1. Attic insulation upgrade

Winter is the ideal season to enhance your home’s energy efficiency by upgrading attic insulation. This project helps regulate indoor temperatures, keeping your home warmer and reducing heating costs. While costs may vary, investing in high-quality insulation can typically range from $1,500 to $2,500. The long-term benefits include lower energy bills and the potential for increased property value.

2. Landscaping enhancements

Winter is an opportune time to plan and implement landscaping improvements. While the garden may be dormant, adding features like walkways, outdoor lighting, or even planting evergreen shrubs can boost curb appeal. Costs vary widely based on the scope of the project, but a well-executed landscaping upgrade can make your home stand out, come spring time. 

3. Smart thermostat installation

Upgrade your home’s heating system by installing a smart thermostat. This winter home improvement project, which usually costs between $200 and $300, allows you to control your home’s temperature remotely, leading to energy savings and increased comfort. Winter installation is convenient, with fewer demands on HVAC professionals and the added benefit of immediate energy efficiency improvements.

4. Kitchen cabinet refinishing

Give your kitchen a facelift without breaking the bank by refinishing your cabinets. This cost-effective winter project can be completed for under $500. Refinishing cabinets is a quick and efficient way to modernize the heart of your home, even if you have a tight budget.

5. Basement waterproofing

Protect your home from winter’s harsh elements by investing in basement waterproofing. This essential improvement can prevent water damage, mold growth, and structural issues. While costs may range from $2,000 to $6,000, the long-term benefits often outweigh the initial investment. Winter is a great time to start this project as it tackles potential vulnerabilities ahead of spring rains, ensuring a dry and secure basement.

6. Ceiling fan installation

Improve both aesthetics and energy performance by installing ceiling fans in key rooms. This affordable winter project helps distribute warm air more effectively in the winter and cool air in the summer. The energy savings, combined with the visual appeal of stylish ceiling fans, make this an easy and cost-effective improvement.

7. Window replacement

Upgrade your home’s energy performance by replacing old or drafty windows. New windows not only improve insulation but also enhance natural light, aesthetics, and soundproofing. The energy savings and improved comfort make this project a wise choice for homeowners struggling with expensive electric bills. 

8. Bathroom fixture upgrade

Revitalize your bathroom by upgrading fixtures such as faucets, shower heads, and lighting. This relatively low-cost project, usually ranging from $500 to $1,500, can instantly modernize the space and improve functionality. Upgraded fixtures not only enhance your daily routine but also contribute to a more appealing and comfortable home.

9. Flooring refinishing

Give your home a fresh look by refinishing the flooring in high-traffic areas. Whether you have hardwood, laminate, or tile floors, this project can cost between $1,000 and $3,000, depending on the materials. Refinishing not only restores the beauty of your floors but also adds durability, making it an investment that can pay off in terms of aesthetics and functionality.

10. Smart lighting system installation

Enhance your home’s functionality and energy performance by installing a smart lighting system. This winter home improvement project, which can cost between $500 and $2,000 depending on the complexity, allows you to control lighting remotely. Additionally, the convenience and energy savings make this a modern and attractive feature for many homeowners.

11. Crawl space encapsulation

Crawl space encapsulation stands out as a key project to safeguard your home in the colder months. The process involves sealing the crawl space beneath your home to create a barrier against moisture, pests, and potential issues that could compromise your home’s structural integrity. Winter proves to be an opportune time for crawl space encapsulation, primarily because the drier air allows for efficient installation and curing of materials. By addressing this project during the colder months, you can fortify your home against the impending challenges of spring rains and thawing snow.

12. Fireplace upgrade

Make your living space more cozy and appealing by upgrading your fireplace. This can involve refacing the fireplace, adding a new mantel, or converting to a more efficient gas or electric model. A stylish and functional fireplace can be a focal point in your home, adding both aesthetic value and charm. 

The most relevant commercial real estate lending basics offer far more than the chance to develop key professional relationships and avoid tenancy issues that often coincide with residential rental properties; it offers lucrative income potential that can dwarf more traditional forms of real estate investing. However, as any commercial real estate investors will tell you, the trick isn’t always finding a commercial property, but rather acquiring one of those ever-essential commercial real estate loans that let you bring a property into your portfolio.

While many lending principles apply equally to both residential and commercial real estate loans, there are some key distinctions (and tricks-of-the-trade) about the commercial real estate loan process that can save you time and money, if understood before plunging ahead.

COMMERCIAL REAL ESTATE LENDING BASICS

Commercial property loans, not unlike their single-family counterparts, are the foundation of a great real estate investment. The loans are just as important as the assets themselves—if not more so. At the very least, there are many types of commercial real estate loans which award savvy investors with unique advantages for their particular situations. That said, it’s not enough for investors to simply take the first loan that comes across their table; they need to mind due diligence and get to know the ins-and-outs of commercial real estate loans before making any decisions. The more an investor knows about their own CRE loan and how it applies to their situation, the better.

Individuals Vs. Entities

It is commonplace for residential loans to be made to individuals. However, commercial real estate loans are usually made to entities. Otherwise known as business entities, entities can represent a number of business: corporations, developers, limited partnerships, funds or trusts. It is common for entities like these to receive commercial real estate loans. If for nothing else, receiving a commercial real estate loan may even be why the entity was created in the first place.

Unlike a residential loan where money is given to borrowers based on things like their credit score, en entity won’t have a credit rating. Instead, the entity will have the owners guarantee the loan. That way, the owners of the entity will provide the credit history. In the event of a default, the owners will also give the lender an idea of who they need to recover from. 

For more information on not only how to get a commercial real estate loan, but also today’s commercial real estate lending basics, here are some answers to today’s most common questions on the subject.

WHAT IS A COMMERCIAL REAL ESTATE LOAN?

A commercial real estate loan, or “CRE loan” as it sometimes called, is a debt-based agreement set up between a borrower and financial institution in which the borrower uses funds to acquire commercial (non-residential) property.

