release edition [057]

read time [8 minutes]

Welcome to The Multifamily Download, a weekly newsletter where I provide institutional insights to help you build an exceptional Multifamily career.

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Today at a Glance:

• Volatility: Reviewing Recent Data
• Investing: 4 Defensive Strategies
• AI: "Something Big Is Happening"
• Weekly Listen: New Home Insights

Volatility

I'm a naturally positive person. I believe that the future will be better than the past, and I always look for a reason to be optimistic.

But as I've been reading headlines, watching data trends, and doing my best to connect the dots, my conclusion remains the same:

2026 could be a much bumpier year than many are expecting.

While I consider myself a supply-side and free-market thinker, I hold reservations about the speed at which the new administration's sea-change policies can matriculate through the economy in a meaningful way.

Regardless, I think there are irreversible structural issues underneath the economy's surface, especially in the Commercial Real Estate ("CRE") sector.

In simple terms, short term interest rates have been too high for too long, and this structural misalignment is causing immense strain across the entire capital stack in many CRE sectors, especially Office and Multifamily.

I'm confident you'll arrive at a similar conclusion if you study the trends, run some numbers, and mark assets to market like a prospective Buyer would today.

Spoiler alert: It's not pretty.

Now that the table is set, and I (hopefully) have your attention, let's review several recent Economic data points.

As I often quip, I'm not an economist, and my goal is simply to present data to let you draw your own conclusions.

First, let's look at some jobs data.

As expected, the January payroll numbers came back stronger than expected, with the BLS reporting 130K new jobs added in January, including 123K collectively across "Health care" and "Social assistance" (Government employment was down 42K).

However, according to LinkUp, there were just ~52K jobs added from December 2025 to January 2026.

Small business employment is struggling.

According to the ADP Employment Report, companies with 249 or fewer employees have seen just 0.56% total payroll growth in the past 24 months, from 95.865M in January 2024 to 96.216M in January 2026.

More specifically, small US firms employing 20-49 people shed -30,000 jobs in January, the 5th consecutive monthly decline.

These firms have seen employment contract in 14 out of the last 17 months. Over this period, payrolls have declined -296,000, to 22.5 million, the lowest since August 2022.

The job openings-to-unemployment ratio is falling rapidly from the March 2022 peak, largely due to a massive decline in job openings over the same time period.

More people are competing for fewer roles, which may have a double negative effect on the overall economy.

Existing home sales fell 8.4% in January just 3.91M annualized, according to the National Association of Realtors.

For reference, existing home sales in 1995 were 3.85M when the U.S. population was ~90M fewer than it is today.

As I wrote one month ago in TMD 053, "I would not be surprised if SFR home sales continue to remain historically weak in 1H 2026 due to ongoing price discovery that is nearly inevitable given how expensive housing is on both an absolute (price to income ratio) and relative (owning vs renting) basis."

The overall U.S. CMBS delinquency rate increased to 7.47% in January, an increase of +17 basis points for the month, according to Trepp.

Year over year, the overall U.S. CMBS delinquency rate is up 91 basis points.

The U.S. Federal debt continues to climb in the wrong direction, as shown on the image below from the Treasury website, which may be exacerbated by elevated interest rates when the debt matures and must be refinanced.

Consumer savings rates are slowing to the lowest level since the 2008 Financial Crisis (excluding the March 2020 to October 2022 period).

Credit card delinquencies rose +0.3 percentage points in Q4 2025, to 12.7%, the highest since Q1 2011.

This is only below the 2010-2011 period when delinquencies peaked at 13.7%, in the aftermath of 2008.

Nine large companies filed for bankruptcy in the US last week bringing the 3-week average to six, the highest rate since the 2020 pandemic.

The inflation-adjusted average starting salary for college graduates is down -8% YoY, to ~$54,500, the lowest in at least 6 years and down for the 4th consecutive year.

Salaries have dropped by 24% in real terms since the ~$71,000 peak seen in 2021.

The trade deficit is shrinking, perhaps due to the combination of both tariffs and a strained consumer. The US’ goods and services trade gap narrowed +$18.79 billion, or +39%, in October, to $29.4 billion, the smallest since 2009.

Inflation is dropping rapidly, with the January BLS CPI reading just 2.4% YoY and Truflation showing <1%, due in large part to energy costs decreasing by 10 basis points over the past 12 months according to the BLS.

