release edition [068]

read time [7 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:

• Q2 2026: Economic Update
• Outlook: Strategic Patience
• Weekly Listen: Paul Tudor Jones

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Q2 Economic Update

When I wrote my Q2 Economic Update last August in TMD 030, I argued the Fed was already late, that a 2.75% Fed Funds Rate would be stimulative without being inflationary, and that the data was weaker than the headlines suggested.

Nine months later, the Fed has cut 75 basis points but is still 75 bps above where I said rates should be. That said, there were three big data releases that came out this week that I'd like to unpack below.

First, the FOMC held rates at 3.50-3.75% on Wednesday in Powell's final meeting as Chair. However, the vote was 8-4, the most contentious split in years.

Three dissenters wanted to remove the easing bias entirely, signaling no cuts. One (Miran) wanted a 25 bp cut now.

Powell has announced he's staying on the Board after his Chair term ends due to ongoing legal disputes with the administration.

Secondly, Q1 GDP came in Thursday at 2.0% annualized, a clean rebound from Q4 2025's 0.5% but below the 2.3% consensus. The print was flattered by the federal shutdown unwind and another quarter of AI capex.

Real final sales to private domestic purchasers hit 2.5%, accelerating from 1.8% in Q4. The economy is still expanding, but it appears to be doing so unevenly.

Lastly, the March PCE inflation jumped to 3.5% YoY (headline) and 3.2% (core), the highest core reading since November 2023.

Headline PCE rose 0.7% MoM, the biggest monthly print since mid-2022, with energy responsible for most of the move as oil remains elevated above $100 per barrel, and gas prices are back above $4 per gallon.

Based on these data releases, here are a few things I'm thinking about as we get into mid-Q2:

1. The labor force shift I flagged in TMD 030 is now mainstream.

Powell said it himself this past Wednesday, that the slowdown in job growth stems from "a decline in the growth of the labor force due to lower immigration and labor force participation."

Eight months ago that was a contrarian observation, but this week the Fed Chair stated it as fact in his closing press conference.

2. The "run hot" framework that I also laid out in TMD 030 is being tested in real time.

America needs nominal growth above inflation and nominal rates below inflation.

With Q1 nominal GDP at roughly 5.6% (2.0% real plus a 3.6% GDP deflator) and headline PCE at 3.5%, nominal growth is still above inflation, but the spread is narrowing.

With the Fed at 3.50-3.75% and core PCE at 3.2%, real rates are compressing toward zero.

The path toward a "run hot" economy may depend on whether Q2 inflation moderates as the Iran shock fades, or whether energy costs become embedded in services.

3. Finally, it appears that the Fed may be boxed in for the time being.

They will not cut into a 3.5% headline print without risking a loss of credibility, and they can't hike rates into a slowing labor market without impairing or constraining the labor and consumer markets further.

So, they wait. The 8-4 split tells us that the Committee can't agree on which risk is bigger.

In short, the macro got more complicated, not less.

Summary

The Fed cut 75 bps over the past year and is likely still too tight. Headline inflation is back near multi-year highs on energy, core inflation is sticky, and GDP is expanding but unevenly.

The labor force is structurally smaller, and it appears that America is being forced into the "run hot" path I described last August, just with an oil shock layered on top.

Actionable Takeaway

Don't position your portfolio for a Fed cutting cycle that isn't coming on the timeline most assume. Real rates compressing toward zero is not the same as the Fed easing.

Underwrite to today's debt environment, and don't anchor exit assumptions to a 2027 cap rate that requires inflation to cooperate. The path to a full recovery may be bumpy and non-linear.

Strategic Patience

When the macro is this complicated, the question I think about is not "What do I do today?", but "What does the next 18-36 months actually look like, and why?"

Some of the recent Q1 Multifamily data gives us a useful place to start against the macro economic backdrop described in the above section.

According to RealPage, Q1 2026 demand was surprisingly solid. The U.S. absorbed 93,300 units in the first quarter, one of the strongest Q1 performances in the past decade.