One common misconception is to assume the terms “commercial loan” and “commercial real estate loan” are interchangeable. This is not the case. Commercial loans refer to the securing of funds that can be used for non-real estate purposes, such as equipment purchases or operating expenses. As an investor, your aim is a commercial real estate loan; it’s important when navigating the loan process to look for lending institutions that specialize in loans of this kind.

Types Of Commercial Real Estate Loans

Not unlike their single-family counterparts, commercial real estate loans can be found with countless terms and underwritings. The sheer volume of available commercial real estate loans is to help buyers acquire deals with favorable terms and rates. There is practically a loan for every situation a commercial real estate investor could think of. Let’s take a look at some of today’s most popular commercial real estate loans:

• SBA 7(a) Loan For Commercial Real Estate: As their names suggest, SBA 7(a) loans are backed by the U.S. Small Business Administration. While there are several types of SBA loans, this particular one is specifically tailored to those who want to purchase or refinance owner-occupied commercial properties up to $5,000,000.
• CDC / SBA 504 Loan For Commercial Real Estate: Also backed by the U.S. Small Business Administration, CDC / SBA 504 loans are best suited for those who need more than the $5,000,000 offered by SBA 7(a) loans.
• Traditional Commercial Mortgage: Traditional commercial mortgages are offered through institutionalized banks and lenders. Traditional loans tend to range from five to 20 years, but are great for those with good credit and in need go longer loans.
• Commercial Bridge Loan: Commercial bridge loans help investors secure immediate financing, giving them a chance to search for a more long-term solution in the interim. Bridge loans help investors bridge the gape between when they need immediate funding and when they can find a more permanent solution.
• Commercial Hard Money Loan: Commercial hard money loans are reserved for those with a need for short-term loans. They tend to come with higher interest rates, but the price comes with a benefit. Since hard money lenders aren’t associated with an institutionalized bank, borrowers can receive the money fast, and without a perfect credit score.

HOW LONG ARE COMMERCIAL REAL ESTATE LOANS?

Commercial real estate loans can be as long as 30 years or as short as a few months. But generally they’ll have a term, on average, of between 5-30 years.

This doesn’t mean, however, that you necessarily will be paying a monthly commercial mortgage for the full term of the loan. Unlike residential loans, which are fully amortized—or have the balance of the loan broken up in regular, monthly payments—commercial real estate loans often have a set monthly payment period (usually the first five to seven years), and then require a large balloon payment at the end.

This can be either a benefit, or catastrophe, for commercial real estate investors. It’s vital you mind your due diligence to ensure the terms of a commercial real estate loan fit in with your overall real estate investing needs.

CRE Loan Repayment Schedule

The repayment schedule of a commercial real estate loan can last anywhere from five years to 20 years. There are, of course, exceptions, but that seems to be the industry standard. It is worth noting, however, that the amortization period is traditionally longer than the loan itself. Not unlike a residential loan, a commercial real estate loan’s rate can change depending on the length and amortization of it. Investors with a good credit standing may have ore negotiating power than those without.

WHAT ARE COMMERCIAL REAL ESTATE LOAN REQUIREMENTS

There are universal criteria that come into play when approaching a lender about a loan, no matter what type. But when applying for a commercial real estate loan, it’s vital you focus on these key CRE loan requirements:

• Credit History: This has less to do with your credit score, which should be at least 680 or higher, and more to do with ensuring your credit history doesn’t contain recent tax liens, foreclosures, and recent bankruptcies. Otherwise you might find the commercial real estate loan process quite difficult.
• A Low Loan-To-Value (LTV) Ratio: LTV ratio calculates the amount of equity, or collateral, a borrower has in a given property by dividing the loan amount by the appraised value (or purchase price) of a property. (Example: If your loan amount is $97,000 and the property is worth $100,00, your LTV is 97%.) Home buyers securing a residential loan can have an LTV as high as 100%, though usually somewhere in the 80-97% range is more common. Investors seeking a commercial real estate loan will most likely have to sit somewhere in the 65-80% range, at a minimum.
• Business Entity: This is a common mistake many first-time commercial real estate investors make when applying for a loan. But having your business entity set up, before filling out that application, can sometimes make a huge difference to lending institutions.
• Organized Paperwork: This is another overlooked area of the loan application process for many first-time commercial investors. But making sure that every document (and packet) you send to a lender is organized, tidy and doesn’t set off “alarm bells” can sometimes make the difference between getting rejected, and that large commercial real estate loan you need to make your investing dreams come true.
• Online Marketplace Loan: Otherwise known as a “soft money” loan, an online marketplace loan will match borrowers with private investors who help finance commercial properties for a return. These loans will come with an interest rate between conventional banks and hard money lenders, which people often call a “soft” loan. These loans are traditionally short for commercial real estate, as they can last from six months to a few years.
• Joint Venture Loan: In the event a single entity isn’t able to secure a loan by itself, it can join forces with another entity. By seeking a joint venture loan, the loan will be given out based on two entities instead of one, effectively making them partners, but also making it easier for entities who would otherwise not qualify.

Do CRE Loans Have Fixed Or Variable Interest Rates?

This depends on the type of commercial real estate loan you secure. (There are numerous kinds of CRE loans, including a traditional commercial mortgage, bridge loan, hard money loan, and joint venture loan, etc.)

As a general rule, a commercial real estate loan will most likely have a variable rate — that large amount of money borrowed comes at a cost — and be considerably higher than residential real estate loans (sometimes as much as two-three percentage points).

CAN YOU GET A COMMERCIAL REAL ESTATE LOAN WITH NO MONEY DOWN?

It is entirely possible to get a commercial real estate loan without putting any money down. However, it is important to note that the less an entity puts down, the harder it will be to qualify. That said, a down payment is not necessary; there are a number fo different financing methods to use instead.

For example, if an entity can’t come up with the money, they can perhaps partner with another entity and form a joint venture. In that case, the other entity could front the money. Another way to get away without putting any of your own money down is to get a bridge loan. Bridge loans can help investors secure short-term funding for a down payment so that they may negotiate a longer-term loan through a more traditional lender. 

