Dave:
The US is on the brink of a recession, or at least that’s what one major bank is saying. According to another one, though the risk is mild and it’s actually going down. So which one is it? Is the economy really faltering and at risk of serious declines or is growth going to continue and does any of this even actually matter to real estate investors? Today we’re going to dive into this and discuss why the traditional ways of measuring recessions is failing to provide ordinary Americans and the real estate investing community with the information it needs, and I’ll even share with you a brand new indicator that I’ve developed to help us make sense of how the economy is really performing.
Hey everyone. Welcome to On the Market. I’m Dave Meyer. Thank you all so much for joining us today. Today we’re going to talk about recessions. Are we in a recession? Are we going to be in a recession? Because it feels like this question has been on everyone’s mind for like five straight years. It seems like it’s never not in the media. There is always a headline about this. In today’s day and age and recently I’ve been seeing completely opposite reads about what’s going on in the economy. There’s recently a study by UBS, one of the biggest banks in the entire world that said the probability of the US going into a recession is 93% right now, that’s pretty high. Meanwhile, chase the biggest bank in the United States says it’s only 40%. So what gives here? How can two banks, they’ve got the same data, how can they have such different conclusions about what’s going on in the economy?
And I should mention, it’s not just these two banks. Everyone is all over the board. Really smart people have totally different opinions on what’s going to happen. Some people are saying AI is going to destroy the labor market. Others say it’s going to lead to a massive boom in the economy. Some people think tariffs are going to lead to domestic job growth. Others say the opposite. That’s going to drag on business growth. In this episode, we are going to try and separate the signal from the noise. We’re going to start by just first of all talking about what a recession is in the first place, how it’s currently measured and why personally, I’ll just tell you now. I think that measurement is inadequate for what we need. Then we’re going to talk a little bit about better ways to measure the true performance of the economy, including a indicator I’ve been working on in my spare time, and then we’re going to talk about what this all actually means for just the average American and for investors, because ultimately the whole point of a recession is to help us understand what we should be doing with our own personal finances and our investing decisions.
So we’re going to talk about that as well in this episode. Let’s do it. So first up, let’s just talk about why we cannot agree on whether or not we are in a recession. Why is this one word recession the focus of the entire financial media when the reality is the word is sort of meaningless. I’ve said this on the show before, but the more time I spend thinking about this, the more true I think it becomes. The word recession has sort of lost all meaning. Let me explain. First of all, there is no actual definition of a recession, so that is definitely one. Maybe the biggest factor in why it’s so meaningless and confusing is because there is no actual standard definition, and this is a common misconception. Many people believe that the definition is two consecutive quarters of negative GDP growth, but that is not what it is in the United States.
When a recession starts and when it ends, and whether we’re inward or not is all decided by a group called the National Bureau of Economic Research, and it is decided retroactively, meaning that after the recession has started, they point backwards and say, okay, it started six months ago, a year ago, two years ago, and then they will say once it ends a year or two after it ends, and it has actually been this way since the seventies, and I know that people think that the definition of a recession has been changed, but it actually hasn’t changed. It has been this way for 50 years. I went on the website and pulled exactly what the National Bureau of Economic Research says their definition of a recession is, and it is a recession, involves a significant decline in economic activity that is spread across the economy and lasts more than a few months.
In our interpretation of this definition, we treat the three criteria, depth diffusion and duration as somewhat interchangeable. That is while each criterion needs to be met individually to some degree, extreme conditions revealed by one criterion might partially offset weaker indications from another end. What does that even mean? That is basically just saying we decide subjectively what a recession is based on looking at data, and I think that’s just the reality of what happens. They don’t say it has to meet this one criteria. We look at one data set and that’s what we decide on. It’s like basically we look at the whole economy and we decide whether or not we are in a recession. This is how recessions are defined in the United States. It’s been this way for a long time. You can go Google it and it’s true. So this is a pretty big issue, right?
Recessions are inherently in the United States subjective, so it is no wonder everyone is debating it because you can’t really measure it. There is no one true way of saying there is a recession, at least officially, but it is important to note that because this is frustrating and because the definition is so subjective, many people do use the rule of thumb of two consecutive quarters of negative GDP because no one really wants to wait around for the National Bureau of Economic Research ember to tell us that there was a recession years after their is already over. And this rule of thumb, it is useful, but I also think it falls short because GDP is not that great of a metric. Yeah, I know that someone who likes economics like I do, saying that GDP is a bad metric is not the most common thing to hear, but before you get all up in arms about it or concerned about it, be honest, can any one of you tell me what GDP is?
Anyone do? You may know that it stands for gross domestic product. That’s great, but do you know what it actually means? Do you know what the formula is, how it’s calculated, what it’s measuring? If you’re wondering, I can tell you that it’s consumer goods plus investment spending, plus government spending, plus the difference between imports and exports, also known as the balance of trade, and that’s how you get GDP. Cool. I mean there’s obviously important metrics in there. I’m not saying GDP is useless, but it’s missing in my opinion, one pretty big thing. Maybe the biggest thing, it completely lacks a measurement for how well the average American is doing. It doesn’t talk about if the average American is better off if they’re employed, are they getting any wealthier? GDP only measures business activity, government activity and consumer spending, but there’s nothing in there about savings or net worth or preparedness for retirement or wealth building for the average American.
And I think this is where it all breaks down because when people talk about recessions with their friends or their families, if they’re concerned about this thing or they’re talking about it on social media, how many of those people, when you talk to your friends about a recession, are you talking about the balance of trade declining? Is that really what you’re worried about? Are you worried about business investments declining? Maybe a little bit. Those things matter, but I think you’re probably worried about paying your own bills, about having gainful employment about how the performance of your real estate or your stock portfolio is going to do, and GDP doesn’t fully measure that. So this is why recessions are so confusing. First, it is completely subjective, and even though we have developed this rule of thumb, two consecutive quarters of GDP decline to cut through that subjectivity so that we have something that we can measure and look at, that also falls short because what the media and the government track in terms of GDP is not really what Americans are thinking about with a recession.
They are different things. I think this is a perfect example of what happened in 20 21, 20 22. There was not officially a recession during that time, but a lot of people felt like we were in a recession because real wages were going down because inflation was super high and it was eating into people’s spending power. That’s where this disconnect goes. Yeah, GDP was going up, but ordinary Americans were suffering, and so that’s why this word recession has become so meaningless is because people think about it in totally different ways. So we do got to take a quick break to hear from our sponsors, but we’ll be right back with more about recession indicators and what you should be doing about them.
Welcome back to On the Market. I’m here talking about recession indicators, how they fall short and how you can do it better. Let’s jump back in. Now again, I think GDP is important for sure. It does do a decent job of how big the overall economic pie is. That is sort of the thing that it is good at. It is good at telling us is the total output of the economy doing well. That’s useful, but we can’t just base recessions around things that are removed from the everyday experiences of American citizens. We need both. So being an analyst and a weirdo who loves this stuff, I decided to figure out my own measurement of the type of recession I think most Americans care about. Not everyone, but just the average person going out there living their life. I wanted to sort of measure is the average American getting better off yes or no?
Because to me, frankly, that’s more important than GDP growth because that’s what actually matters to people. So ultimately, when I decided to think about this, I tried to think about what is the best measurement of financial wellbeing. There are tons, and I’m going to share with you what I came out with, but I genuinely love your feedback on this because it’s something I want to sort of build on and improve over time. I kind of want to create a new metric that we can all talk about here on the market. What I came out with out of looking after dozens of different indicators and things, and I wanted to keep this simple. What I decided the most important thing is real wage growth, the inflation adjusted income of the average American. I want to know if you are working and doing your job well and meeting the criteria of your job, is your spending power going up or down?
To me, this is perhaps the most critical thing because it’s kind of hard to say that things are going well for the American economy if wages are lagging behind inflation. If you’re working hard and you are getting your paycheck and that is buying less and less and less, that’s not good. That is a big warning sign for what’s going on in the economy. On the other side, if you’re working your job and doing a good job and your paycheck is buying more and more and more stuff and more than keeping up with inflation, that’s a good thing. That’s a very good sign of a healthy economy in my opinion. So that became my number one metric is real wage growth up great. The economy is doing well, is real wage growth negative? Then we’re in an ordinary person recession. We got to come up with a good name for that.
So give me some ideas for that. I should have thought of this before we started recording this episode, but I need a name for this other kind of recession that I’m trying to track. I’m going to call it an ordinary person recession, the thing that just came out of my mouth. So that’s one indicator. The other indicator is unemployment going up. Kind of had to come up with a complicated thing here because for example, right now, November, 2025, unemployment has been going up, but it’s at 4.1%, so that is still really low. So I wouldn’t say that we’re in an ordinary person recession because we’ve gone from 3.5% to 4.1%. I did a little bit of math here if you’re familiar with something called the SOM rule or the SOM indicator, it’s very similar to that. Basically, if you want to know nerds, if the three month moving average is more than 25% above the three year moving average, basically I’m measuring are they getting way worse than they’ve been recently?
Hopefully this makes sense to you guys. Again, I’m going to keep explaining it, but let me know if it makes sense to you at the end because I wanted to keep it simple, and I actually purposely kept the reasons out of this. There are reasons that real wages have gone up and down. There are reasons that unemployment go up and down. Those things are very complicated, and I didn’t want to come up with a super complex thing. I wanted something everyone can really understand. Our wages going up, is unemployment going up? That’s sort of what we’re looking at here. So I did this. I actually did all the number crunching and data going all the way back to 1981. I looked at 45 years of data, and what I found is pretty interesting. By my metric, the US economy has been in a real person recession far more than the government.
The ember definition of what a recession is, if you look at how well the average American has fared for the last 45 years, it’s not as pretty as our GDP numbers would make you think, and I want to be clear about something. This is not political. This is not a reflection of anything that’s been going on in the last year or even the last few years. This goes back decades, this goes back at least 45 years, but I do think it explains a lot of what is going on in the economy today. Here’s what I got In the last 45 years, that is 540 months, 57 months have been a recession according to Ember. Officially, we’ve had about 10% of the time we have been in a recession. We had a long time in the early eighties, 17 months. We had nine months in the early nineties, nine months around the.com bust, 19 months, longest one I tracked in the great financial crisis during oh 8, 0 9, and then three months at the start of COVID.
So what they’re saying is that since the great financial crisis ended only three months, the US has been in a recession. That’s interesting. I think if you’re in a high job, if you work in tech or high paying job, you probably agree with that. If you are more in a blue collar, middle class kind of job, you might disagree with that, but that’s what they have in my metric. Out of those 540 months, 240 of them have been a normal person recession. That means a little bit less than half of the time conditions for the average American worker are not getting better. We are either in a situation where unemployment is going up or wages are going down. In the eighties, we had 31 months of this. Then there was a little blip in the mid eighties, 45 months of it in the late eighties and early nineties, 21 months in the mid nineties, 22 months in.com, great financial crisis, 57 months instead of the 19 official ones, which I should say I lived through.
That definitely did not feel like the recession. The GFC was only 19 months. It felt like four or five years to me. Then we had 11 months in 2020, and my indicator for anyone who is wondering does put us having a recession for 21 months from 2021 to early 2023 because inflation was destroying everyone’s income and real wages were going down. Should also mention that by my measurement, we are not in a recession right now, but there is a risk that real wage growth goes negative next year. So it’s something that I personally will be watching, hopefully with feedback from all of you. So what I’m saying is that over the last 45 years, in any given month, it was about a 50 50 shot if your spending power was going up or down or unemployment was getting worse. That is not ideal, and this was really pretty eyeopening to me because I think it puts the numbers that I have personally just felt, and I think a lot of people in the United States feel is that the US economy is not working as well for them.
Yeah, GDP has been going up, but inflation has been pretty brutal for the last four years. It’s hard to get ahead. Very few Americans are prepared for retirement. I didn’t realize this until I did this data analysis, but this is kind of the reason I got into real estate investing in the first place. I could see, you could feel this even going back 10, 15, 20 years when I was in the start of my career, you could feel that you couldn’t really rely solely on wages from a traditional job for your financial wellbeing, for long-term wealth, for retirement. I personally wanted to become an entrepreneur in some way to help mitigate that risk. Unfortunately, for me, real estate has provided that for me, and it has really worked out, and this is kind of why I wanted to make this episode in the first place because a lot of people are focused on what is going on, whether we’re officially in a recession, who’s calling that we’re in a recession, who’s saying that we’re not.
But the reality of the situation is that for most Americans, when you’re trying to make investing decisions and decisions about your own life, it’s kind of this stuff, the stuff that I’m talking about, unemployment, real wages, that honestly matters the most because for me, what this really made me realize is official recession or no recession, it is very difficult for the average American to rely on their career, a traditional job for their wages and their quality of life to improve. Now, there have been spurts where it’s been good over the last 45 years. There’s been spurts when it’s been bad, but overwhelmingly, I was just shocked to see this, that 10% of the time we’re saying we’re in a recession officially, but 40% of the time the average conditions for an American employee is not getting better, and so to me, this just further points the idea that you need to take your financial future into your own hands. For me, I’ve chosen a combination mostly of real estate. I also do some other types of investing, but it really justifies to me the need to use means tools outside of your traditional income, outside of these traditional measurements of whether the economy is growing or not to measure your own success. I’ve got more for you in just a minute about how you should be thinking about this data for your own portfolio, but we do have to take a quick break. We’ll be right back.
Welcome back to On the Market. Let’s jump back in. So for me, what I’m going to do about this information is try and focus a little bit less on who’s saying we’re in a recession and who’s not, because no one knows the economy is uncertain right now. I don’t personally think we’re in a recession just yet, but there is risk, and the best way I think to handle this uncertainty and risk is to focus on your personal situation and how to make it better. For me, that includes investing, so I have cashflow and tax benefits and inflation hedged assets like real estate to make sure that whether we go into official recession or a recession of I’ve defined, it matters less because you’re insulating yourself against those risks regardless of what happens out there. To me, that is how you ensure that your spending power is actually going up.
Your quality of life is actually going up, your financial security, your sense of wellbeing is actually going up, is focusing on the things that you can control, and sometimes you can’t control your own wages, but if you listen to this show, if you learn about real estate investing or entrepreneurship, you can have a higher sense of control over your own financial freedom. Again, I have felt this for a long time. It’s why I wanted to become an entrepreneur is because I felt that I couldn’t rely on a job, and this analysis has really sort of put numbers to that in a way that has felt validating. It’s a little scary because it does mean that you have to take this on for yourself, but I also find it super motivating. I really just think that it shores up my own belief that you have to be proactive about your own financial future because the macroeconomic market might not do it for you.
That’s my takeaway from all this. By the way, I should also mention even if we do go into an official recession in four out of the last six recessions, home prices actually went up because mortgage rates typically go down, make housing more affordable. So if you hear people do talking about an official recession, if it ever gets named, it is not necessarily a bad thing for real estate. It’s probably not good for the country as a whole. You don’t want GDP going down, but it can help real estate, which actually can stimulate GDP, help the whole country recover in the longterm. That’s just some food for thought. But in the meantime, while we wait for the people to decide if we’re in a recession or not, again, I’m going to focus on my own personal real wage growth. What’s going to matter to me? Is my own spending power going up more than inflation?
Can I create a portfolio that will ensure that’s happening even if the rest of the economy isn’t doing that well? To me, that’s the ultimate measure of success and future proofing and insulating and wealth building that you can do as a result of some of this analysis I’ve been doing. That’s what I am really going to be focused on in the years to come. I would love your opinions about this as well, though. I’m an analyst, a data scientist. I worked hard on this, but I need input on this. I would love to know what I’m missing. Is there something I should be including in this? Do you think I’m totally off base, or do you think this information is actually helpful? Does it help you have a better understanding of the decisions you should make about your own financial future, about your own investing portfolio? I would love to know your thoughts in the comments below. Thank you all so much for listening or watching this episode of On the Market. I’m Dave Meyer. We’ll see you next time.

