Dad | Data Analyst | Real Estate Investor l $BTC Maximalist
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Joined October 2010
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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.
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.
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.
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.
Rent concessions are on 14.5% of stabilized units, down from 17% in May. In 2010 it was half of all units.
The landlords still offering one are giving about 5.8 weeks free, the deepest in 15+ years. Fewer of them are desperate. The ones who are, really are.
NMHC's October survey of 130 multifamily execs: Debt Financing Index fell from 46 in July to 10. Equity fell from 44 to 17. Sales volume from 46 to 22.
The apartments are still mostly full. Getting a loan is the hard part right now.
National apartment rents are up 0.9% year over year. First positive annual number since Q2 2025.
Small number. But I've spent the last year underwriting flat or falling rents, so I'll take it.
Wally Taylor retweeted
LeBron fan: “Michael Jordan only won scoring titles because he led the league in FGA. He also led the league in missed shots.”
2 billion NBA fans: “…………… sigh”
Phoenix absorbed 17,000 apartment units in the first half of the year. Sun Belt construction starts are down 75% from the 2022 peak.
My local market might get tight by 2028. My kids' Halloween candy supply will be gone by Monday.
Your sponsor extended the loan. Four questions before you panic:
Was it in the business plan?
Is the lender extending from strength or as a favor?
Did the sponsor tell you first?
Is the equity above you intact?
A timeline change you can underwrite. A structural one, maybe not.
Apartment values are down 4% year over year and 22% below the 2022 peak.
Tempting to call that a sale. With Treasuries over 5%, I care more about whether the income grows than how far below peak I bought.
1/ A sponsor is buying a 318-unit Class A building in Houston for about $44M. The seller has about $68M in it. That's 36% below the seller's basis.
2/ Why it might make sense: Houston absorbed 7,008 units in Q2, 15.5% above its 5-year Q2 average, and units under construction are down 29.3% year over year.