixed mortgage rate to decrease to 5.9 percent by the end of 2024, a tick higher than our prior outlook. Despite the slight upward revision to home sales, incoming mortgage application data, combined with an adjustment to the projected cash share of home sales, caused a modest downward revision to our forecast for mortgage originations. We forecast total mortgage origination volume will be $1.92 trillion in 2024 (compared with $1.98 trillion in our previous forecast) and $2.36 trillion in 2025 (compared with $2.44 trillion in our previous forecast). Real Gross Domestic Product (GDP) was stronger in Q4 2023 than anticipated. As such, we have upgraded our 2024 GDP forecast largely due to stronger momentum to start the year. Additionally, primarily due to the brisk pace of immigration, we have revised upward our underlying assumptions on population and labor force growth, contributing to an upward revision to our GDP and employment forecasts. However, we still anticipate deceleration this year as consumer and local government spending growth slow and the continuing effects of tighter monetary policy work their way through the economy. However, if growth continues to surprise to the upside or inflation proves more persistent than anticipated, this would likely lead to upward pressure on mortgages rates as market participants adjust their fed funds rate cut expectations. Quick Links Economic Forecast Changes Housing & Mortgage Forecast Changes Economic Forecast Table Housing & Mortgage Forecast Table Economic Growth Remains Robust but Softening Still Anticipated Real Gross Domestic Product (GDP) increased at a 3.3 percent seasonally adjusted annualized rate (SAAR) in the fourth quarter of 2023, well above both consensus and our expectations. Consumer spending remained strong, rising 2.8 percent annualized and was particularly strong toward the end of the quarter. Strong consumption at the end of 2023 will mathematically carry over into the first quarter’s consumption growth number. Net exports and business inventory investment, which we had expected to drag on GDP, instead boosted growth modestly. Government spending at the state and local level was also above our expectations.

[Assistant] consumer spending in the next release. While some of the retail sales softness was due to lower gasoline prices, most spending categories showed weakness, with the “core sales” that fee into the D estimates falling .4 percent. Furthermore, we expect some reversal in business inventory investment, and, with a weak global economic backdrop, we expect net exports to slow. Finally, state and local government tax receipts are softening, pointing to weaker future direct government spending growth.


[User] Payroll employment surprised to the upside in January, increasing by the strongest gain in a year. Following an upward revision of jobs to December, nonfarm payroll growth over the past two months looks to have reaccelerated. In contrast, most other labor market measures point to softening. The alternative measure of household employment used to estimate the unemployment rate remains on a much weaker trend than the payroll survey. Additionally, the quits rate is slightly below the pre-pandemic rate, and the job openings rate continues to gradually decline. Broad measures of compensation growth, including the fourth quarter Employment Compensation Index (ECI) and the Atlanta Fed Wage Tracker, indicate that wage growth has also slowed. As such, we continue to expect slowing payroll growth as the year progresses and for the unemployment rate to gradually drift upwards. Based on a reassessment of an assortment of population and immigration measures, we have upwardly revised our underlying projection of working-age population growth over our forecast horizon, driven primarily by the view of continued heightened net-immigration flows. While the trajectory of immigration going forward is heavily dependent on a mix of economic conditions and public policy decisions both here and abroad, we are setting as a baseline to our forecast a similar implied pace of net immigration through 2025 as was experienced in 2023. This led to a modest upward revision to our payroll and GDP forecasts, and if the trend is sustained, would imply a stronger pace of household formation and housing construction over the long run.

[Assistant] Home Sales and Single-Family Housing Starts Expected to Rise Existing home sales dipped slightly in December by one percent to a SAAR pace of 3.78 million units, the slowest pace since 2010. While this was a little lower than we had expected, more recent data on mortgage applications, as well as December pending homes sales, which lead closings on average by 30-45 days, show a modest rebound in sales is underway. Combined with a modest change in our mortgage rate forecast, we have made a moderate change to our existing home sales outlook. Driving much of this change was the anticipation that mortgage rates will decline, as the survey reported the highest net share of consumers expecting mortgage rates to decline since its inception in 2011. Consumers appear to be increasingly absorbing the idea that interest rates are in the process of easing. While both constrained affordability and the “lock-in” effect, which is limiting the selling incentive of current homeowners, will likely remain prevalent for the foreseeable future, more potential homebuyers and home- sellers may be preparing to move. The level of inventory remains low, according to Realtor.com, but recent listings are up 9.5 percent from a year prior as of the week of February 10.


[User] the unseasonably warm weather in December. The pace of single-family starts had recently disconnected from the underlying housing permit series. Single-family permits in contrast edged up 1.6 percent in January, back in line with the overall starts series.

[Assistant] With single-family permits and starts now back in alignment, we expect new single-family construction to continue to drift upward in coming months. With a low supply of existing homes for sale, demand for new homes is likely to remain strong, and the limit on new home sales will be determined by homebuilder production capacity.


[User] Economic Forecast Changes Economic Growth The preliminary estimate for Q4 2023 GDP growth from the Bureau of Economic Analysis (BEA) showed that GDP grew at an annualized rate of 3.3 percent, above both the consensus expectation and our own. The bulk of the change from our prior forecast was driven by the new higher starting point in Q4 2023 and stronger consumption expectations. As a result, we’ve upwar ly revised our GDP path, though we continue to expect growth to slow for some time to a rate below the long- run potential output trend. Therefore, our 2024 GDP outlook increased from a 1.1 percent Q4/Q4 increase to a 1.7 percent Q4/Q4 increase. Labor Market Nonfarm payroll employment growth was in January. The unemployment rate was unchanged at 3.7 percent for the third consecutive month. Compared to last month, our forecasted unemployment rate was essentially unchanged; we continue to expect a gradual rise over the coming quarters, though we expect the unemployment rate to remain below the non- accelerating inflation rate of unemployment (better known as NAIRU) in 2024. Inflation & Monetary Policy The January Consumer Price Index (CPI) report came out after the completion of our forecast and was higher than the market’s e pectation. Headline CPI grew 0.3 percent over the month and 3.1 percent compared to a year ago. Core inflation was more persistent, rising 0.4 percent over the month, with the annual rate unchanged at 3.9 percent, as a jump in shelter inflation offset a decline in used auto prices. The major change to our inflation expectations came from the lower oil price path, stronger assumed population growth leading to a less tight labor market, and a reassessment of core inflation less shelter; though, as the January CPI report shows, there is upside risk to our inflation expectations.

[Assistant] Our baseline expectation is that the Fed will maintain its current rate policy until June, when we expect the first rate cut. Housing & Mortgage Forecast Changes Mortgage Rates Following the slight increase in interest rates in January, our interest rate forecast is slightly higher this month. We expect the 30-year fixed mortgage rate, as measured by re ie ac’s Primary Mortgage Market Survey (PMMS), to average 6.2 percent in 2024 and 5.7 percent in 2025. However, interest rates remain volatile, particularly given changes in Fed policy expectations, which adds risk to our outlook for interest rates.


[User] Existing Home Sales Existing home sales were at a SAAR of 3.78 million in December. We have revised our forecast modestly upward in 2024, mostly due to higher growth expectations, while we have lowered our expectations in 2025, largely due to the slightly higher projected interest rate environment. However, the continued heightened volatility of long-run interest rates continues to point to risk around the sales projection. New Home Sales New single-family home sales rose 8.0 percent to a SAAR of in December. Similar to our existing home sales forecast, sales in 2024 were revised upward due to higher growth expectations, while sales in 2025 were revised downward slightly given the slightly higher projected interest rate path. New home sales continue to benefit from the limited inventory of existing homes for sale.

