Headlines

What’s new in the world of Real Estate

• Single family rentals are all the rage

• The best buyer’s markets

• Office vacancies reach a new high

• Common goes bankrupt

Plus: Housing values hit an all-time high, sellers are cutting prices, Gen Z wants affordable housing, and more.

Listing of the week: A lot that is truly underwater.

Performance

_{as of market close on June 3}

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Market Updates

When it’s difficult for people to buy a home, there is more demand to rent one. As younger generations start having children and want more space and good school districts, they increasingly want to live in single-family homes. Due to low inventory, rising prices and high mortgage rates, many end up renting. This makes single family homes an attractive option for investors, both individual and institutional. Which in turn keeps prices high and supply restricted, creating a cyclical effect. Developers are now building single family houses purely to rent, rather than to sell, with built-for-rent housing starts hitting a record-high. What is good for investors tends not to be good for potential buyers and renters, but perhaps the increased supply will bring a better equilibrium to the market.

Two Florida cities top the list of the best buyer’s markets in the country. Realtor.com looked at the metro areas with homes that sold for the lowest amount compared to their original listing price. The top ten areas saw an average sales price of 9% below the listing price, compared to a nationwide of 3% below. Given that some of the cities on the list — like Key West, FL and Breckenridge, CO — have median listing prices above $1 million, it’s not necessarily a list of affordable locations, just those where sellers may have been overvaluing their properties.

The commercial real estate market is facing rising vacancy rates and slowing rent growth. A report from the National Association of Realtors (NAR) showed office vacancies rising to 13.8% nationwide, a new all-time high, while demand for industrial and retail spaces slows. On the other hand, more renters have led to higher demand for multifamily apartment buildings, and hotel occupancy rates have also stabilized. Meanwhile, a new report from CBRE showed the average downtown office vacancy rate in urban areas has hit a record-high 19.3%. The one bright spot is that mixed-use districts in the biggest cities show far lower vacancy rates than downtown districts. This suggests a potential road to recovery, as many cities are converting vacant downtown office buildings into residential units, hoping to create more vibrant, mixed-use neighborhoods.

Co-living startup Common filed for bankruptcy. The New York-based company raised $113 million of venture capital funding since its 2015 founding, but today holds assets of only $10 million with liabilities above $50 million. It operates more than 5,200 units in 12 cities, and it is unclear what will happen to tenants. Like WeWork in the office sector, Common made agreements with landlords, then sub-divided and sub-leased units to its tenants while never owning property itself. While its failure could be seen as an indictment of the space, other co-living models could potentially prove successful if operators share in property appreciation upside.

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