Real Estate

This time of year, EVERY YEAR, all of my clients, colleagues, friends, and family ask: "what is going to happen with real estate next year?!" So, here are my honest thoughts for 2024: Warning: I may not have a crystal ball, but I do have over 15 years of experience in selling luxury real estate with over $6B worth of transactions under my belt. However, it's still important to note that these are nothing more than educated guesses. 1. We are going to have even greater BIFURCATED MARKETS. Some industries are returning to pre-COVID patterns, while others are now permanently changed. As a result, there is significant interest in the repositioning of big box retail and commercial space. 2. Stemming from the increase in work from home, there will be more NATIONAL SEARCHES. People are now expanding their searches drastically. Rather than looking at comps in a building, neighborhood, or city, they're looking comps across multiple states! 3. SUBURBS are on the rise. This is driving up the demand for bigger homes with more amenities and privacy. Transaction volume is down by over 50% and listing volume is down by over 20%... yet median pricing is up by almost 5%. This creates more tax dollars for the suburbs, so if you're an investor, pay attention to what the municipalities are doing with that money (schools, restaurants, parks, etc.). 4. BRANDED RESIDENCES will be in strong demand. Since 2010, we've seen 40% growth in branded residences – and buyers have proven to be willing to pay a premium for them. 5. DOWNTOWNS built around professional workers will feel immense pressure. Don't get me wrong: Downtowns are not going to go away... but stemming from my 2nd and 3rd points, we are going to see even greater pressure on dense living spaces. 6. Investors are going to become BEARISH on real estate. I hesitate to talk about this because I'm in the real estate business... but with high interest rates, low supply, and low transaction volume, fewer investors are going to be looking to acquire property (in the near term!). 7. Prices are going to continue to... INCREASE! I know – this sounds crazy, right? The lack of inventory is going to continue, and it's going to keep prices high and growing. As the economy continues to do well and inventory stays locked, demand is going to continue to outpace supply. And if interest rates do come down... if you think prices are high now, just get ready. 8. Interest rates will actually STABILIZE. I don't think interest rates are going to plummet, but if unemployment stays low, the Fed will keep interest rates stable. – P.S. If you want to hear about each of these predictions in even MORE detail, check out my newest video on my second YouTube channel, More Ryan Serhant. – Every year can be the GREATEST year of your life. Remember, markets shouldn't dictate your outcomes. They should only dictate your strategy. Ready. Set. GO!

Here's the list of which markets added the most net new apartment renters in the first half of 2023. Any of these surprising? A few takeaways: 1) Huntsville, Alabama, is the nation's 99th largest apartment market (by unit count) yet added more net new renters than all but 14 U.S. metro areas -- all significantly larger markets. Most of that demand went toward new construction, as Huntsville is building like crazy. On a size-adjusted basis, Huntsville led the nation with a remarkable 11.9% supply expansion rate over the last year (amounting to 4,103 new units) and also leads the country with an ongoing construction expansion rate of 20.9% (amounting to 8,059 units). And with all that demand, Huntsville occupancy is surprisingly holding firm right at the U.S. average of 94.7% ... If you build it, they will come? 2) Sun Belt and Mountain region markets claimed 14 of the top 17 spots for net apartment absorption in the first half of 2023. Like with Huntsville, new construction tends to drive much of the net new demand. You can only absorb what is available, and it's often new supply that is most available. 3) Good numbers in Chicago, Washington DC and Northern New Jersey. New supply plays a role in these spots, too, especially in Jersey. But also solid fundamentals (relatively speaking) in all three right now. 4) The West Coast is noticeably absent from this list, and it's not immediately clear why that is. Interestingly (to me), SoCal struggled more than the Bay Area in the first half of 2023 -- suggesting it's not simply about tech sector layoffs. Three major SoCal markets saw negative absorption over the last six months (Los Angeles, Riverside and Orange County). The Bay Area markets remained in positive territory, but still produced unexcitingly tepid numbers -- and the same was true in Portland and Seattle. 5) One to watch going forward is Los Angeles, which recorded 1,716 net move-outs in the first half of 2023. It isn't getting the same watchful spotlight as San Francisco or Seattle, but occupancy there has slowly ticked down in every month since March 2022. Annualized rent growth is now under 1% and could go negative later this year. #multifamily #rentalhousing #apartments

