RealEstateNews 7.1.24

Weekly News Roundup

• Home Prices Rise to Record High
• KKR Bets Big on Multifamily Properties
• Goldman Raises Billions for Real Estate

Record High Home Prices 

Prices for existing homes rose to $419,300 in May, and sales slipped for third month in a row.  The national median existing-home price in May was $419,300, a record in data going back to 1999, the National Association of Realtors said Friday. Prices aren’t adjusted for inflation. That was up 5.8% from a year earlier. Those high prices, paired with elevated mortgage rates, have limited the number of sales this spring—typically the busiest season for home buying.

Sales of previously owned homes decreased 0.7% from the prior month to a seasonally adjusted annual rate of 4.11 million, the third straight monthly decline, NAR said. On an annual basis, existing-home sales, which make up most of the housing market, fell 2.8%. Even though demand is low, home prices are still rising because high mortgage rates are deterring potential sellers from listing their homes, keeping the supply of homes on the market lower than normal. Sales of high-price homes are also rising faster than sales of midprice or affordable homes, pushing up the median price.

Buying a home is out of reach for many renters and homeowners alike. The mortgage payment for a buyer of a median-price home has more than doubled since before the pandemic. In February 2020, just before the Covid pandemic, the median price of an existing home was $270,400. In late February 2022, just before the Federal Reserve began raising interest rates, the average mortgage rate was 3.89%, according to Freddie Mac. This week, the average rate on a 30-year fixed-rate mortgage was 6.87%. Still, the limited supply of homes, plus cash buyers who aren’t sensitive to mortgage rates, are keeping the housing market competitive. About 28% of existing homes sold in May were purchased in cash, up from 25% a year earlier. Source: Wall Street Journal

KKR Bets Big on Multifamily 

KKR has completed its largest-ever purchase of apartment buildings, the latest in a string of big-ticket deals, signaling that some of the most prominent investment firms are betting on a broad rebound for multifamily housing. The New York-based private-equity firm paid $2.1 billion for more than 5,200 apartment units across the country, from California and Texas to New Jersey, KKR said. 

The deal for the multifamily properties, which are 18 new mid- and high-rise buildings, closed Tuesday. Quarterra, the apartment development arm of the home builder Lennar, sold the portfolio. KKR’s acquisition and other recent major purchases could indicate a growing confidence among large investors that rents and values for apartments will soon begin rising again. In April, Blackstone agreed to pay $10 billion for the landlord Apartment Income REIT, while last month Brookfield bought a portfolio of 7,000 apartments for $1.55 billion. 

Rent is already starting to pick up in several Midwest and Northeast cities. Investors say they are encouraged by the falling number of construction starts for new apartment buildings, portending lower levels of new supply and faster-moving rents by 2026. “Even Sun Belt markets where supply is growing fastest should rebound quickly once new supply slows,” KKR said in a recent report addressing the multifamily market. Source: Wall Street Journal

Goldman Raises Billions for Real Estate 

Goldman Sachs Group’s asset management arm has raised one of the largest pools of capital targeting stakes in private real-estate funds, benefiting from investors’ desire to take advantage of mounting liquidity problems among other investment managers and their limited partners. The New York firm said it has collected $3.4 billion for its Vintage Real Estate Partners III fund and related vehicles, around 23% more than the $2.75 billion it brought in for a predecessor pool when it wrapped up in 2020. In May, Goldman finished raising $7 billion to lend to real-estate investors and developers, a market the bank’s asset manager sees as undercapitalized.

Goldman’s most recent drive concluded roughly six months after rival private-equity firms Blackstone and Ares Management said they raised secondaries funds targeting property stakes. Toward the end of last year, Blackstone reeled in $2.6 billion for its Strategic Partners Real Estate VIII fund and related vehicles, its biggest haul for the strategy. Ares, meanwhile, collected $3.3 billion for its Landmark Real Estate Fund IX and associated pools, slightly less than the $3.5 billion it targeted.

Commitments to the new Goldman fund can be used to acquire portfolios of real-estate fund stakes from institutional investors and to back deals instigated by fund managers seeking to offer liquidity to all limited partners in a given fund at once, the firm said. Cash from the fund can also be loaned to fund managers and limited partners as an alternative to selling assets under disadvantageous circumstances. The market represents “one of the most compelling deployment opportunities” for real estate secondaries deals, said Harold Hope, head of Goldman’s Vintage Strategies group, which managed $42 billion across private equity, real estate and infrastructure secondaries as of March. Source: Wall Street Journal