decentraland

Virtual Real Estate In The Metaverse Is Declining In Value 

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Decentraland is known as one of the most prominent virtual real estate platforms in the metaverse. While it was once valued at $1 billion, revenues have been on a major decline within the past year, according to reports from The Block. 

Only a handful of users have reportedly been trading virtual real estate in Decentraland. The real estate traded can be transacted in the form of NFTs for users. 

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According to the reports from The Block, only about 20 to 30 people are actively buying and selling property weekley on the platform; valued at about $50,000. This marks a massive decline when compared to the millions of trades being made between 2021 and 2022. 

This decline shows a major lack of interest in owning virtual real estate, and the metaverse in general. 

While Decentraland had a billion-dollar market cap originally, reports from data collector DappRadar showed that only 38 active users were present over a 24 hour period on the platform. Other platforms within the metaverse have had the same level of struggles within the past year. 

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According to The Block, Decentraland also saw a decline in their Fashion Week event. Last year, over 60 brands sponsored the virtual fashion event with over 100,000 users showing up. This year, however, only about 26,000 users attended the event. 

According to a gaming report from Jay Peters, “the world didn’t feel very alive. While walking around, I’d usually only see one or two other people in my vicinity.”

Hunter Swihart, a metaverse architect, told The Block that he wouldn’t be surprised if Decentraland would completely go under as a business in the near future.

“Everybody saw prices skyrocketing with big businesses buying land for millions of dollars, which now in retrospect was a terrible mistake.”

This decline in interest in virtual real estate shows that users are losing interest in spending their money within a virtual world, and the metaverse in general is losing hold of its audience.

commercial

Economists Worried About The Current State Of Commercial Real Estate 

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Economists are currently worried about the state of the $20 trillion commercial real estate industry. Ever since the beginning of the Covid-19 pandemic, office and retail property values have fallen due to lower occupancy rates, and the shift to working from home and rise in online retail. 

According to Goldman Sachs economists, about 80% of all bank loans for commercial properties are coming from regional banks; smaller banks have had more pressure to liquidate properties as time goes on and the properties don’t show a lot of interest. 

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“I do think you will see banks pull back on commercial real estate commitments more rapidly in a world [where] they’re more focused on liquidity, and I do think that is going to be something that will be important to watch over the coming months and quarters,”  wrote Goldman Sachs Research’s Richard Ramsden, reported by CNN.

Xander Snyder is a senior commercial real estate economist at First American who recently spoke to the media about the current state of the commercial real estate market and its potential threats to the economy. 

“Price growth is slowing and for some asset classes it’s starting to decline. Office properties have been more challenged than others for obvious reasons.”

“Now private lending to the industry is starting to slow as well — bank lending was beginning to dry up over a month before the Silicon Valley Bank failure even happened. Credit was getting scarce for all commercial real estate and a fresh bank failure on top of that only exacerbates that trend,” Snyder explained. 

“A lot of people hear commercial real estate and they think it’s all the same thing and the trends are they’re all the same but they’re not. The underlying fundamentals of multifamily and industrial assets remain relatively stable on a national level.”

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Snyder then explained exactly why commercial real estate ended up in the position it’s in today after the trends it saw within the past few years: 

“As credit becomes scarcer and more expensive, it’s hard to know exactly what buildings are worth. You get this gap opening up between sellers and buyers: Sellers want to get late 2021 prices and buyers are saying ‘we don’t know what things are worth so we’ll give you this lowball offer.’ That was already happening and the result of that price differential was bringing deal activity down.

It’s different for office and retail properties. There’s been a fundamental shift in how we use office space and that has changed demand. That’s something you should have your eye on, especially as low-interest office loans come due.

We’re running into a situation where office-owners have to refinance at a higher rate and only 50% of the building is being used. That doesn’t translate to good cash flow metrics for the lender,” he explained. 

According to The National Association for Business Economists’ (NABE) most recent survey, published this Monday, a majority of economists are predicting a recession to occur this year as inflation rates will likely remain above 4%.

