Market Conditions That Shift Property Value

Zillow's New Move: Why Climate Scores Could Reshape Property Values 🏠 The world's largest real estate platform just added climate risk scores to every listing. Why? Because 80% of buyers now demand this data before purchasing. This isn't just another website update - it's a major market signal about the future of property values. Let's decode what this means: 1. The Market Reality • Insurance costs up 50% in high-risk areas since 2020 • Over half of listings face extreme heat exposure • 17% at major wildfire risk • 13% at major flood risk 2. The Buyer Shift • Climate data now essential to purchase decisions • First-time buyers prioritizing long-term climate safety • Insurance availability becoming deal-breaker • Risk scores affecting property negotiations 3. The Investment Impact 💡 • Banks updating lending criteria • Property values shifting based on risk exposure • New market for climate-resilient upgrades • Insurance companies restricting coverage in vulnerable areas Here's why this matters: When climate risk becomes visible on every property listing, it forces the market to properly price these risks. This could trigger the largest repricing of real estate assets in modern history. Question for real estate professionals: How are you preparing clients for this new reality where climate risk directly impacts property values? #RealEstate #ClimateRisk #PropertyValues #MarketSignals

After 15+ years as a commercial real estate lender, I’ve learned to spot a risky market in under 5 minutes. Here are the 5 market traits I look for in every deal we consider: Most investors jump straight into analyzing the property. I like to start with the market. Because no matter how good the deal looks on paper, if the market is weak, the deal could experience value erosion and exit risk. Here’s what I look for before I even open the underwriting model: #𝟭 𝗗𝗶𝘃𝗲𝗿𝘀𝗲 𝗘𝗺𝗽𝗹𝗼𝘆𝗲𝗿𝘀 If a local economy relies too heavily on one industry, one downturn can wipe you out. For example, when I was lending, we tended to avoid deals in places like Michigan and Ohio because they were heavily tied to the auto industry. All it took was one recession and the tenants couldn’t pay rent. You want markets with a healthy mix of employers - tech, healthcare, education, logistics, manufacturing. That kind of diversity gives you stability. __ #𝟮 𝗠𝗲𝗱𝗶𝗮𝗻 𝗛𝗼𝘂𝘀𝗲𝗵𝗼𝗹𝗱 𝗜𝗻𝗰𝗼𝗺𝗲 $𝟱𝟬𝗞> In a value-add deal, you plan to raise rents. But if the local income doesn’t support those rents, it’s a risk. I want to know the median household income. Not the average household income. Median household income tells you what a “typical” household earns. Average household income can be distorted by wealthy households. If you’re planning to raise rents as part of a value-add strategy, you need to know whether the bulk of the local households can handle that increase. A good rule of thumb: → Rent should be no more than 30% of monthly median household income So if the median income is $50K/year, most households can typically afford ~$1,250/month in rent. __ #𝟯 𝗠𝗮𝗿𝗸𝗲𝘁 𝗧𝘆𝗽𝗲: 𝘀𝗲𝗰𝗼𝗻𝗱𝗮𝗿𝘆 𝗼𝗿 𝘁𝗲𝗿𝘁𝗶𝗮𝗿𝘆 When considering tertiary markets, I look for populations of 50,000+ and strong employment growth. They typically have: - less competition from big institutional buyers - higher cap rates which translates to better cash-on-cash returns - more immediate yield, especially for income-focused investors - potential for undervalued growth potential from population migration __ #𝟰 𝗣𝗼𝗽𝘂𝗹𝗮𝘁𝗶𝗼𝗻 𝗴𝗿𝗼𝘄𝘁𝗵 Population growth is a leading indicator of a market’s health and long-term viability. Rents and property values tend to rise faster in markets with strong population growth. Markets with population growth experience less rent volatility and fewer prolonged vacancies. __ #𝟱 𝗝𝗼𝗯 𝗚𝗿𝗼𝘄𝘁𝗵 More jobs = more people More people = more demand Simple as that. I usually check census.gov or bls.gov for trends in market data. Both should show you population growth trends and employment over recent years, supporting a growing renter pool. — Did I miss something? What’s 1 key market metric you look for?