This article is presented by Connect Invest.

As cities rethink how to fill empty office towers, New York City is leading a transformation that’s redefining how investors approach real estate income. New York City just reached a turning point in its efforts to revive its post-pandemic office landscape. The conversion of JPMorgan’s former 25 Water Street headquarters—now a 1,320-unit residential tower with gyms, co-working lounges, and recording studios—marks the largest office-to-residential redevelopment in U.S. history. At the same time, SL Green’s $730 million acquisition of a fully leased Midtown tower suggests investors are betting that New York’s urban core is far from finished.

Together, these moves tell a story: Institutional capital is reentering office real estate, but through new channels, shorter debt horizons, and adaptive reuse. That creates an opportunity for private-credit investors looking for yield.

That’s the same shift Connect Invest has been tracking in private credit. As institutions pivot to shorter lending windows and asset-backed security, individual investors are following suit, seeking fixed-income opportunities backed by real property.

However, behind each conversion lie layers of complexity. According to Business Insider, conversions are “notoriously architecturally complex” and financially and legally tricky to execute. So while there are substantial ROIs for debt investors to get excited about in this area, there are also substantial complications to be aware of.

Zoning and Permitting

New York’s zoning amendments under the City of Yes for Housing Opportunity initiative are expanding eligibility for residential conversions in districts south of 60th Street. The Midtown South rezoning plan, as it’s also known, has been welcomed by developers, investors, and residents alike because it gets rid of outdated manufacturing zoning in Manhattan’s Garment District, traditionally home to commercial properties in the fashion industry. The manufacturing industry in the city has declined for decades, while the demand for residential units has consistently gone up. 

Howard Raber, director of investment sales at Ariel Property Advisors, told Forbes that owners and developers are tremendously optimistic about the Midtown South rezoning plan because it will allow both office-to-residential conversions and ground-up residential developments.

Financing for office-to-residential conversions will be made easier by the 467-m tax abatement introduced in the New York State 2025 budget. This abatement allows for savings up to 90% for up to 35 years, depending on the project commencement date. The lucrative opportunity for investors is amplified by the fact that residential rents are always considerably higher than commercial. 

Even with the inevitable per-square-foot losses that will come from complying with the Mandatory Inclusionary Housing zoning tool, which stipulates that a certain percentage of residential housing be made affordable to lower-income residents, investors can look forward to further relaxations in the zoning restrictions, notably the lifting of FAR (floor-to-area) density caps. New residential developments that comply with Mandatory Inclusionary Housing will be allowed to have a higher density, which will offset the losses from affordable units. 

Moreover, assemblages are permitted under the new zoning laws. Assemblages combine old office spaces to create new residential ones, utilizing existing airspace to create even more housing. 

Raber told Forbes that these developments have “significant potential,” “leveraging air rights to build much-needed housing and transform blocks with higher rental values compared to vacant or low-rent office spaces.”

The Manhattan South rezoning is not the only current zoning legislation opening up conversion opportunities in NYC. The Atlantic Avenue Mixed-Use Plan and the Bronx Metro-North rezoning also aim to ramp up the building of new housing in the city.

For debt investors, these zoning and structural hurdles highlight a critical advantage: predictable returns are far easier to achieve when you’re lending to projects rather than building them. Through Connect Invest, investors can participate in real-estate-backed notes, secured, short-term debt positions that deliver a consistent yield while leaving the permitting and construction risk to experienced developers.

Structural Work

Despite the welcome relaxation of zoning restrictions, office-to-residential conversions will still come with inherent structural challenges. 

Specifically, office floors often have deeper floor plates and fewer windows; that means developers must carve out interior courtyards or vertical shafts for light and ventilation. Moreover, some office buildings have windows that are inoperable, whereas a residential property, to be desirable, will need functional windows that can be opened. 