HOW LONG WILL IT TAKE TO GET A COMMERCIAL REAL ESTATE LOAN?

As the commercial loan brokerage Whista detailed in a column recently: “Everyone is going to tell you it should take about 30-45 days to get a commercial loan. Not in this lifetime…if your broker or lender is being honest with you, they will tell you to expect about 45-120 days.”

This doesn’t mean there won’t be exceptions; there may very likely be situations in which you’re able to reduce this commercial loan process considerably. But if your investing strategy depends on a quick timeline, go in knowing you may need to be flexible until you hear back from a lending institution.

HOW TO CALCULATE COMMERCIAL REAL ESTATE LOANS

No calculation can be made until a number of metrics are already in hand. That said, to calculate a commercial real estate loan, an entity will need to obtain the possible loan amount, interest rate, amortization term, and any balloon payments if applicable. With all of the numbers in hand, simply visit an online mortgage calculator and fill in the blank fields. 

HOW TO CALCULATE LOAN-TO-VALUE RATIO

As the name suggests, a loan-to-value ratio gives entities a way to measure the value of a loan against the value of a property. In order to calculate the loan-to-value ratio, or simply LTV, divide the amount of the loan by the property’s appraised value or its purchase price, whichever is lower. 

SUMMARY

Learning today’s commercial real estate lending basics isn’t as hard as many would assume, but they do require far more diligence, preparation, patience, and paperwork then a residential mortgage loan; that’s because of the large amount of funds being requested. It is a good to remember that commercial real estate financing is more complicated and logistically challenging; they have to be due to the increased risk. There are many moving parts—both legal and financial. However, if you’re able to stay persistent and focused through the process, you might find a life-changing transaction just around the corner.

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Key Takeaways

• Understanding how to finance commercial real estate is one of the first steps for investors looking to break out of the residential industry.
• With a firm grasp on the commercial real estate financing basics, investors should have a slid commercial foundation to build off of.
• Commercial real estate loans are a bit more complex than residential loans, but they are necessary for larger projects further down investors’ careers.

Successful house flipping requires careful planning, hard work, and a thorough understanding of the real estate market. In this blog post, we’ll guide you through the essential steps to flip a house the right way, ensuring you maximize your chances of a profitable outcome.

Step 1: Research Your Market

Before you dive into the world of house flipping, it’s crucial to research your local real estate market. Understanding current trends, property values, and neighborhoods with potential for growth is essential. Look for areas where homes are in demand and likely to appreciate in value. Conduct thorough market research to identify your target audience and what they’re looking for in a home.

Step 2: Set a Realistic Budget

One of the most common mistakes in house flipping is underestimating costs. Create a detailed budget that includes the purchase price, renovation expenses, holding costs (property taxes, utilities, insurance), and selling costs (agent commissions, closing costs). Be sure to leave room for unexpected expenses, as they often arise in the renovation process. A realistic budget is key to avoiding financial setbacks.

Step 3: Secure Financing

Unless you have significant personal funds, you’ll need to secure financing for your house flipping project. Options include traditional mortgages, hard money loans, private investors, or partnerships. Choose the financing option that aligns with your budget and timeline. Be prepared to present a solid business plan to potential lenders or investors.

Step 4: Find the Right Property

Locating the right property is a critical step in the house flipping process. Look for homes with good bones, in desirable neighborhoods, and with the potential for value appreciation. Pay attention to the property’s condition and the extent of renovations needed. It’s often better to start with a cosmetic fixer-upper for your first flip, as major structural issues can be costly and complex.

Step 5: Renovate Wisely

Effective renovation is the heart of successful house flipping. Create a renovation plan that balances cost-effectiveness with aesthetics and functionality. Focus on kitchen and bathroom updates, fresh paint, flooring, and curb appeal. Be sure to obtain the necessary permits and hire reputable contractors. Keep a close eye on the renovation process to ensure it stays on schedule and within budget.

Step 6: Market Strategically

Once the renovations are complete, it’s time to market the property effectively. Work with a real estate agent who has experience in selling flipped properties. Invest in professional photography and staging to make the home look its best. Price the property competitively to attract potential buyers while still ensuring a profit.

Step 7: Sell at the Right Time

Timing is crucial in house flipping. Pay attention to the market cycle in your area and aim to sell when demand is high. A well-timed sale can maximize your profit potential.

Step 8: Learn and Adapt

Even if your first flip isn’t as profitable as you hoped, it’s essential to learn from the experience. Evaluate what went well and what could be improved. House flipping is a learning process, and each project provides valuable insights for future success.

Flipping a house can be a rewarding and profitable venture when done correctly. It’s essential to approach it with careful planning, realistic expectations, and a willingness to adapt and learn. By conducting thorough research, setting a budget, securing financing, choosing the right property, renovating wisely, marketing effectively, and timing your sale strategically, you can flip a house the right way and set yourself up for success in the world of real estate investment. Muevo is your partner in achieving success in the world of house flipping. Contact us today to learn how our expertise and resources can help you navigate the challenges and opportunities of house flipping, ensuring that you flip houses the right way and achieve your financial goals. Your success is our priority, and together, we can turn your house flipping dreams into a profitable reality.

So, you’re tossing around the idea of packing up your bags and moving to Florida.

If you’re thinking about moving to the home of Disney World, the Daytona 500 and a 200-foot alligator named Swampy (yep, that’s a real thing), you’re probably wondering about the Florida housing market. Well, you’re in luck! We dug into the latest news on the housing market in Florida to give you a heads-up on what to expect in the Sunshine State.

Now, the best way to learn about Florida’s market is to talk to a real estate agent who actually lives in Florida (you can find one through our RamseyTrusted program), but these numbers and predictions will give you a good idea of what to look out for.

Ready to dive in? Let’s go!

What’s the Florida Housing Market Like?

Just like pretty much everywhere else in the U.S., housing prices in Florida went up in 2023—though not by a whole lot.

