Real Estate

Apartment supply jumped to a 36-year high in 2023, resulting from construction projects that started back when occupancy rates and rent growth were around record highs. But by the time those projects completed, their operators faced a very different leasing environment. Nearly 440,000 units completed in 2023, and even more are scheduled to deliver in 2024. After that, completions will plunge due to the recent slowdown in starts linked to higher financing costs and softer fundamentals. High supply means renters suddenly have far more options than they’ve had in recent years, and that’s putting downward pressure on rent growth. Rents flattened in 2023 following back-to-back years of high rent growth. The upside for investors: Following a sluggish 2022, apartment demand rebounded in 2023 thanks to cooling inflation (including rents) and improving consumer confidence. In particular, the 4th quarter – normally a seasonally slow leasing period – turned out to be a surprise bright spot. Net absorption totaled 58,200 units, meaning there were 58,200 more occupied apartments than in the previous quarter. That was the third-strongest Q4 in 25 years, topped only by 2020 and 2021 – and by a wide margin. But strong demand wasn't strong enough to keep pace with supply surging to the highest levels since 1987. As a result, apartment occupancy dropped 80 basis points year-over-year to 94.1% -- still within the long-term normal range, even if much lower than the peaks of 2021-22. And rent growth evaporated due to more supply than demand. Same-store effective rents inched up just 0.3% in 2023. That ranked the second weakest performance for any calendar year since 2009, topped only by the pandemic year of 2020. Notably, though, rent growth levels are no longer rapidly decelerating. Year-over-year rent growth topped out at 15.7% in March 2022, and plunged downward from there until hitting 0.3% in August 2023. It’s held around that mark for five consecutive months. Even in most markets cutting rents, the pace of rent cuts hasn’t further deepened. Furthermore, there remains a clear link between supply and rent change by market. Rents fell in 2023 across 40% of U.S. metro areas – and nearly all of them (primarily in the Sun Belt, Mountains or West Coast) saw significant new supply entering the market. By comparison, nearly one-third of U.S. metro areas (almost all in the Midwest or Northeast) produced rent growth of 3% or more in 2023, and nearly all of them had little supply to work through. Another 671,000 units are scheduled to complete in 2024, after which supply should thin out dramatically. In turn, occupancy and rents should rebound (though not to 2021-22 inflationary highs) in 2025-26. But in all likelihood, 2024 will bring another year of more supply than demand – adding another challenge for apartment investors also confronting higher expenses and elevated debt costs. #multifamily #apartments #housing #rents

Interest rate shocks, post-pandemic behavioral shifts, and banking system stress have all converged on the US real estate market. We answer 6 of the most burning questions that are top of mind right now: Q1: What are our views on housing affordability? A: Housing affordability remains extremely stressed—and right now its significantly less expensive to rent vs. own in 48 of 50 of the largest markets. Q2: Will housing supply and demand balance out anytime soon? A: The housing market is likely to remain unbalanced for the foreseeable future in part due to the “lock-in effect”—80% of owners have a mortgage rate less than 5%. Q3: Will home prices head higher or lower in 2024? A: The supply-demand imbalance should keep a floor on home prices, and we see potential for modest price increases in 2024 at a national level. Q4: Is the worst yet to come for commercial real estate? A: Although distress is likely to increase, capital remaining available from banks and PE dry powder on the sidelines should help prevent a meltdown. Q5: Could office conversions be an answer to supply issues in big cities? A: While this looks like an ideal solution on the surface, it comes with its challenges—conversion potential is likely limited to 10–15% of existing office stock. Q6: Where could we see the best opportunities in real estate? A: We see the best CRE investment opportunities in residential rentals, industrial/warehouse, and distressed real estate debt over the next several years. Read our full report from Jonathan Woloshin, CFA for more.

