Dad | Data Analyst | Real Estate Investor l $BTC Maximalist
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Joined October 2010
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October deficit ..
The US gov't will try to print and borrow it's way out of this. Keep STACKING SATS.
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Q3 commercial real estate sales hit $143B, a four-year Q3 high, per Avison Young and MSCI. Apartments led on volume, but sales grew only 3% and values fell 4.6% year over year. Phoenix and Denver lagged.
Everything else is rebounding. Apartments aren't yet. Worth a look.
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1/ CBRE thinks cap rates could rise another 40 to 60 bps as the 10-year Treasury nears 5%. The gap between cap rates and Treasuries is about 160 bps, a record low.
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2/ The Fed held at 3.75% to 4% in late October after hiking in September. Chair Warsh says inflation is still too high, so a December hike is on the table.
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National apartment rent growth turned positive for the first time since mid-2023. Year over year it's up 0.1%. On a $1,384 median rent, that's about a dollar.
MAA just cut its 2026 guidance on slow Sun Belt rent recovery. Underwrite the rent bumps accordingly.
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CMBS distress hit 11.2% in October, per CRED iQ. Of the $4.5B that went newly distressed, 93% was loans at or near maturity. Some of those buildings are 97% to 99% occupied.
A full building doesn't pay off a loan that comes due at the wrong time.
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CBRE's CEO thinks rate volatility could keep investors on the sidelines until the second half of 2027. Meanwhile CBRE's own US property sales were up 37% last quarter.
Somebody's still buying. I'd rather spend the wait underwriting than refreshing rate forecasts.
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30-year mortgage at 7.6%. Pending home sales down 7.3% in September. Single-family permits at a 3.5-year low.
A lot of would-be buyers are renewing their lease instead. Bad news for their Zillow habit, decent news for apartment demand.
JLL now treats 3-6% yearly construction cost growth as the baseline. Before 2020 it was 2-3%. Costs are already up 25-30% over five years.
Every year that holds, a decent existing building bought below replacement cost looks a little smarter.
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About 82,000 apartments were delivered in Q3, the smallest third quarter since 2019. September starts were down 25.9% from a year ago and about half the 2023 peak.
Fundamentals are getting better. They still won't rescue a deal that was underwritten badly.
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Wally Taylor retweeted
The good news? We almost never have a back to back red October and red November for the S&P 500. The bad news, the last time we did was in 2008. Those numbers were -9% and -16%. This year it's been -0.9% and -1.3% so still very different for now.
Wally Taylor retweeted
Florida elected a Republican governor who backed a U.S. Bitcoin reserve. Texas elected a Democratic senator who voted to create one for his state. The case for holding Bitcoin crosses party lines.
1/ A $1.3B Blackstone apartment CMBS loan went to special servicing after it matured in October. The collateral shrank from 21 properties to 6, with $517.7M still owed. They got a 3-month forbearance to sell the rest.
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2/ Discounted apartment sales are up 62.8% through September. Distressed deals are still only 2.4% of total volume, though, so nobody's giving buildings away.
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