[Assistant] Single-Family Housing Starts Single-family housing starts fell to a SAAR of 1.03 million in December, while permits rose to . The pullback was less than expected. Combined with a stronger growth outlook, we have revised our single- family starts forecast upward. We continue to expect that the lack of existing homes available for sale will continue to boost new home construction in the medium term.


[User] Single-Family Home Prices Home prices grew 7.1 percent Q4/Q4 in 2023, according to the most recently published non-seasonally adjusted FHFA Purchase-Only House Price Index (HPI). Our next home price update will be in April. Single-Family Mortgage Originations We now expect 2024 single-family purchase origination volumes to be $1.5 trillion and 2025 volumes to be $1.6 trillion. These represent downgrades of $30 billion and $4 billion respectively compare to last month’s forecast. The downward revision to the 2024 forecast was driven by weaker-than-expected incoming data on the average price of new home sales. This outweighed upward revisions to our expectation for 2024 existing home sales.

[Assistant] For refinances, we have revised downward our overall volume expectation by $30 billion in 2024 to $459 billion, driven by the higher mortgage rate expectation this month. However, in the near term, we expect refinance volumes to continue to tick upward, consistent with recent readings from the Refinance Application-Level Index (RALI). In 2025, we expect refinance volumes to grow to $709 billion, another owngra e from last month’s forecast riven by the change in our mortgage rate expectations.


[User] 1 Multifamily Economic and Market Commentary JANUARY Multifamily Market Outlook: Instability Expected as Skies Remain Cloudy Based on preliminary data, multifamily rental growth is estimated to have turned negative during the fourth quarter of 2023, after having been at more moderate levels earlier in the year. Our prediction of turbulence in the multifamily market last year was correct, and it appears that it is likely to continue into 2024. Rental demand differed depending upon the metro: Those with a lot of new supply, such as Austin, Phoenix, and Jacksonville, have seen negative rent growth over the past six to 12 months. In contrast, metros that are supply constrained, such as Kansas City, Cincinnati, and St. Louis, have seen above-average rent growth, according to data from RealPage. At a national level, rental demand remained positive for much of 2023, due to stronger-than-expected job growth, smaller-but-continued wage increases, elevated interest rates, and an overall shortage of housing, especially for-sale housing, keeping many renters-by-choice renting – for now.

[Assistant] We expect the economy to grow at a below-trend rate in 2024 and note that the risk of a recession remains elevated. Coupled with more than one million multifamily rental units underway, we are once again expecting lower-than-normal rent growth this year along with a slightly higher national vacancy rate. We expect rent growth to be in the range of just 1.0% to 1.5% in 2024, and we believe it could stumble if job growth worsens significantly. The national multifamily vacancy rate is expected to rise to 6.25% this year, as illustrated in the chart below, and then begin to stabilize at 6.0% in 2025. The pace of absorption is expected to remain positive but only slightly higher this year due to the high number of new units delivering over the next 12 to 18 months. We also expect that the percentage of units offering concessions will increase and that concession levels will rise in oversupplied markets.


[User] According to data from , annualized multifamily demand was estimated at units at the end of 2023, compared to an estimated units in 2022. In addition, is anticipating that demand will rebound in 2024, ending the year with an annualized units of multifamily demand.

[Assistant] 2 Rent Growth Expected to Remain Below Average We believe that national rent growth was positive in 2023, but just barely, at an estimated 0.75%, despite turning negative at the end of the year. Last year’s annualized rent increase is down significantly from an estimated 4.75% in 2022 and estimated 10% in 2021. We expect rent growth to start the year negative, but then turn slightly positive during the second and third quarters, and then turn negative again in the fourth quarter, resulting in an annualized range of between 1.0% and 1.5%.


[User] However, it is important to note that if job growth turns significantly negative, and the broader economy slows down or enters a recession, rent growth could stagnate further or even end the year negative. There is still too much uncertainty at this stage to know how rent growth might ultimately be impacted over the coming months.

[Assistant] Multifamily Economic and Market Commentary Vacancy Expected to Increase The national multifamily vacancy rate is estimated to have risen in late 2023 and is expected to rise again in 2024, primarily due to the amount of new supply expected to deliver this coming year, on top of the more than units that were expected to have been added in 2023. Much of this new supply consists of more expensive, class A units in many places, which should help improve the pace of filtering down the existing multifamily housing stock, resulting in a higher number of less expensive class B units. As a result, we expect that the amount of new supply completing over the next 12 months will push the national vacancy rate up to 6.25% in 2024. It is important to note that this elevated level is expected to be short-lived and is expected to drop back down to 6.0% by 2025, as seen in the chart on the previous page. Additionally, a vacancy level of 6.0% to 6.25% is not that much higher than the long-term average of 5.75% from 2005 through 2022.


[User] 3 Multifamily Economic and Market Commentary Demand for all classes of multifamily units remained subdued through much of 2023, as illustrated below. According to data from RealPage, Inc., as of fourth quarter 2023, quarterly effective rent growth for class A and B units had turned negative, to negative 0.69% for class A and negative 1.11% for class B. Class C rent growth was estimated to have remained positive but just barely at 0.33% for the quarter. We believe that the slowing in rent growth across all classes later in the year was the result of new supply entering many local markets, as well as weaker demand from new renters. National Multifamily Concession Rate by Class Percent Of Units Offering Concessions Source: RealPage, Inc. 3 The number of properties offering concessions increased throughout much of last year, as seen in the chart below right. As of fourth quarter 2023, an estimated 18.1% of class A units were offering concessions, up from 13% a year ago. Class B units increased to 18.5% from just 12.5% in fourth quarter 2022, as did Class C units, which reached an estimated 18.6% as of fourth quarter 2023 compared to 9.5% a year ago.

[Assistant] Although the percentage of units offering concessions has been increasing for quite awhile, the concession levels themselves remained below one month’s free rent, or 8.3%, as seen in the chart below left. Nevertheless, we expect that both the value of concessions and the number of units offering them will increase in 2024, primarily in oversupplied metros.


[User] 4 Multifamily Economic and Market Commentary New Multifamily Supply Expected to Peak in 2024 According to preliminary data from Dodge Data & Analytics Supply Track, which distinguishes between multifamily properties consisting of apartment and condominium units, more than apartment units were likely completed in 2023, up notably from 2022’s units – the most recent peak year for new deliveries. Indeed, according to the National Multifamily Housing Council’s Construction Survey, as of December of respondents reported construction delays, with most stating the delays were caused by either permitting requirements or in actually getting the project started. And of those experiencing delays getting their projects started, 83% stated it was due to economic uncertainty and 79% said it was due to construction financing concerns.

[Assistant] 5 Multifamily Economic and Market Commentary Subdued Multifamily Demand Expected to Continue in 2024 At a national level, we believe that there will continue to be a supply/demand imbalance this year, based on the amount of new multifamily units expected to come online compared to the anticipated increase in job growth.


[User] Although it is unlikely that all new units slated for completion will be delivered by year-end 2024, the possibility of slower growth or even possible recession coupled with slowing job growth means that there is unlikely to be enough demand to keep up with the wave of new deliveries in some metros.

[Assistant] That would likely keep new multifamily rental demand weak, just as an elevated level of new units are expected to deliver.