Here’s a look at Florida’s numbers from Q4 2023 compared to Q4 2022:

Florida Housing Market*	October 2023	October 2022	Percent Change
Median Sale Price**	$410,000	$401,990	+2.0%
Inventory (Active Listings)	74,703	68,813	+8.6%
Closed Sales	19,729	20,837	-5.3%
Median Time to Sale***	71 days	70 days	+1.4%1
Average Mortgage Rate(15-Year Fixed)	7.03%	6.36%	+10%2

_{*Numbers in this chart represent data on single-family homes only.**Median Sale Price refers to the midpoint—half the homes were sold for more, half for less.***Median Time to Sale is the number of days between the listing and closing of a home sale—half of homes selling this quarter took more time to sell, half took less.}

Florida Housing Market in Major Cities

Sometimes, looking at an entire state’s housing situation doesn’t paint a complete picture of what it’s like in individual cities. So, here’s a look at some housing market numbers in three of Florida’s biggest cities: Orlando, Tampa and Jacksonville.

	Orlando	Tampa	Jacksonville
Median Listing Price	$447,450	$425,000	$412,000
Year Over Year % Change	+0.02%	+0.02%	+0.04%3

How Does Florida Compare to the National Housing Market?

Now, let’s see how Florida’s real estate market compares to the U.S. as a whole. At the national level, the median home listing price in November 2023 was $420,000. Florida’s median listing price during the same timeframe was a bit more expensive at $462,623—9.66% higher than the typical national price.

Still, Florida’s housing prices are more affordable than what you’d find in 19 other states—including Vermont, Nevada, Arizona and New Jersey.⁴

Florida Housing Market Predictions for 2024

We’ve looked at the numbers, so let’s shift into seeing what some real estate gurus are predicting about Florida housing heading into 2024.

1. Buyers and sellers will wait patiently.

Homeownership has gotten a lot more expensive over the last few years, with prices going through the roof back in 2021 and interest rates hitting 20-year highs throughout 2023. What will that mean for potential Florida buyers and sellers in 2024? Florida REALTORS® chief economist Brad O’Connor believes a waiting game is on the horizon.

“Inventory is increasing, which has helped slow price growth,” O’Connor said. “Many buyers and sellers are on the fence now, waiting to see what happens to mortgage rates.”⁵

That sounds about right. After all, the sky-high interest rates we’re seeing right now are keeping a lot of folks from being able to afford buying a home, and many would-be sellers don’t want to move if it means losing a low-interest mortgage they locked in before rates went through the roof.

Find expert agents to help you buy your home.

So, the best move for plenty of people heading into 2024 is sitting on their hands—at least until we get a clearer picture of what interest rates will do moving forward. Speaking of interest rates . . .

2. Interest rates should start going down.

So, what should you expect from mortgage interest rates in 2024? Most likely, rates will finally stop climbing and start dropping. That’s what National Association of REALTORS® (NAR) chief economist Lawrence Yun is predicting.

“I believe we’ve already reached the peak in terms of interest rates,” Yun said. “The question is when are rates going to come down?”⁶

While Yun is right that it’s hard to know exactly when rates will begin decreasing in 2024, virtually everyone agrees that they will at some point. How much will rates go down? NAR’s economic outlook from October 2023 predicts that the typical interest rate for a 30-year fixed-rate mortgage will drop from 7.5% at the beginning of the year to 6.3% by December.⁷

A drop of just over 1% wouldn’t be a game changer, but it would make buying a home a bit more affordable for Floridians by the end of 2024.

3. Inventory will still need a boost.

When supply is low and demand is high in the housing market, prices go up. That’s why they increased so drastically a few years back, and it’s why those high prices have held steady ever since. Even though inventory has steadily gone up since 2021—both in Florida and across the country—it hasn’t grown fast enough to keep up with increasing demand.

Will that trend continue in 2024? Almost definitely. Take it from Ken H. Johnson, an associate dean at Florida Atlantic University’s College of Business. He believes that South Florida could really use 200,000 new housing units per year, but the numbers say the area is currently only getting a tenth of that.

“We are having trouble building homes fast enough,” Johnson said.⁸

Even though Florida’s housing inventory is increasing, it’s not happening fast enough to have a major impact on price or to keep up with the state’s crazy population influx. After all, Johnson also predicts that all nine of Florida’s largest metro areas will see a population growth of 10% or more over the next 10 years—with Orlando and southwest Florida potentially growing at twice that rate.⁹

Moral of the story: Just like every other state, Florida could use a lot more homes on the market in 2024.

Will the Housing Market Crash in Florida?

If you’re concerned about a housing crash in Florida or anywhere else in the U.S. in 2024, you can take a deep breath. That’s because home prices aren’t going to drop substantially in 2024. In fact, prices are actually more likely to go up.

For example, NAR predicts that existing home prices across the U.S. will grow by 2.6% in 2024.¹⁰ Freddie Mac expects a 0.8% bump during the same timeframe.¹¹

So, if you’re waiting on home prices to come down drastically before you buy, you’re going to be waiting for a while—it’s not happening anytime soon.

Is It a Good Time to Buy or Sell a House in Florida in 2024?

Alright, we’ve looked at a whole lot of stats, trends and predictions for the Florida real estate market. As we wrap up, you probably have one important question on your mind: Should I buy or sell in Florida this year? Let’s talk about it.

Here’s the deal: You shouldn’t let the housing market control your decision on whether to buy or sell right now. It’s important to understand real estate trends so you have some context, but you should base your decision on your individual situation.

For example, if you’re buying a house, you need to make sure you’re financially prepared. That means being debt-free with a full emergency fund worth 3–6 months of your typical expenses, and having enough cash saved up to make a down payment of at least 5–10%. (By the way, a 20% down payment is best because it means you won’t have to pay for private mortgage insurance.)

And if you’re selling a house, you need to make sure you can afford the move and that doing so won’t hurt your financial situation. It also wouldn’t be a bad idea to line up a new place to live—though you never want to buy a new house before selling your old one.