“Panelists generally agree on the outlook for inflation and the consequences of rate hikes from the Federal Reserve. More than seven in ten panelists believe that growth in the consumer price index (CPI) will remain above 4% through the end of 2023, and more than two-thirds are not confident that the Fed will be able to bring inflation down to its 2% goal within the next two years without inducing a recession,” said NABE Policy Survey Chair Mervin Jebaraj.

for sale

Is The All-Cash Offer Trend Going To Last In The Real Estate Market? 

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The Covid-19 rocked the housing market in a multitude of ways. Real estate agencies saw an uptick in individuals moving out of cities and investing in homes in more rural/suburban areas. 

In 2022, nearly one third of all US homes were purchased using all-cash offers, according to the National Association of Realtors. However, experts are wondering if this trend of all-cash purchases is going to continue, or decline as time goes on. 

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Lawrence Yun is the chief economist at the National Association of Realtors, and recently spoke with the Wall Street Journal regarding this trend and new data in housing trends as reported by Redfin. 

“Only the wealthy are essentially buying homes. If this trend was to continue, that means something fundamentally is wrong with society.”

The Wall Street Journal also reported that the trend of all-cash purchases isn’t equal across the entire nation. For example, nearly one fifth of all homes purchased in Washington D.C. and its surrounding cities were made in cash. 

On Long Island, almost half of the home purchases between 2020 and now were made using all-cash offers across both Nassau and Suffolk county. 

“What we found was those who already were more well-off were able to take advantage of the strong housing market and add to their wealth, while those trying to better their situation were often pushed to the side,” Ali Wolf, chief economist at Zonda, a housing data and consulting firm, said to the Journal.

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Wolf explained that the main population of buyers making all cash offers are retired, international, investors, and wealthy individuals in general. 

The current rate of all-cash home purchases hasn’t been this high since 2014, when the housing market saw its biggest rebound after the Great Recession. 

“FHA loans, which typically allow for lower down payments, have ticked up in popularity in response to the slowdown in housing-market competition,” Redfin noted, detailing government-backed mortgages insured by the Federal Housing Administration.

“FHA loans, which typically allow for lower down payments, have ticked up in popularity in response to the slowdown in housing-market competition,” Redfin noted, detailing government-backed mortgages insured by the Federal Housing Administration.

“Americans who sell a home in a pricey place like San Francisco may use equity to pay cash in a more affordable area like Las Vegas,” Redfin concluded.

fire

The Profit Potential Behind Investing In Fire-Damaged Homes 

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According to one of America’s top fire-damage real estate investors, Fire Cash Buyers, there has always been potential profit earnings for investing in properties that have been damaged by fires. While the damage itself will reduce the home’s market value, its potential for flipping can often lead to increased profits. 

Joel Efosa works for Fire Cash Buyers, and has written about the potential to take fire-damaged properties and flip them to sell at the same price as new properties. 

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Real estate investors also often have access to resources and organizations that specialize in the art of rehabbing homes for a large return on their initial investment. While any kind of property repair takes a decent amount of time and money, the potential to increase one’s earnings on the investment is possible with the right strategy.

Efosa stated that real estate investors are actually often looking for damaged rental properties for flipping purposes. This process often involves collaborating with local firefighters who would be the most likely to know of homes damaged by fire. 

Firefighters also know the area’s they work in quite well, so they have a particular set of skills when it comes to guiding investors to properties with the best potential, and the ones with owners who are most likely to sell after a fire event. 

Investors are also often connected with insurance agencies, adjusters, and other experts in the industry who have access to recent insurance claims and the homeowners who filed them. This can also aid in the process of finding homeowners who are most likely to want to sell their property to investors. 

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“Working closely with these insurance professionals can provide real estate investors with timely information on potential deals, allowing them to be at the forefront of new opportunities when they arise,” wrote Avi Stern for The Jerusalem Post. 

“Ultimately, investing in a fire-damaged house can be an extremely lucrative endeavor for an eager real estate investor – as long as sellers of these damaged homes can be found.”

Real estate agents are generally the best resource for investors to use for this specific type of project. Not only do they have access to their client lists, but access to a large rolodex of properties categorized by their placement in the market; which would include properties damaged by fire. 

