Real Estate

In this, my third data update looking what happened at markets and companies last year, I look at US equities, broken down by groupings, into sectors, market cap deciles and price to book deciles. I put that performance in a historical context, and note that both the small cap and value premiums, mainstays of the twentieth century, have disappeared, and argue that the only justification for continuing to hold on to them in practice is inertia.

*UPDATED* (and still true): When you build "luxury" new apartments in big numbers, the influx of supply puts downward pressure on rents at all price points -- even in the lowest-priced Class C rentals. Here's evidence of that happening right now: There are 21 U.S. markets where Class C rents are falling at least 4% YoY. What is the common denominator? You guessed it: Supply. Of those, all but one have supply expansion rates ABOVE the U.S. average. In Florida -- which continues to make itself a supply magnet with strong demand + the boost from the new Live Local legislation -- NINE metro areas made the list, with Class C rent cuts exceeding 4% year-over-year. Other key markets nationally to highlight: Ultra-high-supplied big markets like Austin, Phoenix, Salt Lake City, Raleigh/Durham and Atlanta are all seeing sizable Class C rent cuts of at least 5%. Tampa, Dallas, Charlotte and Orlando cut at least 4%. Small markets on the list include Provo, Greenville, Colorado Springs, and Wilmington (NC). Bear in mind that apartment demand is NOT the issue in any of these markets. They're all demand magnets. Sure, they've seen some moderation / normalization for in-migration and job growth, but (among the larger metros) every single one of them ranks among the national leaders for net absorption. (Interestingly, btw, Class C rents are falling materially MORE than Class A rents in most of these markets.) Simply put: Supply is doing what it's supposed to do when you add a ton of it. It's a process academics call "filtering" -- which happens when higher-income renters in Class B+/A- apartments move up into higher-priced new Class A+ units ... and then Class B+/A- units see vacancy increase, so they cut rents to lure up Class B renters ... and they Class B cuts rents to lure Class C renters. And down the line it goes. Filtering works best when we build a lot of apartments. We didn't see this phenomenon play out as clearly in past cycles when supply was relatively limited -- and failed to keep pace with demand. We probably won't see it in future years, either, as supply inevitably plunges and (barring some shock) could revert back to falling short of demand in high-growth markets. Less anyone still doubt, the inverse is true as well: Class C rents climbed at least 4% YoY in 22 of the nation's 150 largest metros, and nearly all of them have limited supply. So you can't just blame affordability ceilings when Class C rents are climbing briskly in low-supply markets while falling in high-supply markets. Most new construction tends to be Class A "luxury" because that's what pencils out due to high cost of everything from land to labor to materials to impact fees to insurance to taxes, etc. So critics will say: "We don't need more luxury apartments!" Yes, you do. Because when you build "luxury" apartments at scale, you will put downward pressure on rents at all price points. #multifamily #affordability #housing #rents

Why Zoning is Civil Rights Work When most people hear the word zoning, they think about technicalities: setbacks, height limits, density allowances. It sounds dry, like something only planners or lawyers care about. But here’s the truth: zoning is not neutral. It’s about who gets to live where, and under what conditions. Which means zoning is civil rights work. A Tool of Exclusion Zoning has long been used to draw invisible lines that separated people by race and class. -Early 20th-century zoning explicitly barred Black families from white neighborhoods until the Supreme Court outlawed it in 1917. -When race-based zoning was struck down, cities pivoted to “exclusionary zoning”, large-lot single-family requirements, bans on apartments, and parking mandates. The effect was the same: keeping certain people out. -Combined with redlining and urban renewal, zoning became a powerful tool for segregation and disinvestment. The legacy is visible today. In many cities, the neighborhoods with the best schools, green space, and transit are zoned for single-family homes only, shutting out renters, working-class families, and first-generation buyers. Why Reform Matters Now When we talk about equity in housing, zoning is often left out of the conversation. But it shapes everything else: -Housing access. If only single-family homes are allowed, and those homes start at $500K, who can afford to move in? -Opportunity. Zoning dictates whether a child grows up near strong schools, jobs, and transit, or in an isolated area with fewer resources. -Affordability. Allowing duplexes, triplexes, and small multi-family homes can open the door to more affordable options without subsidies. In other words, zoning is not just land use policy. It’s opportunity policy. Zoning as Repair If zoning has been used as a tool of exclusion, it can also be a tool of repair. Reform doesn’t mean eliminating single-family homes. It means giving communities more choices: -Legalizing missing middle housing like duplexes, fourplexes, and accessory dwelling units. -Reducing parking requirements that inflate costs and limit walkability. -Supporting mixed-use neighborhoods that connect housing to small businesses, schools, and services. When we talk about housing as a civil rights issue, we can’t only talk about programs and subsidies. We have to talk about the rules that shape the very ground we build on. The Call Take Away Zoning may look like a technical detail, but it determines who belongs where. And that makes it one of the most important levers we have for building equitable cities. Civil rights isn’t only about who can vote or who can ride the bus. It’s also about who gets to live in safe, affordable, opportunity-rich neighborhoods. If we want to live up to our values, zoning reform has to be part of the civil rights agenda. What’s one zoning rule in your city that you think needs to change?

