As of November 18, 2024, the U.S. residential real estate market is experiencing significant developments that are reshaping the landscape for buyers, sellers, and industry professionals. We explore four key stories that highlight current trends and their potential implications.
1. U.S. Homebuilder Confidence Reaches Seven-Month High
In November, U.S. homebuilder sentiment reached a seven-month peak, driven by increased optimism following a Republican electoral victory that suggested potential regulatory relief for the construction industry. The National Association of Home Builders/Wells Fargo Housing Market Index climbed to 46, surpassing economists’ expectations.
Current sales, traffic of potential buyers, and future sales projections all improved, with expectations hitting the highest level since April 2022. This optimism stems from the belief that Republican control of the White House and Congress will ease regulations, despite state and local laws often having more direct effects on building practices.
Challenges persist due to labor shortages, limited building lots, and high material costs, exacerbated by potential restrictive immigration policies and rising mortgage rates. Consequently, many builders have reduced prices and offered incentives to attract buyers.
Residential construction remains a drag on economic growth, with subdued activities in groundbreaking and permit issuance for new projects, especially apartments.
2. ‘Iceberg Houses’ Gain Popularity Among Affluent Homeowners
A growing trend among wealthy homeowners involves the construction of ‘iceberg houses,’ which feature extensive underground expansions rather than multi-story vertical builds. These hidden spaces often include luxurious amenities such as pools, gyms, wine cellars, private theaters, and wellness centers.
Building such homes is notably expensive, especially in cities like Los Angeles, where costs can reach millions. NFL star Travis Kelce, Taylor Swift’s boyfriend, is reportedly utilizing this method to expand his $6 million property in Leawood, Kansas, with plans for an indoor golf simulator and other lavish features. The concept of iceberg houses has been popular in London for over a decade, with thousands of such basement expansions.
In the U.S., areas with warm climates, like Phoenix, are seeing increased interest due to the cooling benefits of underground spaces. However, these projects are complex, risky, and pose environmental concerns due to their heavy construction. Despite these challenges, the trend is gaining interest for its privacy and unique appeal.
3. Ken Griffin’s Ambitious Real Estate Project in Miami’s Financial District
In Miami’s financial district, an intriguing real-estate mystery unfolds around Ken Griffin’s development project. Griffin, the hedge-fund executive behind Citadel, is constructing a 54-story glass tower intended as the firm’s new headquarters. The development includes restaurants, a rooftop hotel, and a public waterfront terrace, potentially with a dock along Biscayne Bay.
Griffin owns the entire site, except for a 22-story condominium, Solaris, where an unknown buyer has been acquiring units in all-cash deals via Delaware-based LLCs. Public records show that nearly half of the units have been purchased.
If 80% ownership is achieved, the buyer could take control and potentially demolish the building. Speculation arises whether Griffin is behind these purchases, as similar registered agents appear in both his and the LLCs’ transactions. This scenario is part of a broader trend of developers buying out condo units to demolish and rebuild, driven by high property values and scarce developable land. Residents faced with steep assessments and Miami’s rising property prices, leading some to suspect tactical pressures to sell.
The situation remains complex and unfolds amidst the backdrop of Miami’s intense real estate market dynamics.
4. Douglas Elliman’s Stock Appears Undervalued Amidst Market Challenges
Douglas Elliman’s stock, valued at around $1.90 after an 80% drop since its spinoff from Vector Group in 2021, appears undervalued.
Despite its leading position in luxury real estate markets and a solid balance sheet with over $100 million in net cash, the company has operated at a loss, burning through $100 million in cash since the spinoff.
Recent measures, including appointing a new CEO, cost-cutting initiatives, and expanding revenue through property management and related services, aim to restore profitability.
The stock’s valuation is compelling, offering potential upside through successful turnaround efforts and possibly increased market activity or a takeover.