Tag housing

TAMPA, Fla. – A recent report is unpacking the impacts of rising homeowners insurance costs in Florida. 

According to a new report from online realtor Redfin, nearly three-quarters (70.3%) of Florida homeowners say they or the area they live in have been affected by rising home insurance costs or changes in coverage (e.g., their insurer dropped them) in the past year. This compares with less than half (44.6%) of homeowners nationwide.

The report is based on a Redfin-commissioned survey in February of this year. The survey was fielded to 2,995 U.S. homeowners and renters.

“Insurance is top of mind for homeowners in Florida and California because those states are the epicenters of the insurance housing crisis,” Kenneth Applewhaite explained in an April 17 news release. 

Applewhaite elaborated that many homeowners have seen their premiums skyrocket, and some have lost coverage altogether because intensifying natural disaster risk has prompted many insurers to stop doing business in Florida and California. 

In the Sunshine State, 11 insurers have liquidated amid growing flood and storm risk,” he wrote. 

Mounting insurance costs and natural disasters are prompting some people to relocate. According to Redfin, in Florida, 11.9% of survey respondents who plan to move in the next year cited rising insurance costs as a reason — roughly twice the national share of 6.2%. 

But while some people are leaving disaster-prone areas, there are still more people moving in than out, a separate Redfin analysis found.

Homeowners living in areas where insurance premiums are surging are at risk of seeing their properties gain less value than homeowners in areas with stable premiums — and in some cases, they may even lose money,” said Redfin Chief Economist Daryl Fairweather. “Homes with low disaster risk and low insurance costs will likely become increasingly popular, and thus more valuable, as the dangers of climate change intensify.”

Condo prices in some parts of Florida have already started to fall amid an increase in insurance costs and HOA fees.

For professionals seeking quick and flexible financing solutions, hard money lenders are an invaluable source of opportunity in the real estate industry. While these lenders offer a lifeline for those looking to seize lucrative opportunities, navigating the terrain requires caution. In this article, we’ll shed light on common mistakes professionals make when borrowing from hard money lenders and provide valuable insights to steer clear of these pitfalls.

Mistake 1: Underestimating the True Cost

One prevalent mistake is underestimating the true cost of borrowing. Hard money loans often come with higher interest rates and fees compared to traditional financing options. Professionals must meticulously analyze the total cost of the loan, including interest rates, origination fees, and any other associated charges. By doing so, borrowers can make informed decisions about whether the investment remains profitable in the long run.

Tip: Always request a clear breakdown of all costs associated with the loan and carefully assess how they align with your overall financial strategy.

Mistake 2: Ignoring the Terms and Conditions

Another common pitfall is neglecting the fine print in the loan agreement. Hard money lenders may impose strict terms and conditions, such as short repayment periods and high penalties for default. Professionals must thoroughly review the terms, seeking clarification on any ambiguities. Ignoring these details can lead to financial stress and potential legal complications.

Mistake 3: Overleveraging Without a Cushion

One critical oversight is overleveraging without a financial cushion. Some borrowers make the mistake of borrowing the maximum amount without considering unexpected expenses or market fluctuations. This can lead to financial strain and increase the risk of default.

Tip: Build a financial cushion into your borrowing strategy, considering potential unforeseen expenses, market uncertainties, and other risk factors.

Mistake 4: Failing to Have an Exit Strategy

A crucial oversight is neglecting to establish a clear exit strategy. Hard money loans are typically short-term, and professionals need a well-thought-out plan for repayment. Without a viable exit strategy, borrowers may find themselves scrambling to secure alternative financing or facing unfavorable terms for an extension.

Tip: Develop a comprehensive exit strategy before obtaining the loan, considering potential challenges and outlining specific milestones for repayment.

Conclusion

Borrowing from hard money lenders can be a strategic move for professionals in real estate and investment. However, avoiding common mistakes is essential to ensure a positive and profitable experience. By thoroughly understanding the costs, scrutinizing the terms, being cautious about overleveraging, and having a well-defined exit strategy, professionals can navigate the terrain of hard money lending with confidence and success.

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.

---

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.

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

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.

---

READ ALSO: How Incentives Boost Office Conversions

---

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.

---

READ ALSO: Property Management Success: How AI Boosts Industrial

---

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.

---

READ ALSO: Mixed Shopping Cart for Retail

---

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!

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.

Fed raises rates 2200% The floor on housing prices drops

The real estate party cannot go on forever.  We are in a goldilocks scenario where prices are staying high even in the face of doubling mortgage rates.  Unfortunately, eventually the porridge cools off!    It is not possible with the steep rise in interest rates that there is not a misstep in the economy.    Will the billions in Wall Street money sitting on the sideline waiting for a reset keep housing prices high?  Why is the “floor” on real estate prices dropping?

