May 7th 2024 - This Week in Real Estate

Brought to you by 3i Members, a global deal network for accomplished private investors


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.


Freddie Mac 30 Year Fixed
7.22% (+.05% weekly)
Dow Jones Real Estate Index
327.92 (+3.4% weekly)
319.98 (+3.2% weekly)
Green Street CPPI - May
121.8 (unchanged)


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Market Updates

View of downtown Pittsburgh from the top of Duquesne Incline.

Pittsburgh ranked as the #1 market for budget-minded buyers. A report from 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.”

Listing of the Week

A property that caught our eye

(Concierge Auctions)

The former St. Anthony’s seminary in Santa Barbara, California sits on an 11-acre lot with ocean views and includes six buildings with over 123,000 square feet of space, a basketball court, gardens, and a bell tower. The buildings include classrooms, offices, a recording studio, libraries, and a gymnasium. It is up for auction in June, with a list price of $50 million and a starting bid of $25 million.


by Lincoln Electric Systems, Lincoln Nebraska

  • Community solar and CRE: Solar power installations grew by 51% in 2023, and the number of community solar projects are expected to double by 2028. With this comes opportunities for commercial real estate owners, who can lease land or rooftop space to such projects, particularly in cities that have limited space for on-site solar.

  • Farmland prices plateauing: The rapid rise in prices over the past few years has started to slow down, and even flatten in parts of the country, but higher-quality land is still performing well.

  • A $3 billion CRE investment: Eldridge Industries partnered with AECOM Capital on a new venture planning to invest $3 billion in the next five years into commercial real estate, including on multifamily and student housing properties.

  • $550 million foreclosure: Fortress Investment Group is attempting an unusual U.C.C. foreclosure that targets Cohen Brothers’ realty by auctioning off equity shares of the company rather than targeting individual distressed properties.

  • Redfin settles: The online brokerage agreed to pay $9.25 million to settle their part of the recent broker commission lawsuits, but it is unclear which of its business practices, if any, will be changing.

  • Florida’s overvalued market: Eight of the thirteen most overvalued real estate markets in the country are in Florida, according to a study released by two Florida universities, which also found that a typical home in Florida is priced nearly 35% higher than its long-term trend.

The 15 most overvalued markets in the country (Florida Atlantic University)

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