There has been much handwringing about the increasing credit problems of subprime borrowers and the fallout on the financial system and economy. Subprime borrowers are indeed suffering serious financial stress. The delinquency rate on #subprime loans (loans to borrowers with below a 660 Vantage score) jumped to 8.3% in September. This is the highest delinquency rate in September since 2010 in the immediate wake of the Global Financial Crisis. And the direction of travel is disconcerting. It is just more evidence of how hard-pressed lower and middle-income Americans are. However, worries that losses on subprime loans will be a big blow to banks and other financial institutions are overdone. Subprime loans outstanding as of this September total $2.63 trillion, equal to 15.3% of all household debt outstanding. At their peak in 2007, they totaled $3.38 trillion, equal to 28.2% of outstanding debt. Outstanding subprime first mortgage loans are a shadow of what they were in the lead-up to the GFC, and there is about the same amount of subprime bank cards outstanding. Consistent with the recent bankruptcies in the auto sector, there are more subprime auto loans outstanding than prior to the GFC. Still, even so, they amount to just over $400 billion in outstanding. Not enough to do the financial system or the economy in. At least not yet.

💥 New homes are now CHEAPER than resale homes 💥   This marks a significant inflection point in the housing market, reversing the historical trend where new construction commanded a premium—often as much as 20% more than existing properties. The shift, which began during the pandemic with a narrowing of the price spread, has fully materialized over the past three months.   While new home prices can be influenced by changes in product offerings or location, our Zonda data, builder survey, and NewHomeSource.com trends all confirm that real price cuts are also occurring in the new home space.   Beyond the raw data, several additional factors make new homes even more compelling for buyers: - Lower insurance premiums. New homes typically incur lower insurance costs compared to existing properties due to modern building codes and materials. - Reduced maintenance. New construction offers a maintenance-free or lower-maintenance lifestyle, saving homeowners time and money on immediate repairs and upgrades compared to the resale market. - Enhanced energy efficiency. New homes are often more energy-efficient than existing homes, leading to lower utility bills and a reduced overall cost of living. - Attractive builder incentives. Builders continue to offer incentives (e.g. buydowns or design credits), providing extra perks to buyers that can further offset costs. Zonda Sarah Bonnarens Alexander Edelman Tim Sullivan Bryan Glasshagel Evan Forrest #housing #realestate #newhomes

I spent the week trying to answer the question: How can I build a property management company with zero human employees? After studying every AI tool in multifamily, I found something surprising. Here's what would happen if machines ran your apartment building: A few months ago, I designed a hypothetical zero-employee development firm. Now, I'm tackling property management. I can't stop thinking about how close we are to this reality. From leasing to maintenance, there's now an AI tool for almost every step. So I designed a hypothetical property management company with zero employees: Asimov Management. The goal: a full-service multifamily property manager that happens to have no full-time staff. For this to work, we'll use AI and automation to cover: • Marketing and leasing • Pricing optimization • Virtual and self-guided tours • Tenant screening and onboarding • Customer service • Maintenance coordination • Renewals and reporting While the tech isn't 100% there yet, here's what I learned: What's already possible: → AI-powered leasing assistants handle most prospective tenant questions → Self-guided tours work through automated access control systems → Maintenance requests can be routed to third-party gig workers → Renewal offers can be automatically generated and negotiated Where we're stuck: → Physical maintenance still requires humans (robots can't fix toilets...yet) → Many residents still prefer talking to a human at a front desk → Preventative maintenance relies on technicians' intuition → Larger buildings (250+ units) struggle with full automation The reality: • The most valuable application isn't replacing property managers • It's giving them superpowers to handle more properties with less effort Here's what this means for property management: • Class definitions may shift as service expectations change • Tasks will be centralized rather than eliminated • Resident preferences may actually evolve to favor AI interactions • The best operators will blend automation with strategic human touchpoints From my experience founding Common in 2015, I learned something critical: The approaches that worked well at 50-unit properties often broke at 250 units. Technology can centralize most functions. But, some residents always prefer walking to the front desk rather than using an app. This could change as AI improves. Meaning residents may prefer the predictability of AI over unpredictable humans. We're already seeing this in ride-sharing, where Waymo beats Uber and Lyft in user retention. So how close are we to machines running property management? Perhaps far closer than we expect. What parts of property management do you think AI will transform first? Full letter on how I designed Asimov Management is linked in the comments.

