Is the commercial real estate implosion? Upon Us And how much could apartment buildings drop in value? How much could commercial real estate drop in value? How about industrial? How about retail? How much good office spaces drop in value? Well, we've got a new report. multiple new reports here, but one in particular is going to give you exact percentage forecasts for where the pain could be coming in real estate. So let's get into the topic. keep in mind: I Am a licensed real estate broker, but not only am I a licensed real estate broker I run an actively managed ETF I've got courses on building your wealth especially zero to millionaire real estate investing courses linked down below the licensed financial advisor and I've got a real estate startup so real estate is absolutely near and dear to me, and because we're sitting on cash at that real estate startup, we're ready to buy sweet sexy deals in real estate.

I'm sharing that Journey with you of where we ultimately want to buy and the research that we're studying. So without further. Ado Let's get into some of these reports on: Commercial Real Estate Uh, and where the stress is coming from? Uh, because. well, it's a little bit of a problem.

We'll also talk about housing. In fact, before we talk about that commercial and Industrial and stuff, let's do a quick little snippet here on housing and what's driving this sort of segmentation in real estate that we're seeing. Look, we know rents rates have gone up, Real estate rates have gone up, which made real estate more unaffordable. We know that, uh, housing prices have fallen more in the west coast in Phoenix in areas like Phoenix and areas like Austin uh Boise Idaho some of the work from home places uh California has been hit, but we also know that parts of the country like Florida have actually been holding up and doing pretty decently.

So, what's happening here and why are we seeing this divide? Well, according to Bank of America when it comes to single-family housing, one of the reasons we're seeing this Divine in this Sunbelt area is the following: Median rents and mortgage payments for all Bank of America customers were up eight percent and seven percent year every year, respectively. But some Sun Belt regions are seeing a bigger surge in Phoenix median rent payments grew by 26 percent year over year compared to just 2.5 percent in San Francisco That's a big debt, especially since home prices in Phoenix are down about 20 to 25. That's quite interesting from Peak Comparing back to May According to Bank of America's internal data, mortgage payments show a similar Regional divide. So why uh, have some areas experience a much bigger housing boom than others and one underlying reason may be complex, but we propose some potential example explanations: Domestic migration has been driven by affordability, above average on employment gains, and an increasing share of higher paid jobs.

And so really, they're making this idea that rent payments are potentially growing, where the jobs are growing. Okay, well what a surprise. Well where are those rents and jobs going? So let's take a look at this median rent and mortgage pay payments based on these various different areas in the United States So uh, and and we're gonna align this with home price declines here as well in just a moment. And I'll show you this: Uh, I'm gonna pay a specific attention with a green circle to this region right here.

Look at this: Rents up 23 20 Atlanta Orlando Tampa 23 Miami 16 Dallas 18 Rent in Austin up 21 Phoenix Rent up 26 Los Angeles Only six percent Rent in San Francisco Only up two and a half percent So why are we potentially seeing this lower region over here blow up? Well, a lot of folks are saying the reason for that blow up is because of jobs offices going to Austin Dallas new offices going to Miami Tampa Massive job growth on the right lower side, so the right side of the country in the South the Sun Belt region because of an availability of jobs. However, recent Studies have shown that only about three percent of jobs in Florida In In or or I should say Tampa Specifically, uh, or 10 percent of jobs in Florida in aggregate are actually advertising the potential for work from home. So this is creating a really interesting spread where basically work from home drove a boom in many areas. Idaho Phoenix Austin Florida But that work from home is going away in areas like potentially Austin and Phoenix and Idaho and staying.

Uh, and the jobs are going to places like Florida where that work from home trend is potentially going away. And one of the ways we could see this before we get into the commercial industry sector is we can look at median sales prices on the Redfin housing data app and I want you to show some of the trends. What do you see? Some of the trends we're seeing? So these are the trends. Right now.

We can see housing prices slowly starting to pick up at the beginning of the year. Here, they're not moving flat as we potentially expected they would. they're actually increasing Nationwide which is quite interesting. There's technically negative year over year right now, but not terribly much, but this goes a little bit more extreme when we jump into individual regions.

Watch this. Let's go into Phoenix. You're going to see an interesting switch here. Look at Phoenix in Phoenix you have a flat level of price and growth.

Which means you are actually looking at negative year-over-year pricing, right? Pricing? You sat around 468 000 and Phoenix now down to about 427. Peak to trough, it's even worse. you're looking about 490 to about 427, right? So if you go 490 to 427, you're down about 13. So maybe not as much as that 20 that had been estimated when we compared to the end of last year.

Uh, this is the Phoenix area. Now look at the area like Austin Texas What do you see over here Austin Texas from Peak to trough 439 from 574. go 439 to 574. you're looking at that about 23 drop.

Where are you not seeing these kind of drops? Well watch this go to my Miami go to Miami Florida Look at that. Prices are higher in Florida than they were last year compared to Phoenix which is negative or Austin Texas which is negative. Let's do another one. Let's look at Tampa Look at Tampa Prices are higher this year than where they were last year.

so Florida is killing it. So how do we reconcile this housing disaster from a residential point of view? And how then do we compare that to what's going on in the commercial space? And then we'll get some more data as well? So in my opinion, what's happening is the following: What you're seeing is: uh, in work from home areas, work from home areas You saw a boom and then a big bust and now with less companies offering work from home, you're feeling that pain. So you potentially have more price sliding to do in very work from home popular areas like for example, on Idaho whereas in California California you already had this substantial boom that was accelerated a bit, but that drop is probably less impactful because people are moving to. Let's say Southern California For reasons outside of work, work and affordability aren't driving migration into California, They might be driving migration out of California for sure, but the net reason people stay is generally outside of the reason of work and so that might be why you see a little bit less of that bubbliness in California Whereas now in Florida you actually see a boom that is continuing.