Depending on the building’s original design, the structural interventions required can be quite dramatic. The 25 Water Street conversion, for example, involved cutting two light wells into the center of the building and adding 10 floors to the top. As is typical of a commercial building of its size, the Water Street building had small, insufficient windows and would not comply with existing regulations for residential buildings as it was. 

John Cetra, the Manhattan architect and co-founder of CetraRuddy, the practice that executed the conversion project, told Business Insider that they “created the hole in the doughnut to bring the light and air into the middle of the space.” 

Light and ventilation are two obvious requirements that conversions must fulfil, but there are many other structural considerations that have legal implications. For example, conversion projects will have to comply with federal laws such as the Americans With Disabilities Act.

Investors need to factor in necessary structural changes into their business plans. The nature of apartment conversions is quite different from the simple remodel that is often all that’s needed in an existing residential investment.

Mechanical and Plumbing

Finally, once the structural work is done, apartment conversions typically undergo extensive mechanical and plumbing overhauls. Entire water, HVAC, and electrical systems in these buildings have to be reengineered for the multifamily code.

A commercial building’s HVAC system is substantially different from that of a residential one; the two comply with very different sets of rules and regulations, or HVAC zoning laws. 

An office building is designed to provide ventilation and air conditioning five days a week, with typically a single thermostat serving an area as large as 2,000 square feet. 

A multifamily residential building, on the other hand, requires a thermostat per residential unit, and a fully functioning HVAC system that will provide ventilation and heating/AC 24/7. In many cases, office spaces come with outdated HVAC systems unsuitable for residential use that have to be replaced completely.

Details like metering (each unit will need its own utility meters) and the number and positioning of electrical outlets will also need to be carefully considered and planned for. The same goes for plumbing: It is not simply that a residential building needs more plumbing fixtures than a commercial one. This has implications for the size of incoming water service and outgoing waste services. The capacity will need to be increased for both. 

Final Thoughts

None of these issues is insurmountable, but they are considerably more complex than a like-for-like residential conversion. 

For most investors, dealing with and coordinating all the different aspects of an apartment conversion is simply too much work, especially if juggling multiple investments. The takeaway? Complex projects like these will always require deep capital, long timelines, and expert teams. But for investors who want exposure to the same asset class without the sleepless nights, debt-based investing offers a direct path.

Connect Invest bridges that gap, letting everyday investors earn fixed monthly returns backed by real estate, while the developers handle the heavy lifting.

Instead of betting on permits and construction deadlines, you can earn a predictable income from the same ecosystem that drives billion-dollar projects like Water Street.

Learn more about Connect Notes at Connect Invest.

This article is presented by Walker & Dunlop.

Before buying any property, the investors should ask themselves: Is this a good market? Understanding the local fundamentals is critical if you want to avoid overpaying or investing in a declining area. 

In order to be successful, you need to know the economic health, tenant profile, rent trajectory, and market potential of an area before you ever run the numbers on a deal—whether you are buying a 5-unit property in Texas or a 100-unit apartment complex in Georgia.

Tools like WDSuite from Walker & Dunlop make that process easier. This free platform lets investors analyze institutional-level data with just a few clicks. Instead of researching multiple sources, WDSuite brings employment trends, tenant credit scores, and population shifts into one dashboard.

Here are five market analysis metrics every investor should be using, and how to find them in WDSuite.

1. Macroeconomic Indicators

Macroeconomic indicators include employment statistics like job growth, unemployment rates, and labor force participation. These reveal the broader economic health of a market.

Why it matters

Employment is directly tied to rental demand and tenant stability. If job opportunities are growing, people move in. If unemployment is rising, vacancies and missed rent payments may follow.

What indicates a strong market versus a weak one

• Strong market: Low and declining unemployment, steady job growth, expanding labor force
• Weak market: High unemployment, job losses, shrinking labor force

How to use WDSuite

Search for a property and the macroeconomic benchmarks are displayed directly in the property overview. You’ll find local job growth compared to the national median, labor force trends, and unemployment rates at the county level. This helps you assess whether demand for housing is likely to rise or fall.

2. Radius-Based Demographic Insights

This includes age distribution, household sizes, population growth, and income levels within one, three, or five miles around a specific property.

Why it matters

Demographics determine the type of housing in demand. For example, younger populations may favor apartments, while older demographics might prefer single-level homes. Income levels influence rent ceilings, while household size affects bedroom count needs.

What indicates a strong market versus a weak one

• Strong market: Growing population, rising or stable income levels, high renter population
• Weak market: Declining population, stagnant or falling incomes, aging or shrinking renter base

How to use WDSuite

Search for a property and navigate to the demographic analysis in the neighborhood tab. It will break down population changes, age brackets, household income levels, and size trends, all compared to the metro average. This is essential for aligning your investment strategy with local renter needs.

3. Tenant Credit Quality

This metric shows median credit scores and loan payment delinquency rates for renters, helping you assess the overall financial stability of residents of a property in comparison to renters in the area.

Why it matters

Credit scores are an estimate of the likelihood for a consumer to default on a loan payment in the coming 30 days.  If local tenants struggle with low credit scores or missed credit card payments, there is a risk that they won’t be able to make consistent rent payments. On the flip side, knowing renters have strong credit scores and low delinquency rates can support stable rent collections and low vacancy rates.

What indicates a strong market versus a weak one

• Strong market: Average credit scores above 650, consumer delinquency rates below the metro average
• Weak market: Credit scores below 600, consumer delinquency rates exceed the metro average

How to use WDSuite

Search for a property and navigate to the multifamily tenants tab. You’ll find renter credit scores aggregated at the property level and consumer loan payment delinquency rates all as recently as last month. This can help you minimize default risk.

4. Market Rent Trends and Forecasts

This measures historical and current rent levels in your target area.

Why it matters

Rent growth shows demand and pricing power. This directly affects your cash flow and projections.

What indicates a strong market versus a weak one

• Strong market: Steady or increasing rent growth and forecasts
• Weak market: Flat or declining rents

How to use WDSuite

Search for a property and navigate to the demographic analysis in the neighborhood tab.   The rent trend and forecast for the 1, 3, and 5 mile radius can be found in the housing section.

Why Easy Access to Market Data Matters

Successful real estate investing is about managing risk, which starts with having the right information. In the past, accessing this level of market insight meant hiring a research analyst or buying expensive reports. 

WDSuite removes that barrier. With just a few clicks, investors can assess market strength, tenant quality, rent potential, and resale comparables. WDSuite is free to use, so there is no reason not to use it.

Instead of flying blind, you can make data-informed decisions that protect your capital and guide your long-term strategy.

WDSuite is one of the best tools you can have in your analysis toolkit, whether you’re buying your first multifamily property or adding to a growing portfolio.

Dave:
This investor had no exit plan from a demanding and dangerous day job, working a full 30 years to vest. His pension just didn’t feel possible, but then he discovered real estate and now just five years later, he owns 16 investment properties and is on track to retire 10 years ahead of schedule. And he’s doing this while investing thousands of miles away from his expensive California hometown. This is the path to financial freedom. What’s up BiggerPockets community? I’m Dave Meyer, housing analyst, rental property investor and head of real estate investing at BiggerPockets. Welcome to the show. Today we’re bringing you the story of investor Brian Waters from Huntington Beach, California. Brian loves his job. He’s a firefighter, but he’s seen friends and colleagues struggle trying to reach retirement in a very dangerous line of work. So he started looking for a long-term backup plan and he bought his first rental property during the pandemic. Now he’s amassed a very impressive out-of-state portfolio that puts him on path to financial freedom well before his sixties. On today’s episode, Brian’s going to share what he’s been doing, why he started investing with a turnkey company instead of riskier value add properties, how documenting his journey on social media paid off huge when he needed capital to expand and how he’s proving every day that the burr is far from dead in Midwest American cities. Let’s bring on Brian. Brian, welcome to the BiggerPockets Podcast. Thank you for being here.

Brian:
Dave. Thank you so much for having me. I’m super excited. It’s good to finally get to meet you and I can’t wait to talk about some real estate.

Dave:
Let’s do it. Tell us a little bit about yourself first. Where were you in life when you first got the bug or started thinking about investing in real estate?

Brian:
I was in my early twenties. I became a medevac pilot in Hawaii, a commercial airline pilot. I was living at home and I wanted to buy a house. I live out in southern California. It’s super expensive. So we had talked to a real estate agent in the area and he kind of had the inside of this place, and I knocked on the door, a lady answered, and I asked her if she would be willing to sell her house to me, and she said, yeah, but I’m not ready to move. So we bought it, we’d rented it back to her for a year. And then for the next over 10 years, I had roommates. I was a pilot, I was gone. I flying all over the country, so who cares who’s in my house? So my mortgage was pretty much free, and that allowed me to build all that equity, which later became the golden goose to my investments.

Dave:
So what’d you do from there after a house hack? I think a lot of people either stick with just house hacking over and over and over again, but what did you do after that first deal?

Brian:
So it was years until I actually got back into the real estate game. So I let that property just increase in value. I’m lucky Southern California, the home prices go up over time, but that kind of fast forwards me to getting in the fire service and being a 33-year-old with brand new twin boys and kind of almost in panic mode like, Hey, I don’t want to work till I’m 63. And also I’m one injury away from actually having to retire.

Dave:
Wow, that’s scary. That’s hard.

Brian:
Yeah, I’ve been part of our peer support team for over 13 years and you see a lot of mental and physical stuff going on, and I just had to come up with a plan. So the very next property was, it was right around when COVID was happening. I had enough equity in my house that I was able to refinance. I don’t even want to say the rate because going to make people, it’s going to trigger some people, but it was very low.

Dave:
Does it start with a three?

Brian:
It starts with a two.