Bank of America's Bull & Bear Indicator is up to 9.4 points, the highest since February 2018, and is at its 4th-highest level in 24 years, signaling extremely positive market sentiment.

This robust investor sentiment is driven by margins continuing to improve with the acceleration of technology.

Summary

The reality is that there are two sides to every coin, and the data above may only tell part of the Economic story.

Even so, I presented these specific data points simply so you can choose to watch them, too, as you determine your view of how and where the economy may be trending.

Sentiment is still generally positive, but the underlying data may be telling a different story.

My opinion is that all roads lead to a lower Fed Funds Rates, and potentially volatile treasury markets.

We've seen this volatility recently as the 10-year Treasury has rallied more than 20 basis points since February 3rd.

For better or worse, it will take time for markets to digest a new Fed regime that is willing to "run hot" to stimulate an economy that, for far too long, was told that it doesn't need to be stimulated.

The resulting cognitive dissonance may befuddle market participants, and this confusion may translate to outsized volatility.

But with volatility comes opportunity.

Investing

Chasing maximal returns is how investors get wiped out, especially in Multifamily.

Thankfully, there's a better way to invest in Multifamily that produces both strong returns and longevity.

Below I share four strategies that I'm focusing on in 2026. I hope they're helpful for you.

1. Basis

The number one most important variable in any Real Estate investment is the overall cost basis.

Evaluating the cost basis (purchase price + capital expenditures + closing costs) relative to current replacement cost is helpful starting point, but I take it a step further.

In today's market, I want my underwritten year-5 exit price to be lower than the previous peak pricing for similar vintage comparable properties that sold in 2021-2022.

2. Cash Flow

The downstream effect of a strong cost basis is durable cash flow that will allow an investor to avoid being held captive by the broader Capital Markets at loan maturity.

Also, the smaller the deal, the better the cash-on-cash return needs to be to offset the floor costs of certain future expenditures. For example, items like HVAC, windows, and boilers all have relatively high fixed costs regardless of a property's unit count.

3. Assumable Debt

One way to financially engineer cash flow is by assuming low cost fixed rate financing.

My team did this in 2025 by acquiring three properties with individual HUD 223(f) loans at sub-3% coupons.

Debt is a two edged sword, and sometimes it's difficult to predict which way it's going to cut.

4. Functional Obsolescence

Properties with deferred maintenance that doesn't drive revenue should be carefully evaluated before being acquired.

Spending money in a non-productive manner raises the cost basis without raising the NOI, which is an inherently risky way to invest at this point in the cycle.

If a property needs CapEx dollars then there should be an incremental benefit to the NOI as a means of de-risking the asset.

This is why the untrended yield-on-cost metric is critical to understand and utilize.

Summary

These four strategies are just the tip of the iceberg, but I think you get the picture.

Investing for maximal growth in rapidly growing markets that are easy to build new supply can wipe out investor Equity seemingly overnight.

Instead, focus on buying quality Real Estate at a compelling basis with a defensible path to relatively predictable NOI growth in a balanced market with relatively limited new supply.

AI Article

The Multifamily Download is focused on Multifamily.

But, every once in a while something non-CRE related catches my eye that I think it worth sharing.

This week, Matt Shumer wrote this article titled "Something Big Is Happening", and it went super viral with 30M+ impressions in just 24 hours.

In the article, Matt wrote, "Dario Amodei (the CEO of Anthropic), who is probably the most safety-focused CEO in the AI industry, has publicly predicted that AI will eliminate 50% of entry-level white-collar jobs within one to five years. And many people in the industry think he's being conservative."

I encourage you to read it.

Weekly Listen

This week's listen is a podcast that I haven't featured previously, the New Home Insights podcast by John Burns Research and Consulting.

In this episode, Chris Nebenzahl and Zak Nyberg join Dean Wehrli to weave us through the rental market maze, covering supply and demand, rental trends, regional variations, amenities, the capital markets, and more.

(Side note: I had the pleasure of meeting Chris last month at NMHC. We spoke about an interesting demographic phenomenon that I plan to share more about soon).

You can listen to the full episode here.

Wrap Up

That's it for today. I hope you found this edition of The Multifamily Download insightful.

Consider sharing this link to The Multifamily Download with a friend or colleague.

Your feedback is appreciated, so feel free to reply anytime.

Thanks for reading. See you next week!

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