Headlines

What’s new in the world of Real Estate

• A prominent Wall Street short seller took aim at Blackstone’s Mortgage Trust

• Mortgage rates dropped to their lowest point in four months

• Zillow’s November Housing Market Report tilted towards buyers

• J.P. Morgan released their 2024 commercial real estate outlook

Plus: A look back at 2023’s housing market, Adam Neumann is back, and more

Listing of the week: A Pennsylvania B&B from the early 1700s

Market Updates

Short-selling hedge fund Muddy Waters took out a large bet against the Blackstone Mortgage Trust (BXMT). The fund’s CEO, Carson Block, explained that he believes that the trust’s exposure to office building debt has led to a lot of “rot in its book”. He also believes that many of the borrowers whose loans make up the trust won’t be able to make full payments and the underlying buildings are now worth less than the loan value. Essentially, Block is betting against large borrowers of office properties and that Blackstone is heavily exposed to them. Blackstone, predictably, pushed back on those assertions, saying that they have a record amount of liquid reserves and had no problem covering its latest dividend. Shares in the publicly traded trust immediately fell 8%, but have rebounded slightly since, and are now trading around 3% lower than they had been prior to the short.

30 year fixed mortgage rates fell to their lowest range since August. With inflation rates staying steady and the Federal Reserve expected to keep rates where they are when they meet this week, there is some optimism that mortgage rates will finally fall back to a more affordable range. Redfin found that the median housing payment has fallen to $2,561 - a decrease of $177 since the all-time high in October. Additionally, mortgage applications have increased by 15% and new listings are up by 7%, and you can draw a pretty clear line between rates decreasing and market activity heating up.

Zillow’s Home Value Index fell for the third consecutive month. The falling prices along with lower mortgage rates and more plentiful price cuts have made the market for affordable for buyers than it has been in quite some time. Housing inventory is still low but trending towards more normal levels, though there is still strong competition for desirable listings. The largest monthly, and yearly, drops in housing prices have come in New Orleans, Austin and San Antonio, which are giving back their pandemic-era gains.

J.P. Morgan’s 2024 outlook for commercial real estate sees strength in multifamily and neighborhood retail. It also shares the near-universal outlook that office buildings face an uncertain future as vacancy rates rise and interest rates remain high. It notes that while industrial real estate has continued to perform well, there are some signs that the performance is softening. Investors into all sectors of commercial real estate need to take into account rising costs, particularly for property insurance as well as labor and materials for maintenance and renovation. Finally, as with all downturns in markets, there will be opportunities available and savvy investors with access to cash could take advantage.