[User] Much of this new supply is primarily concentrated in about 15 metros, as seen in the chart below. In addition, several of the impacted submarkets are located in some of the most expensive metros in the country, including New York, Washington, DC, Seattle, and Los Angeles. Although Moody’s Analytics is expecting some metros to see positive job growth in 2024, such as Austin, Orlando, and Phoenix, the amount of expected new units could still easily outstrip demand. 6 Multifamily Economic and Market Commentary 6 There are a number of oversupplied metros across the country, in terms of the amount of new supply underway compared to the current inventory of multifamily units. As seen in the chart below, metros such as Austin, Denver, Charlotte, Miami, Orlando, Nashville, Raleigh, Colorado Springs, and Huntsville, all have more than 10% of their respective multifamily inventories underway.

[Assistant] In general, a market is considered in balance when it has between 2% and 4% of inventory underway, and with some of these metros expecting below average job growth this year, many are expected to remain oversupplied over the next 12 to 18 months.


[User] 7 Multifamily Economic and Market Commentary 7 Although at a national level job growth is expected to be just 0.6% in 2024, Moody’s is expecting a number of metros will see job growth exceed the national average, as illustrated below. Some Texas metros, such as Austin, Dallas, and Houston, are all expected to have job growth of between 1.0% and 2.0%, making them some of the best performing in the nation. Yet it is not expected to be enough to keep up with all the potential new supply. For example, with job growth forecasted at 1.3% this coming year, Austin could produce demand for about 5,900 new multifamily units, but the new supply expected to deliver in 2024 totals more than 28,000 units, meaning an excess of more than 22,000 units. Dallas is expecting about 34,000 new multifamily units in 2024 but based on Moody’s Analytics’ anticipated job growth rate of 1.1%, the metro would likely only have demand for a little more than 12,000 units, leaving a potential excess of 29,000 units. Houston, which Moody’s expects to have some of the nation’s best job growth at 2.0% this year, is expecting nearly 25,000 multifamily units, but the expected number of new jobs is likely only going to produce demand for about 13,000 units, leaving an excess of more than 11,000 units.

[Assistant] Positive Job Growth Will Not Be Enough in Some Metros… … But Others Become Undersupplied by 2025 There are some metros, such as Las Vegas, Los Angeles, Chicago, and Orlando, that might have too much supply this year, but could be undersupplied by as soon as 2025. For example, Las Vegas has more than 5,500 units expected to deliver by the end of 2025, and while it is expected to be oversupplied in 2024, by the following year, it could actually be undersupplied by more than 2,500 units. Los Angeles is also expected to be briefly oversupplied this year, by about 5,800 units, but will likely fall short by an estimated 3,400 units by 2025. Similarly, Chicago is expected to be oversupplied by about 5,300 units this year but will be undersupplied by about 2,100 the following year. Orlando has a projected oversupply of more than 11,000 units in 2024, but just a year later could be short by a little more than 1,250 units. In some metros, patience will likely be a virtue in terms of waiting for a multifamily supply/demand balance.


[User] 8 Multifamily Economic and Market Commentary 8 As a result of increased new construction, many oversupplied metros may find that their average multifamily vacancy rates are going to stay higher longer. In taking a closer look at some of these metros, although the amount of new supply tends to decline over the next five years, as seen in the charts below, the vacancy rates stay relatively elevated.

[Assistant] For example, according to third quarter 2023 projections from , despite Austin’s new construction pipeline declining to just under 2% of its multifamily inventory by 2028, its vacancy rate is expected to be 10% that same year, well above the metro’s long-term average of 8.5%. Similarly, believes that Nashville is also poised to see a higher-than-average vacancy rate of nearly 10% by 2028 compared to its long-term average of 6.8%. In contrast, Phoenix is likely returning to its long-term average vacancy rate due to all its new supply. With its new construction pipeline falling to an estimated 1.3% of inventory by 2028, is expecting the metro’s vacancy rate to be about 9%, which is only slightly above its long-term average of 8.7%. Midland-Odessa is in a similar position, with its vacancy rate expected to be an estimated 8.8% by 2028, which is only slightly higher than its long-term average of 8.5%. Some Metros May See Higher Than Average Vacancy Rates for Awhile Source: Moody’s Analytics Austin Colorado Springs Nashville Phoenix Salt Lake City San Antonio Midland/Odessa Austin Colorado Springs Nashville Phoenix Salt Lake City San Antonio Midland/Odessa Avg. Vac. Rate: Units Completed By Year (% of Market Inventory) – Select Markets Historical and Forecasted Vacancy Rates – Select Markets Source: , QWe continue to maintain a cautious outlook for the national multifamily sector in 2024. We expect the multifamily sector will see a further softening in demand this year, possibly resulting in negative rent growth during the first quarter of 2024 due to new supply entering the market, especially during what is normally a slow lease-up time of the year, as well as again during the fourth quarter due to the additional stressor of expected slower job growth. At a metro level, demand will vary. In some metros, especially those with a large amount of supply expected to come online during the year, we believe rents could remain flat to negative much of the year, in turn pushing up concession rates as well as the number of units offering them, but that is likely to be at a localized, submarket level. In other undersupplied metros, rent growth is expected to be positive but will not be at sufficient enough levels to dramatically alter the overall national outlook. As a result, we expect multifamily origination volume levels will remain subdued. As of October 2023, the Mortgage Bankers Association is estimating that multifamily originations volume will be $285 billion in 2023 and $339 billion in 2024, but that is subject to change. Based on current trends, our estimated annual multifamily originations are in the same general range, albeit slightly lower: $255 billion to $275 billion in 2023 and $295 to $325 billion in 2024. We expect the multifamily rental market to see continued softness in demand from both tenants and investors, and a return to more normalized trends is not anticipated until mid-2025.


[User] Higher interest rates dampened investor appetite for purchasing commercial real estate properties in 2023, and multifamily properties were no exception. Sales of U.S. multifamily properties plummeted last year, totaling just an estimated $105.5 billion year to date through November 2023 for properties valued at $2.5 million or higher, according to data from MSCI Real Assets. As expected, November's average cap rate was estimated at 5.36%, which was up slightly from 5.32% in October and up quite a bit from 4.82% as of November 2022, according to data from MSCI Real Assets and as seen in the chart below.

[Assistant] We anticipate that cap rates could inch up higher this coming year, perhaps climbing to as high as 5.75% before declining back to between 5.5% and 5.25% over the next 12 to 18 months, in response to any interest rate reductions.


[User] Economic Growth, Inflation Still on Track to Slow as Interest Rate Volatility Continues Our May forecast maintains our previous outlook for Q4/Q4 real Gross Domestic Product (GDP) growth of 1.8 percent in 2024 and 1.9 percent in 2025.