Dave:
It starts with a two. Oh man. Yeah, so

Brian:
Just don’t hate on me for that. But

Dave:
I

Brian:
Was able to pull out some money and I wanted to get in real estate because I love my children to death. And as a father, I didn’t want to have to have them live in Timbuktu and not be around me. So selfishly I was looking for property where I could buy early and kind of make them have to be around me forever. So as I was looking around southern California, I found a house that was for sale, and I call it the firefighter special because the realtor was a fireman. The seller was a fireman and I was a fireman. And so the seller, he was three years from retirement and he wanted to sell his house, but he wanted to live in it for three more years. His son was in high school and finish off. And so I was like, perfect. That was my first rental and that property stow one of my better properties today. But what happened eventually is I looked at my bank account and I was like, well, I can no longer afford houses in California.

Dave:
Yeah, I It’s crazy.

Brian:
Imagine my next journey was into the outstate

Dave:
Stuff. Now Brian, I want to hear how you scaled. I’ve sort of gone down a similar path where I started in a more expensive market. At a certain point it gets super hard, and so you have to come up with a new strategy. You don’t have to go out of state, but it sounds like you did. We’re going to hear about that, but we do have to take one quick break. We’ll be right back. Stick with us. Managing rentals shouldn’t be stressful. That’s why landlords love rent ready. Get rent in your account in just two days. That’s faster cash flow, less waiting, no need to message a tenant. You can chat instantly in app so you have no more lost emails or texts. Plus you can schedule maintenance repairs with just a few taps so you’re not playing phone tag. Ready to simplify your rentals. Get six months of rent ready for just $1 using promo code BP 2025. Sign up at the link in the bio because the best landlords are using rent ready. Welcome back to the BiggerPockets podcast. I’m here with investor Brian Waters who is just talking about how he turned his primary residence into a small portfolio in southern California. But Brian sounds like you hit the point most people in California do where it’s just not really logical to keep going, at least if you want to buy rental property. So what was your solution to that challenge?

Brian:
What I decided to do instead of going into the flips or the burrs, which I later got into, I decided to go the turnkey method. And for me, that has been an amazing transition to out-of-state properties.

Dave:
People call turnkey different things. Some people say a property that you buy directly that is just fixed up and nice is turnkey, but you’re talking about buying from a turnkey operator.

Brian:
Yes, absolutely.

Dave:
So maybe you could just tell our audience a little bit about what that entails and why you were attracted to it.

Brian:
So number one, this is a great strategy for an active, hardworking W2 super busy person. I’m a firefighter, I’m a dad, I coach full-time football for my kids. I don’t have a lot of time to go do this stuff. And those other strategies aren’t wrong. But what these turnkey providers are, there’s companies all over the country and they internally do everything. They go out and door knock, they market, they cold call, they find the houses. Once they do that, then they go out and have their own construction teams that fix the properties and they put in new flooring, new kitchens, new bathrooms, new water heaters, new roofs, everything. And then what they do is they turn around and they have a property management company that finds a tenant and signs a lease. Then they put it on their website. It never goes to the market and investors can go buy it. So I love this strategy because literally they give you the numbers. You already know what that it’s rented for. You already know that all the major CapEx items, like the roof and water heater is brand new. Those are going to be deferred for later. You have a good quality product and you could run the numbers because you know what the price is, you know what the insurance is, you know what the rent is, and you just have to analyze it. And that’s what I did, and I absolutely love that strategy for beginners.

Dave:
Yeah, I think what you said is so important that where you are, the kind of investor you are will usually dictate if this is a good strategy for you. If you’re busy and you’re out of state, this is a great idea. This just makes a ton of sense. Being able to go out and buy something, get the benefits of a value out opportunity, but not having to go out and source all of the contractors or subs yourself knowing that the repairs and CapEx and maintenance and all this stuff is going to be a little bit less is really appealing. But I have some questions. I think this is a really interesting option for our audience. I’d love to dig in on, so did you know the market you wanted to invest in? Did you go out and find the turnkey operator first or how did you find a deal that you were comfortable with?

Brian:
So what I did is I called multiple turnkey providers, and this is kind of a buyer beware for all the listeners. There’s some really, really good ones out there and there’s some really bad ones. So I am a big believer of follow the herd mentality. So I was talking to other investors through forum, through Facebook groups. The cool part about that is is you’re protected in a lot of senses here. You’re protected by the inspection report, you’re protected by an appraisal. You already have a lease signed, and people will argue, well, you’re not going to cashflow on these. I want to tell you a little bit about some of the incentives these people are offering, which is actually blowing my mind when I talk about it. So a few of the ones out there that are really good, they will buy the rates down to 5.5% 30 year conventional fixed, which is amazing. That’s awesome. They have a one year tenant guarantee where if the tenant moves out, they’re going to pay you that rent that was talked about. They often will have a lower incentive property management fees of 5%. We’re investing in these states that have low property taxes, and again, the CapEx items are all taken care of. So I am very conservative when I underwrite stuff, but every single one of these cash flows.

Dave:
Well, good on you for doing your due diligence. I think that’s the real thing that people get hung up on about, right, especially in 20 21, 20 22, everyone was calling themselves a turnkey rental company, and I would just encourage you all to look for people who have a track record. There are great reputable companies who do this. I am sure they’re frustrated by some of the people in the industry that give them a bad name, but there are very good reliable companies that do this, and I love that you called the investors too. These businesses, they’re different than traditional home sellers. And I think it’s similar to something we’ve talked about on the show recently, which is that new construction is becoming more appealing because builders just have a different business model. They need to move inventory. And the same thing is true with turnkey operators too.
They’re doing volume and they’re willing to buy down your rate to sell something a month faster, whereas home sellers, Brian gave us two examples. People are like, I’ll just wait three years. It’s just a totally different mindset. And so if you’re the kind of investor one who can move quickly, two might buy at volume, might buy more than one, people will potentially work with you and give you really great deals. So Brian, how did you actually ultimately pick a deal? Did you settle on the operator first or the market first, or what order did you go

Brian:
In? I settled on the market first, which was Memphis. And Memphis was a market that a lot of people were talking about. Never been there, still have never been there, but I asked around different people who had used them. Some of these investors had multiple ones, and when I interviewed them and talked to them, I mean these people sometimes are turning over hundreds of properties, and so I was using them as the subject matter experts in that area.

Dave:
That’s great. And have you scaled that up since then?

Brian:
Yeah, so I currently have a total of 16 properties. 15 of those are out of state, and I’ve kind of spread my wings a little bit to other markets as well. The first six properties minus the California one, were all turnkey at that point. I kind of opened the wallet again and was like, oh, where’s all my money? And so I had to start getting creative, and at that point, I felt like I’d really learned a lot about the industry, even though they were easier to do. I understood how to analyze stuff, how to find stuff. I started really digging into the BiggerPockets communities and understanding, and so then I transitioned into the B stuff.

Dave:
And so how many turnkey properties do you have total?

Brian:
Nine turnkey totals, and then the rest are all burs.

Dave:
And you’ve never seen any of ’em?

Brian:
Never even been to the state that That’s

Dave:
Incredible.

Brian:
I know.

Dave:
Yeah. I mean, you must have good reporting then. That to me would be the thing that I would be nervous about. I invest out of state too, but I’ve just hand selected. The property manage was clearly you’re happy with the property management

Brian:
And they use all the fancy online portals where they send you stuff, and truthfully, it becomes easier by the fact that it’s away from me. It have to have better systems, and I have to have a better team to do it so I can go to the fire department and take care of the community, or I can be on the football field coaching my kids’ stuff and not have to worry about, Hey, the tenant called me and first off, I’m not even good at that stuff. I’d go over there and probably break more than I would try to fix. Right?

Dave:
Oh, I know all about that.

Brian:
Right? So by the fact that it’s far away, I’ll wake up in the morning and like, Hey, you had a little plumbing link, don’t worry, it’s fixed. The tenant’s happy. We’re good. I’m like, cool, thanks.

Dave:
Yeah,

Brian:
On. That’s

Dave:
Incredible. Well, good for you. I know it is a big leap for anyone listening to this to invest out of state, but I completely agree with you, Brian. It forces you to just take a different position on the team. When I lived and invested in Colorado, I did so much myself just because I lived down the road and it just seemed silly to go hire someone to do that, and that worked well. I don’t regret doing that, but as soon as I started investing out of state, I’m like, oh, I could concentrate on what I am good at, which is finding markets, analyzing deals, doing asset management, and find people who are way better at property management that I’m, I wasn’t doing myself any favors fixing stuff. Absolutely not. And so I think it’s almost like this forcing function that allows you to just mature as an investor if you do things out of state, but it takes a certain personality, not everyone’s going to be comfortable with that. I do want to hear more about how you moved onto Burrs and what you’ve been up to recently, but we got to take one more quick break. Stick with us.
Welcome back to the BiggerPockets podcast. I’m here with investor Brian Waters talking about how he moved from investing in his own backyard in California to doing out-of-state turnkey properties in Memphis. Brian, what came next for you?

Brian:
So as I did a few of the turnkey properties, I kind of analyzed what these providers were doing and I had really started to educate myself. There was so much that I learned early on and it was less risky. Those turnkeys had a lot less risk, but I knew that I couldn’t just continue saving up for a property and buy, saving up for a property and buy. So I wanted to scale faster. One thing that was super, super important, and I had this discussion with this awesome couple at the BiggerPockets convention we just had is one of my friends early on told me is you have to start using social media when you first start, and I still to this day cringe when I watch my own videos. It’s just uncomfortable,

Dave:
Right? Oh, it sucks At the beginning. It’s so

Brian:
Hard. The reason I’m talking about this is because this allowed me at a certain point to raise over a million dollars in private money, which is I’m super, super happy about that. I have some amazing partners, but it creates that gap between that awkward conversation of me asking them and them coming to me when they come to me. I could just have a conversation. I won’t even talk about private lending until they say, Hey, I want to do this too, but I don’t want to put in all the work. And then it’s easier. It’s more of an organic conversation. So all my lenders have come from pretty much my warm circle, friends, family, aunts, uncles, people that came to me and I was able to take that money and now I’m like, well, now I got to start brewing, right? Because I have

Dave:
You better do something. People need a return.