And why is that continuing? Well, Potentially because people who are looking for more affordable housing in a more affordable cost of living structure combined with the opportunity for jobs or going to Florida Because Florida is not offering that same kind of work from home as other states were, so you have more of a boom and bust in the work from home States More stability in California but more of a boom continue or in California but more of a boom continuing Florida That's what I'm seeing and I'm seeing the same thing as I travel the country on the ground. Let's look at some more data here and then we'll look at some commercial stats as well. Take a look at this. This Bank of America piece explains that affordable housing could be what's driving people to these Southern cities.

Look at the boom that's happening in Atlanta or Florida for example. Completely agree with that. These markets are still considered affordable, so even more room for markets to increase. Atlanta Dallas Uh, Tampa They do have Austin and Phoenix in here, but I just want to put my own asterisk on top of that report.

because of that work from home potential Orlando Miami has become a little less unaffordable already. Then we have more jobs, more income, more housing demand absolutely makes sense and higher paid jobs are creating more of a boom here. Where are those higher paid jobs? Look at this: Total non-farm payrolls 12-month moving Average total employment in Tampa and Phoenix was around seven percent higher than compared to January of 2020 compared to just one percent for the national payroll. Uh growth.

So uh, here you can kind of see some trends of some areas where you're seeing more of a booming employment growth. Just be careful because some of this I think will change in 2023. So I stand a little bit in contrast to some of the information from Uh Bank of America Here we've got a Wall Street Journal piece talking about the tale of two housing markets. This is more of what I'm talking about where.

Look at this where you could see how a little bit more of those increases over here on the right and potentially more pain in the west especially Silicon Valley Silicon Valley And fairness is getting hit less so and SoCal more stability here in SoCal for the weather, more pain in Silicon Valley Here you've got maybe the work from home pain here. you've got where that Sun Belt boom is happening with the exception of Austin Austin is really Tech exposed like San Francisco but then you go to like Dallas uh, Atlanta or Atlanta over here and then Florida that top one is more like uh Jacksonville right there. Uh. Cities have become closely associated with tech are experiencing the biggest falling of home prices whereas Florida and Southern markets are still attracting individuals.

Uh, this makes a lot of sense. Many economists expect home prices to fall further on an annual basis this spring or summer, but now a lot of this information. Oh, Metro Areas in the Southeast that experience big price run-ups like Nashville or Raleigh are especially vulnerable to price declines. The speculative markets that are not potentially in areas like Florida where jobs are still going.

That's very interesting. Uh, so Bake is sort of takeaway here so far is Florida looks really desirable and so does Texas and that seems to be where a lot of potentially jobs are going, but it really also aligns with what we're seeing over here with what's going on with property prices and I find this really interesting. Uh, this piece from Morgan Stanley Look at this. This piece from Morgan Stanley tells you that property prices could decline an At or have been.

This is retail commercial real estate prices and this I think gets affected by the way by the boom and work from home which is hurting a lot of office spaces. But the one place office spaces could potentially still hold up might be Florida where you're getting less of that work from home. But listen to some of the projections from Morgan Stanley here Morgan Stanley suggests that property price declines. This cycle have averaged 1.32 per month, tracking worse than the Great Financial Crisis.

The Global Financial Crisis had less property declines on a monthly basis than what we're seeing. Now, it's pretty wild for commercial real. estate. They expect that office prices will fall 40 percent in the net in the total 24 months of this cycle, compared to 34 percent of the global Financial crisis.

So in other words, bigger declines for offices. This cycle Suburban Prices falling 40 percent for offices apartment buildings to fall 15. That's less than the 30 percent fall during the Great Financial Crisis, but they do expect weakness in apartments Bank of America also talks about office uh, wreaths and apartment REITs experiencing more pain potentially uh than we saw during the Great Financial Crisis. There's also a talk that reads especially apartment reads are selling at a little bit more of a premium than they otherwise should be retail stores potentially a 30 percent Peak to trough decline, industrial of 15 decline uh, and then uh.

Overall real estate, including residential real estate potentially an average 15 peaked trough decline. but I think the biggest and the coolest chart out of all of this to pay attention to is where the pain is happening and where jobs are shifting. And personally, I am very interested in Florida because of the changes that we're seeing. Uh, and one of the things that makes me really excited is my opportunity with my real estate startup to basically fly my plane to Florida and once we're in Florida we can hop around and explore Florida like crazy and I grew up in South Florida So I'm a big fan of the Florida markets huge fan much more than I thought I would be and the charts showing us that the Sun Belt regions are booming, we're going to be something we really want to pay attention to.

So with that said, there's a lot of a big shift in mix-up happening I Think Covet basically threw all of real estate up in the air and it's gonna be really interesting to see where it all falls. but I'm watching it really closely and I'm particularly interested in what's going on in Texas Atlanta and certain cities in Florida so stay tuned. Follow the channel I Think they're gonna be great opportunities. Check out the programs of building your wealth linked down below.

Now we're going to run over to the course member live stream for the Bell Thanks so much! we'll see in the next one. Bye.