[Assistant] We expect payroll growth to decelerate and the unemployment rate to drift upward to 4 percent by the end of the year. Longer-term interest rates, including mortgage rates, have been volatile the past two months – first rising in response to stronger than expected economic data, and then a more recent decline on weaker readings. Despite this, we view economic growth and inflation as being on the same track as our prior outlook, and we continue to anticipate moderation as the year progresses. We also continue to expect the Federal Reserve to implement the first of two rate cuts this year in September as inflation measures moderate, gradually trending toward the Fed’s 2-percent target. However, we believe the Fed is likely to remain cautious as there are still signs that inflation may remain stickier than anticipated. We revised modestly lower our total home sales forecast, primarily due to the higher mortgage rate forecast compared to last month’s projection – although we still expect an upward trajectory in sales through our forecast horizon, and recent downward movements in mortgage rates following the conclusion of our interest rate forecast present slight upside risk to housing activity. We now project 2024 total home sales to be 4.89 million (4.96 million previously), followed by 2025 total sales of 5.29 million (previously 5.47 million). Consistent with the slower sales outlook, our forecast for total mortgage originations was downgraded modestly to $1.73 trillion for 2024 ($1.81 trillion previously) and $2.08 trillion in 2025 ($2.26 trillion previously). Quick Links Economic Forecast Changes Housing & Mortgage Forecast Changes Economic Forecast Table Housing & Mortgage Forecast Table Underlying Growth Remained Steady Through Q1 but Slowing Still Likely First quarter 2024 GDP increased at a 1.6 percent annualized rate, below both consensus and our expectations. However, the headline miss was due almost entirely to the volatile net exports and business inventory investment categories; real consumption growth and private fixed investment were in line with our forecast. Real final sales to private domestic purchasers, the sum of personal consumption and gross private fixed investment, increased at a solid 3.1 percent annualized rate, nearly identical to each of the prior two quarters. However, on net, this quarterly change has no material impact on our full- year 2024 total growth forecast. in April, which fell by 0.3 percent over the month, is supportive of this view. While revolving consumer credit balances remain normal relative to incomes, higher interest rates are likely putting some consumers under stress: Personal interest payments on all non-mortgage debt as a percentage of total personal outlays has been at its highest level since 2008 over the past three quarters, and recent data show an uptick in credit card and auto loan delinquencies. Additionally, we expect further softening in labor market conditions, which will likely limit consumption growth. The April employment report showed nonfarm payroll growth slowing to a marked slowdown compared to the average jobs added each month in the first quarter. While additional data will be necessary to definitively establish that the trend is slowing, a downshift in hiring would be consistent with other labor market indicators, such as the Job Openings and Labor T rno er r ey’s (JOLT ) job openings and quits rates, which have shown cooling labor market conditions for several months.


[User] We believe the combination of softer labor market conditions and weaker consumption growth should flow through to lower inflation prints in the second half of the year. Further, we continue to expect measures of shelter inflation to weaken over time as measures of new tenant rents, including the Bureau of Labor Statistics’ (BLS) own series, show near-zero rent growth over the past two quarters. While these “f ndamentals” point to decelerating inflation mo ing forward, releases to date have highlighted the risk that inflation pressures remain sticky. The Fed’s preferred core Personal Consumption Expenditures (PCE) inflation averaged an annualized rate of 4.4 percent through the first three months of the year. While this strength can be explained away by idiosyncrasies in measuring items such as auto insurance and healthcare costs, alternative inflation measures, including the median Consumer Price Index (CPI), also point to some price stickiness that we believe will likely give the Fed and financial markets pause. Additionally, while most labor market indicators are pointing to softening, the Employment Cost Index (ECI) increased 1.2 percent in Q1, an acceleration of three-tenths compared to the prior quarter. As such, we still expect that the Fed will hold off on rate cuts until September and only cut twice this year. We view risks as weighted toward fewer than two cuts rather than three or more cuts. While the 10-year Treasury rate has pulled back after peaking around 4.7 percent at the end of April, the trend in 2024 has clearly been upward. Our May forecast shows a higher interest and mortgage rate path this year and next relative to our prior forecast. Home Sales Forecast Lower on Higher Mortgage Rates, but Recent Data Coming in as Expected Existing home sales fell back 4.3 percent in March to an annualized pace of 4.19 million, in line with our expectations. While we expect home sales to remain sluggish going forward, the flow of new listings has remained steady in recent months despite generally rising mortgage rates, suggesting that additional sizeable sales declines are unlikely. We suspect that, for a myriad of reasons, enough would-be sellers are deciding they can no longer put off moving. In April, the supply of active listings, according to Realtor.com, was up 30.4 percent from a year prior. While the higher mortgage rate forecast this month translates into a modest downgrade to 2024 sales, we see the flow of for-sale listings in the near term as being relatively resilient to recent mortgage rate moves. We forecast a modest drift upward in existing home sales over our forecast horizon. New home construction and sales look to be converging as expected. We had previously noted that the pace of starts has been elevated relative to the new home sales pace in recent months. Single-family starts fell in March by 8.7 percent, followed by a 0.4 percent decline in April, while new sales rose 8.8 percent in March. We expect this convergence to continue in the near term via a combination of homebuilders offering incentives to move existing inventories and a modest slowing in the pace of starts. While existing home sales listings are loosening somewhat, the housing market remains tight in most metros. As such, we continue to expect a solid pace of new home construction over the next two years as buyers look to new homes due to the limited existing home supply. Economic Forecast Changes Economic Growth Q1 2024 GDP grew at an annualized 1.6 percent, well below the consensus and our estimate of 2.4 percent, with the difference driven mostly by net exports and the change in business inventories. e to stronger “core” GDP we anticipate a rebound and, therefore, have revised upward our Q2 and Q3 forecasts, but our forecast for total yearly growth in both 2024 and 2025 is unchanged at 1.8 percent Q4/Q4 and 1.9 percent Q4/Q4, respectively. Labor Market Nonfarm payroll employment growth was in April. The unemployment rate ticked up one-tenth to 3.9 percent. Compared to last month, we have lowered slightly our unemployment rate expectations consistent with a modest GDP growth upgrade in Q2 and Q3, though we continue to expect a gradual uptick over time. We continue to project the unemployment rate to gradually trend upward over the course of our forecast horizon. Inflation & Monetary Policy A lower near-term energy outlook led to a slight downward revision in the headline CPI outlook, though the persistent stickiness in the core measure of inflation led to a slight upward revision to our core inflation forecasts this month. However, we still forecast inflation to moderate over the outlook time horizon. Our baseline expectation continues to be that the Fed will begin rate cuts in September, with only two rate cuts this year given the persistence of inflation and the robust labor market. Existing Home Sales Existing home sales fell to a seasonally adjusted annualized rate (SAAR) of 4.19 million in March. We revised modestly downward our forecast through 2025, mostly driven by the change in mortgage rate expectations. While we expect a pullback in Q2, due to a strong start at the beginning of Q1, we continue to forecast existing sales to trend upward over our forecast horizon on a monthly sequential basis. New Home Sales New single-family home sales jumped 8.8 percent in March to a SAAR of . Similar to our existing home sales outlook, we have lowered our expectations for new home sales primarily due to the higher interest rate outlook. However, new home sales continue to benefit from the limited inventory of existing homes for sale, which we expect to support demand for new homes over our forecast horizon.

[Assistant] Single-Family Housing Starts We continue to expect that the lack of existing homes available for sale will continue to boost new home construction in the medium term, though we have lowered our expected starts pace over the forecast horizon due to the higher interest rate path.


