Headlines

What’s new in the world of Real Estate

• Climate change is affecting coastal real estate

• Zillow forecasts a market downturn

• Home sales close to a record low

• Industrial vacancies rise

Plus: Markets facing downturns, WeWork is back, condo insurance is spiking, and more.

Listing of the week: A 470,000 square-foot mall in Massachusetts.

Performance

_{as of market close on June 17}

Partner

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Market Updates

Beachfront property across the country is being affected by climate change. With sea levels rising, and storms increasing in frequency and intensity, some previously luxury real estate is being wiped away by flooding and erosion. Just on the East and Gulf coasts, there are an estimated $100 billion worth of real estate facing significant flood risk. Many luxury communities, such as Nantucket and Montauk, are facing difficult decisions on which areas to protect and how to do it with the tax base diminishing due to declining property values. For investors, it is a reminder that the long-term effects of climate change need to be considered when evaluating where to buy..

Zillow sees home prices dropping by 1.4% over the next 12 months. While they expect prices to rise slightly through the end of 2024, they anticipate a continuing increase in new listings that will push prices down through the first half of 2025. New listings were up 8% month over month in May, with overall inventory up 22% year over year. While the Zillow Home Value Index rose in May, it did so at a slower pace than it did in April. Supply is slowly catching up to demand and prices could flatten out or decline.

Home sales fell by 1.7% in May and neared historic lows. Only two months in the past decade have seen fewer home sales, as high prices, low supply and high interest rates continue to stall the market. In an effort to boost sales, 19.2% of homes for sale have seen a price cut, though the median home sale price is still up 5.1% year over year. Meanwhile, more than 60% of listings are sitting on the market for over 30 days without going into contract, and more than 40% are languishing for over 60 days. The increase in “stale listings” reflects a slow market, but is also an indication that buyers and sellers have different ideas of what houses should be valued at in the current environment.

Industrial real estate is starting to see higher vacancy rates. After spending much of the past few years as the standout performer among commercial asset classes, the industrial market is slowing down. This is due in large part to a construction boom that has created new supply that is just coming onto the market. This has resulted in a disconnect between owners, who are expecting higher rents, and renters, who have more inventory to choose from. It is not just leases that are down, but sales as well, as the market has not been insulated from the higher interest rate environment.