Brian:
I learned about the private money process and I found a gem of a contractor in the city of Detroit, and I’ve been hammering Detroit, and I know you talked a lot about this on a few podcasts recently, and I love that market and I’ve in the past two years of bird, we’re on our seventh property there right now, and for those who say the bird is dead, I disagree.

Dave:
Yes, I love it. Brian, we’re just breaking down. Myth. Brewer is not dead. Your primary residence is not a bad investment. I love it.

Brian:
Lies.

Dave:
Well, I just want to commend you for the social media thing. I know from personal experience, it’s very awkward to get started, but it is a really powerful tool. It takes a lot of guts, man. So good for you. And I know not everyone’s going to do that, but it’s a really repeatable strategy that almost anyone can do. If you are willing to laugh at yourself the first couple of times you make it real, they’re not going to come out well. They’re going to be very cringey and then you’ll get better over time. Well, in the spirit of getting uncomfortable, tell me about doing the Burr long distance. I’m sure that was a little bit uncomfortable too.

Brian:
Oh, it was completely uncomfortable and not all of ’em went perfect. I will say that my last two were actually home runs

Dave:
In the last couple years.

Brian:
No, in the last couple days, the last week. Love that. Amazing. So I had heard about the Detroit market. I actually listened to episode 1, 3, 2, 5 on the BiggerPockets Daily where they read the articles out,
And I highly encourage all the listeners to go and listen to that one. It’s an article that someone wrote about the Detroit market, and it blew my mind. I was like, oh, here’s an opportunity. I had never been there, so this was one of the one markets that I actually went to. Everyone told me, this city is super dangerous, don’t go there. But you know what? I’ve learned not to listen to people that have not done what you want to do. The downtown area had people driving around on those beer cars, kegs on ’em. There’s rooftop bars, super clean companies like Rocket Mortgage have their headquarters there. They just bought Redfin, by the way.

Dave:
Yeah,

Brian:
All of those factories have been coming back up. The Detroit Lions are doing good go Lions if you’re a fan. It’s one of the only cities or one of 10 cities in the country that have all five major sports. They’re building a Detroit FC soccer stadium there.

Dave:
Oh, cool.

Brian:
And so they’re just putting, it was so bad for so long. So there’s only one way that it can go and it can go

Dave:
Out. Yeah,

Brian:
Great. So what I did is I contacted a realtor before I went again, interviewed a few, made sure they were investor friendly, asked them to give me some neighborhoods. I already knew a bunch of houses that were for sale and that had sold. And so I was kind of doing a little bit of detective work in that area and it just blew me away.

Dave:
People always generalize things about cities, whether it’s Detroit or Chicago or Indianapolis or whatever it is. Go there and decide for yourself. I have learned a lot. I’ve gone to a lot of markets. I love doing what you’re doing, by the way. I do the same exact thing. I have a map. I drive around, I just walk into random stores. I just try and get the vibe. It’s a vibe check. I don’t know how else to describe it, but you do that. I have gone to markets that people love and I hated them. I’ve gone to markets that people hate and I’ve loved them. It’s just depends on who you are, what you’re comfortable with, what you’re trying to accomplish, but think for yourself. I think that’s really the thing. And honestly, it’s one of the reasons why on this podcast, people always message me and they’re like, what markets do you invest in the Midwest? And I don’t tell them because I don’t want you to do what I do because what I do is for me and my strategy, and you shouldn’t just blindly listen to me or to Brian or to anyone else. You should come up with your own strategy and find the markets if you want to do out of state that work for you. So maybe walk us through one of your recent deals. What are the numbers on these look like?

Brian:
What I do is I go on to Redfin and I put little areas and that sends me a message right away when something pops up. So I knew where I wanted to go first. I already had a private lender ready to go, and when this property came up, we just struck on it right away and it was $70,000. And the scope of work on it was 40 grand.

Dave:
And so when you say you’re doing the private lender, are you just straight up buying a hundred percent of the acquisition price and the renovation with one private lender? Is that kind of the goal?

Brian:
Correct. I’ve mixed before, but I think it’s easier for me and for that lender just to do one-offs together.

Dave:
Okay. So you basically borrowed 110 grand. Do you mind telling us, is that hard money kind of terms? 10, 12% interest,

Brian:
No points. And I pay that lender 10%. Wow, that’s awesome. It’s a great deal. And again, getting back to solving people’s problems, my lender was on a fixed income. She’s an older lady that has, she had to have roommates and she’s in her seventies. And so I came to her and I said, you deserve to live alone and make some

Dave:
Money.

Brian:
How do we solve that problem for you? And I was willing to pay whatever, and we came to terms on that and the next month she moved her roommate out. She has her own space and she is loving our relationship and I take really good care of her because she deserves that.

Dave:
That’s fantastic. Yeah, that’s amazing. I love that. Again, always talking about this mutual benefit. Real estate is not a zero sum game. Your contractor can win, your realtor can win, your tenants can win, your lender can win, and you can win all at the same time. That’s when you’re doing it right.

Brian:
Not only can they win, I want them to win because I want to be their favorite customer when they’re coming back and they’re going to do better work for you if they’re winning with you.

Dave:
A hundred percent. I love that approach. So tell us, finish the deal. So again, one 10 is this one of the home runs that you’re talking about?

Brian:
This is one of the home runs. So they cranked it out. We ended up putting a Section eight tenant in there. The process was pretty simple because we put in new everything, and I’d planned to keep it for a while. Please don’t lipstick on a pig stuff. You guys, it’s important if you’re going to keep this for a long time. The tenant deserves a nice place to live, and if you’re going to keep it, it’s going to have less headaches for you later. So we’re all in for one 10. And when we got the section eight tenant in there, it was 1350 for the rent and it just appraised for 180 and I was able to pull out 75% of that. I paid back the lender all their money. I still have a ton of equity in the property, and I was able to actually put money in my own pocket. I know this is rare, but they’re out there still, so

Dave:
Wow, that’s unbelievable. And I’m curious, what is your deal flow? Are you having trouble finding these or can you kind of do as many of these as you want?

Brian:
Yeah, I could do as many as I want. I mean, in that market, there’s so many, just because a burr is not perfect and you’re not getting all your money out, I would argue that if you can get half of your money out, that’s still better than a normal deal.

Dave:
A hundred percent.

Brian:
If you can get a hundred dollars back, that is a win. I totally agree. You have to change your expectations of what is perfect. But to answer your question, I look for on market stuff. I also have now have a contact with a really good wholesaler out there. And third, my GC is always on the move looking for, because he is a realtor, he’s always sending me deals. So I have more deals than I could fund, but I also am a busy working professional. So I’m trying to start with my strategy. I don’t want to do a thousand, I’m a busy, busy person, so I’m doing five a year right now, and that’s plenty for

Dave:
Me. That’s plenty. And how much time does that take you on an average week or month?

Brian:
I think the hardest part is probably the underwriting, getting the property going. But once we do that, I’m using the same flooring, the same color paint, the same windows, everything. I literally have a spreadsheet and I do this in case I have to change contractors, but all the way down to the item number at Home Depot or Lowe’s where it becomes super simple for them to do it. Also, I could predict my costs better. Once I get that, I am spending a couple hours here and there. If problems come up, then obviously it takes me more, but it’s part of that who not how. Find that team member that’s going to be really good at their job and it’s going to be less work for you. It’s not passive it, it’s less work that I have to

Dave:
Do. Awesome. Well, I love it, Brian. Well, congratulations on your success. I really admire the way you’ve sort of adapted over the course of your career. I think a lot of people come into and say, I’m going to be this kind of investor. I’m not going to be this kind of investor, but you got to learn. I wrote the book star strategy. You have to have a goal, but the path towards that goal is going to shift and switch. And if you just educate yourself, work hard, you can absolutely do it. So congratulations on all your success.

Brian:
Thank

Dave:
You. And thank you for being here. I loved hearing your story. We’ll have to hear how you’re doing in a year or two. You have to come back and join us again.

Brian:
Thank you guys for the opportunity. This has been an amazing opportunity for me. And yeah, keep growing, keep learning, and I would love to come back at some point if you have me.

Dave:
And thank you all so much for being a part of this community and for listening to this podcast. We’ll see you in a few days for another episode of the BiggerPockets podcast.

Dave:
Housing demand is up, but prices are dropping. Mortgage rates have been a little bit better, but layoffs are all around us. The upside down economy that we’ve been in for years is rolling on, but we’re here to help you make sense of it. Everyone, welcome to On the Market. I’m Dave Meyer, joined by James Dainard, Kathy Fettke and Henry Washington today to talk about the latest news and try and instill some sense, some narrative that makes sense about what’s going on. Kathy, I think I’m gonna call on you first ’cause you got an uplifting story here about the housing market in the economy. Share it with us.

Kathy:
Yes. Everybody could use a little good news. So this is an article from Housing Wire. It is housing demand now reflects a positive trend. And this is written by Logan Mo Shami, who I know we all follow. He tracks weekly data. And what he says in this article is so much of the data that we see in headlines is dated. Mm-hmm . It’s two to three months old, especially the case index that gets headline news and people are talking about something that was three months ago and we’re not in that market now. So his weekly tracker is super helpful. It’s more volatile. ’cause week to week, if there’s a holiday or something, you’re gonna see skewed numbers. But still there is a lot of important information. Highly recommend it. The one I wanna focus on is the section of this article that’s housing inventory. Because the headlines are talking about all this inventory.
We’re constantly talking about it being a buyer’s market and the shift and so forth. But that is dated news. And what is more current is that the housing inventory data showed 33% year over year growth earlier in the year. And that’s the story people are talking about. But now it’s down to 16% year over year growth. So what we’ve seen in the last few months is obviously mortgage rates have come down a bit, and we’ve talked about this for a long time, that as soon as mortgage rates come down, there’s a whole bunch of people that can enter the market. It’s doesn’t make it more affordable for everybody, but it makes it more affordable to some people who were just on the edge and given the massive number of millennials out there in that house buying era in the mid thirties, give them a little leeway and they’ll take it. Right. So that’s what we’re seeing. And we’re just going into a season where there’s less inventory anyway because it’s the holidays. You don’t really wanna show your house, um, during Thanksgiving or Christmas. So inventory levels tend to go down anyway. And because mortgage rates are lower, Logan was kind of worried like, dang it, I’d liked the higher inventory. This is better, healthier for the housing market. And now we’re kind of going back to less inventory.