[User] Further Declines in Mortgage Rates Needed to Address Affordability and Spur Home Sales Despite a meaningful pullback in mortgage rates over the past few months, home purchase activity continues to be unresponsive, with existing home sales remaining near cycle lows. Lock-in effects and affordability constraints are keeping many would-be homebuyers on the sidelines. While we have made little change to our macroeconomic outlook, we have revised downward our near-term home sales forecast. We now expect 2024 total home sales to be 4.7 million (previously 4.8 million), down 0.3 percent from their 2023 total; notably, we also expect 2024 existing home sales to fall to the slowest annual pace since 1995. We forecast sales to then pick up by 9.8 percent in 2025 to a pace of 5.1 million units; with the majority of that increase coming in the second half of 2025 if mortgage rates decline sufficiently to end 2025 at 5.7 percent, as we currently project. Our forecast for total single-family mortgage originations was revised downward modestly for 2024 to $1.68 trillion (previously $1.70 trillion), while the outlook for 2025 was moved slightly higher to $2.16 trillion (previously $2.15 trillion), principally due to a rise in refinance volumes from anemic levels. For economic growth, we expect 2024 Real Gross Domestic Product Growth (GDP) to be 2.0 percent on a Q4/Q4 basis (1.9 percent previously) and 2025 growth to be 1.8 percent (unchanged), and for the unemployment rate to gradually drift upward to 4.6 percent by end of 2025. Quick Links Economic Forecast Changes Housing & Mortgage Forecast Changes Economic Forecast Table Housing & Mortgage Forecast Table Economy Downshifts as Post-Pandemic Imbalances Fade With inflation continuing to move toward the Federal Reserve’s target and most labor market data softening, we believe economic growth is in the process of downshifting, even though consumer spending to date has remained more resilient than previously expected. Fed commentary has stated that risks to their dual mandate – maximum employment and stable prices – are now better balanced and a rate-cutting cycle is imminent. The Consumer Price Index (CPI) fell four-tenths to 2.5 percent compared to a year ago in August, a new cycle low and roughly even with pre-pandemic readings. While core inflation remains somewhat stickier, 2.3 percentage points of the 3.2 percent year-over-year increase in core prices is due to lagged shelter prices, which are widely expected to converge to lower measures of rents on newly signed leases over time. On the employment side, the increase in payroll employment in August represented an improvement from July’s downwardly revised estimate of 89,000 jobs added, but the three-month moving average of job gains declined to just the lowest level since the start of the labor market recovery following the pandemic. The unemployment rate fell back one-tenth, as expected, to 4.2 percent due in part to a reversal in those reporting temporary unemployment in July, but it remains five-tenths higher than in January. Data from the July Job Openings and Labor Turnover Survey (JOLTS) also showed a slowing labor market as job openings declined to their lowest level since February 2021, layoffs moved up to their highest level since March 2023, and the quits rate remained below its pre-pandemic level. Varying business surveys also show softening in hiring. Despite this, real Personal Consumption Expenditures (PCE) have remained robust to date. Second quarter PCE was revised upward by six-tenths to a 2.9 percent annualized gain in the second release of GDP and monthly data showed another 0.4 percent increase in real consumption in July. As has been the case over the past half-year, the strong consumption occurred without a corresponding large increase in real disposable personal income, which grew at just a 0.9 percent annualized rate in the second quarter. This dynamic has pushed the saving rate down to just 2.9 percent in July, the lowest level since June 2022 and several percentage points below its pre-pandemic level. We continue to believe that the current rate of spending relative to incomes is unsustainable, and therefore expect consumption will slow by the end of the year. However, the exact timing of this downshift presents risk to our forecast.

[Assistant] On balance, our growth forecast is largely unchanged compared to last month. While we have upgraded our third quarter growth expectations due to stronger base effects from the higher second quarter reading, we continue to expect that growth will slow in line with business surveys and signs of a weaker labor market. We now forecast 75 basis points of fed funds rate cuts by the end of the year, spread evenly between t e Fed’s t ree remaining meetings. We anticipate that rates will continue to decline through next year and, with a lag, will provide a boost to the economy as monetary policy transitions from a restrictive to a neutral stance. We expect GDP growth will return to roughly its long-term potential by the end of 2025.


[User] Rising Regional Variation in Housing Market as Sales Fail to Respond to Easing Mortgage Rates Existing home sales continue to be weak despite the pullback in mortgage rates over the past few months. While existing home sales edged upward by 1.3 percent in July, the pace remained at a subdued 3.95 million units annualized, near the cycle low. Furthermore, pending home sales, which lead sales on average by 30-45 days, fell back by 5.5 percent in July, pointing to likely further weakness in August and September. Higher frequency data such as purchase mortgage applications and Redfin’s Home Search Demand Index, also show little signs of a pickup in sales. Therefore, we have downwardly revised our near-term existing home sales forecast and now expect existing home sales to average only around 4 million annualized units for the remainder of 2024 and for the year to be slightly below the 2023 sales pace. On a national basis, the inventory of homes listed for sale continues to nudge upward. According to the National Association of REALTORS®, the number of homes on the market at the end of July was up 19.8 percent from a year prior. However, this rise in homes on the market is not occurring because of a significant increase in new listings. Rather, the pace of sales has been so weak that new listings on average are remaining on the market longer. The rise in the inventories of homes for sale has not been uniform across geographies, and we believe this geographic variation is a significant factor as to why home sales have not responded meaningfully to the pullback in mortgage rates. Most of the rise in homes for sale have occurred in Sun Belt and a few Mountain West states. Some of these states now have for- sale inventories near or even above what was available pre- pandemic at the end of 2019. However, most of the Northeast and Midwest continue to have near cycle lows of homes available for sale. While there are likely many factors driving this divergence, an examination of the states driving the rise in homes for sale shows that these they tend to have two characteristics in common. First, the cumulative home price gains since the pandemic have tended to be some of the largest, creating a larger relative shock to affordability for residents in these states. Second, these states have had comparatively strong new home construction since the pandemic, causing existing home listings to face greater competition from homebuilders offering new homes. We interpret the lack of a sales pick up in these states, despite the increase in for-sale listings, as meaning there are no longer enough borrowers able or willing to transact at current price points and mortgage rates, whether because affordability is now binding for the marginal buyer, because new home sales are more attractive, or some other reason, such as concern about availability and cost of insurance. To date, the decline in mortgage rates has not helped affordability enough to generate sales in these markets. This can be seen in the scatterplot chart above, where states in the top right quadrant are those with comparatively high recent homebuilding and comparative large post-pandemic home price gains. These states are driving the bulk of the national rise in active for-sale listings of existing homes.

[Assistant] As time progresses, more households will likely initiate moves because t ey can’t put off various life events any further; however, as long as the lock-in effect remains as strong as it currently is, we do not expect a large increase in transactions broadly. For the states that are seeing rises in active inventories, we expect a combination of easing mortgage rates and soft home price growth relative to income growth will be needed before existing home sales begin to meaningfully rise, as affordability constraints appear to be a large driver. While it will likely take some time before sales recover to a more “normal” pace, we forecast existing home sales to begin moving up in a meaningful way in mid-2025 as mortgage rates ease further and home price growth decelerates, as shown in our forecast. While we have softened our new home construction forecast over the past couple months, we continue to expect comparatively robust activity in the new home sales market as elevated existing home prices will continue to make new homes attractive, especially as homebuilders continue to offer concessions and rate buy downs.


