Blackstone Sticks with Warehouses, Student Housing Amid Firm’s Worst Performance to Date

Good morning,

Blackstone sticks with warehouses, student housing amid firm’s worst performing sector; Powell hints rate hikes could pause as Treasury yields tighten conditions; banks close branches nationwide; and home sales slump to 2010 lows but tight supply keeps prices high. Let’s delve into today’s topics.

📈 Market Update

🏭️ Blackstone Sticks with Warehouses, Student Housing Amid Firm’s Worst Performing Sector

Despite a 27% decline in real estate earnings that dragged down its overall Q3 profits, Blackstone is staying the course in its real estate strategy, concentrating on sectors like warehouses, data centers, and student housing. The private equity giant believes these areas still have favorable fundamentals, while it continues to shy away from offices given remote work trends. Though dealmaking has slowed, Blackstone sees opportunities to invest its massive warchest at lower valuations. Its optimism stems from views that the Fed's rate hikes will eventually cool inflation and that rising rates benefit some of its businesses.

🛑 Powell Hints Rate Hikes Could Pause as Treasury Yields Tighten Conditions

In a speech on Thursday, Federal Reserve Chair Jerome Powell suggested the central bank's series of interest rate hikes could soon pause, as the sharp rise in long-term Treasury yields is already tightening financial conditions. Powell noted the 10-year Treasury yield nearing 5% could restrain economic activity, reducing the need for more Fed rate increases. Though not declaring an end to hikes, Powell cited progress on inflation and moderating wages as reasons the Fed may not need to raise rates much further.

🏦 Banks Close Branches Nationwide

Major banks including Bank of America, Wells Fargo, and JPMorgan Chase are shuttering dozens of branches across the U.S. in cities like Dallas, Phoenix, and San Francisco. The closures come as banks face profit pressures from higher interest rates and growing distress in their commercial real estate loan portfolios, especially on office buildings. Though closing less desirable locations, some banks are still entering new markets and renovating branches elsewhere. The trend reveals how banks are reducing expenses while remaining selective in targeting optimal geographies.

🏘️ Home Sales Slump to 2010 Lows But Tight Supply Keeps Prices High

Existing home sales tumbled in September to the slowest annualized pace since 2010, as rising mortgage rates continue to erode affordability and deter buyers. But the limited inventory, with suppliers unwilling to sell into high rates, is propping up prices in most markets. While sales volume declines, the mix is shifting more to investors paying cash. To comfortably afford a home payment, Americans need to earn at least $114k. The trends reveal a housing market weakened by rates but supported by low supply, though the downturn may worsen entering the seasonally slow winter months.

NYC is Even More Unaffordable:
New York City homeowners are facing mounting financial pressures as co-op and condo fees are rising 3x faster than inflation, driven by new regulations and insurance costs. Inspection rules, climate mandates, and liability payouts are all contributing to fee hikes that could make homeownership unaffordable for many. While beneficial for safety and emissions, the added expenses worry middle-class owners and could force them out in a city increasingly catering to the wealthy. Boards are struggling to cover critical needs while limiting burdens on residents stretched thin. The tensions reveal how even robust markets like NYC face challenges keeping housing accessible.

✍️ Further Reading

• Harvard’s $51 Billion Fund Beats Yale in Hard Year for Endowments (BBG)

• New York on Track for its Worst Year of Housing Production Since 2012 (RD)

• Blackstone Raises Additional $3.2 Billion for Latest European Real Estate Fund (CS)

• Related Cos., Developer Behind Manhattan’s Hudson Yards, Ventures Into Cold Storage (CS)

📊 Chart of The Day