Dave:
Well I’m so glad you brought this story here Kathy, because it is probably one of the most misunderstood parts of the housing market right now is you see on social media all the time. Yeah. There’s no buyers, no one’s buying homes. That’s not what’s

Kathy:
Happening. Yeah.

Dave:
Actually we see that home sales is up a tiny bit year over year, but when you look at mortgage purchase applications, it’s up year over year. Yes. From this time last year. And it’s because rates have gone down. And I know it doesn’t feel like rates have come down that much, but they were at 7.2 in January and now they’re at 6.2. Like that matters. One full percent that matters, that’s hundreds of dollars a month. So people are noticing that and coming back into the market, the reason sales prices are dragging is because of inventory. But as Kathy pointed out, we’re getting that correcting kind of vibe where people are realizing it’s a bad time to sell. So they’re not selling. Uh, and so that’s why we’re probably in a normal sort of correction, but that is not because there’s no one buying. People are still buying homes at the same rate they have the last few years. It’s just a little bit different vibe.

Kathy:
Like you said, it’s increased a little bit. Um, I think, I think it was 4.02 million or something. Sales volume. Yeah. Which is up, it was, it was under 4 million.

Dave:
It was,

Kathy:
Uh, before. So yeah, just it, it’s different per market and that’s where people are like, in my market, my stuff’s not selling. I mean, I just talked to someone who said I’ve, he’s had his flip on the market somewhere on the East coast and for a long time and it’s not selling. Uh, so that would just tell me it’s not priced right. Right.

Dave:
. Yeah. It just feels draggy in a lot of markets and I think we’re gonna mm-hmm . We’re gonna, we’re gonna talk about that. But I do think that’s encouraging. And what we’ve seen so, so much in the last two or three years is that demand is way more interest rate sensitive than it is during normal times.

Kathy:
Yes.

Dave:
For most normal eras, interest rates fluctuate by 0.25%. Doesn’t really change anything. Or 0.5% doesn’t change anything. Now people are like, oh, I’m gonna jump in this week. You know, there’s inventory rates are down. Last week it was 6.1%, like if you jumped in, that’s the best rate we’ve seen in years. Yeah. You know, and, and there’s better inventory. You have better negotiating leverage. This is the buyer’s market. It’s not great for sellers, but buyers are, I think, gonna start coming outta the woodwork ’cause there’s gonna be better opportunities to buy.

James:
You know, one thing that does drive me bonkers is when people start talking about trends and it’s been two to three months. . Yeah. . Like, it’s like what trend is that? Like that’s, that’s a blip. Because what I do know is at the beginning of the year we were red hot that first quarter, lots of buyers and it wasn’t even just things were selling, there was just a lot of showings going on. We had some tariff news come out, market froze up. And now rates like Dave just said, is like nearly half point, three quarters point lower. Right. So like, it’s not just all rates, it’s, it’s also just, I think just a mental fear thing.

Dave:
Mm-hmm .

James:
But you know, I feel like inventory is going down because people are kind of in this panic because they’re like, I’m gonna miss the moat. I’m gonna throw my house up for sale. And then they’re canceling too quite a bit.

Dave:
Mm-hmm .

James:
And there’s a lot of canceling inventory coming off, but it’s just a slow thick in the mud grind market right now. But I mean, it just, for me, it’s not trend until it goes past. Like, like we have to see what if we go into first quarter in 2026 and it’s slow then that’s a trend to me. But I feel like with the seasonals and the three months of information, like they just kind of gotta ride the waves and to quit panicking because we don’t know what we don’t know.

Kathy:
Yeah. I just, I feel like, what I hear a lot and I see in the notes of, of these shows that we do is people saying, oh well you know, you’re giving bad advice and we’re in a bubble and there’s gonna be a housing crash. And the thinking is always, well, prices are so high, it must be a bubble. And that’s not the right thinking. It, it makes sense because in 2008, prices were high and then they crashed. But that didn’t have to do with high prices. It had to do with mortgage rates adjusting and they were on short term rates. All of a sudden their payment doubled in many cases and they couldn’t afford the payment. If that didn’t happen, we wouldn’t have had the crash. So we don’t have that right now. Mm-hmm . We have high home prices, similar kind of issue, but most people who own those homes are on fixed rates. Most people, the majority are in fixed rates. So they’re not having any of that price pressure in most cases. Of course, multifamily, commercial loans, different story. They did see their payments double. But that’s the difference. It’s not a bubble just because prices are high. And that’s what so many people are stuck thinking.

Dave:
All right. Well I I thank you for sharing this one Kathy. I think this is a really important context for everyone. Especially when we go into these correcting markets. People start to panic. But if, if you really understand, you know, markets and prices, they’re dependent on both supply and demand. And for a real crash you need to see demand deteriorate. You need supply to explode. That’s what, when a crash happens, we’re not seeing either of those happen. We’re seeing demand relatively stable supply has increased, but it’s already starting to level off. Uh, and so these are indicators that although we don’t know for sure, much more likely that we’re in a correction than in a crash like we’ve been saying for a long time. But the data does really bear that out. Let’s move on to our next story, which I’m going to share ’cause I think it’s kind of related here because I know a lot of people who are saying, I’ll get into the market when we get mortgage rates down to 5% or five and a half percent . And actually Zillow, John Burns real estate, they’ve done all this research that shows like when will the market like really get back to normal levels of volume, which is like five and a quarter million instead of 4 million. And they say five to 5.5%. So the question in real estate has often been when are we getting there? How are we getting to 5%? And Bank of America just put out a study saying they’ve understand they think there is a path to a 5% mortgage rate, but it’s not pretty . This is not a good looking thing right

Henry:
Here. Oh no.

Dave:
Yeah. They said the path to 5% mortgage rates is if the Fed does mortgage backed securities, quantitative easing. Oh,
And I’m gonna be honest, I feel pretty validated about this ’cause I have been saying this for a while. The only way you’re getting down that low is quantitative easing. Yep. If you’re not familiar with quantitative easing as it’s basically when the Federal Reserve buys mortgage backed securities or buy government bonds, which is for all practical purposes printing money, they take money outta thin air and they buy mortgage securities and they buy bonds. And this has been an important part, especially after the financial crisis of stabilizing the market. Like they’ve done this to good effect in the past. I think most people in retrospect would say they probably did a little too much of it following the COVID downturn, which contributed a lot to the unaffordable levels that we have in housing right now and inflation. And so I agree with this. I think it’s gonna be really hard for mortgage rates to get to 5% unless they do this.
I guess my thinking is the probability of this happening to me is going up. I’m curious what you guys think, but if the labor market deteriorates and President Trump has stated many times that he wants mortgage rates to come down, that’s a tool after he almost certainly will replace Jerome Powell in May of 2026. It might be a tool he can influence. And I think the likelihood of this is going up, which can mean more mortgage rates, but also comes with a host of other trade-offs. So curious if you guys think this is even in the realm of possibility.

Kathy:
It, it already is. The Fed has already said they’re going to stop their quantitative tightening.

Henry:
Mm-hmm .

Kathy:
Which is selling off the stuff that they already bought. They already did this. This is why rates were so low. It’s called financial engineering. It is funny money. It is not great for the population because the Fed goes in debt over this, which is basically, uh, US who has to pay it back. Um, but it is what they do behind the scenes and um, you know, it’s great for those who own assets.

Henry:
Mm-hmm

Kathy:
. Like it, it’s great for homeowners. That’s why we keep seeing housing go up and up and up from all this financial engineering and funny money and cheap money and just creating out of thin air. When you’ve got an asset that’s real, that becomes more valuable simply because it takes more money to buy it. So great for real estate, I suppose not great for the economy.

James:
i’ll, I’m always looking for where the juice is and for some reason I have a feeling next year all these things are gonna get pushed through and they’re gonna pump some juice in the economy for the elections.

Dave:
Yeah.

James:
And like I feel like we’re kind of in the mud right now and then we’re gonna take off and then I don’t know what’s gonna happen after that. I, you know, I think in the short term it could have a very positive effect for real estate investors in the long term. It’s probably not a good thing. It’s not probably, it’s not a good thing. like we can’t keep printing. We’re gonna keep devaluing the dollar and then I’m gonna be really wishing I listened to Dave about buying gold and Bitcoin and all these other commodities

Dave:
Stuff.

James:
But

Dave:
Dude, my gold portfolio

James:
Is crushing

Dave:
Right

James:
Now.

Kathy:
. Oh man. Me too. My fear portfolio is working. Fear portfolio

James:
Is on fire right

Kathy:
Now. . That’s

James:
Why I think like even right now I’m contemplating pulling some houses off the market because it’s just slow. There’s a lot of fear, a lot of weird things going on and then just dropping ’em in the hot spot because real estate’s about timing. Yeah. And honestly, I do think next year there’s gonna be some juice pumped in this economy and that’s when you’re gonna wanna dispo off anything you don’t want anymore.

Henry:
Yeah, that’s a good perspective. I’ve been considering doing the same thing because of the slowdown here and going into the holidays. Although the Fed did drop rates again, and I know that’s probably not gonna affect interest rates like people think it is, but I don’t really care what actually happens. I care what people think is going to happen . Right. And people think that the Fed dropped rates and that it’s, it’s gonna be a better time. And so hopefully that injects some buyer activity. So I’m gonna give it another 30 days and see what happens. I’ve got one house in particular that I’m considering holding off on selling. The rest I think are gonna do just fine.

