Headlines

What’s new in the world of Real Estate

• Where to buy on a tight budget

• Office defaults are at a 12-year high

• Renters don’t think they will ever buy

• Concerns over BREIT

Plus: Community solar projects, farmland prices, overvalued markets, and more.

Listing of the week: A Santa Barbara seminary.

Performance

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Market Updates

Pittsburgh ranked as the #1 market for budget-minded buyers. A report from Realtor.com looked at the places in the country where people who earn under $100,000 can still afford a typical home in the metro area. Fourteen of the top 50 metro areas qualify, assuming a 20% down payment, a 7% mortgage rate and a 30% spending cap relative to income. Buyers only need an annual income of $67,000 to afford the median house in Pittsburgh, with fellow Rust Belt cities Detroit and Cleveland rounding out the top three. As other cities become less affordable, demand for property in these areas could continue to grow.

More than $38 billion worth of office buildings are at risk of default. This represents the highest mark since 2012, and with interest rates rising and demand for office space declining, there could be even more distressed assets moving forward. Just 35% of office loans that were converted into mortgage-backed securities were paid off last year, compared to 90% in 2021. As more loans made during the lower-interest rate environment come due, Moody’s projects that 73% will have trouble refinancing, which could lead to even more struggles for the sector.

Only 40% of renters think that they will ever be able to afford a home. This is according to an annual survey from The Federal Reserve Bank of New York, and is the lowest mark since the survey began in 2014. Additionally, 74% of renters felt that getting a mortgage is somewhat or very difficult, a sharp rise from 2021, when only 50% felt that way. Overall, 67% of respondents felt that buying property in their area was a good or very good investment, and they expect home prices to rise by 5.1% in the next year. This shows that demand hasn’t subsided, but pessimism has grown in the face of limited supply and higher mortgage rates.

There are growing questions about BREIT’s valuation practices. Both Business Insider and the New York Times wrote about Wall Street’s growing concern about the performance of Blackstone’s massive private REIT that targets individual investors. While the commercial real estate market has struggled, BREIT has supposedly been significantly outperforming the market and comparable funds. Both articles point to the conflict of interest present in BREIT’s practice of determining its own net asset value (NAV) on a monthly basis. This raises questions about the true level of its performance, with one analysis finding that BREIT is overstating its NAV by more than 55%. Also concerning is its past inability to pay dividends and redemption requests without raising money from new investors, leading one hedge fund partner to call it “the absolute definition of a Ponzi scheme.”