🇷🇺 Russia’s “information confrontation” doctrine turbocharged with #AI: an analysis by #RUSI 🔹The decentralized, multilingual, actor-diverse nature of the Russian-aligned influence ecosystem means innovations or failures in one locale (e.g. a Telegram channel) can diffuse or morph across languages and geographies. 🔹ambition to dominate AI-mediated influence, but anxiety about dependency on Western tools and ideological control. Useful reminders in this report : ⚔️“information confrontation” (информационное противоборство) is conceptually treated as co-equal with conventional or nuclear conflict. 🤖 2019 national AI strategy commits Russia to global leadership in AI by 2030. 📲 domestic AI ecosystems fostered by the state (Sberbank’s GigaChat, Rostec for defense, and Yandex for general-purpose AI) under state coordination, via a National Centre for AI Development. 🤖main uses of AI : 🔺 coordination & alignment between hacktivists + state intelligence: hacktivist groups reference ties to GRU units 🔺Content automation & amplification: to generate fake articles, images, videos, social media posts & scale up messaging. 🔺Astroturfing / bot networks: automated accounts simulating debate or grassroots sentiment; staging dialogues between bots. 🔺Deepfakes & synthetic content: AI-generated articles mimicking Western news outlets 🔺 AI bots for moderation; chatbots modeled on authoritative figures Internal criticisms 🔸persistent criticisms / mistrust of domestic AI systems, regarding ideological bias and responsiveness, expressed by Russian-affiliated actors : Discontent with domestic AI systems: YandexGPT or Sber GigaChat too cautious, refuse to answer geopolitically sensitive questions (e.g. Crimea), or produce evasive responses. 🔸other users interpret the AI platforms’ reluctance to affirm state narratives (e.g. Crimea being Russian) as subversion or unpatriotic behavior. 🔸Users sometimes prefer Western AI tools (despite trust concerns) judged more capable, undermining the project of digital sovereignty. 🔸Poorly executed AI outputs are explicitly criticized: e.g. low-quality AI images or videos that fail to convincingly mimic reality degrade credibility. 🔸fear that adversaries may use deepfakes or AI content to discredit Russian or Wagner operations: Ukraine (or Western states) training their own neural networks to produce disinformation targeting Russian actors. Report based on : screening of tens of thousands of sources daily (e.g. Telegram channels, media, hacktivist forums) associated with Russian influence actors. Claudia Wallner Antonio Giustozzi @simon copeland

The Missing Middle is Still Missing: Why I Believe We Need More Than Just Luxury and LIHTC In most cities, we have two dominant housing models: -Luxury apartments with rooftop decks and garage parking, funded by private capital, marketed at the highest rent the market will bear. -Affordable housing financed through Low-Income Housing Tax Credits (LIHTC), often restricted to those earning 30%–60% of Area Median Income. What’s missing is everything in between. What is “Missing Middle Housing”? Missing Middle Housing refers to the types of homes that used to be common but have largely disappeared from new construction: -Duplexes -Fourplexes -Bungalow courts -Walk-up apartments above corner stores -Small multi-family homes in walkable neighborhoods -Creative infill developments These housing types fill a crucial need for working-class people, teachers, firefighters, baristas, social workers, and young families who don’t qualify for LIHTC housing but also can’t afford luxury rent or a down payment on a single-family home. Why It’s Still Missing The reason we don’t see more of this is not because there’s no demand. It’s because our systems actively work against it. Zoning laws that ban multi-family housing in most neighborhoods Parking requirements that inflate costs and reduce feasibility Financing models that favor large-scale over small-scale development Public resistance to change, often rooted in misinformation or exclusion Developers aren’t incentivized to build Missing Middle housing. Cities rarely streamline it. And when we talk about housing policy, this middle tier gets lost in the noise between high-end and deeply affordable. What We Need to Change *We need zoning that allows for gentle density. *We need capital that supports small-scale, context-sensitive development. *We need public conversations that value housing diversity as a community strength. We also need to stop pretending that LIHTC alone can solve our affordability crisis. It’s one tool. A powerful one, yes. But it cannot be the only strategy on the table. It’s Time to Build the Middle When we build only for the top and the bottom, we leave out the majority of our communities. We erode economic mobility. We undermine walkability. We disconnect our neighborhoods from the people who hold them together. If we’re serious about equitable cities, we have to bring back the middle. Not just in price point, but in form, in access, and in who gets to live where.

