Headlines

What’s new in the world of Real Estate

• Farmland values show steady gains

• Home price growth is slowing

• Property investor regrets

• A big change in commercial lending

Plus: A new episode of Smart Humans, is a rate cut coming?, a Listing of the Week update, and more.

Listing of the week: An iconic West Virginia hotel.

Performance

_{as of market close on August 5}

Partner

Hospitality Fund I: Investing in Hospitality in the Sun Belt Region

Hospitality Fund I targets premium branded select service and extended stay hotel properties in the Sun Belt region. This fund leverages industry expertise and market insights to generate returns for investors through strategic investments in the hospitality sector.

The Strategy:

Portfolio Assembly: Assemble a portfolio of Marriott-, Hilton-, Hyatt-, and IHG-branded limited-service, select-service, and extended-stay hotels in high-growth markets throughout the Sunbelt.

Strategic Acquisition: Acquire well-positioned hotels in need of brand-mandated property improvement plans that would benefit from well-capitalized, hands-on ownership and institutional management.

Market Focus: Target markets with strong demographic trends, high barriers to entry, and stable, recession-resistant demand generators such as airports, universities, medical centers, and major non-office employers. to maximize margin of safety and achieve attractive risk-adjusted returns.

Deal Size: Focus on deal sizes between $8 million and $20 million, targeting hotels with 100-150 rooms.

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Market Updates

Average cropland value rose 4.7% last year and is up 37% since 2020. This data comes from the USDA’s 2024 Land Values Summary, which measures the value of agricultural land in the country. In 2023, cropland values rose the most in Appalachia and the Southeast, and the least in the Northeast. Overall, farm real estate value rose by 5% last year and pasture value rose by 5.2%. Farmland has historically been a steady performer in times of high inflation, and it remains to be seen how it will fare as inflation slows.

Housing prices in May started to stagnate. The FHFA House Price Index was flat in May, and showed a year-over-year gain of 5.7%, down from prior months. The S&P Case-Shiller Index was up slightly, and showed a year-over-year gain of 5.9%, though down from the 2024 high of 6.5%. It also saw stronger performances from its 20-city and 10-city indices, as major metro areas are seeing their prices hold up better than smaller markets. It seems that high mortgage rates combined with rising inventory have finally started to slow the growth of housing prices.

A survey asked for the biggest regrets that property investors have. More than 90% of respondents reported they had lost money. The sample size is not representative. But it is instructive to any prospective investors to see what mistakes investors made and what they would do differently. First on the list is dealing with bad tenants, which can be mitigated by thorough screening. Second is overpaying for properties, a risk for any potential buyer, and requires studying the market along with finding a trustworthy local agent. Ultimately, preparation and research is key, and no one should jump into a field as complex as real estate investing without educating themselves first.

Fannie Mae and Freddie Mac are looking to enact stricter lending guidelines for commercial properties. The government-backed mortgage financing companies are tightening restrictions as commercial mortgage fraud comes to light due in part to falling market values. Among the reported new rules will be requirements that lenders independently verify a borrower’s financial information and do their own due diligence on the appraised value of a property. Additional difficulties for buyers in obtaining financing could slow down dealmaking activity in a space that is already struggling with limited demand.