The housing market is shifting. Nearly 15% of U.S. home purchase agreements fell through in June, according to Redfin—up 1% from a year ago and the highest June figure since tracking began in 2017. At first, this stat might seem puzzling. After all, isn't there supposed to be pent-up demand, especially among Millennials and Gen Z? So, what’s behind this? Well, according to the report... • Some buyers are using inspection contingencies to walk away after spotting an issue or discovering a better home • Mortgage rates remain stuck in the upper mid-6% range, and some buyers are hoping for a drop • And in some cases, shoppers are simply more cautious amid economic uncertainty Still, the Redfin data isn’t revealing a sudden change—it’s part of a broader trend I’ve been tracking throughout 2025: the shift to a buyer's market. In my latest Housing Market Predictions piece, I covered how home price growth has been slowing and inventory has been steadily improving since the start of the year. That extra supply, combined with sticky mortgage rates, has given buyers a little more breathing room and negotiating power in a still-pricey housing market. Even so, it's important to remember that housing trends remain deeply regional. For example, affordable markets in parts of the Midwest and Northeast, which didn’t experience the extreme price surges of the pandemic years, are seeing strong buyer demand and competitive conditions. In contrast, areas like Florida and parts of the West, where insurance costs and high home prices are causing concern, and where rapid home building in recent years is now offering buyers more choice, are experiencing more deals falling through. If you’re wondering where the housing market is headed for the rest of 2025, here’s the breakdown of the trends I’m watching: https://lnkd.in/eAfHPdQn Forbes Advisor

This time of year, EVERY YEAR, all of my clients, colleagues, friends, and family ask: "what is going to happen with real estate next year?!" So, here are my honest thoughts for 2024: Warning: I may not have a crystal ball, but I do have over 15 years of experience in selling luxury real estate with over $6B worth of transactions under my belt. However, it's still important to note that these are nothing more than educated guesses. 1. We are going to have even greater BIFURCATED MARKETS. Some industries are returning to pre-COVID patterns, while others are now permanently changed. As a result, there is significant interest in the repositioning of big box retail and commercial space. 2. Stemming from the increase in work from home, there will be more NATIONAL SEARCHES. People are now expanding their searches drastically. Rather than looking at comps in a building, neighborhood, or city, they're looking comps across multiple states! 3. SUBURBS are on the rise. This is driving up the demand for bigger homes with more amenities and privacy. Transaction volume is down by over 50% and listing volume is down by over 20%... yet median pricing is up by almost 5%. This creates more tax dollars for the suburbs, so if you're an investor, pay attention to what the municipalities are doing with that money (schools, restaurants, parks, etc.). 4. BRANDED RESIDENCES will be in strong demand. Since 2010, we've seen 40% growth in branded residences – and buyers have proven to be willing to pay a premium for them. 5. DOWNTOWNS built around professional workers will feel immense pressure. Don't get me wrong: Downtowns are not going to go away... but stemming from my 2nd and 3rd points, we are going to see even greater pressure on dense living spaces. 6. Investors are going to become BEARISH on real estate. I hesitate to talk about this because I'm in the real estate business... but with high interest rates, low supply, and low transaction volume, fewer investors are going to be looking to acquire property (in the near term!). 7. Prices are going to continue to... INCREASE! I know – this sounds crazy, right? The lack of inventory is going to continue, and it's going to keep prices high and growing. As the economy continues to do well and inventory stays locked, demand is going to continue to outpace supply. And if interest rates do come down... if you think prices are high now, just get ready. 8. Interest rates will actually STABILIZE. I don't think interest rates are going to plummet, but if unemployment stays low, the Fed will keep interest rates stable. – P.S. If you want to hear about each of these predictions in even MORE detail, check out my newest video on my second YouTube channel, More Ryan Serhant. – Every year can be the GREATEST year of your life. Remember, markets shouldn't dictate your outcomes. They should only dictate your strategy. Ready. Set. GO!

