Oakdale Capital

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?? Multifamily CMBS special servicing rates are on the rise! In September, the rate hit 6.07%, the highest in nearly 9 years... This marks the second straight month of increases, driven by challenges across commercial real estate. Office properties saw the largest spike, but multifamily properties aren't far behind. What does this mean? We could see more distressed assets and unique opportunities in the market ahead. Stay informed—change is happening! #RealEstate #CMBS #Multifamily #CRE #Investing

We've added more new apartments in the first nine months of 2024 than we did in ANY FULL CALENDAR YEAR since 1987! And more is on the way. Take in the view because many of us many never see numbers like this again in our careers. We're at the peaks. Here are the numbers: -- Completions in 2024 YTD total 438,259 units. That just barely eclipses 2023's full calendar year total. Prior to that, we hadn't built more than 400k units in any year since 1987. -- Completions in Q3 2024 alone approached 163k rental apartment units. That's MORE than nearly every FULL calendar year between 2003 to 2012 (with only exceptions being 2008-09, back when many people thought 200k units was a lot. Ha). -- At the moment, Q3'24 appears to be the top of the mountain. Peak quarterly supply. -- We're on track to add another 161k units in Q4'24. Some of those may get delayed into 2025, but the full calendar year total should still approach the 600k mark -- levels not seen since 1974. -- Supply will remain elevated through much of 2025 in most markets. Completions are then projected to plummet in late 2025 or early 2026, depending on the market, with abruptly dramatic drops likely across the country. -- Remember that the gap between starts and completions in 2024 YTD is the largest on record. We're completing a lot more than we're starting. Permits are way down nearly everywhere, too. All signs suggest we're not only going to see apartment supply drop off, but it could fall well below pre-COVID norms. -- It's difficult to see a scenario where we see these types of numbers again, barring a far bigger shock than any candidate or policymaker is proposing today. It took a perfect storm of factors (cheap debt, ultra-high demand, double-digit rent growth, cap rate compression across asset classes) to get supply at a 50-year high. And while starts will eventually pick back up as the market absorbs all this new product, it seems unlikely to re-accelerate to the levels we saw in this cycle. So, as I said above: Enjoy the view from the peaks because there's a good chance we won't see it again any time soon. #housing #apartments #multifamily #construction

?? Ever wish you had a rewind button? ?? Many would argue that 2011-2021 was the best decade multifamily real estate has ever seen. With falling interest rates, declining cap rates, and institutional ownership flooding the market, a lot of millionaires were made. ???? But we've come a long way from the peak of 2021-22. Transaction volume this year is at its lowest since the financial crisis, and multifamily prices have dropped 27% below their 2022 highs. Now, after two tough years, we're finally seeing some early signs of recovery. But the big question is: Are we on the verge of another bull run? Sure, interest rates may not drop as drastically as they did a decade ago… but the 10-year Treasury yield is nearly identical to where it was in 2009. Stranger things have happened. And let’s not forget the real issue: a massive housing shortage, especially in areas people want to live and that are affordable for the average person. ??? While it's still early, this could be a pivotal moment for multifamily investors. With interest rates and market shifts in play, the next couple of years could define the next decade. What do you think—is this the bottom for multifamily? #RealEstate #Multifamily #Investing #MarketTrends #PropertyInvestment #CRE

?? Commercial Real Estate Shows Signs of a Comeback! ?? According to CoStar, the commercial real estate market is starting to rebound, signaling a possible revival in deal flow as we progress through 2024. After a challenging 2023, marked by high interest rates and economic uncertainty, the market is showing early signs of recovery. In the first half of 2024, we've seen property sales reach $211 billion across office, industrial, retail, multifamily, and hospitality sectors. While this is a slight dip compared to last year, the 9% uptick in the second quarter is sparking cautious optimism. Large core markets like New York, LA, and Dallas are leading the way, already surpassing their two-year averages in property sales. As we look ahead, a potential interest rate cut by the Federal Reserve this September could be the catalyst needed to boost deal flow further, especially with new opportunities expected to flood the market after Labor Day. The path to recovery is becoming clearer, and if the current trend holds, the commercial real estate sector could see a strong finish to the year! ?? We are seeing 2025 as a big year for acquisitions at Oakdale Capital... #CommercialRealEstate #MarketTrends #EconomicOutlook #InvestmentOpportunities #RealEstateRecovery #CRE

?? Multifamily Construction Hits Decade-Low ?? The multifamily housing market is facing a significant slowdown, with new construction starts plunging to their lowest level since 2011. This decline follows a surge in development during 2022 and 2023, driven by record-high rents, low interest rates, and strong demand. However, with the recent surge in interest rates, higher material costs, and banks pulling back on lending, developers are now unable or unwilling to proceed with pipeline projects. The number of units under construction has dropped 20% since early 2023, and starts in 2024 have fallen 63% year-over-year. Quarterly starts are down from a peak of ~200,000 units per quarter in 2022 to now less than 60,000 units per quarter. This sharp decline sets the stage for a substantial reduction in new apartment supply over the next two years, with projected completions in 2025 and 2026 expected to be significantly lower than in recent years. As a result, the market could experience tighter availability and a return to pre-pandemic vacancy rates and rent growth, assuming demand remains steady. With fewer units coming online, the multifamily market may rebalance, offering opportunities for investors and developers to navigate this shifting landscape. #RealEstate #Multifamily #Construction #HousingMarket #CommercialRealEstate #InvestmentTrends