Bottom line: You are in control of whether it’s a good time to buy or sell a house in Florida—not the market.

https://www.ramseysolutions.com/real-estate/florida-housing-market

The financial world is buzzing with anticipation following the Federal Reserve’s recent choice to keep interest rates steady. While market analysts largely predicted this move, the unexpected twist came from Fed Chair Jerome Powell, who hinted at a possible three-rate drop in 2024. This surprising announcement has ignited curiosity and raised questions about its potential impact on real estate portfolios, particularly for investors seeking to navigate the evolving landscape.

Understanding the Fed’s Decision

At its year-end meeting, the Fed chose to halt interest rate hikes, keeping short-term rates within the 5.25% to 5.5% range. Powell’s assurance of scaling back on rate increases indicates a shift in monetary policy heading into 2024.

Predictions suggest a more relaxed atmosphere for mortgage rates, offering potential relief for aspiring homeowners and investors with Debt Service Coverage Ratio (DSCR) portfolios. The positive outlook is supported by housing economists, pointing towards a favorable period ahead.

Optimistic Trends

Powell’s traditionally hawkish stance has taken a surprising turn, signaling a potential end to the rate hike cycle. This shift has implications across investments, causing yields on 5-year and 10-year Treasuries to contract. For investors monitoring DSCR loan pricing, these changes align with future rate trajectories that could enhance investment opportunities.

Real estate investors eager to refinance may encounter challenges due to tight inventory, affecting affordability. Despite these hurdles, a buoyant selling season is anticipated, especially for flippers, who could benefit from reduced refinance rates on investment properties.

Taking a skeptical view, Powell’s dovish turn raises questions about potential political motivations, especially considering the upcoming 2024 election. Active investors should consider this factor when speculating on medium-term market conditions.

Investor Sentiment

Positive sentiments fueled by Powell’s reassuring foresight may prompt previously hesitant investors to enter the market. Temporary dips in transaction volumes are attributed to elevated rates rather than distress, aided by the liquidity from COVID-era stimulus funds.

While a modest 25 basis points dip occurred, predicting a return to pre-pandemic interest rates of 3-5% seems unlikely. Investors should prepare for a new normal of higher interest rates and adjust their strategies accordingly.

Refinancing Opportunities for DSCR Portfolios

For investors with DSCR portfolios, the present is an opportune time to refinance and secure lower rates. The market’s desire for rate reductions could lead to unforeseen developments.

While an immediate surge in real estate sales is not expected, a potential boom may unfold in the next 60 to 90 days. The affordable housing segment is poised for price increases due to limited inventory and high demand, presenting an opportunity for buyers to act quickly.

Exit Strategies and Market Engagement

Pressure on flipper margins underscores the importance of robust risk management. Investors may need to reconsider their exit strategies, shifting from quick flips to potential long-term rentals.

Financial institutions are exercising caution, influencing the pace of re-engagement with the market. Investors should monitor these shifts as they can impact portfolio decisions.

The Bottom Line

Real estate investors must strike a balance between cautious optimism and prudent skepticism considering the recent Fed decisions. While the landscape is evolving, taking informed steps such as monitoring interest rate trends and seizing refinancing opportunities is crucial for securing investments. Armed with knowledge, foresight, and a blend of caution and courage, investors can navigate the changing real estate landscape successfully.

Amid declining property values in a tight lending environment, all-cash buyers will benefit from bargain pricing, CBRE predicts in its latest outlook.

CBRE expects an economic slowdown in the U.S. next year that will impact commercial real estate with bank lending remaining tight throughout 2024, investment volume decreasing 5 percent, cap rates expanding and property values declining.

But the U.S. may be able to avoid a recession and interest rates should be reduced later in the year as activity picks up in the second half of 2024, according to the firm’s 2024 U.S. real estate outlook.

Property types with relatively strong fundamentals, including demand, vacancy and rent growth, like industrial, retail, multifamily and data centers will be most favored by investors in 2024, according to CBRE.

Richard Barkham, CBRE global chief economist & global head of research, said in prepared remarks there is still some more pain ahead for the commercial real estate industry in 2024, including overall investment volumes remaining down for the year. But he expects an upturn by the second half and overall leasing activity to pick up as well. He notes stabilization and the early stages of recovery are also not far off.

North America dry powder by strategy. Chart courtesy of CBRE

With inflation easing, the Federal Reserve is expected to begin reducing short-term interest rates in 2024, possibly to around 4.25 percent by the end of the year and to 3.5 percent in 2025.

There should be buying opportunities in the first half of 2024, especially for all-cash buyers like sovereign wealth funds, pension funds and endowments. CBRE expects the lowest pricing for assets will occur in the first two quarters.

The report notes increasing cap rates, which have risen by about 150 basis points between early 2022 and late 2023 depending on the market and asset type, imply a 20 percent decline in values for most property types. For office, the increase was higher, rising by at least 200 basis points.

“We think cap rates will expand by another 25 to 50 basis points in 2024, with a corresponding 5 percent to 15 percent decrease in values,” the report states.

CBRE expects real estate values for most property types will likely not stabilize before mid-2024.

Historical & forecast cap rates. Chart courtesy of CBRE

Office vacancies to peak

The outlook expects another tough year ahead for the office market with office vacancy peaking at nearly 20 percent in 2024, up from 18.4 in the third quarter of 2023 and 12.1 percent at the end of 2019.

CBRE notes a slowing economy in the first part of 2024 and increasing acceptance of hybrid working arrangements will continue to limit office demand next year. The 2023 U.S. Office Occupier Sentiment Survey found more than half of the respondents planned to further reduce their office space in 2024.

Companies looking to lease less than 20,000 square feet will account for most of the leasing activity, according to CBRE. Leasing activity should rise by 5 percent in 2024, however that is still 20 to 25 percent lower than pre-pandemic levels.

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READ ALSO: How Incentives Boost Office Conversions

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Meanwhile, the flight-to-quality trend should continue with occupiers seeking space in newer, prime office properties with the best amenities. But office construction levels will be at their lowest levels since 2024, which could result in a shortage of that sought-after Class A space later in the year. CBRE forecasts that average prime office asking rent will increase by as much as 3 percent.