12x things I would have done differently if I was transitioning now: 1 - started earlier Should have started 18 months out, but would have loved to had 2-3 years...allowing me to space things out Doesn't mean "I'm getting out & going to job fairs" for 2-3 years Means I'm getting my LinkedIn profile together, growing my network, having exploratory conversations about careers & working on education (if necessary) It took 200+ phone calls & cups of coffee to figure out what I wanted to do...it would have been MUCH less stressful spread out over a few years (instead of 10 months) 2 - take TAP as soon as possible It isn't an amazing course (unless you luck out & get one of the absolute angels that teach it + have experience) But it is designed to give you a FOUNDATION Almost like transition Cliffs Notes 3 - request a mentor from American Corporate Partners (ACP) (14 months) Gives you full year to work with them before you get out Hint: ask your mentor to introduce you to other people if things are going well 4 - work on ethics memo (12 months out) for senior leaders Visit local JAG or ethics office You'll need an ethics letter for many senior defense sector jobs, so better to know now (and maybe even start the cooling off period earlier...while still in) 5 - get free LinkedIn Premium (12 months out) Google "free LinkedIn Premium for veterans" and hit the first link 6 - conduct informational interviews (12 - 6 months out) You ideally start way earlier, but here is where you really narrow down the answer to the question: what do you want to do? I recommend at least 2x calls a week to learn more about what people do, ideally you are doing 3-5x a week 7 - Sign up for USO Transitions (12 months out) Get a USO Transition Specialist that will work with you one-on-one, and they also have some cool webinars 😎 8 - get life insurance quotes (12-6 months out) Do it BEFORE you document everything that has ever been wrong with you for your disability (or get a sleep study) VGLI is #expensive & designed to ensure everyone (even medically discharged) can get it This can save you hundreds a month (easy) 9 - get free cert from Onward to Opportunity (6 months out) Ideally you've done enough informational interviews to choose the best one for your next career (not the automatic PMP everyone says to get) O2O will give you (+ spouse) free training for 1x cert AND pay for the exam They will also give you a career workshop, coaching & help with your resume 10 - take extra TAP classes Visit your transition center & see what else they offer They hold events and have specialized training beyond the minimum required classes 11 - work on resume (4-6 months out) with mentors It doesn't make sense to write a resume until you figure out what you want to do 12 - start applying for jobs (2-3 months from day you can start) Ideally with referrals from your mentors, giving you 11x better odds of getting job) Questions? #quinnsights HireMilitary

As we look ahead to 2024, one sector I will be looking especially closely at is single-family housing activity, especially starts of single-family houses. The sharp drop in single-family housing starts that began around June 2022 closely corresponded to the start of the trucking freight recession, and the cooldown in housing starts in early 2019 also corresponded to the start of a freight recession. Single-family housing is very sensitive to mortgage rates, which are a function of the market yield on 10-year treasuries (https://lnkd.in/eD-k3B2F), which are themselves linked to the Federal Funds rate (https://lnkd.in/eJ4d9EZG). In this regard, November’s housing data really stood out. One chart below. Thoughts: •This chart shows not seasonally adjusted single-family housing starts. As can be seen, November’s reading came in shockingly strong, with starts increasing in November and coming in at 26% above November 2019 levels. The seasonally adjusted month-over-month change for November from October was 18% (https://lnkd.in/eA4A4hV). While these data are likely to be revised downward, these data provide more evidence that we have exited the single-family housing recession. •One thing that makes me think these data aren’t a total fluke is a separate series for single-family homes under construction increased in November (https://lnkd.in/guasB5Sa) after being on the decline since June 2022. •So where does this put things in 2024? My answer is it depends on when the FOMC starts lowering interest rates. If cuts happen as early as March (which I deem unlikely), I could see stronger than expected single-family housing starts. Assuming cuts start in June or July (which I view as more likely), I would expect starts to be about 8-12% above 2023 levels, yet still down from frothy 2021 levels. Implication: if any sector is going to jolt trucking demand out of the current freight recession, it is single-family housing starts. These data may be the most important leading indicator of how trucking demand will evolve in 2024. #supplychain #supplychainmanagement #freight #trucking #transportation     