Quarterly supply slowed to about 75,200 units, and annual deliveries dropped to roughly 367,000, back in line with the 10-year average for the first time since the cycle peaked at 589,000 deliveries in late 2024.

However, on a rolling basis, annual demand totaled just 303,000 units, below the decade average of about 340,000.

So while the quarter looked strong, the trailing-twelve-month picture is a market still absorbing less than it has historically, against a supply pipeline that is only now beginning to normalize.

National occupancy stood at 94.9%, up 10 bps quarter-over-quarter but still 20 bps below year-ago levels.

Concessions tell the same story. Per RealPage's March update, 16.9% of stabilized units were offering concessions, up from 16.6% in February and 5.1 percentage points higher (!!) year-over-year.

The average discount was 10.8%, equating to roughly six weeks free (!!) on a 12-month lease. (Remember, this is an average figure).

RealPage notes this is the highest concession levels since the post-Great Financial Crisis period in 2010.

Let's take a quick look back at the GFC timeline:

The Fed began raising rates in June 2004 from 1.0% and reached a peak of 5.25% in June 2006.

Rates held there for approximately 14 months before the Fed began cutting in September 2007.

Multifamily values, per Moody's and NCREIF data, bottomed in late 2009 / early 2010, roughly three years after the peak of the interest rate hikes.

By the end of 2010, values had rebounded 20% off the Q3 2009 low but remained 28% below peak. The full recovery to pre-GFC values took until 2012-2013.

The current cycle has different drivers, but the rhyme is worth paying attention to.

The Fed peaked at 5.25-5.50% in July 2023. Then, they cut 75 bps in late 2025 and have held at 3.50-3.75% since.

Supply is now slowing meaningfully, but the demand picture remains complicated by collapsed immigration, a softer SFR market, and consumer spending that decelerated in Q1 even as headline GDP rose.

If the GFC pattern is any guide, the path from "rates peak" to "values bottom" must be measured in years, not quarters.

The path from "values bottom" to "full recovery" can take another three to four years on top of that. This is offered as a historical reference point, not a forecast, so please draw your own conclusions based upon your target markets and personal view on how technology may help advance the recovery timelines.

To me, the implication for Multifamily owners is that this is a market environment for strategic patience.

Concessions at decade highs is a signal, as is rolling demand below the decade average along with Q1 absorption rebounding.

The strategies I outlined in TMD 057 (basis discipline, durable cash flow, assumable debt, and avoiding functional obsolescence) are designed for exactly this kind of environment.

Continue to underwrite deals and stay close to your markets, but recognize that the macro is doing exactly what late-cycle stagflationary environments tend to do, and the ensuing recovery may take longer than most of us would like.

Summary

Q1 2026 absorption was strong on a quarterly basis, but trails the decade average on a rolling basis. Concessions hit their highest level since the post-GFC period. The GFC reference point suggests recoveries from peak rates take three to four years to bottom in values, with full recoveries taking even longer. Deploying strategic patience is important in 2026.

Actionable Takeaway

Build your underwriting around the rolling 12-month picture rather than the latest quarter's headline. If you're tracking a market with concession usage above the national 16.9% average, model concession burn-off in a relatively conservative manner based upon nearby supply and pipelines.

Weekly Listen

This week's listen is one of the best macro conversations I've heard in months. Patrick O'Shaughnessy hosted Paul Tudor Jones on Invest Like the Best podcast.

If you're not familiar, PTJ is the founder of Tudor Investment Corporation. He infamously called the 1987 crash, shorted the Japanese bubble in 1990, and has compounded capital at extraordinary rates for over four decades.

In the episode they cover whether we're in a bubble, why he sees AI as one of the greatest risks in history, why he believes Bitcoin is the best inflation hedge, and the difference between trading and investing.

Recorded in mid-February, before the Iran conflict, which makes some of his macro observations land even harder in retrospect.

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.

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Thanks for reading. See you next week!

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