Fear & Greed Index

Tariff and immigration policy have been very detrimental to the construction and development of housing, and ill-thought-out protectionism and war are only making the situation worse. Easing government permitting and zoning will not by itself increase housing supply if it remains unaffordable to build the units, even with increased density

There are many federal policies and actions that have been very bad for this sector: from tariffs, to fuel costs, to the K-shaped economy and the almighty consumer base being the weakest it’s been in decades.

Operating costs—including property taxes, insurance, fees, technology, and appraisals—are skyrocketing and making value-add projects (1+ year vacancy) not doable for a lot of smaller investors.”

I feel as if the current market is heavily affected by the cost of construction and the lead times from the wars overseas. This is causing more pressure, especially at smaller boutique firms, to compete in the market.

Debt availability is strong, but institutional equity capital is effectively on the sidelines. Interest rate volatility and local market-specific regulations put a continued pause on capital investment. Sellers continue to kick the can and wait for better days. The bid-ask spread between buyers and sellers remains wide.

There is still a big gap in what owners think their properties are worth, especially if they bought in 2021–22. Asking cap rates are lower than current Agency debt rates (Fannie Mae/Freddie Mac), and any negative spread on a deal just won’t work, but sellers don’t seem to understand or believe that.

In my 14 years of being in CRE, this market has been the hardest to transact in. There are headwinds coming from multiple directions.

Recovery cannot begin until lenders begin to acknowledge losses (equity is already long gone) and move the assets through the foreclosure/disposition process. Simply rolling loans will never clear the unsustainable debt needed to reset pricing that will allow the recovery phase of the cycle to begin.

The cost to develop new units is more than current sale prices. In addition, operating soft costs continue to escalate. You have to be vertically integrated on the development and construction side to ensure you make a profit. Cash flow is king.

Development may slow down due to uncertain rates and downward pressure from inventory coming online.

Oversupply has driven down multifamily rents in my market (Tampa Bay). Land development demand is expected to pick up for us.

In the Puget Sound…the regulatory environment is very unfriendly to development, and demand is clearly not as strong as policymakers believe, given the concessions on first lease renewals to retain tenants and the concessions on new lease-ups. Retail vacancy is up…Industrial is still fairly strong, but development may have overshot demand, since the conversations about leasing have become more tenant-friendly over the last 6–12 months.