James:
I got five ,

Henry:
I believe you ,

James:
You know what comes down to the sweet spot of the market ’cause things are moving. But yeah, if, if you’re outside that sweet spot, it makes more sense to pull it off and put it back on.

Dave:
I’ll just say, I, I, I agree with you what you all said, especially Kathy, like I think short term it could help real estate. I think long term this introduces some really significant issues. First and foremost, it’ll just make housing unaffordable again. Like this will make it affordable for a minute and then it will get unaffordable as soon as they stop mortgage backed securities, which they’ll have to do at some point because inflation will get out of control. The other thing that I think will compound that, and this is, I’ve been trying to say this for the last like three to six months, I’ve gotten increasingly concerned that long-term interest rates are going up long-term mortgage rates not a year or two or three years, but five to 10 years we might be in eight to 9% mortgage rate territory. I don’t even know buying mortgage-backed security and new monetary supply that in itself could do it.
But considering that we have such a high national debt, the temptation to keep printing money is gonna be pretty high to devalue the dollar to pay off that debt. And bond investors don’t like that. And if bond investors don’t like it, they’re gonna demand a higher interest rate that’s going to push up mortgage rates. And so one of the reasons I’ve been saying a lot and for my own portfolio really been focusing on fixed rate debt. Mm-hmm . And not trying to buy anything with variable rate debt. I’m actually been spending a lot of time looking at new deals recently. There’s better and better stuff out there. But I’m just trying to lock things in ’cause I don’t want that adjustable rate. Even if there’s a good commercial deal right now, I’ve been looking at fixed rate commercial debt even though you pay a higher rate on it.
’cause I don’t, I don’t trust that in five years when I have to refi or seven years when I have to refi that rates are gonna be lower. I think you have to hedge and assume that they might be higher. So this is something perhaps the biggest thing to watch next year. Honestly, I I think this is, would be an enormous shift in the housing market and would change my personal strategy a lot if this started to happen. So, uh, something I just kind of want to bring up and share with everyone and we’ll keep an eye on it. All right. We gotta take a break. But when we come back we have more stories about buying opportunities in different markets across the country and the impacts of some of those high profile layoffs that you’ve probably been seeing in the news. We’ll be right back. Welcome back to On the Market. I’m here with Henry, Kathy and James talking about the latest news. We’ve talked about housing demand, how it’s up the potential for quantitative easing. Now Henry, you’ve got some more housing news for us. What is it?

Henry:
Absolutely. So I wanted to talk a little bit about, uh, housing prices and when they will drop. So there is a sentiment that people think housing prices are going to drop. And the reality is in some markets prices have come down a little bit. And so, uh, I wanted to talk about this article from Yahoo Finance called When Will housing Prices drop Costs have already decreased in some major Metro areas. And I thought I would like to have a little fun with you guys. So we’re gonna have you guys guess you all get to pick two cities that you think are on the top 10 list for housing prices dropping and you can’t pick Austin ’cause I know you’re all gonna say that.

Dave:
And what’s the time period since last year?

Henry:
This is price decrease since September 24.

Dave:
All right.

Kathy:
Okay.

Henry:
So the article is essentially saying that, uh, the typical Home First sale spent 62 days on the market in September, 2025. And that’s a week longer than it took a year ago at this time. It also talks about, according to the US Census Bureau, that the median home price in Q2 of 2025 was 411,000. And it’s down from 423,000 at the beginning of the year. Uh, and so it is showing that the median price has come down and it’s also saying that the National Housing inventory is lower than before the pandemic. And it’s unlikely that we’ll see a huge jump in listings until mortgage rates fall a little more. It’s just telling us all the things that we’ve kind of talked about earlier on the episode. We’ve kind of debunked some of these things, but there are markets where housing prices have fallen and I know that there’s a lot of people interested in where those markets might be.
’cause this could be a place where there’s some opportunity to buy. ’cause a lot of these cities are big cities and they’re not gonna stay in decline forever. So we’ve talked about it with cities like Austin, like if you want to invest in Austin, this may be a time to get in because yes, prices are down. We know it’s a city where people want to live. And so I expect that markets like this rebound. So knowing where these cities are, if you either invest in these cities are interested, investing in these cities could provide you some opportunity to get in while prices are low. So you can monetize if and when values go back up. So with that being said, Dave, give me two cities.

Dave:
Okay. I’m just trying to think. I I gotta think that they’re in California, Florida, Texas, or Louisiana. Those are, those are like my, my big states for them.

Henry:
Okay. Okay.

Dave:
I know Cape Coral’s like big, but I don’t think it’s gonna be on this list ’cause it’s too small of a city. So my first thought was San Francisco or San Jose.

Henry:
Okay.

Dave:
Like that whole Bay Area.

Henry:
Okay.

Dave:
Then I think James lives in one of ’em. Phoenix is my other guess. And I think Nashville where like three of them I had up there. I would’ve said Austin. But those are my other ones.

Henry:
James,

James:
Gimme

Henry:
Two

James:
Cities. Ooh, two cities. You know what I’m going with the ones I do live in ’cause I’m feeling it the most. , dating might live in one of them too right now. I know. Oh yeah. If, if we’re going year over year. Yeah, because last September was hot in Seattle for sure. I think the median home price jumped like from like eight 40 to eight 80 during that time.

Dave:
Wow.

James:
So I’m going to Seattle and Phoenix. The, the two places I, uh, have most of my money in right now.

Dave:
So this is for personal

Henry:
Experience. . All right. Kathy, what are your two?

Kathy:
Uh, Seattle and San Francisco.

Henry:
Seattle and San Francisco. All right. Drum roll please. The winner is Dave Meyer. He nailed both cities. He got, he got San Jose specifically said San Jose and Phoenix. No, that’s not doing well. So you’re,

Kathy:
Wow.

Henry:
But San Jose was six on the list. Phoenix is number seven. Number one is San Diego with a 5%, 4.9% price decrease since last year in September 24.

Kathy:
Ooh. Buyer opportunity

Henry:
Number two, Miami, Florida, 4.8%.

Kathy:
Yeah, that tracks

Henry:
Number three. Kathy, I thought for sure you were gonna go hometown. Los Angeles, 4.8% decrease.

Kathy:
I did not know that.

Henry:
Number four Austin. Number five. New York City, New York, New Jersey.

Kathy:
Really?

Dave:
Yep.

Henry:
I

Kathy:
Didn’t

Dave:
Know

Henry:
That. 4.7%. San Jose, 4.6. Phoenix, 4% Dallas Fort Worth 3.3%. Boston, 3.3%.

Dave:
Boston. Okay.

Henry:
Boston 3.3%. And number 10 is Sacramento, California with 3%.

Dave:
Okay. All right. Well that was fun. Yeah. We should do more trivia.

Henry:
Absolutely. . So if you want a deal in a market that may be emerging, you might want to check out some of these places and see if you can snag yourself something.

James:
I feel like Austin has had zero rebound since the rates have spiked. Like it’s the only one that hasn’t gone like this. It just keeps just kind of going like this.

Dave:
Yeah. Even if you look at like the California markets, they’ve kind of been up and down the last few years. It’s like sort of random. Florida’s been sort of consistently down. Mm-hmm . But this, those are leveling out. Austin is just getting hammered. All right. We gotta take one more quick break, but when we come back, we’re gonna have more uplifting news about layoffs. That was a joke. It’s not uplifting, but we will talk about layoffs when we come back. Stay with us. Welcome back down the market. We got one more story for you, James. You’re bringing the, the fun stuff today talking about layoffs, but I do admit I’ve been following this very closely. It’s a little bit scary. So tell us what you’ve, what you’re uh, reading

James:
About news article from Yahoo Finance was all, all good things. It says layoffs hit Amazon’s up target and it’s fueling more cuts. And so Amazon announced over 14,000 layoffs. And this has been a trend with just all big tech right now is just slowly cut things back. And a lot of this is due to AI. And then also they were just being very frothy during that hiring process. You know, like during the pandemic there was like these tech wars going on where there was recruiters and they were stealing people and throwing money out. And I think there’s just a lot of bloat going on to where they’re starting to cut that back. And the reason I do feel like this is so important is because as investors, I’m really trying to get planned ahead for 2026. What do I wanna buy and what do I want to target?
And these are not like low paying jobs. Like a lot of people were speculating that it was gonna be like kind of lower tech paying jobs that were being replaced with ai. The average salary for these layoffs were about 110 to $135,000. And that does not include the vesting in the stock that these people also receive, which is on average around 20 to $40,000 a year. And so these are 150 to $160,000 jobs. And many of these tech cities, uh, Kathy, I think you would agree, like there’s a lot of dual income buyers out there. Like you got dual tech buying. So that’s a purchasing power of three to $400,000 that is really starting to get laid off. And not only that, it’s making that buyer pool very afraid to make any kind of decision because they don’t know what’s happening with the world of ai. They are very not confident in their job. Whereas in the pandemic, if you were talking to someone in tech, they’re like, oh, I’m getting offers everywhere. I mean, the amount of people I saw go from Microsoft to Amazon to Apple and like a two year period. Yeah. They’re just moving, moving now. No one wants to move. I can tell you that much. And so, you know, I, I’ve really been digging into where’s the buyer pool, you know, I’m in Washington, there’s a lot of tech going on that demographic of buyer, they’re typically buying 1.2 to $1.5 million houses. And that’s exactly where we’re seeing the gap in our market right now.