[User] Economic Forecast Changes Economic Growth The second estimate of Q2 2024 GDP was revised upward by two-tenths to an annualized 3.0 percent, driven by an upward revision to consumption. This higher starting level led to an upward revision to our Q3 forecast, though we maintain our expectation of weakness in Q4 and the first quarter of 2025. Our GDP forecast for total yearly growth in 2024 on a Q4/Q4 basis was revised upward one-tenth to 2.0 percent. Our forecast for growth in 2025 was unchanged at 1.8 percent Q4/Q4. The unemployment rate fell one- tenth to 4.2 percent, ending a four-month string of increases. Given this, our unemployment rate expectations were unchanged, and we continue to expect the labor market to cool at a gradual pace. Inflation & Monetary Policy Our inflation outlook was revised downward following a downward revision to our oil price outlook. The August Consumer Price Index (CPI) report was in line with our expectations for further deceleration in inflation. We continue to forecast inflation to moderate over our forecast horizon. Given the inflation numbers and signs of cooling in the labor market, our baseline expectation remains that the Fed will begin to cut the federal funds rate in September by 25 basis points, followed by 25-basis point cuts at both the November and December meetings. Existing Home Sales Existing home sales rose 1.3 percent to a seasonally adjusted annualized rate (SAAR) of 3.95 million in July. We revised downward our near-term outlook for existing home sales, despite the lower mortgage rate path, given the weakness in recent high-frequency indicators, such as purchase applications, which have shown little movement despite the drop in mortgage rates. However, we continue to forecast existing sales to trend gradually upward over our forecast horizon as affordability slowly improves and lock-in effects weaken. New Home Sales New single-family home sales jumped 10.6 percent in June to a SAAR of . We have upwardly revised our new home sales outlook following the strong July report, and we continue to expect the dearth of existing homes being listed for sale to help support new home sales and lead to a gradual increase over the forecast horizon.

[Assistant] Single-Family Mortgage Originations We expect 2024 purchase origination volume to be $1.3 trillion, a downward revision of $20 billion from the prior forecast. This revision is driven by a somewhat weaker expectation for existing home sales. In 2025, we expect purchase volumes to grow by 15 percent year over year to $1.5 trillion. For refinances, we now expect 2024 volume to be $375 billion, a slig t upward revision from last mont ’s forecast given the lower mortgage rate path. We expect 2025 volumes to come in at $649 billion, an upward revision of $23 billion from the prior forecast, again driven by the lower expected mortgage rate path. These upward revisions are consistent with a slight uptick in F tarts urrent Forecast rior Forecast F tarts urrent Forecast rior Forecast F A Actual July Forecast urrent April Forecast rior urc ase Refinance Forecast ots represent prior forecast


[User] The number of facilities producing these factory-built homes conforming to HUD standards has grown in recent years. According to MHInsider, in 2023, there were 36 companies producing factory-built homes with a combined 148 production facilities, compared with 35 companies with 146 production facilities in 2022. This represents an 11% increase from the 133 production facilities recorded in 2019. Private Property Elsewhere Subdivision/PUD Land-Leased/MHC Location of New Manufactured Homes Shipped (for Residential Use Only) Source: U.S. Census Bureau and U.S. However, not all purchasers of manufactured homes can afford to purchase the land needed to situate their new home, and some prefer to avoid the maintenance associated with owning that land. Manufactured Housing Communities (MHCs), also known as land-lease communities, address this need. For those residents who own their manufactured home, these communities offer pad sites for rent, which are spaces where owners can place their homes that also provide access to utility hookups. MHCs can also offer manufactured homes for rent. According to information from Datacomp Appraisal Systems, Inc., which verifies the existence and location of MHCs, as of second quarter 2024, there were just over 44,000 MHCs providing land for lease to owners, as well as rental of both the pad site and the manufactured home itself. While demand for manufactured housing has remained steady, rising interest rates have had a negative impact on production of manufactured homes and loan origination. As a result, current community occupancy remains high and pad site rents continue to increase. New Manufactured Home Production Slowing According to the U.S. Census Bureau’s Manufactured Housing Survey, from 2018 to 2020, an average of 95,200 manufactured homes were completed annually. Pent-up demand, along with rising housing prices and low interest rates, increased interest in manufactured homes as a more affordable source of housing. MHCs Completed in Only a Handful of States According to , only five MHCs have been built or expanded since the start of 2023. Three are in Texas: the 437- pad site Fannin Meadows in Tyler, owned by Four Leaf Properties; the 420-pad site The Landing at Pearland in the Houston metro area, developed and owned by Jacob White Construction; and the 200-pad site Creeks Crossing located just outside of Austin, and owned by Sun Communities. In addition, the Kofa Cabana Courtyard was developed outside of Yuma, Arizona and has 24 manufactured housing rentals, and the 54-pad site Blue Haven Mobile Estates owned by BoaVida Communities was developed in Paradise, California. MHC Under Construction or Proposed There was only one MHC under construction as of mid-August 2024, the Twin Lakes at Avon Park that will consist of 325 manufactured housing rentals in Avon Park, Florida, according to data from . This represents a fraction of the amount of new MHCs that were produced 20 years ago, as shown in the chart below. 5 Multifamily Economic and Market Commentary Age 55+ - MHC Occupancy and Pad Site Rents for Select Regions* Occupancy Q2 2024 Occupancy Q2 2023 Change Rent Q2 2024 Rent Q2 2023 Change Midwest Northeast Pacific South Southwest West National Two Types of MHCs Roughly one-third of MHC are Age-55+ MHCs, targeted to older adults. Two-thirds are All Ages MHCs, which tend to attract families and residents of all ages, including those older adults that do not want to live in an Age-55+ community.

[Assistant] Fundamentals in both segments of MHC appear to have weathered the pandemic, recent inflationary trends, and elevated interest rates – at least so far.


[User] Source: Datacomp/JLT * As of July 1, 2024, Based on Trailing 12-month average. Note: Pad Site rents exclude utility payments Southeast: 13 states including Florida, Georgia, and the Carolinas. Northeast: seven states including Pennsylvania, New York, and New Jersey, Pad Site Rents Record Strong Growth in Most Regions As shown in the table above, pad site rents vary widely among regions. The Pacific region, which is comprised of the high-cost coastal states of California, Oregon, and Washington, has a 99% occupancy rate and the highest monthly rent at $911 per month, as of second quarter 2024, according to Datacomp. By contrast, the large Midwest region, which is comprised of 12 states, including Michigan, Illinois, and Indiana, had an average pad site rent that was $330 lower at $581 per month – the lowest rent among the six regions. Low vacancies and ongoing job and wage growth led to another year of strong rent growth, with pad site rents across all regions growing by 6.6% on average year over year as of second quarter 2024, following a 7.5% increase as of second quarter 2023. The 6.6% increase is more than double the 3.0% non-seasonally adjusted inflation rate and the estimated 1.1% average national increase in multifamily rents over the same timeframe. Pad site rents in the South and Southwest regions saw the highest increases, growing by 7.4% and 7.3%, respectively to $700 and $656, respectively. Occupancy Q2 2024 Occupancy Q2 2023 Change Rent Q2 2024 Rent Q2 2023 Change Midwest Northeast Pacific South Southwest West National All Ages MHC - Occupancy and Rents for Select Regions* MHC Capitalization Rates Tick Up After declining significantly in recent years, capitalization rates for institutional-quality MHCs have started to increase, as shown in the adjacent chart. According to MSCI Real Assets, the average cap rate for MHC property sales fell from an average of 6.8% in second quarter 2013 to an estimated 4.7% as of second quarter 2022. Since then, however, the average MHC cap rate has increased to 5.5% as of second quarter 2024.