Real estate agents also have access to property information that’s not often made public for the average investor/buyer to find. So when it comes to finding fire-damaged properties with the intent of flipping the space to resell for a large profit, it’s truly all about the team of individuals you have around you that can better help connect you to all the people you need to make the project happen.

interest

Mortgage Rates Hit a 20-Year High of 6.92%

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According to Freddie Mac, mortgage rates reached a 20-year high last week due to rising interest rates, now at a whopping 6.92%. The Federal Reserve is continuing its aggressive monetary policy to squash surging inflation, sending shockwaves throughout the housing market.

The federal funds rate is projected to reach 4.4% by the end of 2022. Russia’s invasion of Ukraine, supply chain issues and record low interest rates during the pandemic led to unprecedented inflation, prompting the Fed’s policy initiative.

While the Fed continues to wrangle with inflation, the housing market is especially feeling the pinch of higher interest rates. The S&P 500 and the New York Stock Exchange also fell 20% from this time last year as a result of these rate hikes. The declines have continued for several weeks.

Despite the Fed’s efforts, the consumer price index has not significantly budged. The index rose to 8.2% in September, far from the Fed’s eventual target of 2%.

For the last 15 years, mortgage rates in the U.S. have been relatively low. Thirty-year fixed mortgage rates were notably low during the previous two years, hovering between 2.5% and 3.5% between 2020 and early 2022.

However, mortgage rates spiked in recent weeks. As of Oct. 13, the thirty-year mortgage rate is at a two-decade high of 6.92%. The fifteen-year rate is at 6.09%.

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Freddie Mac’s chief economist Sam Khater released a statement regarding the rates.

“Rates resumed their record-setting climb this week, with the 30-year fixed-rate mortgage reaching its highest level since April 2002. We continue to see a tale of two economies in the data: strong job and wage growth are keeping consumers’ balance sheets positive, while lingering inflation, recession fears and housing affordability are driving housing demand down precipitously. The next several months will undoubtedly be important for the economy and the housing market.”

The Fed has been clear about its plan to continue increasing the federal funds rate until prices begin to level out. Mortgage rates tend to rise alongside the federal funds rate.

In September, the chairman of the Fed, Jerome Powell, said there is no way to avoid the rising unemployment and slowing growth that will follow the Fed’s current monetary policy. The consequences of out-of-control interest rates may be even more disastrous for the economy than necessary rising interest rates. The Fed estimates unemployment will climb to 4.4% in 2023 and 2024, up from the current rate of 3.5%.

“We have to get inflation behind us. I wish there were a painless way to do that. There isn’t.”

Some experts are taken aback by how quickly mortgage rates are rising. Economist Matthew Speakman from Zillow told ABC News that “few could have predicted exactly how far and how fast they have risen.”

“There’s not a lot of incentive for rates to come down dramatically in the near-term, but that doesn’t necessarily mean they’re going to keep running away at this pace.”

The relationship between homebuyer behavior and rising mortgage rates is complicated. In general, higher mortgage rates reduce demand, which drives down the prices of homes. Real estate prices are falling, but not as rapidly as expected, in the face of the skyrocketing mortgage rates.

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Daryl Fairweather, an economist at Redfin, spoke on the complexity of the current housing market.

“It’s like a standoff between buyers and sellers. Buyers can’t afford higher prices, and sellers don’t want to sell for lower prices.”

Recession worries, rising inflation and high-interest rates have made things appear bleak, but many experts believe mortgage rates will not continue to skyrocket. Lawrence Yun, the chief economist at the National Association of Realtors, predicts that rates will hover around the resistance point of 7%.

“We don’t want to see a bursting out of that second resistance and going up, because you’re talking about 8.5% mortgage rates, something that we clearly do not want to see. The 7% interest rate could be the new normal.”

In July, Yun released a statement predicting that higher mortgage rates will persist as long as the high inflation rate persists.

“If consumer price inflation continues to rise, then mortgage rates will move higher. Rates will stabilize only when signs of peak inflation appear. If inflation is contained, then mortgage rates may even decline somewhat.”

house

Homebuilder Sentiment Falls for Ninth Consecutive Month

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U.S. homebuilder confidence in the housing market dropped to its lowest level since the beginning of the COVID-19 pandemic. Experts believe the high inflation rate and rising borrowing costs are contributing to first-time homebuyers’ hesitancy to purchase new single-family homes.