?? Real Estate Market Insight ?? We are big fans of Blackstone, but are they manufacturing splashy headlines just to prop up their own valuations? Take a look at this recent article... "Blackstone Leaders Predict 'New Cycle' Of Higher Real Estate Values On The Way After Slow Quarter" The article states that Blackstone's recent earnings report shows a significant 18% drop in their real estate earnings, which is largely a reflection of the broader market challenges. But despite this downturn, Blackstone's leaders are forecasting a "new cycle" of higher real estate values. Why the optimism? Given Blackstone's position as one of the largest real estate owners globally, this rosy stance might be viewed as self-serving. By promoting a positive outlook through strategic headlines, Blackstone aims to bolster investor confidence and attract continued capital inflows. This tactic is especially pertinent as they grapple with high borrowing costs and rising office vacancy rates. Such positive messaging can help prop up their fundraising efforts and maintain the perceived value of their extensive portfolio. Right now, we think it's essential to approach optimism with caution. While Blackstone's leaders highlight opportunities in niche sectors like industrial and data centers, the broader real estate market still faces significant headwinds with elevated interest rates. We, too, think real estate will have better days ahead, but not without more pain in the interim, especially for large owners like Blackstone. We're not ready to call the bottom, but it could be here before we know it! #RealEstate #Investment #MarketTrends #Blackstone #InvestorInsights #RealEstateInvesting #MarketOutlook #Fundraising #RealEstateMarket

?? Skyrocketing Earnings for National Homebuilders Amid High Demand for New Homes ?? Recent earnings reports from major homebuilders show a resilient housing market, even with mortgage rates near 7%. Net incomes and orders have increased, highlighting strong performance in the sector. Despite slight dips in revenue, these companies are thriving thanks to the limited supply of existing homes and strategic builder incentives like mortgage rate "buy-downs." The ongoing "lock-in effect," where homeowners are reluctant to sell due to historically low mortgage rates, continues to boost demand for new single-family homes. Strong cash flow and significant investments in land acquisition by homebuilders set the stage for continued growth. Why is this trend fueling multifamily demand? As more buyers look for new homes, the shortage of existing homes and high mortgage rates make multifamily units an attractive and often more affordable alternative. Builders are capitalizing on this by offering incentives that can't be matched by existing home sellers, making new multifamily developments a hot market! At the same time, multifamily construction is slowing almost to a standstill, with decade-low deliveries forecasted for 2026-2027. ...sounds like a good time to be a homebuilder and multifamily buyer... #RealEstate #HousingMarket #NewHomes #Homeownership #Multifamily #MortgageRates #BuilderIncentives #MarketTrends #PropertyInvestment

?? Embracing the Current Market Realities in Real Estate ?? Believe it or not, we are actually in very normal times... The real estate industry has enjoyed an exceptional run for over a decade, but the current market conditions are not as terrible as they might seem. ?? Yes, multifamily sales volume has dipped to decade lows after record highs in 2021 and 2022. However, we are close to the long-term average for quarterly sales volume when adjusted for inflation. ?? Most multifamily buyers hold their assets for about five years. Properties purchased in 2021 and 2022 will likely be sold by 2026-2027 at lower values than anticipated. Similarly, many buyers from 2018 and 2019 are holding off on selling due to higher interest rates and pricing disparities between buyers and sellers. This could lead to higher transaction volumes in 2025-2026, even in a subdued pricing environment. ?? Who's ready to navigate these changing tides? #RealEstate #MarketTrends #MultifamilyInvesting #PropertyInvestment #RealEstateInsights #EconomicTrends #RealEstateMarket

I see the bad moon a-risin' I see trouble on the way... ---- Trigger ---- Multifamily asset pricing was significantly overheated during the Covid rebound, especially for class B and C properties. About 30-40% of the sector traded around the peak, and values have since fallen by 20-25%, wiping out 50%+ of investor equity (on paper). ---- Balance sheets in focus ---- The fallout has primarily been balance sheet and/or debt-related: -- Floating rate pressures -- Cap costs -- Short-term maturities -- Blend and extend -- Rising cap rates Since NOIs have held up and sellers have avoided selling properties, widespread equity erosion has been accrued but not recognized. [i.e., if a tree falls in the woods... if I buy at 3% cap rates then interest rates spike but my NOI holds up, then I refuse to sell and my loan doesn't mature for another few years.] ---- Emerging risks? ---- No Class B/C sponsor has captured more headlines than Tides Equities, and if the firm (which amassed $7B of properties near the peak) is an accurate barometer, more problems could be emerging. We started following Tides' properties about two years ago, and although we don't have complete coverage, rents and occupancies seem to be moving in the wrong direction for 90% of the Tides portfolio. ---- Brace for a wave of defaults? ---- This performance erosion could also be an early indicator of a near-term spike in defaults. Lenders often extend loan maturities as long as property income is stable and covers debt service. Similarly, borrowers are typically willing to hang on when they don't have to come out of pocket to fund debt service, even in the face of strained LTVs. ...but when leverage AND coverage are strained, you can expect to see more defaults and you probably won't have to wait until loan maturity to see defaults begin to mount. ---- Takeaways ---- If Tides is a decent indicator, Class B and C multifamily properties may be moving in the wrong direction. We're all fatigued by the headlines, but this suggests that we're in the early innings of multifamily loan distress and problems could emerge quickly. PS - What property type has the highest historical CMBS default rate? ...multifamily at 14%.