On the investment side, the higher-for-longer outlook for interest rates will cause some owners of Class B and C office assets to sell due to further erosion in values. Many of those older buildings that lack modern amenities will continue to struggle to attract tenants, so a higher percentage of older office assets are likely to be converted to other uses. While office conversions can be challenging, the report notes the federal government is providing grants, low-interest loans and tax incentives and local governments are also offering incentives.

Not all office markets are suffering, and the outlook shines a light on several active cities in the U.S. In Nashville, Tenn., where absorption and rents are up, demand for new office space is expected to remain strong. Miami is seeing one of the highest rent increases in the country and the vacancy rate is dropping as new-to-the market tenants are keeping the market healthy. Las Vegas has seen an uptick in leasing activity and strong preleasing at speculative projects, putting the market in a strong position heading into 2024.

Industrial sector slowdown

The industrial sector should see net absorption similar to 2023 levels and rent growth moderating to 8 percent. Construction deliveries are tapering off and expected to continue to slow down due to economic uncertainty, tight lending conditions and oversupply in some markets.

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READ ALSO: Property Management Success: How AI Boosts Industrial

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Vacancy is expected to hit 5 percent by mid-2024, up from 4.2 percent in the third quarter of 2023 but decrease later in the year due to the decline in new construction. Looking ahead, CBRE is forecasting a 7.5 percent increase in U.S. industrial production over the next five years as more occupiers improve their supply chains by adding more import locations and onshoring or nearshoring of manufacturing operations. Markets to watch include Austin and San Antonio in Texas; Nashville; Salt Lake City and Central Florida.

Retail’s declining availability

The retail sector is also facing a lack of new construction. That will contribute to retail availability rates dropping by 20 basis points next year to 4.6 percent. Asking rent growth is expected to drop below 2 percent for most of 2024 but go above 2 percent by the fourth quarter.

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READ ALSO: Mixed Shopping Cart for Retail

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Open-air suburban retail centers will see demand grow faster than other retail formats and neighborhood, community and strip centers will have stable occupancy throughout the year. Look for traditional mall-based retailers to seek other new formats outside the malls for expansion. Texas markets are expected to see more luxury brands. Other markets to watch include Orlando, Fla.; Charlotte, N.C.; Denver; San Francisco and Orange County, Calif.

AI to fuel increased data center demand

The data center market is seeing growth, often driven by advances in cloud-based solutions, artificial intelligence and other new applications and technologies. CBRE notes demand will continue to be higher than supply and construction in major markets will exceed 3,000 MW in 2024, up from the company’s 2023 estimate of 2.500 MW. Markets to watch include Austin; San Antonio and Omaha, Neb.

https://www.commercialsearch.com/news/what-to-expect-for-cre-in-2024/

When it comes to living a healthier lifestyle, the little things can add up and make a considerable impact! It’s not just about hitting the gym or eating right – it’s also about creating a healthier home environment and adopting habits that promote overall well-being. To help you on your journey, here are some tips that will contribute to a more holistically fit lifestyle.

Purify Your Air

Minimizing indoor air pollution can affect how you feel, from reducing asthma triggers to creating a better sleeping environment. Because of this, ensuring good air quality in your home is something you should prioritize. One easy solution is to invest in an air purifier, which can help eliminate many common indoor pollutants. And if you live in a region that gets smoke-filled air from frequent forest fires, an air purifier is a must in the summer and fall months. Additionally, regularly changing your furnace filters can substantially improve your indoor air quality.

Adopt Some Green Friends

Plants don’t just make your home prettier – they also offer some serious health benefits! Certain types, like the snake plant, aloe vera and peace lily, are well-known to clean the indoor air, increase humidity and release oxygen. Plus, introducing plants is a great way to add a relaxing dose of nature to your living space, along with enhancing the air quality.

Make a Shoes-Off Policy

Keeping your shoes at the door is a simple practice that can keep your home cleaner and healthier. Shoes can track in germs, dirt and other outdoor pollutants, not to mention allergens like pollen. Adopting a shoes-off policy can significantly reduce this influx of unwanted substances into your home, improving the overall living environment and potentially contributing to a decreased risk of allergies and illnesses.

Regularly Deep Clean Carpets

Carpet maintenance is not just about keeping up the aesthetic appeal – it’s fundamentally a health measure. Carpets can act like a filter, trapping various airborne particles, including pet dander, dust mites, pollen and other allergens. Although vacuuming helps, it often isn’t enough to remove all these contaminants deeply embedded in the carpet’s fibers. A regular deep clean is necessary to extract these allergens and pollutants fully. Experts recommend a professional cleaning every 12 to 18 months, depending on your carpet’s usage level.

Filter Your Water

Filters can remove contaminants from your water, providing safer and often better-tasting H2O. Clean, fresh water is vital in maintaining good health, so it’s well worth the investment. A reusable pitcher is also a greener and more economical choice than buying plastic bottled water. Plus, there are fantastic pitcher options, from the downright luxurious to the no-frills model.

Room to Exercise, Destress & Create

Repurposing space in your home and creating dedicated areas for physical activity, relaxation and hobbies can significantly influence your health journey. Make a quiet corner ready for workouts, even if it’s just enough space for a yoga mat – it can motivate you to stick to a regular exercise routine. Exercise not only boosts your physical health but also acts as a natural stress reliever. In addition, having a place to unwind and disconnect can considerably improve your mental health. This could be a reading nook, a meditation corner or somewhere to engage in your favorite hobbies and crafts.

Establish a Tech-Free Zone

Consider a kitchen or dining room charging station to keep phones out of bedrooms at night. A tech-free bedroom can help improve sleep quality and promote a better sleep routine and a healthier home. Tempting as it may be, instead of using your phone’s alarm to wake up in the morning, pick out one of these top-rated and stylish alarm clocks.

Remember, living a fit, healthy lifestyle is more than the big gestures – it’s also about the little steps you can take daily. Pick a few from our list and start 2024 off on the right foot!

When it comes to living a healthier lifestyle, the little things can add up and make a considerable impact! It’s not just about hitting the gym or eating right – it’s also about creating a healthier home environment and adopting habits that promote overall well-being. To help you on your journey, here are some tips that will contribute to a more holistically fit lifestyle.