The National Association of Home Builders/ Wells Fargo Housing Market Index, which measures the activity of the single-family housing market, fell to 46 in September after declining for the ninth consecutive month. The last nine months are the most prolonged and persistent decline in builder sentiment in the last four decades.

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Experts say a Housing Market Index above 50 shows a healthy market with net positive growth. In November 2020, the index rose to 76, the highest in 35 years, due to the Federal Reserve pushing the federal funds rate to nearly zero. After the pandemic’s dampening effect, the Fed’s loosening of the federal funds rate was meant to stimulate the economy back to health.

Recently The Federal Reserve has been raising interest rates by adopting an aggressive monetary policy to bring the inflation rate back down to sustainable levels. A lack of supply due to construction costs fueled by those interest rates has slowed down building into a housing recession.

NAHB chairman Jerry Konter said builders are responding to a falling market by using incentives to bolster sales, “including mortgage rate buydowns, free amenities and price reductions.”

Pantheon Macroeconomics analyst Ian Shepherdson believes that builder sentiment will continue to decline.

 “This probably will not mark the bottom of the cycle, given the latest surge in mortgage rates above 6%. The rate of fall of mortgage applications slowed over the summer, but the early September numbers point to a renewed sharp decline.”

Mortgage rates have skyrocketed to those seen during the 2008 housing crisis, with interest rates on 30-year fixed loans hitting 6%. According to data released from the Mortgage Bankers Association, mortgage rates have already risen 4% so far this year.

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This increase in mortgage rates would add $389,000 in interest payments to the life of a $500,000 single-family home purchase. The association’s data also showed that the seasonally adjusted MBA Purchase Index rose only 0.2%. New applications for mortgages went down  1.2%.

Though builder sentiment often signals the eventual direction of mortgage applications, NAHB CEO Jerry Howard told Fox Business that people should have confidence that the housing market will pick back up again.

“I think you’re seeing a weakening in virtually every market, but those that were stronger are weakening less. I guess the most important thing that investors and people need to remember is that Americans still want to own their homes and that, as soon as the conditions turn a little more favorable, housing will pick up. That will pick up the whole economy.”

flooding

$34B of US Real Estate May Be Fully or Partially Underwater by 2050

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Rising waters due to climate change could engulf $34 billion in US real estate within the next 30 years.

According to a report from the nonprofit Climate Central, up to 650,000 properties will be underwater or partially below the tidal boundary level within 30 years. Thirty counties across the country will lose more than 10% of their useable land, and 100 counties will lose at least 2% of their usable land.

The states most affected will lose a sizable portion of their total dry landmass. These states include Louisiana (8%), Florida (1.8%), North Carolina (1.3%) and Texas (0.2%).

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Rising waters will likely make these locations less desirable to live and work in, causing property values to plummet. Property taxes are an integral part of a municipal’s budget. They pay for many community social services, including schools, fire protection, emergency services, transport and other governmental aids.

Taxes also fund disaster relief and the subsequent costs of rising sea levels. New infrastructure, building safeguards against rising tides and relocating entire communities cost money. The aftermath of a rise in waters will quickly deplete many localities of their necessary funding.

“Property taxes fund local government operations, which typically include services such as K-12 schooling, roads and other infrastructure, police and fire protection, water, waste management, sewers, public transit, parks and public housing. Quality public services at competitive tax rates are key to attracting and retaining residents and businesses, which in turn support local tax revenues. Diminished property values and a smaller tax base can lead to lower tax revenues and reduced public services–a potential downward spiral of disinvestment and population decline, reduced tax base and public services and so on.”

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Seas will rise 8 to 23 inches along the nation’s coasts by 2050. The East Coast, particularly the Southeast, will be hit the hardest. Due to the sediment that flows in from the Mississippi River and the drilling for oil and gas pipelines, the gulf coast will be hit even harder by rising water levels and sinking ground.