Yield Curve 101. When the yield curve flattens and eventually inverts, you worry. But it’s when the curve steepens late in the cycle as the Fed must react to a weaker labor market that you become really scared. Yield curve dynamics represent a crucial macro variable, as they inform us on today’s borrowing conditions and on the market future expectations for growth and inflation. An inverted yield curve often leads towards a recession because it chokes real-economy agents off with tight credit conditions (high front-end yields) which are reflected in weak future growth and inflation expectations (lower long-dated yields). A steep yield curve instead signals accessible borrowing costs (low front-end yields) feeding into expectations for solid growth and inflation down the road (high long-dated yields). Rapid changes in the shape of the yield curve at different stages of the cycle are a key macro variable to understand and incorporate in your portfolio allocation process. There are 4 main yield curve regimes to consider: 1) Bull Flattening = lower front-end yields, flatter curves. Think of 2016: Fed Funds already basically at 0% and weak global growth. Yields stay put at the front-end and could meaningfully move lower only at the long-end, hence bull-flattening the curve. 2) Bear Flattening = higher front-end yields, flatter curves. 2022 was the bear flattening year: Powell raised rates aggressively to fight inflation, but he ended up choking the economy off. This was reflected in lower future growth and inflation expectations at the long-end of the curve. Front-end rates went higher, but the curve bear-flattened. 3) Bear Steepening = higher front-end yields, steeper curves. October 2023: yields are rising but it’s the long end which dominates the move because investors think the economy can handle higher rates for longer and they start pushing up the term premium. Rare and potentially dangerous if growth isn’t strong. 4) Bull Steepening = lower front-end yields, steeper curves This move tends to happen ahead of recessions as the Fed must intervene and cut rapidly as the recession approaches. Front end yields tumble and long end yields drop too but more slowly. The yield curve is a key indicator every macro investor should watch. Did you enjoy this post? Let me know your thoughts in the comments!

