• Zero Flux
  • Posts
  • Real Estate Values Are ‘Bottoming,’ Blackstone Says

Real Estate Values Are ‘Bottoming,’ Blackstone Says

Plus, Easiest places for Gen Z to buy a house and 6 more Real Estate Insights

Macro Trends

Economic Watch: Q4 2023 GDP Exceeds Expectations, Likely Signaling a Soft Landing link

  • U.S. GDP grew by 3.3% in Q4 2023, surpassing the expected 2%. This strong growth, coupled with the Core Personal Expenditures Price Index meeting the Federal Reserve's 2% target, suggests a stable economic outlook.

  • The Federal Reserve is likely to cut short-term interest rates by May 2024. A decrease in the 10-year Treasury yield to 3.6% by year-end is anticipated, fostering a recovery in investment activity in the latter half of the year.

  • Despite global economic challenges and rising real interest rates, the U.S. economy is expected to slow down but avoid a full-blown recession. Healthy economic growth is predicted to sustain leasing demand throughout 2024.

Real Estate Trends

Here are the top 10 hottest housing markets in 2024: CNBC  link

  • The top 10 hottest housing markets in 2024 are spread across the South, Northeast, and Midwest, with Buffalo, New York, leading the list. This ranking is based on factors like job growth, home value appreciation, and the speed of home sales.

  • A "hot" market indicates intense competition among buyers, but it doesn't always signify market health. For example, Florida's attractiveness to baby boomers is driven by its warm climate, tax benefits, and housing affordability, not necessarily by job market growth.

  • In contrast, the "coolest markets" expected to see less competition and possibly declining home values include New Orleans, San Antonio, Denver, Houston, and Minneapolis. These trends are influenced by factors like affordability and market saturation.

"Housing affordability is reshaping migration trends," economist says. Here's where people are moving: CNBC link

  • High mortgage rates and home prices are driving people to relocate for better housing deals. In 2023, people moving interstate chose metros with lower housing costs and less competition, where homes cost $7,500 less on average than their previous locations.

  • Southern and Midwestern cities are gaining popularity due to their affordability and job creation. Cities like Charlotte, Providence, Indianapolis, Orlando, and Raleigh are seeing an influx of new residents, particularly from high-cost areas like New York City.

  • These metros are not just affordable but also rapidly developing in sectors like tech and finance. This growth, combined with new housing constructions, is making these areas more attractive for relocation, balancing the demand and supply in the real estate market.

Home Selling Profits Drop in 2023 for First Time in Over a Decade Amid Modest Price Gains link

  • In 2023, home sellers saw their profits decrease for the first time since 2011, with a typical sale generating a 56.5% return on investment. This decline occurred despite gross profits and profit margins remaining near record levels, indicating a notable shift in the housing market dynamics.

  • The median home price in the U.S. rose to $335,000 in 2023, marking the smallest annual increase in over a decade. This slowdown in price growth reflects a complex interplay of factors, including fluctuating interest rates and a tight supply of homes.

  • Cash sales of homes reached their highest level since 2014, accounting for 38% of all single-family home and condo sales in 2023. This trend highlights a significant shift in the home buying landscape, with a notable increase in cash transactions.

Real Estate Values Are ‘Bottoming,’ Blackstone Says link

  • Blackstone, the world's largest commercial property owner, indicates a positive turn for real estate values in 2024. Inflation slowing and expected Federal Reserve rate cuts contribute to this optimistic outlook, despite recent challenges in the sector.

  • The company's performance in real estate, its largest segment, has been the weakest for four consecutive quarters. However, Blackstone's opportunistic real estate investments declined by 3.8%, and its stable income-producing investments fell by 4.6%, showing signs of recovery.

  • Blackstone's strategic moves, including a $31 billion investment in the last quarter and major transactions like the $3.5 billion Tricon Residential deal, signal confidence in the real estate market's recovery. Sectors like life science and multifamily, despite current slowdowns, are expected to improve, reflecting a long-term positive outlook.

Risks

Triple Net Lease Cap Rates Still on the Rise link

  • The Lomuto Report from Northmarq indicates a continued increase in average closing cap rates for triple net leases. Factors like excess inventory, maturing loans, and tight spreads contribute to this trend.

  • Challenges in the sector include difficulties in rolling over maturing loans and a lack of 1031 exchange buyers. These issues are not typically associated with stable or falling cap rates.

  • The current market conditions, including developers needing to recycle capital and a dearth of 1031 buyers, suggest that rising cap rates are likely to persist. This situation is unusual for the triple net lease sector.

Something I found Interesting

2023 New Home Sales Helped the Economy Avoid a Recession link

  • In 2023, the new home sales sector played a crucial role in preventing a recession, significantly contributing to the U.S. economy. This sector not only employs construction workers but also stimulates the purchase of goods and services needed for home building.

  • Despite the initial impact of high mortgage rates on new home sales and housing permits, the situation improved after November 2022. Single-family permits grew, and residential construction workers were not laid off as in previous economic cycles, reflecting a positive shift in builder confidence.

  • The U.S. Census Bureau and the Department of Housing and Urban Development reported that new single-family house sales in December 2023 were at a seasonally adjusted annual rate of 664,000. This figure is 8.0% above the revised November rate and 4.4% higher than the December 2022 estimate, indicating a rebound in the housing market.

One Cool Chart

Pro Member Only Content

The 10 Best—and 10 Worst—States for Retirement in 2024

(This content is restricted to Pro Members only. Upgrade)

  • Florida leads as the ideal retirement destination in 2024, praised for its tax benefits, low-cost health services, and abundant natural and recreational amenities. Despite high median home prices, the absence of income tax on Social Security and retirement accounts adds to its allure.

  • Kentucky ranks as the least favorable state for retirement, hindered by low life expectancy, poor health care, and limited quality-of-life amenities. This highlights the importance of considering health care quality and lifestyle factors alongside financial aspects in retirement planning.

  • WalletHub's analysis of the best and worst states for retirement in 2024 reveals a surprising trend: eight of the top ten states have median home prices above the national average. This suggests that retirees prioritize factors beyond just climate, including health care and quality of life, even at higher living costs.

  • Here is the full list:

    The 10 best states to retire
    1. Florida (Median home list price: $459,900)*

    2. Colorado ($549,900)

    3. Virginia ($415,250)

    4. Delaware ($474,990)

    5. Wyoming ($435,000)

    6. Idaho ($550,000)

    7. New Hampshire ($549,999)

    8. Minnesota ($375,000)

    9. Montana ($619,000)

    10. Pennsylvania ($285,000)

    The 10 worst states to retire
    1. Kentucky (Median home list price: $294,900)*

    2. New Jersey ($525,000)

    3. Mississippi ($275,000)

    4. Rhode Island ($485,000)

    5. Oklahoma ($295,000)

    6. Louisiana ($275,000)

    7. New York ($634,900)

    8. Washington ($614,975)

    9. Arkansas ($298,900)

    10. Illinois ($294,700)

    link

That's all, folks. If you enjoyed today's issue, please reply (it helps with deliverability)

Cheers,

Vidit

If you are finding value, please consider helping the newsletter by becoming a paying subscriber

A subscription gets you:

✓ Content delivered 5-6 days a week

✓ Exclusive insights that are usually tucked behind paywalls (which I cover the costs for)

✓ Curated Top 10 lists

✓ The latest updates on prop-tech funding rounds

Subscribe for free to keep reading

This content is free, but you must be subscribed to Zero Flux to continue reading.

Already a subscriber?Sign In.Not now

Join the conversation

or to participate.