Do I rent or do I buy? The cost of home ownership has gone parabolic compared to annual income and rental prices. From 2020 to present, incomes have risen 14%, while home prices have increased 29% and thanks to higher mortgage rates, monthly payment for home ownership have risen 81%. While the cost of ownership is exorbitantly expensive, what about rents? Comparing rents versus cost of ownership through time, we show the cost of ownership has never been more expensive today compared to renting during the past 24 years of data we track. Lending standards have tightened significantly from pre-GFC when liar loans and a housing bubble led to 6-years of home price declines. Median mortgage debt-to-income ratio is at a 10 year-high of 40%, a statistic we also track in our dataset from recent originations, but it remains below the traditional prescribed 43% limit. What is keeping housing so firm is record low inventory levels (we estimate 3 million deficit in housing stock, compared to the start of housing bubble in 2007 when there were 3 million too many homes on the market). New housing starts today are ~33% below pre-pandemic levels. With 80%+ of the mortgage universe having locked-in an average mortgage rate of 3.5% or below, homeowners are less mobile, thus supply is likely to be low for the foreseeable future. OER, a major input for CPI will remain firm for some time to come as rents are high, but have room to rise given how expensive home ownership is as seen by the green line in the chart below. When investing in residential mortgages and/or RMBS, the LTV calculation is always critical as it provides a necessary margin of safety. My advice is to stay disciplined and keep your LTV at 70% or less, as the home price run-up is severe. We see in the graph below how expensive home ownership truly is vs. rentals, which means multifamily properties and SFR should have an upward bias for years to come. While home prices are high and certainly have room for correction, the housing shortage provides major support.

💥 New homes are now CHEAPER than resale homes 💥   This marks a significant inflection point in the housing market, reversing the historical trend where new construction commanded a premium—often as much as 20% more than existing properties. The shift, which began during the pandemic with a narrowing of the price spread, has fully materialized over the past three months.   While new home prices can be influenced by changes in product offerings or location, our Zonda data, builder survey, and NewHomeSource.com trends all confirm that real price cuts are also occurring in the new home space.   Beyond the raw data, several additional factors make new homes even more compelling for buyers: - Lower insurance premiums. New homes typically incur lower insurance costs compared to existing properties due to modern building codes and materials. - Reduced maintenance. New construction offers a maintenance-free or lower-maintenance lifestyle, saving homeowners time and money on immediate repairs and upgrades compared to the resale market. - Enhanced energy efficiency. New homes are often more energy-efficient than existing homes, leading to lower utility bills and a reduced overall cost of living. - Attractive builder incentives. Builders continue to offer incentives (e.g. buydowns or design credits), providing extra perks to buyers that can further offset costs. Zonda Sarah Bonnarens Alexander Edelman Tim Sullivan Bryan Glasshagel Evan F. #housing #realestate #newhomes

Nearly $1T of commercial real estate loans mature in 2024, by far the largest amount of any upcoming year. With a large percentage of these loans underwater, creditors and debtors alike will face difficult choices in 2024. Should creditors choose to foreclose on assets, heavy downward price pressure would ensue. On the other hand, if creditors choose to modify existing loans and extend their duration out, a default cycle can likely be avoided, but would require highly capital buffers from banks as well as a writedown of the loan values to something closer to market value. There are no ideal choices here, and overall economic growth will likely be slower in either outcome - default scenario or extension scenario.

Per a recent analysis by Redfin, 92% of all mortgages are below 6%. 82% of mortgages are below 5%; 62% are below 4% and a lucky 23.5% are below 3% (nice job guys). See the graph. The current 30-fxed mortgage rate is now 7.58%. And the 10-year UST just hit a 15-year high of 4.21% yesterday - front page WSJ news today. The last time 10y UST was that high was back in June 2008. Those were interesting days... Dana Anderson, writing for Redfin said: "Many would-be sellers are staying put rather than listing their home to avoid taking on a much higher mortgage rate when they purchase their next house. This “lock in” effect has pushed inventory down to record lows this spring." As I've said previously, this dynamic is showing us that Fed policy appears to be affecting Supply more than Demand, despite the Chairman's comments to the contrary. Powell has been quoted saying the Fed could only impact Demand with their policy. Based on what is happening in the mortgage market, I think we can conclusively say that is not the case. High rates are affecting supply in a major way. Given that home values haven't dropped much since 2022, we can conclude that the supply curve has shifted nearly as much as the demand curve. What are you seeing out there? What I see, anecdotally, is that when a house goes up for sale, buyers pounce because there are so few houses for sale, while there are still buyers who relocate for jobs, etc. It's pushing up the bids where I live. #fedpolicy #interestrates #riskmanagement