We just released our Zonda New Home Market Update for February. What did we learn? -The spring selling season got off to a slow start. Sales were down 12% year-over-year in February and our Zonda Market Ranking was average for the month. -56% of new home communities offered incentives on to-be-built homes and 74% on quick move-in (QMI) supply. Publicly advertised incentives averaged 4% of local home prices nationally. -Home prices (excluding incentives) were largely flat across all price segments. -Total community count rose to the highest level since early-2021, up 5.7% year-over-year. -National QMIs totaled 33,420. -NEW THIS MONTH: There were 2.4 QMIs per community nationally, up from 1.9 this time last year. From now on, we will include QMIs per community in our report.   -The continued silver lining is the high-end market (map below). We just released a report to clients called The Current Confidence Crisis, which highlights a key risk for this buyer group. You can learn more here: https://lnkd.in/gKSVhmmh Sarah Bonnarens Trevor Tetzlaff Tim Sullivan Janelle Bourdon Bryan Glasshagel Evan F. Keith Hughes Rachael Edgerly CiAnn Blue Dan Fulton Shaun McCutcheon #housing #realestate #newhomes

I lost £35k on the sale of my first home because of one simple mistake. Don't make the same error as me: 1. Strategic timing matters. Sell in summer when your home looks its best and yards are in bloom. The real estate market fluctuates dramatically, so once you have an offer, move quickly toward closing. Our costly mistake? Pushing for a 6-month closing timeline, leaving too much time for market conditions to change. When market sentiment shifted, our buyer's lender reappraised the property lower. 2. Small investments yield big returns. Spend a few hundred dollars on fresh paint, minor repairs, and professional cleaning. These small touches can add thousands to your final sale price by creating a move-in-ready impression. The ROI on pre-sale improvements is often 5-10x your investment. Focus on kitchens and bathrooms - they sell homes faster and for more money than any other area. 3. Create competitive bidding situations. Host open houses during limited timeframes (1-2 hour windows). When multiple buyers view simultaneously, they see the competition firsthand. This perception of demand creates urgency and drives up offers. A good agent will leverage this energy to negotiate between multiple interested parties. I used Highcastle - and they were great. 4. Thoroughly verify your buyer's financing. Don't just accept "pre-approved" at face value. Our mistake was not digging deeper into our buyer's mortgage situation. The longer the process drags on, the more time for financing circumstances to change. Request proof of funds or a mortgage pre-approval letter. For those using Islamic home financing, this verification is even more critical as the process can involve additional steps. 5. Compress your timeline as much as possible. The probability of a sale falling through increases dramatically with time. Between agreement and closing, countless variables can change: mortgage rates, buyer circumstances, and home appraisals. Each week that passes represents a risk to your sale price. Push for 30-60 day closing windows whenever possible. The painful lesson: What began as a £35k premium evaporated because we opted for a distant closing date. Have you experienced something similar with real estate timing? Share your story below.

Perth's housing market... booming. CoreLogic Australia's HVI puts the monthly growth rate for Perth housing values at 1.6%, the highest in the nation. While the quarterly pace of capital gains has decelerated across most of the capitals, the rate of growth in Perth values has accelerated into October. It's hard to imagine such a rapid rate of growth could be sustained amid high interest rates (potentially higher next week), a cost of living crisis and deeply pessimistic consumer sentiment, but at the moment the fundamentals of the Perth housing market are pointing to further growth. Extremely low inventory levels against solid demand, record low vacancy rates and substantially lower affordability hurdles relative to the larger cities are the key factors driving this market. One to watch! You can see the full detail of CoreLogic's monthly Home Value Index here: https://lnkd.in/gQzgdMf4