[Assistant] data, which includes smaller transactions for which cap rates can vary more widely, shows an even larger jump, on a relative basis: It estimates that cap rates rose to 9.5% as of second quarter 2024 from 7.2% as of second quarter 2022. Source: ,MSCI Real Assets Note: MSCI Real Asset data is quarterly based on a trailing 12- month average. Includes property or portfolio sales of $2.5 million or greater.


[User] Strong Rent Growth Pad site rents in All Ages MHCs recorded another year of strong growth, increasing by 6.6% year over year to an average of $665 as of second quarter 2024, as seen in the table above. This follows a year-over-year increase of 6.8% as of second quarter 2023. Pad site rents are highest in the Pacific region, growing by 5.4% year over year to over $1,061 as of second quarter 2024. Pad site rents saw the fastest growth in the South, Southwest, and West regions, where they grew approximately 8% to and $826, respectively. Even in the traditionally more affordable Midwest region, the average rent rose by 6.7% to $523. As a comparison, the year-over-year inflation rate was 3.0% at that time. During the first half of 2024, sales of MHCs totaled just $1.1 billion, which is on par with sales for the first half of 2023 but about 52% lower than the sales activity for the first half of 2022, according to MSCI Real Assets. This is also lower than the $1.9 billion in sales recorded for the first half of 2020, during the height of the pandemic. We believe that the ongoing elevated interest environment kept sales depressed in the first half of 2024. 8 Multifamily Economic and Market Commentary MHC Sale Price-Per-Site Declined According to data from MSCI Real Assets, MHC sale prices-per-site totaled an estimated $69,000, as of second quarter 2024. This is down 12% from the $78,700 price-per-site in Q1 2023, just five quarters prior.

[Assistant] Lending Volume Declining Although not a complete market view, publicly available data combined with third-party vendor data provides insight into financing trends. As shown in the chart to the right, lending volume totaled an estimated $7.3 billion in 2023.This is on par with the $7.3 billion in lending volume in 2022 but down from a record $12.8 billion in 2021. The total lending volume for the first half of 2024 totaled just $2.2 billion, which means that lending volume could fall even further, to perhaps just $4.4 billion for all of 2024. However, with the Federal Reserve poised to cut interest rates, borrowing costs will likely decline, which we think will lead to increased financing of MHC in 2025.


[User] The factual framework for this analysis was developed by HUD’s Economic and Market Analysis Division as thoroughly as possible on the basis of information available on the “as-of” date from both local and national sources. As such, they may be modified by subsequent developments. We wish to express our appreciation to those industry sources and government officials who provided data and information on local economic and housing market conditions.

[Assistant] This analysis takes into consideration changes in the economic, demographic, and housing inventory characteristics of the market area during three periods: 1990 to to the as-of date of the analysis (“Current date”), and from the Current date to a “Forecast date.” The analysis presents counts and estimates of employment, population, households, and housing inventory, as of the 1990 and 2000 Censuses, the Current date and Forecast date. For the purposes of this analysis the forecast period is 24 months.


[User] Analysis of the Janesville-Beloit, Wisconsin Housing Market as of April 1, 2003 Housing Market Area The definition of the Janesville-Beloit, Wisconsin Housing Market Area (HMA) is coterminous with the Janesville-Beloit Metropolitan Statistical Area by the Office of Management and Budget, defined as Rock County. For purposes of this report, the Janesville-Beloit HMA is divided into two submarkets: the city of Janesville, and the remainder of the HMA, referred to in this report as the Remainder. The Janesville-Beloit HMA economy slowed during the 3-year period 2000 through 2002 compared with the previous 3-year period when the unemployment rate was low and employment was increasing. The economic slowdown is reflected in job losses in manufacturing and other sectors of the economy.

[Assistant] Demand for new housing in the Janesville-Beloit HMA will remain strong for sales housing, and balanced for rental housing. Demand for new sales housing is strong, due to low mortgage interest rates and increased household growth. The rental market in Janesville and Beloit is expected to remain slightly soft. The rates of population and household growth in the past 3 years have been moderate. The growth is primarily due to an increase in the number of people moving to the area for affordable housing. Increased net migration is primarily from the Madison, Wisconsin metropolitan area (Dane County) and northern Illinois counties. The rates of demographic and economic growth are expected to remain relatively stable during the 2-year forecast period.


[User] Recent low mortgage interest rates have had a positive impact on new home construction in Janesville. Since 1998 the median sales price for existing homes in the HMA has averaged $96,600 annually, or $60,000 less than the median sales price of existing homes in Madison. These factors have led to increased home sales and contributed to the softening in the rental market, as renters converted to homeownership.

[Assistant] It is estimated that there will be demand in the HMA for 1,150 units of new sales housing and 450 new rental units over the 2-year forecast period.


[User] Economy of the Area The economy of the HMA has been dependent on the manufacturing sector. In 2002 manufacturing jobs accounted for 23 percent of the total nonfarm jobs in the area. The economy of the area has slowed recently due to the decline in manufacturing jobs in the HMA and a substantial slowdown in new firms relocating to the HMA. In 2000 the Beloit Corp., manufacturer of papermaking equipment, closed its business, resulting in the loss of 1,200 jobs. In 2002 General Motors transferred work from its Janesville automobile assembly plant to Flint, MI, resulting in the loss of 800 jobs. Despite the job losses, from 1999 through 2002 the economy of the HMA diversified and several employment sectors experienced job growth. From 1992 through 1999, the service- producing sector added 1,025 jobs annually. During the same period, trade, transportation, and utilities accounted for 35 percent of the job gains in the service- producing sector. From 1992 to the Current date, the education and health services sectors increased by 110 persons annually, or an average annual 1.5 percent change. Mercy Health System is the second-largest employer in the HMA, with an estimated 2,350 employees. Household Incomes The median family income in the Janesville-Beloit HMA is estimated to be $58,100 in 2003, a 1.4 percent increase since the 2000 Census. The rate of increase in median family income during the past 3 years has declined significantly compared with the 6.1 percent annual increase between 1990 and 2000, due in part to the loss of high-paying manufacturing jobs. Population As of the 2000 Census, the population of the HMA totaled up 0.9 percent annually from the 1990 Census. The population was estimated to be approximately as of the Current date. Sixty percent of the population increase during the period occurred in the City of Janesville. From 2000 to the Current date, population growth for 4 Analysis of the Janesville-Beloit, Wisconsin Housing Market as of April 1, 2003 the HMA increased an average of 1,225 persons annually.

[Assistant] Population gains during the forecast period are expected to continue at a stable rate of 1,200 persons annually. The trends in population and household changes from 1990 through the Forecast date for the HMA and the two submarkets are presented in Table 3.


