AI is Changing Property Valuations

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Industrial net lease sales dip link

• Industrial net lease sales hit $4.6B in Q1 2025—slightly above last year’s start but down from late-2024 momentum, signaling a shaky start despite long-term optimism. Cap rates crept up to 6.56%, just 6 basis points higher than a year ago.

• Private buyers dominated with over 50% of purchases, while institutional investors took 26%. REITs backed off even further, representing just 4% of activity—down significantly from prior years.

• Tight supply and low vacancy rates are still supporting rent growth, even as borrowing costs rise. Future performance will hinge on broader economic conditions and investor confidence in CRE.

Warehouse conversions surge as tariffs squeeze supply chains link

• Bonded warehouses are gaining traction as firms try to avoid upfront tariffs—especially with steel and aluminum imports facing a 50% duty. Converting existing space into bonded facilities is costly but becoming more common due to ongoing trade uncertainty.

• Industrial rents rose 6.3% year-over-year to $8.54 per square foot nationally in May, while vacancies dropped to 8.5% month-over-month—but are still up 2.9% compared to last year. Miami led all metros with 9.8% annual rent growth.

• Industrial construction is slowing sharply, with 2024 on pace to be the weakest year for new starts this decade—only 86.9 million square feet started through May. High tariffs and fewer interest rate cuts are delaying leases and suppressing development.

Multifamily Projects Face Mounting Permit Delays and Deal Repricing link

• 85% of developers reported permitting delays in June 2025, up from 77% a year ago, with some waiting 9+ months just to break ground. Only 10% said they had no issues.

• 72% of respondents said deals were repriced in Q2 due to financial uncertainty, as nearly half expect construction costs to rise within six months.

• Labor concerns are split: 43% expect less availability over the next year, while only 22% foresee improvement—making timelines riskier for multifamily starts.

First-time buyers squeezed out of the market—only 1 in 4 homes go to them now link

• In 2010, 50% of home purchases were by first-time buyers. Today, that share has dropped to just 24%, showing a major shift in who can afford to buy.

• This steep decline signals worsening affordability and rising barriers to entry, especially for younger buyers with limited savings or credit history.

• The market is increasingly dominated by repeat buyers or investors, which may further widen generational wealth gaps tied to homeownership.

Housing Market Shows Signs of Midyear Plateau as Inventory Growth Stabilizes link

• Active listings are up 27% year-over-year but have stayed flat for three weeks straight, suggesting seller activity is cooling after a strong start to 2025. New listings rose 9.3% annually last week but are no longer accelerating.

• Despite a 47% annual jump in May delistings and a 35% YTD increase, total inventory still hit 1.08 million in June—the highest since 2019. Many sellers are pulling homes that don’t meet price expectations.

• Purchase mortgage applications jumped 9% week-over-week and 25% year-over-year as rates dipped to 6.67%, showing buyers are still active if rates move. But homes are taking longer to sell even with more inventory.

AI is Changing Property Valuations link

• AVMs now allow commercial real estate investors to check property values like a bank balance, offering instant insights that used to require formal appraisals. Engagement with these tools jumped 52% from 2020 to 2021.

• AI-driven models analyze far more data than human appraisers—factors like debt coverage, occupancy, and market shifts—to deliver real-time updates and reduce subjective guesswork.

• But the tech isn’t replacing people: AVMs paired with human judgment yield more accurate outcomes, much like how breast cancer detection improved 2.6% when doctors and AI worked together.

Zillow’s AI Overhaul Could Reshape Home Buying—and Cut Out the Gatekeepers link

• Zillow is piloting AI tools that summarize calls, schedule follow-ups, and guide buyers and agents through transactions—part of a push to digitize every step of home buying and selling. This agent-assist tech could streamline deals and cut busywork dramatically.

• U.S. housing supply is short by nearly 5 million homes, and existing owners are holding onto 3% mortgages, worsening the shortage. As a result, home sales are down 33% below normal levels, hovering around 4 million per year instead of the usual 6 million.

• Zillow’s rental business now surpasses its for-sale traffic, with more renters than buyers on the platform. They’re also building tools to help renters build credit and transition into buyers, capturing long-term demand early.

Henry

AI deal assistant for CRE brokers to automate document prep and workflows

Philadelphia rents rebound as 8,400+ new units hit market link

• Average asking rent in Philly rose 0.4% to $1,821 through March—outpacing the national average by 30 basis points, despite a wave of new supply in 2024. Occupancy stayed solid at 95.5%, unchanged from a year ago.

• Developers delivered 8,470 units in 2024—the highest of the decade—and another 16,763 are now under construction. A pipeline of 77,000 more units is in planning or permitting, signaling strong long-term inventory growth.

• The metro added 46,800 jobs in the year ending January 2025, led by 29,900 new roles in education and health services. Big-ticket projects like the $4B Bellwether District and $6B Navy Yard redevelopment are fueling demand.

The State of Mortgages in 2025 link

• Vermont leads the nation with 85.8% of mortgages now equity-rich, up from 82% a year ago—almost every homeowner has over 50% equity. It’s the highest rate of any state in the U.S.

• Despite overall strength, 47 states saw a quarterly decline in equity-rich properties; Florida had the sharpest drop, falling from 54.4% to 49.3%. That’s a 5.1% loss in just 3 months.

• Connecticut saw the biggest annual gain, jumping from 42.2% to 48% equity-rich in Q1 2025. New York and New Jersey also posted major increases, signaling strong Northeast momentum.

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A private home library!

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Vidit

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