The Canovo Report - June 5, 2024

Median Sold Price UP 12.48% YTD; Zion’s Bank Facing High CRE Exposure Risk

June 05, 2024

This week in the Canovo Report…

👉 Median Sold Price for Utah Multi-unit UP 12.48% YTD

👉 Salt Lake City Renter’s Staying Put Longer

👉 National Vacancy Rates hit 6.7%

👉 Zion’s Bank Facing High CRE Exposure Risk

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Happy Investing,

David

// NEW MULTI-UNIT LISTINGS THIS WEEK

> Our team has analyzed these deals using our custom bulk property analyzer. If you’d like more detail regarding any of these listings, click the links below.

$750,000

332 W Harvard Dr Midvale Utah , 84047

Type: 2

Est Proforma Cap: 5.71%

Total Monthly Expenses: 1190.31

Gross Monthly Income: 4904

$1,350,000

7337 W Laxey St Magna Utah , 84044

Type: 4

Est Proforma Cap: 5.59%

Total Monthly Expenses: 2120.83

Gross Monthly Income: 8672

$1,800,000

862 E South Temple Salt Lake City Utah , 84102

Type: 8

Est Proforma Cap: 5.12%

Total Monthly Expenses: 2707

Gross Monthly Income: 10704

$380,000

3325 S Jefferson Ave Ogden Utah , 84403

Type: 2

Est Proforma Cap: 6.27%

Total Monthly Expenses: 633

Gross Monthly Income: 2700

$899,900

486 W 1720 N Provo Utah , 84604

Type: 2

Est Proforma Cap: 3.90%

Total Monthly Expenses: 1199

Gross Monthly Income: 4252

$1,650,000

163 S 1300 E Salt Lake City Utah , 84102

Type: 6

Est Proforma Cap: 4.04%

Total Monthly Expenses: 2232.17

Gross Monthly Income: 8028

Canovo Group may not be the listing brokerage for the above properties. The information provided is not guaranteed and should not be relied upon to make investment decisions. Buyers should complete their own analysis and due diligence before making any investment.

// SOLD MULTI-UNIT LISTINGS LAST WEEK

> Here's a roundup of multifamily properties sold over the past week. We've estimated their selling cap rates using our bulk analyzer.

// FAIR MARKET RENT RATES

> Below you will find the current Fair Market Rents for each Metropolitan Area in Utah as published by HUD.

Fair Market Rents, as defined in 24 CFR 888.113 are estimates of 40th percentile gross rents for standard quality units within a metropolitan area or nonmetropolitan county.

// UTAH MARKET SNAPSHOT

> Utah Multi-Unit (2+ units): Median Sold Price

  • The median sold price for multifamily property was down 5.4% YOY in May but is up 12.48% year to date going from $585k last year to  $658k this year to date.

> Utah Residential Homes: Median Sold Price

  • The median sold price for single family property is up 5% YOY in May and is up 4.16% year to date going from $480k last year and $500K this year to date.

Source: wfrmls

// INTEREST RATES & FINANCING

> Mortgage Rates as of 6/05/2024

Sponsored by: Spencer Allen | Trillion Mortgage NMLS #2296408

// TOP HEADLINES, REPORTS, & INSIGHTS

Zion Bancorp, based in Utah, is highlighted as having significant exposure to commercial real estate risks, making it vulnerable to financial instability.

Main takeaways:

  • High CRE Exposure: Zion Bancorp's commercial real estate (CRE) exposure stands at 440% of its total equity, notably higher than the industry average of 139%.

  • Potential for Financial Instability: Such high levels of CRE exposure increase the risk of failure, particularly in a climate of high interest rates and declining commercial property values.

  • Comparison with Other Banks: Among the U.S. banks identified, Zion Bancorp and Flagstar Bank have some of the highest CRE exposures, posing similar risks of a bank run due to their reliance on uninsured deposits.

In Salt Lake City, more renters are choosing to stay in their homes for longer periods, reflecting a broader trend across the U.S. driven by high housing costs and the rise of remote work.

Main takeaways:

  • Increased Tenure for Renters: In 2022, 32.5% of Salt Lake City renters stayed in the same home for 12 months or less, a decrease from 40.5% in 2012, indicating increased stability in rental tenures.

  • Long-term Residency Growth: The share of renters who have stayed in their homes for over 10 years has risen from 6.6% in 2012 to 9.4% in 2022.

  • National Trend: This trend mirrors national patterns where economic factors like soaring home prices and higher mortgage rates are making it difficult for renters to transition to homeownership, thus prolonging rental stays.

Amid fluctuating economic indicators, the Federal Reserve is grappling with the dual challenge of managing inflation while ensuring employment stability, suggesting potential shifts in monetary policy focus.

Main takeaways:

  • Core PCE has been trending downwards, currently averaging 2.82% for the year, with Fed projections indicating a gradual decline toward their target.

  • There's ongoing market speculation about potential rate cuts, though recent Fed statements and data suggest caution, prioritizing evidence of sustained inflation control.

  • Emerging discrepancies in job data and the quality of employment growth are raising concerns, potentially influencing future Fed decisions to focus more on employment figures than solely on inflation.

The June 2024 Apartment List National Rent Report shows a subdued rental market with slight month-to-month increases but overall negative year-over-year growth, reflecting a nationwide trend of rental market cooling.

Main takeaways:

  • Continuous Rent Increases: National median rent has risen for four consecutive months, albeit modestly by 0.5% in May, with the total now at $1,404, despite this period typically experiencing faster growth.

  • Decline in Year-Over-Year Rent Growth: Nationally, year-over-year rent growth has remained in negative territory at -0.8%, a trend persisting since last summer, indicating a long-term cooling period after the spikes in 2021 and 2022.

  • Increasing Apartment Vacancies: The national vacancy index is up, standing at 6.7%, with expectations of more vacancies due to a significant number of apartment completions anticipated this year, the most in decades.

I hope you found this weeks report valuable. If you have any questions, feedback, or if I can serve you in any way, don’t hesitate to reach out!

David Robinson

Principal Broker/Managing Partner

> Whenever you’re ready there are a few ways I can help you:

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