[User] Net in-migration to the HMA, as a result of increased employment opportunities and available affordable housing, significantly contributed to the gains in population. Although some persons moved to the HMA for employment, much of the population increase has been from households who work in the Madison metropolitan area and north central Illinois. Between 1990 and 2000 net in-migration averaged 500 persons a year. The rate of population growth from net in-migration is estimated to have remained stable, at 500 persons annually, from 2000 to April 1, 2003. The rate of net in-migration is forecast to continue at the same level to April 1, 2005. Annual data from the Wisconsin Department of Health and Family Services, Vital Statistics, indicates a relatively stable rate of net natural increase of 780 persons annually during the 1990s. From 2000 through the Current date, net natural increase in the HMA is estimated to have averaged approximately 730 persons annually. The level of net natural change is forecast to be 700 persons annually during the next 2 years. Households Between 1990 and 2000, an average of 640 households a year were added in the HMA. The number of owner households increased by 610, or 95 percent of the total change. From 2000 to the Current date, household growth has remained relatively stable, averaging approximately 650 annually. An estimated 60,600 households are in the HMA as of April 1, 2003. Although the area lost 3,300 jobs from 1999 through the Current date, the area has become a bedroom community, the result of increased household and population growth from persons with high-paying jobs in surrounding areas such as Madison seeking affordable housing in the HMA. The housing market remains relatively strong and even stronger for sales given the lower interest rates. During the next 2 years, the growth of households is expected to increase slightly to an average of 675 annually. It is estimated that more than half, or 350 households, will occur in Janesville, basing estimates on current and prospective residential construction activity. The trends in households from 1990 through the Forecast date for the HMA are presented in Table 3. Housing Inventory In response to the increased demand for housing, as a result of the gains in population and households, the housing inventory since 1990 has grown steadily. From 1990 to 2000 the housing inventory increased to 62,190 units, or an average annual increase of 740, while households increased by 640 annually. The overproduction of 600 units in rental inventory led to an increase in rental vacancies from 4.3 percent in 1990 to 7.3 percent in 2000. As of the Current date an estimated 64,450 housing units are in the HMA, or an average annual change of 750 units since the 2000 Census. The counts of housing 5 Analysis of the Janesville-Beloit, Wisconsin Housing Market as of April 1, 2003 inventory, occupancy, and vacancy by tenure for the 1990 Census and 2000 Census and the Current date are presented in Table 4. Because of job growth through increased economic diversification, and in-migration for affordable housing, a steady shift in demand to homeownership occurred throughout the 1990s. In percent of all households in the HMA were owners; by 2000 the homeownership rate had increased to 71 percent. Most of the single-family permit activity during the 1990s occurred while the national and local economy was strong during the second half of the decade. From 1990 through 1993, single-family production, as measured by building permits, averaged 490 units a year. Beginning in 1994 the demand for new homes began to increase steadily. From that year through 1999 single-family permit activity averaged 640 homes annually. The recession of 2000 and subsequent slow job growth reduced homebuilding activity during the past 3 years, only slightly. While the slow economy has reduced demand, low interest rates and lower sales prices in the HMA compared with Madison have kept activity relatively high. Building activity in the HMA, as measured by permits, has averaged 590 single-family homes a year, between 2000 and the Current date. More than half of the homebuilding activity in the past 3 years in the HMA occurred in the City of Janesville where buildable land is available. The level of single-family home construction of recent years is expected to continue during the forecast period due to the relative affordability of homes in the HMA. The trends in building permit activity in the HMA from 1990 to the Current date for single-family and multifamily housing are presented in Table 5. Housing Vacancy As of 1990 the sales vacancy rate was 1.3 percent in the HMA and 1.0 percent in the City of Janesville. By 2000 the sales vacancy rate increased to 1.4 percent in the HMA and 1.3 percent in Janesville as a result of the housing inventory increasing faster than household growth. As of the Current date sales vacancy rates are little changed from 2000: sales vacancy is 1.1 percent in the HMA and 1.5 percent in Janesville. Between 1990 and 2000 the rental vacancy rate increased from 4 percent to more than 7 percent in the HMA. The increase was the result of increased multifamily overproduction. The rental vacancy rate has increased to an estimated 8 percent as of the Current date. This subsequent increase is the result of both the prior increase in multifamily production and a decline in renter demand due to the economic slowdown and shift of a significant number of renter households that have become homeowners due to low mortgage interest rates. Sales Market Conditions The market for sales housing since 2000 has been fairly strong. Affordable sales prices and low interest rates continue to fuel demand. Conditions have remained strong for both new and existing homes despite the economic slowdown. From 1998 through 2002, sales for new and existing homes in the HMA have averaged 1,750 annually. During the 6 Analysis of the Janesville-Beloit, Wisconsin Housing Market as of April 1, 2003 period, the median sales price of existing homes has risen steadily from $90,000 to or a 3.5 percent average annual change. The shift in demand toward sales housing has led to a tight single-family market and increased housing production. Sales in the 12 months ending March 2003 totaled 1,950 homes, a 13 percent increase over the same period a year earlier. The median sales price for existing homes during the most recent 12 months was . Both the South Central Wisconsin Multiple Listing Service and the Madison Area Builders Association estimate that the average price of new homes in the HMA during the past 12 months is approximately compared with an average price in the Madison area of more than . Rental Market Conditions Conditions in the Janesville HMA rental market are balanced with softness noted in some segments of the market. The current vacancy rate in the HMA is estimated to be 8 percent. The rental vacancy rate in the City of Janesville is estimated to be 9 percent currently and conditions are softer than in the Remainder of the HMA. The high vacancy rate in Janesville reflects a less competitive position of the older stock as well as the increase in new units in the north and northeastern parts of the city, where most of the production has occurred.

[Assistant] Rent concessions of 1 to 2 months’ free rent are offered throughout Janesville. Current gross rent for new apartments in the HMA are $585 for a one-bedroom unit, $675 for a two-bedroom unit, and $750 for a three-bedroom unit. The softer conditions in Janesville are anticipated to continue through the forecast period given the anticipated levels of production. There are 200 units of rental housing planned in both Janesville and Beloit during the next 24 months. Several local apartment developers indicated that absorption of new units has been moderate, averaging seven units a month.


[User] While the conditions are soft in the market-rate segment of the rental market, conditions in the market for “affordable” and “federally assisted” rentals are balanced. As of the Current date, an estimated 2,500 units of federally assisted rental housing were in the HMA, according to the Wisconsin Housing and Economic Development Authority. Occupancy rates in assisted housing developments average 94 percent, and a 96 percent utilization rate is in Section 8 Housing Choice Vouchers.

[Assistant] Forecast Housing Demand Based on anticipated household growth and current market conditions, estimates indicate that a demand for new housing will be approximately 1,600 units during the 2-year forecast period ending March 2005. Demand in the HMA would best be met by the construction of 575 units of sales housing and 225 market-rate rental units annually. This level of construction would maintain a balance in demand-supply conditions in the sales market and help to bring the rental market in balance during the forecast period. Sales housing demand is expected to continue to increase as a proportion of total demand based 7 The REALTORS® Association of South Central Wisconsin anticipates that much of the demand for new single-family homes will be priced under . It is expected that almost all 575 units of owner demand will be for single-family homes and a minimal number for condominiums.


[User] Secondary office assets have already seen sharply lower pricing due to rising vacancies, as hybrid working arrangements now appear permanent. Once interest rates begin to fall and inflation eases further, rehabilitation or conversion of underperforming office buildings to other uses will become more attractive and financially viable. This process will receive substantially more state and local government aid in 2024.

[Assistant] 2024 Economy & Policy


[User] 2024 Despite easing inflation, the U.S. economy will face cer- tain headwinds in early 2024, including relatively high interest rates, a strong dollar, near recessions in Europe and China and continued geopolitical conflicts. Resilience will come from the U.S. consumer, so often the mainstay of the global economy. Consumer balance sheets are strong and wage growth will outstrip inflation for at least the first half of 2024. As a result, spending on services such as health, leisure and hospitality will provide vitality and There is an increased chance that the U.S. will avoid a recession and achieve a soft landing in 2024.

[Assistant] There will be an economic slowdown and downside risks will be elevated but the unemployment rate will rise to only around 4.5%, which won’t materially weaken real estate fundamentals except in the office sector.