𝗚𝗹𝗼𝗯𝗮𝗹 𝗧𝗿𝗲𝗻𝗱𝘀: 𝗪𝗵𝗼'𝘀 𝗕𝘂𝘆𝗶𝗻𝗴 𝗣𝗿𝗼𝗽𝗲𝗿𝘁𝘆 𝗶𝗻 𝗗𝘂𝗯𝗮𝗶 𝗡𝗼𝘄? (𝟮𝟬𝟮𝟱 𝗨𝗽𝗱𝗮𝘁𝗲) Last year's buyer nationality analysis was one of my most discussed posts. Full-year 2025 data tells a sharper story. Dubai's buyer base is more diversified than at any point in the city's history, and the motivations driving capital here have broadened well beyond pure speculation. ↳ 𝗜𝗻𝗱𝗶𝗮 (𝟮𝟮%, #𝟭): Expanded to 22%, driven by Golden Visa uptake, Rupee hedging, and a growing share of buyers purchasing as primary residents rather than pure investment. ↳ 𝗨𝗻𝗶𝘁𝗲𝗱 𝗞𝗶𝗻𝗴𝗱𝗼𝗺 (𝟭𝟳%, #𝟮): Highest UK share in recent history. Non-dom tax reforms and fiscal uncertainty at home are driving structural reallocation into Dubai lifestyle assets: waterfront properties, golf communities, and branded residences. ↳ 𝗖𝗵𝗶𝗻𝗮 (𝟭𝟰%, #𝟯): The 2025 story. Chinese capital returned at scale after years of pandemic suppression and domestic property market stress. Geopolitical neutrality, Belt and Road alignment, and expanded direct flights accelerated the reentry. Strong preference for off-plan, new-build product. ↳ 𝗦𝗮𝘂𝗱𝗶 𝗔𝗿𝗮𝗯𝗶𝗮 (𝟭𝟭%, #𝟰): Highest average ticket size among all top nationalities, concentrated in Palm Jumeirah and Dubai Hills Estate. Dubai complements Riyadh's build-out as the established regional second-home market. ↳ 𝗥𝘂𝘀𝘀𝗶𝗮 (𝟵%, #𝟱): Stabilized from the 2022 surge (15%, #1) to a steady 9%. Capital now reflects settled community and portfolio expansion, concentrated in super-prime waterfront. ↳ 𝗘𝗺𝗲𝗿𝗴𝗶𝗻𝗴 𝗦𝗶𝗴𝗻𝗮𝗹𝘀: Pakistan holds at #6. Italy and France anchor a growing European lifestyle bloc. Egypt and Turkey entered the top 10 as currency and inflation hedgers, with Egyptian buyer activity up 150% in early 2025. The deeper signal is diversification itself. Five years ago, two or three source markets drove most of Dubai's transaction volume. Today, 10 or more nationalities each hold meaningful share, and their motivations span tax optimization, currency hedging, geopolitical safety, lifestyle relocation, and yield. That breadth is a buffer. When one corridor cools, others absorb. The question for developers and investors: does your product strategy reflect who is actually buying, or are you still underwriting for the buyer mix of 2022?

The playbook for real estate investment is evolving. It’s no longer just about location and asset class; it’s about integration and intelligence. A pleasure to join two important conversations on this topic this morning, first on Bloomberg and then at the FII Institute #FII9.   My key takeaways: 1️⃣ Urbanization is the engine. The global trend of migration into large urban centers is the single biggest driver of demand. This means residential will be the largest asset class by absolute investment volume, fueling the need for everything from office space to retail in growing cities. 2️⃣ Think beyond single assets. The highest value will not be in individual assets, but in the intelligent ecosystems they create. Think of an industrial park with its own dedicated green energy source and EV charging network. This integrated approach is what our clients are demanding. 3️⃣ AI is the operating system. AI is the essential layer that makes these systems work. It allows us to analyze data and operate complex ecosystems in a smart, efficient, and cost effective way.    Thank you to Joumanna Bercetche and Eleni Giokos for two insightful and wide-ranging conversations this morning.  

I lost £35k on the sale of my first home because of one simple mistake. Don't make the same error as me: 1. Strategic timing matters. Sell in summer when your home looks its best and yards are in bloom. The real estate market fluctuates dramatically, so once you have an offer, move quickly toward closing. Our costly mistake? Pushing for a 6-month closing timeline, leaving too much time for market conditions to change. When market sentiment shifted, our buyer's lender reappraised the property lower. 2. Small investments yield big returns. Spend a few hundred dollars on fresh paint, minor repairs, and professional cleaning. These small touches can add thousands to your final sale price by creating a move-in-ready impression. The ROI on pre-sale improvements is often 5-10x your investment. Focus on kitchens and bathrooms - they sell homes faster and for more money than any other area. 3. Create competitive bidding situations. Host open houses during limited timeframes (1-2 hour windows). When multiple buyers view simultaneously, they see the competition firsthand. This perception of demand creates urgency and drives up offers. A good agent will leverage this energy to negotiate between multiple interested parties. I used Highcastle - and they were great. 4. Thoroughly verify your buyer's financing. Don't just accept "pre-approved" at face value. Our mistake was not digging deeper into our buyer's mortgage situation. The longer the process drags on, the more time for financing circumstances to change. Request proof of funds or a mortgage pre-approval letter. For those using Islamic home financing, this verification is even more critical as the process can involve additional steps. 5. Compress your timeline as much as possible. The probability of a sale falling through increases dramatically with time. Between agreement and closing, countless variables can change: mortgage rates, buyer circumstances, and home appraisals. Each week that passes represents a risk to your sale price. Push for 30-60 day closing windows whenever possible. The painful lesson: What began as a £35k premium evaporated because we opted for a distant closing date. Have you experienced something similar with real estate timing? Share your story below.