Henry:
Mm-hmm

James:
. And so as we go forward, I’m really trying to plan out 2026, okay, what price points do I wanna be in? And I might play in the uber expensive, but also just I wanna be below those ranges. And so I’m really trying to track who’s being laid off, what’s the income, what’s the affordability and shift my price points around for flipping or development. Same with rents. I do think there’s rent growth gonna happen in Seattle ’cause there’s gonna be less buyers in the market and the average rents are 25 to 3000 for that type of employee. And I don’t think they’re going to sacrifice quality. And I do think we could get a little bit of rent growth in that kind of b class type of rents too. So now I’m looking at, okay, well where can I get some rentals at? Pricing is down that will serve that buyer pool.

Henry:
Do you feel like this is gonna have an impact on inventory from people who may have already purchased and now may not be able to stay in their home?

James:
Um, you know, with that buyer pool, from what I saw, most of those buyers were trading up anyways. So their down payments were pretty hefty. They weren’t like your low down 5%, 10% down buyers that were buying these 1.5. So a lot of these buyers were putting 30, 40% down when they were trading up. And so I think their, their current mortgages are okay and they’re not gonna be selling unless they get transferred to a different region. But I do feel like the consumer spending’s gonna drop quite a bit. You know, it’s gonna go back to like, Hey, I need to pay my mortgage and then whatever I left over, I’m gonna go spend money elsewhere. And so I don’t think we’re gonna see a lot of inventory coming there, but I definitely don’t think we’re gonna see a lot of buyers in that range.

Kathy:
Yeah. We are experiencing something that our ancestors never had to experience and it’s going to be massive transformation over the next five years. And anyone who thinks things will be the same old same old is just not paying attention. AI is going to change everything. And this has been predicted, I’ve been new doing news stories on this for 10 years, that the, actually the white collar jobs are the ones at that the most risk. And it’s the blue collar job so far, not as much. We are going through major transformation and if you are not paying attention, you’re gonna be in trouble. That’s the bottom line. It’s a very interesting time that we’re living in.

Dave:
Yeah. I am simultaneously terrified by AI and also think it’s way overblown. I I just, you know, those are completely contradictory ideas , but I think it, yes, there is gonna be a lot of disruption in the labor market. There is no doubt about that. I think the idea that AI in its current state should be taking people’s jobs is also just wrong. Right? Like I use chap PT every day, it makes mistakes all the time. I would never trust PPT in its current state to do what a human can do right now. So I think companies are probably gonna over layoff right now and think that they can use AI for systems that they probably can’t. But longer term, I this is obviously going to make a huge change.

Kathy:
Yeah. Think about a year from now, five years from now, it’s, we can’t even imagine. But I think

Dave:
That’s good though, Kathy. ’cause I, I feel like it will drip in a little bit more than people feel like it’s gonna be this cliff where it’s like, oh my God, everyone’s getting replaced. It might happen a little bit more gradually, which hopefully will give time for the new jobs that will come in an AI economy to, to come in. But just in general, I think this is just bad for the economy right now. Even though like I was trying to pull together data. ’cause we’re not getting government data right now on unemployment because there’s a shutdown. But I was looking at state data and private data and like, it’s not that bad. If you look at the overall unemployment rate, it’s really not changing all that much from the data that we have. But it’s high profile, high paying jobs. And if you wanna go one step deeper, if you look at consumer spending right now, I think it’s 50% of all consumer spendings by the top 10% of earners right now.
It’s crazy. And so if you start to see pullbacks in spending from the top 10%, corporate profits are gonna start to see that. Like, you’re gonna start to see that reflected in the stock market, I would think. And so I I do think more than it’s really an emergency, it might have a psychological effect on the rest of the country. And as James said, a lot of it’s just done about uncertainty. It’s not like a lot of these people are necessarily, you know, they’re gonna get foreclosed on or they’re going delinquent, but they might delay making big financial purchases just given. There’s just so much uncertainty right now. It feels like it’s sort of inevitable for purchasing, especially on big ticket items like housing to, to start to feel it at some point

James:
When the people are getting rehired too. They’re just getting rehired from what I was reading. Like it’s just a little bit less too, right? So their, their income’s dropped 10% or so as they’re getting rehired. So it’s not like there’s just, they’re all at the food bank line looking for, you know, like Right. They can’t find work, right? They’re finding work. But that’s why it’s so important to pay attention to that kind of median income in whatever city that you’re in, right? And what’s going on around you. You can listen to everybody and the different strategies, but where are you investing? Where’s the job growth? Where’s the job cuts? And you really gotta pivot with that. And they’re everywhere, right? Midwest, Ohio, they saw 40,000 layoffs in 2025 manufacturing corporate cuts. That’s not the same income bracket, but where, how much are those people making? And then look at what do they buy? What do they rent? ’cause there could be a gap in the, in that market.

Dave:
All right. Well this has been a great episode. Thank you guys. I, I thought all these stories were really, uh, helpful. So just to summarize, Kathy brought us a story about how housing demand is actually up year over year, but despite that we are seeing prices decline in a lot of markets as Henry shared. We’re also seeing layoffs, which I think is a big thing to watch as we go forward. I don’t think it’s an emergency just yet, but obviously if this is the beginning of a trend that’s gonna impact the market. And then of course we have quantitative easing to look out for in the next six months, which is the big X factor that we all get to wait and see if that comes around again. But this has been a lot of fun. Thanks for listening. We’ll see you next time.

This article is presented by Connect Invest.

U.S. commercial real estate is under mounting pressure as vacancy rates hit record highs—first in offices, and now creeping into multifamily and industrial properties. A decade of cheap capital and aggressive development has caught up to landlords facing slower rent growth, higher refinancing costs, and rising delinquencies across several sectors. Moreover, both commercial and residential real estate is undergoing profound changes as large metro areas cease to be automatically attractive as job destinations.

Why are multifamily markets turning risky, and what strategic changes can investors make to mitigate the risks and protect their margins?

Warning Signs for Commercial Real Estate

According to CBRE, total investment volume is still expected to rise roughly 10% this year to $437 billion, but much of that activity is concentrated in distressed sales and recapitalizations. Meanwhile, the Mortgage Bankers Association reports that delinquencies ticked up across lodging and industrial assets in Q1 2025, signaling stress that could spill into housing credit next.

The market segment that is most obviously ailing is the commercial office segment. According to a press release from Moody’s Analytics, the vacancy problem faced by the office real estate market is severe enough to signal a “structural disruption rather than a temporary downturn for the multitrillion-dollar sector.” 

Office vacancy rates in major commercial hubs, notably San Francisco and NYC, have reached unprecedented levels (27.7% and 23%, respectively) as of the second quarter of 2025, according to recent Moody’s data. The pre-pandemic vacancy rate in San Francisco was just 8.6%.

The decline of office space vacancy is creating a tense situation for owners-investors and commercial building landlords. They are facing refinancing problems with lenders, who are increasingly viewing this type of investment as risky. This problem is exacerbated by the fact that many lenders of commercial space loans are smaller regional banks, which are even more likely to make these lines of credit more expensive in order to protect themselves from increasing default activity.

Adaptive reuse, aka apartment conversions, may solve part of the problem, with some success stories. However, this too is risky, since converting office spaces into apartments is fraught with structural and legal challenges. 

Multifamily Markets in Trouble

The most obvious answer for investors considering pivoting away from office space is multifamily real estate. But is investing in apartment new builds as safe a bet as it once was?

There are indicators that the multifamily market—long considered the safest corner of real estate—now faces its own headwinds. A wave of new apartment supply, softening rent growth, and stubbornly high interest rates have compressed margins for developers and owners alike. For lenders and investors, that means reevaluating credit exposure and shortening duration risk.

After nearly a decade of rent growth turbocharged by the surge in demand during the pandemic, the multifamily market is stagnating, with growth of just 0.2% recorded this year, according to RealPage numbers. The multifamily building frenzy in response to unprecedented demand for housing in popular relocation areas like the Sunbelt has finally caught up with this segment of the market. 

The situation is unlikely to improve in 2026 and beyond; with interest rate decreases to below-6% levels on the horizon, many renters will inevitably become homeowners in the coming years. 

These are normal market fluctuations that inevitably result from supply-and-demand imbalances and economic ups and downs. However, what investors must understand going forward is that there are larger shifts at play here—they are societal, not merely economic, and likely to be permanent. 

The fates of the office market and multifamily segments are profoundly interlinked. Both are suffering from a historic shift in how Americans work, and what is happening to urban areas as a result. 

A substantial majority of people are no longer prepared to simply rent an apartment close to where their office is; they no longer have to. Renters actively choosing multifamily developments are now likely doing so for other reasons, like great amenities or a walkable and exciting downtown area, where they can enjoy life outside work. 

Refining Your Portfolio Is Key

A multifamily investor’s biggest concern is no longer so much falling rents as uncertainty about long-term occupancy prospects.

The most obvious solution here is refining one’s portfolio-building strategy and shortening debt duration whenever possible. What does refining mean here? 

Think of the multifamily investing of years past as a blunt tool: You go wherever rents are currently the highest. Now, however, selecting where to invest requires a detailed understanding of the overall health of a specific metro area. What does it have to offer renters in the long term? 

A more refined portfolio cherry-picks multifamily investments that offer the best longitudinal occupancy rates. Going forward, this will be the best way for investors to mitigate risk, secure favorable financing, and protect their margins. 

Simply chasing rent growth just won’t do as a viable investment strategy in 2026. It’s all about choosing lower-risk, shorter-term investments in locations where multifamily real estate remains attractive for a plethora of reasons—not just the one reason (high rental yield) that was good enough circa 2019.

Connect Invest 

This is exactly where Connect Invest’s Short Notes come in. By funding diversified, short-term real estate debt investments, investors can earn fixed, high-yield interest while limiting exposure to long-horizon vacancy and rent risk. Connect Invest’s underwriting process actively stress-tests each project against occupancy and income fluctuations—so even if vacancies rise or rents fall, investor returns remain stable.

Instead of worrying about the next vacancy report, investors can keep their capital moving—and their returns steady—with Connect Invest’s data-driven approach to short-term real estate credit.