2021 marked 10 years since I published the first post on
this blog. At the time I was real estate agent and teacher who was about to
begin law school and was looking for ways to better understand real estate
modeling and real estate finance. I hoped to create a community of like-minded
people so that we could explore ways to better value real estate properties and
mortgages and discuss the market. Ten years and many experiences later this
blog has grown and transformed into a general forum on all things real estate and
I am amazed at the direction it has taken. 2021 has been an amazing year for
TRET, so let’s take a look at the year in review.
What a crazy year for real estate! 2021 started with an
insane housing market in which demand greatly outpaced supply. The pandemic
created so much pent-up demand that in some markets, average time on the market
was less than two weeks. This state of affairs, was clearly a carry-over from
the effects of the 2020 quarantine. As the year progressed, housing prices
rose, however so did inflation, depressing any true wealth gains.
Inflation and pent-up demand places the housing market in a
strange position, as inflation rises the cost of construction making an the
housing supply unprofitable. On the other hand inflation reduces the real gains
from selling property, which also makes selling property less desirable. The Fed’s
response to this situation and the market in general will be to raise rates,
which will lower demand, making acquisitions more expensive. This will lead to a
market with inflated prices and high interest rates—a rare market in which buying
is undesirable and selling is only mildly incentivized. For housing, 2022 is
looking to be a slow year for housing as the market returns to normalcy. That said,
the traditional approach to sales and acquisitions will likely be the most
successful. CNN Business has a similar assessment of the market, but with a slightly
different conclusion. Feel free to check out their article here.
Commercial real estate had a unique year as well, but for different
reasons. The year began with depressed asset prices across all classes as
businesses struggled to project their physical needs after the pandemic. Although
asset values were down across the board, multifamily properties performed the
best and proved to be the best way to the whether the storm. Then something
even more interesting happened…seemingly out of the blue, institutional investors
woke-up and began acquiring everything.
A surge of institutional acquisitions took place during the second and third quarters of 2021. Multifamily, retail and industrial properties started to surge. Office properties were being left behind, but many municipalities began to facilitate their conversion into multifamily properties in order facilitate even more activity in market. Then, just as quickly as it came, the wave was over. In retrospect, it is clear that the major players in the market were looking to move money into real estate to avoid the effects of inflation, but at the time, the frothy commercial market felt very much like a feeding frenzy.
The Podcast:
The 10th Anniversary of TRET saw the start of TRET: The Podcast. Although it certainly wasn’t an easy journey, recording the podcast episodes with my childhood friend and real estate extraordinaire, Conrad Bastien, Jr. was a lot of fun. TRET also branched into TRET Shorts, which were also a lot of fun to make. Expect more in future. The podcast was an opportunity to explore a number of topics in a manner that required even more depth and research than would be required by a blog post. Moreover, the chemistry created on that podcast cannot be duplicated. Please feel free to check out our episodes, which are posted here and on this blog.
The Growth:
This year has also seen TRET expand into the area of guest
contributors. We were privileged to benefit from the perspectives of a number
of guest authors, who allowed us to expand our content. I am personally thankful
for the contributions as they served a motivation to keep TRET going.
So after a year like 2021, where do you go? The only answer
is up. Look for more and better from TRET in addition to a migration to a new
platform. TRET is growing, we’d love you all to be a part.
