January 2nd, 2024 - This Week in Real Estate

Author

Adam Katz
January 02, 2024

Headlines

Today is a special year-end edition, where we’ll look at the biggest stories from 2023 in:

  • Residential Real Estate

  • Commercial Real Estate

  • Farmland

Plus: The battle over real estate commissions, WeWork’s bankruptcy, and more.

Listing of the year: A entire replica Wild West town in Colorado.

2023 Performance

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The Year in Real Estate


Residential: While mortgage rates ended the year in a similar place to where they started, in October they rose to the highest they’d been in 23 years before declining quickly as 2023 came to a close. Record-low inventory led to all-time record highs in housing prices and the lowest sales pace in 14 years. The combination of high rates and high prices meant housing affordability hit a record-low. However, the recent drop in mortgage rates and the forecasted Federal Reserve interest rate cuts in 2024 points to a more optimistic outlook in the new year.

Commercial: The office vacancy rate reached a record-high, but other sectors performed better than expected. The retail vacancy rate fell to its lowest level since 2005 as the overall economy avoided a recession and consumer spending increased. Thanks to demand for buildings like warehouses and data centers, industrial real estate had a good 2023, though its momentum slowed by the end of the year. There are looming storm clouds, as the amount of debt on distressed commercial real estate jumped to $80 billion, reaching the highest level in the last decade. The value of office buildings dropped by an estimated 20% while hundreds of billions of dollars of loans are maturing and will need to be refinanced this year.

Farmland: After a record-breaking 2022, farmland prices - both land values and cash rents - continued to rise across the board, though at a lower pace. Institutional investors continued to turn to farmland as an inflation hedge, as the seven investment farms biggest now own 1.65 million acres (only around 0.2% of all farmland) in the U.S., and have seen a 8x growth in value in the last 15 years. Demand for farmland is likely to remain high, even as inflation wanes, and supply is limited, with climate change threatening as much as 30% of U.S. cropland over the next decade. Those factors are likely to continue driving prices upwards in 2024.

Listing of the Year

A property that caught our eye

(Zillow)

While it looked like it might be sold in November, you still have a chance to own this entire replica Old West town in Saguache, Colorado - about 3 hours southwest of Denver. The 320-acre property contains a 3-bed, 3-bath luxury lodge and a fully operational hotel & dance hall, along with a saloon, church, general store, barn and livery stable. It was originally listed at $4.7 million when it went on the market in January, but the price has been cut to $3.7 million and it appears to still be on the market.

Explore

More of the year’s biggest stories

  • A Missouri jury awarded $1.8 billion in damages to home sellers after finding realtors artificially inflated commissions - a verdict that could radically transform the market and led to further lawsuits in other states.

  • After a prolonged fall from grace, co-working company WeWork filed for bankruptcy, with negative repercussions for the commercial real estate world.

  • While only around 3% of U.S. farmland is owned by foreign investors, national security concerns are leading the government to propose legislation to regulate foreign ownership of U.S. farmland.

  • A congressional report found that wildfires destroy up to $337.5 billion in real estate value per year, as climate change becomes a huge concern to homeowners and real estate investors alike.

  • There was a shortage of top-tier office space as there has been increasing demand for new, modern, Class-A office buildings and construction activity was at its lowest level since 2011.

  • Venture Capital funding for property technology companies (proptech) dropped by 42.4% as part of a the larger VC market correction.

  • Vacation home sales in the U.S. continued to decline, due in large part to an inventory shortage, as demand still remains high.

  • That’s a wrap on 2023. Happy 2024!


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