Mark Rupp, director of the adaptation program at Georgetown Climate Center, points out that insurance carriers are reluctant to serve the Florida market, have become insolvent or have pulled out from the state entirely.

“How many mortgage lenders want to be lending for mortgages in flood-prone areas if they don’t think they’re going to be paid back?”

Rupp emphasizes that it is essential that these communities can rely on their state and federal governments to pay attention, fund their communities and provide a plan.

According to NASA, the earth’s climate has changed at a rate unseen in the past 10,000 years. The current rate of global warming is “occurring roughly ten times faster than the average rate of warming after an ice age.” The carbon dioxide we release is “increasing about 250 times faster than it did from natural sources after the last Ice Age.”

For sale

The Housing Market Is In A Recession And What It Means For Those Looking To Buy A House

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Over the last few months, the housing market was at an all time high between high demand, surging prices and low interest rates.

However, recent data revealed that the market may actually be in a “recession” from where it once was. 

“We’re witnessing a housing recession in terms of declining home sales and home building,” said Lawerence Yun, chief economist for the National Association of Realtors.

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The slowdown in market sales will hurt the economy but it could also help those people who are searching for a home who are willing to pay the high prices.

According to Barrons, ever since July, previous homes were sold at an annual rate of 4.81 billion which marked the lowest rate since November of 2015.  

New home sales also have found themselves in a decline into their their lowest level in six years. 

“It’s not a recession in home prices. Inventory remains tight and prices continue to rise nationally with nearly 40% of homes still commanding the full list price.”

Both home builders and home sellers are experiencing the slowdown which explains why the prices are still up even with the start of this “recession.”

The rise and fall of the housing market also goes along with supply and demand. Even though the demand for homes has dropped recently, the supply count is still very tight. 

The lack of supplies is partly due to the lack of construction that has occurred over the last decade and even since the 2008 crash.

The demand for buying new homes have continued to drop since January, but the mortgage rates have still continuously faced a rise from 3.3% at the beginning of the year to 6% now.

The high mortgage rates have made it harder for those looking to buy a home to afford them.

The demographics also play in part with the supply and demand of the housing market as well. 

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Even while there is a recession within the market, there are still more people searching for a home than there are actual homes to buy. 

“We are seeing more inventory come into the market, but it’s not enough to meet the buyer demand,” said Jessica Lautz, vice president of demographics and behavioral insights at NAR. 

Given the constant highs and lows of the market, buyers may want to be patient before they decide if they are ready to commit to buying a home. 

For first-time homebuyers, they also have to consider the price of rent because that is consistently increasing as well. 

“Even though borrowing costs have risen, it still in the long run may be worth buying a home given that what’s driving inflation right now is rising rental prices. It still may be an opportunity to get out of the pressure of rents,” said Jeffrey Roach, chief economist at LPL Financial, a national broker-dealer. 

best places to live

The Best Places To Live In America This Year 

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Real Estate company Niche has released their fifth annual report of the Best Places to Live in America, which includes a number of different categories including the most affordable places in the nation to live. 

“The pandemic triggered a new set of possibilities—suddenly, many individuals and families found themselves more mobile than ever before, and in the past two years they have continued to think hard about where they really want to live,” says Luke Skurman, CEO and founder of Niche.

Niche creates their reports using data from reliable sources such as the US Census and other government agencies, in addition to citizen reviews and reports. When it comes time to put there report together, they look at factors such as affordability, diversity, local housing economies, and other integral factors that buyers would look at when it comes time to buy a home. 

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For the second year in a row, Niche reported that The Woodlands is the top place in America to live. Ryan Bell, the principal strategist at Niche, discussed why it’s been able to top the list two years in a row. 

“When you look at all the factors we chose for our best cities ranking, The Woodlands is extremely well-rounded. It had high scores in each category, including weather, overall affordability and the quality of its public schools.”

“Niche’s best cities rankings also incorporate real ratings from people who live there, so the residents’ love and appreciation for their home certainly helped The Woodlands hang on to the number one spot for two years running,” says Bell.

Gil Staley, CEO of The Woodlands Area Economic Development Project, also spoke to the perks that The Woodlands has to offer leading to its top ranking on the list. 

