Headlines

What’s new in the world of Real Estate

• Investment funds are bullish on real estate in 2024

• Cities are looking to convert unused office space into apartments

• Fractional platform Here.co shut down

• Mortgage purchase applications are up

Plus: Yet another real estate commission lawsuit, more evidence that rents are falling, and more.

Listing of the week: A former church in Philadelphia.

Performance

Market Updates

Real estate investments by top investment funds hit a 12-month high. The Bank of America Global Fund Manager Survey showed that these funds - with a combined $256 billion of assets under management - are anticipating lower interest rates and lower bond yields this year and are acting accordingly by investing in real estate, cash and commodities. Conversely, they are cutting their investments into bonds, banks and insurance companies. A record 91% of the fund managers are expecting a drop in short-term interest rates, which will likely be a boon to the real estate market.

As offices remains vacant, cities want to convert them to apartments. Major cities like New York, San Francisco and Washington D.C. are seeing high vacancy rates in office buildings and are now incentivizing developers to convert unused space into apartments to stem the current housing shortages each city faces. However, only around 10-15% of office buildings nationwide are realistic candidates for conversion due to many factors, including the lack of windows and plumbing for interior units. The cost can also be prohibitive and only makes sense if the conversion can result in luxury units that may still need generous amenities to attract tenants. Still, with hybrid work seeming like it’s here to stay, finding a use for vacant office buildings benefits everyone.

Fractional real estate investment platform Here.co shut down operations. The company allowed investors to buy shares in short-term properties and raised over $10 million from investors to purchase 13 properties in the past two years. They also raised a $3.5 million seed round in July 2022, but reported a net loss of $56,374 on their properties for the six months ending July 2023. Considering the additional cost of operating the company, it is not a surprise they have chosen to shutter their platform, though apparently the company is continuing in an unknown form. Their statement blamed the “current interest rate environment and economic conditions” and are aiming to sell all their properties and return net proceeds to investors within the next six months. This news followed the shutdown last week of short-term rental management company Frontdesk, highlighting the struggles of startups in the short-term rental industry.

Both homebuyer demand (+5%) and mortgage applications (+3%) are up this month. According to Redfin’s Housing Market Update, as mortgage rates have held steady, more buyers are entering the market, though both metrics are still down from this time last year. New listings rose by 9%, but pending sales were still down 2.5%, though that is the smallest monthly decline since January 2022. The median sale price rose by 4.1% year-over-year, with the biggest increases in West Palm Beach, FL, Newark, NJ and Anaheim, CA.