The real estate industry has not internalized its imperative to retrofit buildings, but it will spur into action ones the fines start hitting. I'd say the industry has put off about two decades of energy maintenance on their assets. This delay makes sense, as owners and operators are typically consumed with short-term pressures and problems. The climate retrofit is not the "closest alligator," given everything going on in real estate. Historically, the need to decarbonize has come from tenant demand to decarbonize their entire supply chain (of which real estate is a part) or capital markets. However, real estate has never really paid money for owning an inefficient asset...until now. The introduction of carbon fines and carbon neutrality laws will likely lead to a shift in owner behavior, as they begin to see the financial impact of non-compliance on their bottom line. This is essentially a new form of real estate tax, which will come directly out of cash flow, so you can basically put a capitalization rate on it and roughly estimate the value destruction. The sheer amount of capex needed to address existing building stock is shocking to me, and in the conversations we have with real estate owners, through no fault of their own, they just don't know that number. But in the next two decades, that's would-be cash flow and distributions to investors that will be cannibalized. We've focused a lot on building decarbonization at Fifth Wall, so it was nice to talk to a smart, outsider point-of-view in Brad Hargreaves (Thesis Driven) about the industry's retrofitting imperative, as well as the interesting and non-venture ways to finance all of this. #proptech #realestate

I just discovered why 90% of proptech sales fail, and it has nothing to do with the product's features. It's because founders don't understand how real estate developers actually make money. Let me show you the secret math that drives every decision they make. I was catching up with a proptech founder last week. His client, a GP, passed on software that would cost him $500/month. "They said it's too expensive!" he told me, frustrated. Then I showed him the math through the GP's eyes: $500/month = $6k/year = $120k hit to exit value (at a 5% cap rate) With his 20% promote, that's $24k straight out of his pocket. But here's where it gets interesting: Most vendors think real estate is about NOI. It's not. It's about the waterfall. Here's how it actually works: First, debt gets paid. Then, LPs get their principal back + preferred return (usually 8%). Only THEN does the GP get their promote (typically 20% of remaining profits). I used to tell founders: "Pitch the NOI increase!" Now I say: "Show them how to get past their pref faster." Different message. 10x the conversion. The promote is everything. It's why a GP will obsess over a $500/month expense but drop $50k on a lobby upgrade without blinking. One adds to NOI (and helps hit the promote). The other is just a cost. Want to sell into real estate? Stop thinking like a SaaS founder. Start thinking like a GP chasing a promote. Here's the framework I teach: • Calculate the NOI impact • Multiply by the exit cap rate • Show how it affects the promote • Watch them lean forward in their chair Example: "Your current vacancies cost you $10k/month in lost NOI. At a 5% cap, that's $2.4M in lost exit value. With your 20% promote, you're leaving $480k on the table." Now you're speaking their language. Most proptech founders think their enemy is the status quo. Wrong. Your enemy is the 8% pref. Every dollar matters. Every timeline matters. Every basis point matters. Because missing that promote doesn't just hurt the deal. It hurts the GP personally. I spent years watching smart operators pass on great solutions. Turns out they weren't cheap. They were doing math that the vendors didn't understand. Now I teach founders to lead with the waterfall. Sales cycles cut in half. The best prospects? Opportunistic developers 2 years from exit. The worst? Core owners collecting management fees. Different math. Different motivations. Different pitch. Stop selling software. Start selling promotes. P.S. If you want to master this (plus 50+ other frameworks for selling into real estate), we cover all of it in our course on 19th May. Join us- link in the comments. But honestly? This waterfall trick alone will transform your sales. Try it tomorrow. Thank me later.

Interest rate shocks, post-pandemic behavioral shifts, and banking system stress have all converged on the US real estate market. We answer 6 of the most burning questions that are top of mind right now: Q1: What are our views on housing affordability? A: Housing affordability remains extremely stressed—and right now its significantly less expensive to rent vs. own in 48 of 50 of the largest markets. Q2: Will housing supply and demand balance out anytime soon? A: The housing market is likely to remain unbalanced for the foreseeable future in part due to the “lock-in effect”—80% of owners have a mortgage rate less than 5%. Q3: Will home prices head higher or lower in 2024? A: The supply-demand imbalance should keep a floor on home prices, and we see potential for modest price increases in 2024 at a national level. Q4: Is the worst yet to come for commercial real estate? A: Although distress is likely to increase, capital remaining available from banks and PE dry powder on the sidelines should help prevent a meltdown. Q5: Could office conversions be an answer to supply issues in big cities? A: While this looks like an ideal solution on the surface, it comes with its challenges—conversion potential is likely limited to 10–15% of existing office stock. Q6: Where could we see the best opportunities in real estate? A: We see the best CRE investment opportunities in residential rentals, industrial/warehouse, and distressed real estate debt over the next several years. Read our full report from Jonathan Woloshin, CFA for more.