Purify Your Air

Minimizing indoor air pollution can affect how you feel, from reducing asthma triggers to creating a better sleeping environment. Because of this, ensuring good air quality in your home is something you should prioritize. One easy solution is to invest in an air purifier, which can help eliminate many common indoor pollutants. And if you live in a region that gets smoke-filled air from frequent forest fires, an air purifier is a must in the summer and fall months. Additionally, regularly changing your furnace filters can substantially improve your indoor air quality.

Adopt Some Green Friends

Plants don’t just make your home prettier – they also offer some serious health benefits! Certain types, like the snake plant, aloe vera and peace lily, are well-known to clean the indoor air, increase humidity and release oxygen. Plus, introducing plants is a great way to add a relaxing dose of nature to your living space, along with enhancing the air quality.

Make a Shoes-Off Policy

Keeping your shoes at the door is a simple practice that can keep your home cleaner and healthier. Shoes can track in germs, dirt and other outdoor pollutants, not to mention allergens like pollen. Adopting a shoes-off policy can significantly reduce this influx of unwanted substances into your home, improving the overall living environment and potentially contributing to a decreased risk of allergies and illnesses.

Regularly Deep Clean Carpets

Carpet maintenance is not just about keeping up the aesthetic appeal – it’s fundamentally a health measure. Carpets can act like a filter, trapping various airborne particles, including pet dander, dust mites, pollen and other allergens. Although vacuuming helps, it often isn’t enough to remove all these contaminants deeply embedded in the carpet’s fibers. A regular deep clean is necessary to extract these allergens and pollutants fully. Experts recommend a professional cleaning every 12 to 18 months, depending on your carpet’s usage level.

Filter Your Water

Filters can remove contaminants from your water, providing safer and often better-tasting H2O. Clean, fresh water is vital in maintaining good health, so it’s well worth the investment. A reusable pitcher is also a greener and more economical choice than buying plastic bottled water. Plus, there are fantastic pitcher options, from the downright luxurious to the no-frills model.

Room to Exercise, Destress & Create

Repurposing space in your home and creating dedicated areas for physical activity, relaxation and hobbies can significantly influence your health journey. Make a quiet corner ready for workouts, even if it’s just enough space for a yoga mat – it can motivate you to stick to a regular exercise routine. Exercise not only boosts your physical health but also acts as a natural stress reliever. In addition, having a place to unwind and disconnect can considerably improve your mental health. This could be a reading nook, a meditation corner or somewhere to engage in your favorite hobbies and crafts.

Establish a Tech-Free Zone

Consider a kitchen or dining room charging station to keep phones out of bedrooms at night. A tech-free bedroom can help improve sleep quality and promote a better sleep routine and a healthier home. Tempting as it may be, instead of using your phone’s alarm to wake up in the morning, pick out one of these top-rated and stylish alarm clocks.

Remember, living a fit, healthy lifestyle is more than the big gestures – it’s also about the little steps you can take daily. Pick a few from our list and start 2024 off on the right foot!

In a competitive real estate market, you need more than just luck on your side. Whether you’re looking to sell your property or finally get your hands on your dream home, one thing’s for sure – you need the expertise of a seasoned real estate agent who has neighborhood knowledge, market insights, negotiation finesse and experience with contracts and closing details. Working with a real estate agent is your go-to resource when it’s time to buy or sell.

Sharing Local Expertise

When it comes to exploring community lifestyles or marketing a property to the most likely buyer at the right time, real estate agents are the ultimate insiders. They know the market and the area, and also have a network of connections and trusted professionals they can call on to ensure all your real estate goals are met. They’re well-connected in the real estate world, which means they’ve got the scoop on off-market listings and soon-to-be-available properties.

Data-Driven Decision Making

Who doesn’t love a good data-driven strategy? Real estate agents have a treasure trove of tools and technology. Using market data analytics, insights into trends impacting buyers and sellers and a comprehensive Competitive Market Analysis, they can accurately tell you where the opportunities lie and what to expect for pricing, days on the market and more.

Detailed Coordination

Ever felt overwhelmed by the intricacies of buying or selling a property? Working with a real estate agent gives you a personalized approach every step of the way. They will handle placing an offer, coordinating inspections, getting a home ready to list and developing a custom marketing plan. They’ll also connect you with any necessary vendors, including repair specialists or mortgage, title and insurance professionals. With an agent at your side, the intricate processes and complexities become a breeze.

Expert Negotiations

When you’re in the final stages of the game, your real estate agent turns into your personal advocate. They’re armed with data analytics and negotiation strategies that can lead to winning deals and peaceful resolutions. They’ll make sure it’s a smooth process.

Before getting into my predictions, the chart above is indicative of the mixed signals in the economy. Prices are rising on cardboard due to increased consumer demand. How is demand for cardboard rising if consumer spending is slowing along with inflation?  The answer to this question is key to predicting what happens in 2024.

On the real estate front, the beginning of the year started out good but as interest rates rose substantially volumes dropped off a cliff and prices began falling.  What do the changes mean for residential and commercial real estate in 2024?  Will prices have a larger reset than we are already seeing?

2024 will finally be a big reset in real estate

Regardless of prices, real estate is already in a deep recession, with closing volumes down close to 20 year lows.  At the same time interest rates are remaining above 7.5% (as of this writing).  Late 2023, we started to see the beginning of what is to come in 2024 with values finally starting to come off their epic run in most cities throughout the country.

Three factors that will shape real estate in 2024

Before getting into my predictions for next year, there are three crucial factors to discuss that will shape the real estate market in 2024 and beyond: Interest rates, inflation, and consumer sentiment. All three are intertwined as they influence each other, but it is important to discuss each one individually to understand how each unique variable will influence real estate in 2022 and beyond.

Inflation:

Inflation continues to run at almost 2 times the Federal reserve target of 2%.  There should be some break in the continued price acceleration as supply chains “catch up” with demand.  Furthermore, we are seeing in the latest retail numbers that prices are starting to dampen demand a little, which will help.  Unfortunately, there are a few categories that will remain elevated for a while: housing and wages that will factor into the price of goods.

