A chart that shows it's not the right time to buy distressed CRE

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Asking Rents Fall for First Time in 4 Years link

• The nationwide median asking rent in July was $1,647, down $53 from the all-time high in 2022. This marks the first time since June 2020 that rents fell across all bedroom counts.

• The sharpest drop was seen in 3+ bedroom apartments, where rents fell by 2.4% year over year to $2,010. This decline is attributed to an oversupply of larger units and less demand.

• Sun Belt metros, particularly in Texas and Florida, experienced significant rent decreases, with Austin, TX, leading at a 16.9% drop. In contrast, cities like Virginia Beach, VA, saw a 13.7% rise in rents, the highest increase recorded in July.

Student Housing Market Shows Mixed Signals for 2024-25 Academic Year link

• Demand for student housing is strong in many regions, driven by stable enrollment and limited supply. Yet, the market is not uniform, with some areas experiencing softness.

• Rental rates have risen sharply in several markets, notably those with high competition for on-campus housing, putting pressure on students to seek off-campus alternatives.

• Investors remain cautious due to economic uncertainties and the potential impact of future interest rate hikes. This has led to a varied investment outlook across different regions.

New Residential Construction Slides in July; Multi-Family Projects Lead Decline link

• New residential construction fell sharply in July, with permits down 4% from June and 7% year-over-year. Housing starts dropped 6.8% from June and are 16% below July 2023 levels.

• The Northeast and Midwest were hit hardest, with housing completions down 25.4% and 16.5% year-over-year, respectively. The South and West showed more resilience, with completions rising in the West by 13.4%.

• Builders in the South continue to lead in single-family permits, representing 72.7% of new builds. The Northeast has the highest proportion of multi-family unit permits at 56.6%, reflecting regional demand dynamics.

Fannie "Real Estate Owned" inventory Decreased 10% in Q2 2024 link

• Fannie Mae's REO inventory dropped to 7,179 in Q2 2024, marking a 10% decrease from the previous quarter and a 17% decline year-over-year.

• The current REO inventory is 96% lower than the peak in Q3 2010, showing significant recovery from the housing crisis era.

• The number of REOs is now well below normal levels, indicating that a large surge in foreclosures is unlikely in the near future.

Is it the right time to buy distressed CRE? link

• Buying distressed commercial real estate now might not be wise, as any drop in interest rates could be linked to a recession. This would exacerbate problems in sectors like rental housing, multifamily, and warehouses.

• The consensus expects a slowing economy, which would worsen conditions for distressed properties, making their recovery riskier and potentially more prolonged.

• CMBS loan delinquencies, particularly for office spaces, remain a concern, indicating further instability in the commercial real estate market.

Refinancing Hurdles and Market Slowdown in LA Multifamily Sector link

• The LA multifamily sector faces challenges with refinancing due to rising interest rates, leading to a slowdown in transactions. Many property owners are finding it difficult to meet debt service requirements, pushing them to consider selling.

• Investment activity in the market has dropped significantly, with fewer deals closing compared to previous years. This is largely attributed to the widening gap between buyer and seller price expectations.

• Despite these hurdles, there is still demand for multifamily properties, particularly in well-located areas. However, buyers are becoming more selective and cautious, focusing on assets with stable cash flows.

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I would never leave that library

Link to the listing

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Vidit

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