This real estate cycle is radically different than 2008

This real estate cycle has some stark differences with 2008 and other prior cycles.  Typically the federal reserve raises rates quickly to contain runaway growth and inflation.  In this cycle, the federal reserve waited about a year too late before tapping the brakes which has allowed inflation and consumer spending to become entrenched.

Even as the federal has raised rates from .25% to 5.5% consumers keep buying cars, trips, etc…. keeping inflation well above the federal reserve target.  This strong consumer spending and high inflation changes this real estate cycle.

If we rewind to 2008 along with prior cycles, there was typically some event that led to a reset in prices.  In 2008, the raising of interest rates and large quantities of adjustable rate mortgages led to an enormous drop in real estate prices and a subsequent decline in employment.  The Federal reserve was then able to drop interest rates to help the economy recover.

In this cycle, with inflation running well above targets, dropping rates quickly is not in the cards as the goal is a “soft landing” where employment stays high and consumer spending does not pull back enormously.  Under this scenario interest rates stay much higher for considerably longer as the federal reserve will be hesitant to drop rates to early as inflation could reaccelerate.

Wall Street money puts a floor under real estate

I’ve said for a while that wall street buyers in this real estate cycle would put a “floor” under real estate prices as they deploy billions in capital.  Essentially the theory is that as real estate prices fall, big investment firms like Blackstone and countless others will “feast” on lowered real estate prices as they can buy huge quantities of single family homes for long term rentals.  As they deploy capital this will put a “floor” under real estate prices as their demand will halt too far of a drop in prices.

Federal reserve has changed where the floor is

As mentioned above, in this cycle we will not see a huge drop in interest rates quickly.  As interest rates remain high, the return on Capital that is required also remains high.  For example, if the federal funds rate stays at 5%, basically the risk free rate of investing, then investors will demand a higher rate of return for taking risks.  In this case an investor will require a higher return.  For example they would require a 6 % return or they could invest in other assets like the mortgage market with interest rates on 30 year loans north of 8% (as of this writing).

This rate of return is also known as the capitalization rate (cap rate) in commercial properties.  As wall street firms buy properties they are analyzing them based on their rate of return.

Remember the higher the cap rate the lower the price of the property is (inverse). We are seeing this play out in real life. Invitation, which owns about 83,000 houses, has been selling properties that have appreciated to the point that they are yielding less than 4% and putting the proceeds in the bank, where the cash is earning more than 5%.  (Wall Street Journal)

Prices have to fall substantially more in order to hit the floor

With rising interest rates this means cap rates have increased substantially.  As cap rates remain high the only solution to hit the rate of return is for prices to fall.  Below is an example of of how prices will for a single family home will be impacted by rising cap rates.

As you can see it will take a big price adjustment to get wall street money to move off the sidelines with interest rates remaining high.

Will prices really fall as much as the model above predicts?

I find it highly unlikely that we will see retail prices of homes fall 46% as this would put us on par with 2008 which is not in the cards at this point.  But, there will still be a drop in the 5-15% range is most probable.  At the same time large investors will focus on buying huge pools from banks, the FDIC, etc… as the financial sector hits headwinds.

Summary

Before this recession, I thought that Wall street would put a floor under prices so that they didn’t fall too far.  Unfortunately in a high rate environment this assumption has been turned on its head.  Based on interest rates staying higher for longer this means that Wall Street will not bail out the housing market until prices fall considerably (40% or so to make the returns work).  Although I don’t foresee a drop this steep, it does portend that the market will be able to fall quite a way before Wall street comes to the rescue.

Currently my base case is a 5-15% drop depending on market, price point, etc… but I don’t see a 2008 repeat in the near future.  The wild card is how high the federal reserve needs to take rates and how long they have to hold them high before something bad breaks in the economy.  So far, it looks like a moderate recession, but as with anything in economics, there are a ton of variables that could radically alter this assumption.  In the meantime, I’m confident prices will have a reset in early 2024 due to higher rates so plan accordingly.

Ever stumbled upon a quaint café in an unexpected place and thought, “How did I not know about this?” The world of real estate has its own hidden cafes—secondary and tertiary markets. But why are they like hidden gems, and how can you, as an investor, benefit from them? Let’s unpack it:

• Primary Markets: These are big players such as Dallas, LA, or Chicago.
• Secondary Markets: Cities like Austin, Nashville, and Portland, which have been gaining traction.
• Tertiary Markets: Think of areas like Bend, Oregon, or Macon, Georgia. They may be talked about less, but they’re brimming with potential.

Considering a fix-and-flip project or rental investment properties in these lesser-sung regions? Let’s weigh some of the pros and cons.

