RealEstateNews 3.10.25

Weekly News Roundup

• Big Metro Differences in Housing
• Government Cancelling Office Leases
• DOGE Pauses Selling Buildings

Big Metro Differences in Housing

Stark regional differences are opening up in the housing market. Buyers have the power to demand big price cuts in some parts of the country, but still face bidding wars in others. Inventory has shot above 2019 levels in a handful of areas. In Texas, the number of properties for sale is 20% higher than it was before the pandemic, data from Realtor.com shows. Florida and Colorado are also above 2019 levels. At the other end of the spectrum, supply is crunched in parts of the Northeast and Midwest. In 15 states including New Jersey and Pennsylvania, the number of homes currently on the market is still less than half what was normal before the pandemic.

Based on permitting applications, most new construction has happened in the South, particularly in Florida and Texas. Florida expanded its housing stock by 15% since 2020, according to estimates by Brad O’Connor, chief economist at Florida Realtors. These newly built homes are hitting the market at a time when demand from buyers is exceptionally weak because mortgage rates remain high.  Thanks to a migration boom during the pandemic, property prices in some Sunbelt states rose faster than in other parts of the country. Those properties look overvalued, so buyers aren’t biting.

Meanwhile, in states like Illinois, strict zoning laws and expensive building costs have hampered new construction. The lock-in effect of cheap mortgages is also slightly weaker in some regions than in others, which is influencing how fast homes are hitting the market. In the South, 21% of outstanding mortgages on average had a rate of 6% or higher at the third quarter of last year compared with 18% in the Northeast, based on an analysis by Chris Porter, a senior vice president at John Burns Research and Consulting.  Barring a decline in mortgage rates, home prices in markets like Texas are likely to fall. This isn’t the case in many parts of the Northeast and Midwest, where strangled supply should support property prices. Source: Wall Street Journal

Government Cancelling Office Leases

The Trump administration further accelerated its pace of commercial real estate lease terminations for federal agencies, spreading the scrapped agreements to all 50 states. Since Friday, the Department of Government Efficiency has added more than 500 lease terminations to its total. That’s about one in 10 active federal commercial real estate leases canceled, according to CoStar News analysis, and double what DOGE had previously publicly listed.

The fast-changing nature of the initiative shows how the administration is pushing to cut expenses and release more federal agencies from rental agreements. The canceled leases are not only hitting owners but also service providers across the country including appraisers and lenders who are busy trying to determine the impact on their markets and portfolios.

DOGE has initially been targeting primarily federal commercial real estate leases that have reached their lease termination rights date, the point when the federal government has the right to end the lease agreement. It’s different from the lease expiration date that simply marks the end of the agreed-upon term. Of the listed terminations, 615, or 89%, had reached their termination date, according to the combined analysis of the DOGE and GSA data. However, only 22 of the terminated leases, totaling 544,048 square feet, had reached their lease expiration date. Source: CoStart

DOGE Pauses Selling Buildings

The U.S. government on Tuesday was gearing up for one of the largest sales ever of commercial real estate. By Wednesday morning, that sales process was suddenly in limbo. In an extraordinary reversal, the General Services Administration removed from its website about 440 federal buildings representing nearly 80 million square feet of space that only hours earlier it had listed for sale. The initial list of 440 properties primarily targeted the more than 150 buildings in the Washington, D.C. area, where the office market has experienced one of the highest increases in vacancy and lowest return-to-office rates in the U.S.

A spokesman for the GSA, which manages federal real estate, said a list of specific properties for sale will be republished in the near future “after we evaluate this initial input and determine how we can make it easier for stakeholders to understand the nuances of the assets listed.” The list that the GSA made public on Tuesday included the Washington, D.C., headquarters of the Federal Bureau of Investigation, the Department of Health and Human Services, and the Labor Department. But later Tuesday, the GSA reduced the list to 330 properties and removed many of the higher-profile buildings. On Wednesday morning, the GSA website no longer listed any properties. It said that the list of “non-core properties for disposal” was “coming soon”

While many of the properties are aging, shabby buildings that wouldn’t fetch much, some better-known properties were also up for sale. The average age of GSA-owned buildings is more than 50 years old, and most of those buildings have never been renovated, said Dan Matthews, a member of the Public Buildings Reform Board, an independent agency set up in 2016 to make property-disposal recommendations to the GSA. “They are pretty cheap buildings thrown up quickly without the best building materials,” he said of buildings that are at least a half-century old. “In many respects they’re functionally obsolete. They need a massive amount of capital to renovate those buildings.” Source: Wall Street Journal