Housing:  As rates have almost tripled from their lows, housing has gotten considerably more expensive due to financing costs.  Furthermore supply continues to be reduced due to the lock in effect.  Remember housing makes up over 30% of the CPI calculation.

Wages also look to continue higher as the work force remains constrained either from retirements or others not reentering the work force for several reasons.  For example, as inflation and wages increase, so does childcare costs which makes it more difficult for many to justify working if they are spending close to what they are making on childcare.  I do not see this issue getting resolved until possibly late 23 which will lead to continued upward pressure on wages, but likely not as much as in 2022 as demand wanes a little.

Interest rates:

The Federal reserve finally came around that inflation is not transitory and as a result they accelerated the wind down of their bond purchases which will put them in a position to pause hiking rates into 2023.   The market has picked up the inflation fight for the fed with long term yields finally heading higher even without additional federal reserve hiking.

Some are predicting a quick reversal in the fed next year.  I do not see this happening as they are forced to hold rates higher for longer due to the stickiness of inflation and huge deficit spending that further increases pressure on yields. The early indicators of rising cardboard prices is a warning that the road ahead will be bumpy on inflation.   These factors will keep mortgage rates in the 6-7% range in 2024.

Consumer Sentiment

Even with huge inflation and predictions of a downturn, the consumer keeps spending.  I think late 23 the consumer starts to get “tired out” and will eventually slow spending down as they work through built up pandemic savings.  This should help slow inflation, but will not lead to a quick reversal.

The recent bank collapses are a wildcard.  So far, the contagion seems to be isolated, but if this spreads consumer confidence will take a large hit.

Multiple macro wildcards to watch in 2024

2024 is a hard year to predict as rates remain high there is increasing probability of something breaking in the economy.  Here are some factors I am watching:

1. Deficit spending/financing: The federal deficit has basically doubled over the last 3 years and all of this must be financed through the treasury market.  As the treasury continues its borrowing rates could continue to spike.  I see no end in site to the current deficit spending which will lead to rates higher for longer
2. Interest rates/inflation: I’m not convinced that we are totally done with inflation, the labor market is still exceptionally strong which will continue upward pressure on wages and in turn products/services.  Rates will have to remain high even in the face of a possible moderate recession
3. What breaks? The federal reserve continues touting a soft landing, in order to accomplish this rates will need to remain higher for longer.  This drastically raises the risk of something breaking.  My first thoughts are commercial real estate and regional banks.  But I don’t think the economy will come out of the high rate environment unscathed.

How the three factors above play out could have substantial implications on real estate, for example if something in the economy breaks bad enough like commercial real estate, we could enter a recession with higher unemployment than anticipated.  My gut says that rates will stay higher for longer due to the tight labor market and increased deficit spending which ultimately will put pressure on commercial and residential real estate prices.

What are my predictions for real estate in 2024?

2024 still looks to be a transition year, but likely will not happen exactly as economists have planned.  Unfortunately, there are more negative than positive risks for real estate heading into the second half of 2024.

In the first half of the year, I do not see the bottom dropping out of prices.  There will be some softening with prices dropping in the 5-10% range, some markets will hold steady while others could still increase further. The real test comes in the second half of the year when consumers exhaust their pandemic savings and the bills come due for all the spending.  

Furthermore interest rates will remain much higher than the market is currently anticipating, which will ultimately lead to a reset in the economy.  

On the commercial side, rising real interest rates will continue to put pressure on cap rates.  Remember that the higher the cap rate the lower the value (they work in inverse to each other.  Office is going to get destroyed with values dropping around 30% overall due to lower demand, higher financing rates, and much higher cap rates.  Retail and Industrial will also come off their highs as cap rates continue to rise to keep up with the rise in treasuries.  Rents will not be able to rise fast enough to compensate for the higher cap rates.

The wild card is what happens late 2024 as higher interest rates continue to dampen demand; furthermore, the federal reserve must hold rates higher for longer which will keep rates from falling back to their lows.  Worst case scenario 10-15% price drops, likely is somewhere under 15% reset in prices.  This will not occur until mid 2024 as the consumer finally comes to terms with increased borrowing costs and slows down their spending. 

Commercial is a different ballgame as  commercial properties are at much higher risk for larger price drops.  For example, large class B office will need a huge reset in prices which could be in the 40%+ range.

Will there be a recession in 2024?

I’m going to put my odds at 75% for a recession in 2024.  As rates remain higher commercial real estate values will plunge which will lead to more bank failures and less lending.  Eventually the lack of liquidity will flow through to consumer spending leading to a slowdown.  Unfortunately, the risks of recession are mounting as there is always a lag in the economy.  Furthermore, I think the market is calling the all clear on inflation a bit too soon and will be in for a rude surprise of higher rates.

Summary:

2024 is going to be a bumpy year in real estate.  We are already seeing signs of this on the residential side with the median prices off 5% in Denver year over year and volumes down 25%. This is just the beginning of the reset in real estate.

Commercial real estate is a whole different animal with rents dropping, vacancy rising, and ultimately prices facing a huge reset especially in the office sector along with multifamily.  If rates remain higher for longer, there will be increasing stress on every commercial property type as cap rates remain elevated.

Anyone in residential or commercial real estate is going to have a tough ride as volumes will stay extremely low throughout the nation until there is a major reset in the economy that forces individuals and businesses to sell and rates to fall substantially.  Long and short 2024 looks like a tough year in real estate that will likely worsen for most compared to 2023.  Fortunately every single cycle creates new opportunities and we can always look forward to 2025

Additional Reading/Resources

• https://www.bloomberg.com/news/articles/2023-11-02/housing-crisis-gets-worse-for-americans-on-mortgage-lock-in-effect?srnd=premium
• https://car-co.stats.showingtime.com/docs/mmi/x/Statewide?src=map
• https://www.wsj.com/business/the-rising-price-of-cardboard-a-positive-sign-for-the-economy-08908d0f