Upsides of investing in secondary and tertiary markets

Cost-efficient entry

These markets are often in regions that haven’t experienced the rapid urbanization and commercialization in primary cities. Without the hype and media attention driving up property prices, entry costs remain relatively low. This allows investors to make strategic, calculated investments without the heavy financial weight that prime markets often demand. A savvy investor can view this as an opportunity to diversify their portfolio, leveraging the affordability of these markets.

Less crowd, more space

Most often in the limelight, primary markets attract domestic and international investors. In contrast, secondary and tertiary markets remain relatively under the radar.

The charm of this understated focus is the freedom it offers. Real estate investors can take their time to understand a property, negotiate without the pressure of multiple counter-offers, and finalize deals in a less aggressive environment. This space for deliberation can lead to more informed and, ultimately, profitable decisions.

Promising returns

The untapped nature of these markets means there’s substantial room for growth. The ROI here isn’t just about immediate profits. It’s also about long-term appreciation.

As these markets mature and attract more attention, early investors can see substantial returns on their initial investments. To succeed in these markets, look for properties that can increase in value over time as the market changes.

Steady growth

Primary markets are influenced by global trends and international investments. On the other hand, secondary and tertiary markets typically experience growth as a result of local factors.

This means growth is often steadier and more predictable, grounded in local economic and infrastructural developments. For an investor, this translates to more sustainable, organic appreciation. Monitoring local news, understanding community plans, and keeping an ear to the ground can provide valuable insights into potential growth trajectories.

Challenges of investing in secondary and tertiary markets

Potentially more demanding research

The relatively low-profile nature of these markets means that traditional real estate research tools might not always offer comprehensive data. This challenge, however, is also an invitation for investors to innovate. Engaging with local realtors, joining community forums, and even connecting with residents can offer invaluable insights. Immersive research helps choose properties and understand local culture, preferences, and long-term investment viability.

More gradual appreciation

These markets are influenced by local factors. So, the speed of growth may not be as fast as the rapid increases seen in top markets.

However, slow and steady growth can be a blessing in disguise. It gives investors the time to adapt, make further investments, or even exit if they foresee a plateau. Recognizing the steady nature of these markets is essential to setting realistic expectations and crafting a strategic investment plan.

Networking nuances

The bustling real estate events and seminars are less frequent here, but that shouldn’t deter the passionate investor. Embrace this as an opportunity to pioneer. Host local meetups, collaborate with community leaders, or even establish digital forums for like-minded investors targeting these markets. By taking the initiative, you not only build a network but potentially position yourself as a thought leader in the space.

Market variability

These markets can be sensitive to local economic shifts. A significant employer downsizing or a local industry experiencing a downturn can have palpable effects.

But with challenge comes opportunity. Staying informed about local happenings can allow proactive investors to pivot strategies, hedge risks, and even identify new avenues for investment. Regular engagement with local businesses and economic forums can be invaluable.

Taking the plunge: Market research and tips for new local market investments

It’s pivotal to acknowledge the importance of thorough market research when considering investments in secondary and tertiary markets. Venturing into these lesser-known territories requires a tailored approach. So, where should you start?

• Local Expertise: Building relationships with local real estate agents or brokers can offer unique insights that standard market reports might miss. They have their fingers on the pulse of the local community, understanding the intricacies and trends that define these markets.
• Community Forums & Social Media: Engage in local online forums or social media groups. These platforms have valuable information about neighborhood developments, upcoming projects, and local events that can affect property values.
• Visit In-Person: Nothing beats an on-ground visit. Walk the neighborhoods, visit local businesses, and strike up conversations with residents. This will show you the community spirit and help you understand how many people want to rent or buy renovated properties.
• Assess Local Amenities: Look for signs of growth. Are new schools being built? Are there parks and recreational areas? What about public transport facilities? These can be indicators of a budding community, which can be especially attractive for rental investments.
• Stay Updated: Once you’ve gathered your initial insights, it’s essential to keep updating your knowledge. Markets evolve, and what’s true today might change in a few months. Set up Google alerts, subscribe to local news outlets, and keep in touch with your local connections.

Venturing into a new market also means adapting your investment strategies to align with local demands. For fix-and-flip projects, understanding the local architectural preferences, popular home features, or even favored color palettes can be the difference between a property that sells instantly and one that lingers on the market.

For rentals, it’s about understanding the demographics. Are potential tenants young professionals, families, or perhaps retirees? Each group has unique needs, from proximity to schools to easy access to nightlife.

Aside from conducting market research, it is crucial to find a reliable lending partner. One that has a proven track record and expertise in the local market.

That’s where Muevo comes in

At Muevo, we’re changing the real estate financing game. Our presence in 50 states plus DC has equipped us with diverse market insights. We’ve seen the aspirations of investors in primary cities and the untapped passion of those in secondary and tertiary ones. This broad spectrum of experience allows us to offer tailored financing solutions, from Fix and Flip/Bridge Loans to DSCR Rental and Rental Portfolio Loans.