“Our county, as a whole, is one of the fastest growing counties in the nation and our community has turned into a regional center for jobs,” Bell explained, adding that the highly ranked school districts in the county also make the Woodlands a desirable place to live. 

Niche listed Fort Wayne, Indiana as the most affordable place to live in the US, a title which it also earned in 2018, 2019, and 2021. 

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“To take the number one spot, Fort Wayne had to have strong performance in several factors we take into account for the lowest cost of living rankings. In particular, housing and rental affordability in comparison to incomes in the area, are Fort Wayne’s strongest factors for affordability this year,” says Bell. 

Forbes Magazine reported on why citizens in Fort Wayne also believe it’s such an amazing place to live: “Fort Wayne is a lovely place to visit and live. I’ve lived here for six years now and still haven’t seen everything. It’s family friendly and just friendly in general. It’s a small city compared to most, but there’s much to do. It’s full of history and rivers.”

The Top 10 Best Places to live in America according to Niche are ranked as follows: 

  1. The Woodlands, Texas
  2. Cambridge, Massachusetts
  3. Naperville, Illinois
  4. Arlington, Virginia
  5. Overland Park, Kansas
  6. Ann Arbor, Michigan
  7. Columbia, Maryland
  8. Berkeley, California
  9. Plano, Texas
  10. Irvine, California

For the rest of the rankings from Niche, check out their full report here.

housing market

Home Sale Cancellations Seeing Highest Rates Since Start Of Pandemic

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According to a new report by real estate brokerage company Redfin, 60,000 agreed home purchases fell through nationwide in June, which is equal to 14.9% of total homes that went under contract in the month.

That number is the highest since the COVID-19 pandemic began in March and April of 2020, where 17.6% and 16.4% of houses under contract fell through, respectively.

This month’s rate rose from 12.7% in May and 11.2% in 2021. “The slowdown in housing-market competition is giving homebuyers room to negotiate, which is one reason more of them are backing out of deals,” Redfin deputy chief economist Taylor Marr explained.

“Buyers are increasingly keeping rather than waiving inspection and appraisal contingencies. That gives them the flexibility to call the deal off if issues arise during the homebuying process.”

Marr additionally noted that raised mortgage rates are playing a role in cancellations. “If rates were at 5% when you made an offer, but reached 5.8% by the time the deal was set to close, you may no longer be able to afford that home or you may no longer qualify for a loan,” he said.

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The Federal Reserve previously raised its benchmark interest rates to 0.75% on June 15 in an effort to lower the now-9.1% inflation rate. With a possible recession on the horizon, it clearly impacted buyers who found themselves on the cusp of securing a property.

“When mortgage rates shot up to almost 6% in June, we saw a number of buyers back out of deals,” Miami Redfin mortgage agent Lindsay Garcia recounted, saying some buyers could no longer get a loan due to the rate jumps. “Buyers are also more skittish than usual due to economic uncertainty.”

Among the markets that saw the highest percentage of pull-outs during a pending sale include Las Vegas (27.2%) and several Florida cities like Lakeland (26.7%), Cape Coral (25.7%), Port St. Lucie (25.7%), and Jacksonville (25.3%).

Unlike Southwest metro areas, the Northeast saw a minimal loss of sales with Newark, New Jersey, Rochester, New York, Nassau County, New York, and Montgomery County, Pennsylvania all at or below 6%.

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As Fox News notes, homebuilders are also experiencing cancellations. A survey conducted by John Burns Real Estate Consulting (JBREC) in June found that cancellation rates of new builds flew up to 14.5%. That’s up from 10.4% this past May and 6.5% in June of 2021. Total home sales also fell by 31%.

The increased mortgage rates have also seen the average amount of home purchase loans diminish. The week ending on July 8 saw total mortgage application volume hit 1.7%, while the loan size fell to $415,000. Mortgage applications to buy a home fell by 4%.

However, 30-year fixed mortgage rates finally saw a win by cooling off to 5.3%, which Redfin reports is the largest one-week drop since 2008. That should give potential buyers an opening to save before rates increase again.