There’s a significant shift happening that you should know about the commercial real estate market closely. Banks are starting to quietly sell off troubled real estate loans, trying to minimize their losses before things get worse. This is one of the earliest signs of distress brewing in the commercial real estate market—especially when it comes to office buildings. Here’s what’s happening: ➡️ Banks are dumping loans: ↳ Major banks like Deutsche Bank and Goldman Sachs are offloading their commercial real estate loan portfolios at discounted prices. ↳ They’re doing this quietly to avoid attracting too much attention. ➡️ Key deals are already underway: ↳ George Soros’ family office recently bought a delinquent mortgage on the Argonaut building in Manhattan. ↳ Fortress Investment Group purchased $1 billion in distressed office loans from Capital One. ➡️ Why it matters: ↳ U.S. banks currently hold around $2.5 trillion in commercial real estate loans. ↳ Billions of office building loans will mature in the next few years. The Bigger Picture: ➡️ Interest Rates & Vacancies are causing trouble: ↳ High interest rates are making refinancing difficult for property owners. ↳ Low occupancy rates, due to the shift toward remote work, are leaving office buildings half-empty. ➡️ Quiet Deals are happening behind the scenes: ↳ Banks are discreetly selling loans to select investors, avoiding too much attention. ↳ The frequency of these deals is rising, which shows deeper issues within the commercial real estate market. ➡️ This Is a huge opportunity for investors: ↳ There’s a chance to buy distressed loans at significant discounts. ↳ Prime properties in major markets like New York, San Francisco, and Boston are being sold for a fraction of their original value. ↳ If the market recovers, these assets could become highly valuable. What’s Coming Next: ➡️Expect More Defaults: ↳ With billions of dollars in loans maturing in the next two years, many property owners will struggle to meet payments. ↳ More distressed assets will become available, offering opportunities for those ready to invest. ➡️ The Market Is Heading Toward Trouble: ↳ While we’re not at 2008 crisis levels yet, the increasing number of distressed loan sales points to bigger issues. ↳ Bank are under pressure from regulators and shareholders to reduce their exposure to commercial real estate. As Michael Hamilton, a real estate expert, put it: “The general public doesn’t yet grasp the severity of the problem.” But the cracks are showing, and it’s just a matter of time before the full picture comes to light. Im curious to hear your thoughts on how this will impact the future of commercial investing and securing funding for deals. What changes or challenges do you foresee in the market as a result? 💰If you're working on larger deals needing at least $10M in debt and/or equity and are struggling with traditional lending, I'm here to help. Let's connect!

LOS ANGELES MULTIFAMILY VALUES CONTINUE TO DECLINE The Los Angeles multifamily real estate market has experienced notable shifts, influenced by evolving interest rates and rental trends. Recent data indicates that property values are adjusting downward, with some areas reflecting metrics reminiscent of the 2009 financial crisis. Mar Vista Observations: In the Mar Vista neighborhood, properties are trading at approximately an 11.9 Gross Rent Multiplier (GRM) and a 5.4% capitalization rate (broker cap). For instance, a non-rent-controlled 9-unit property on the Westside of Los Angeles is listed with these metrics, offering the potential for a 6.3% CAP at market rents (broker cap). Valley Add C Locations: In certain C-class locations within the San Fernando Valley, properties are being valued at around 10 times the annual rental income. This valuation aligns closely with the levels observed during the Global Financial Crisis of 2009. Market Dynamics: Several factors contribute to these valuation adjustments: Interest Rates: Fluctuations in interest rates have directly impacted borrowing costs, influencing property valuations and investor returns. Rental Trends: Flat rent growth in Los Angeles.