We combine the agility of technology with human expertise, ensuring you close deals faster, enjoy competitive rates and have our unwavering support in every step.

Wrapping up

Exploring secondary and tertiary markets means embracing both the challenges and opportunities they present. The key? Knowledge, diligence, and a reliable partner in your corner. As the landscape of real estate investing evolves, staying informed and adaptable can be your greatest asset.

So, whether you’re diving into the deep end or just dipping your toes, remember every market has its unique story. Happy investing, and here’s to uncovering the next great opportunity!

Real estate investing has gained popularity in recent years — perhaps because the asset is a well-known hedge against inflation. But according to Moody’s Analytics, it’s not all sunshine and rainbows.

Data from Moody’s Analytics reported by Bloomberg revealed that commercial real estate prices in the U.S. fell in the first quarter of 2023, marking the first decline since 2011.

Courthouse records of transactions analyzed by Moody’s showed a drop of less than 1% in the commercial real estate market during the quarter. Multifamily residences and office buildings were the key sectors driving this decline, according to the report.

And this could be just the beginning. Moody’s Analytics Chief Economist Mark Zandi warned that “lots more price declines are coming.”

Don’t miss:

• Elon Musk Is Bullish On Austin. Here’s How To Invest In The City’s Growth Before He Floods It With New Tech Workers
• Want To Grow Your Wealth Passively? These High-Yield Real Estate Notes Might Be Your Holy Grail

Delinquencies And Defaults

Zandi explained the reasoning behind his bearish outlook on Twitter.

The economist pointed out that demand for commercial real estate is weak because of more people working remotely and shopping online. A substantial number of multifamily units are under construction. Meanwhile, it’s challenging to obtain credit for refinancing and purchasing properties.

As a result, Zandi said commercial real estate prices are “expected to be off 10% peak-to-trough by mid-decade.”

And borrowers will likely face difficulties in meeting payment obligations.

“CRE loan delinquencies and defaults are sure to increase, causing agita for the banking system,” Zandi said in a tweet.

Zandi also mentioned that rising delinquencies and defaults “shouldn’t be the catalyst for a revival of the banking crisis” because property owners have built up “ample equity” as a result of the substantial price gains during the pandemic.

Office Vs. Housing

Zandi isn’t the only expert to sound the alarm.

During an interview with former Fox News personality Tucker Carlson, Tesla Inc. CEO Elon Musk issued a bleak warning regarding commercial real estate.

“We really haven’t seen the commercial real estate shoe drop. That’s more like an anvil, not a shoe,” Musk said. “So the stuff we’ve seen thus far actually hasn’t even — it’s only slightly real estate portfolio degradation. But that will become a very serious thing later this year, in my view.”

He argued that the work-from-home trend has substantially reduced the use of office buildings around the world. And that does not bode well for the segment.

“Almost all cities at this point have record vacancies of commercial real estate,” Musk said.

Billionaire investor Stanley Druckenmiller also highlighted the challenges facing office buildings at the 2023 Sohn Investment Conference.

When discussing how the median regional bank has 43% of its loans in commercial real estate, Druckenmiller pointed out that “around 40% of that is in office.”

And because of the Great Resignation and more people working from home, he said, “We have a higher vacancy rate than we had in 2008.”

But it’s a different story for housing.

“Housing has obviously gone down dramatically given the 500 basis-point increase in interest rates,” Druckenmiller said.

“But unlike [2007 and 2008], we actually have a structural shortage in single-family homes going into this. So if things got bad enough, I could actually see housing — which is about the last thing you would think of intuitively — could be a big beneficiary on the way out.”

The reality is, elevated home prices and high mortgage rates mean owning a home is less feasible. And when people can’t afford to buy a home, renting becomes the only option. This creates a stable rental income stream for landlords.

The best part? It’s easy for retail investors to invest in housing — and you don’t actually need to buy a house to do it. There are publicly traded real estate investment trusts that own income-producing properties and pay dividends to shareholders. And if you don’t like the stock market’s volatility, there are crowdfunding platforms that allow retail investors to invest directly in residential real estate with as little as $100 through the private market.

Read next:

• While REITs Are Struggling, Private Market Real Estate Pulls In Huge Returns
• ‘People-First’ Real Estate Fund Shares Rent With Tenants While Generating Strong Returns For Investors

Don’t miss real-time alerts on your stocks – join Benzinga Profor free! Try the tool that will help you invest smarter, faster, and better.

This article ‘Lots More Price Declines Are Coming’: Moody’s Chief Economist Sounds Alarm On Commercial Real Estate, Warns That Loan Defaults Are ‘Sure To Increase’ originally appeared on Benzinga.com