00:00There's a lot of confusing data, right?
00:01Yes.
00:02What's your read?
00:03So demand for apartments or for housing has been very, very strong over the last few years.
00:09But that's been really masked by the oversupply that we saw over those years.
00:14And so that kept rents fairly flat.
00:17And while now we started to see something really shift in Q1, Q2 of 2026.
00:24And what happened is construction that was at a very high rate at the peak of 2022 was about 60
00:33% down over the last year.
00:35And so what's happening now is there's less supply coming online.
00:37And so that demand is now finally being unveiled.
00:40So in just Q1 and Q2, we had absorption that was about double of what new supply was.
00:46And so what's really interesting about this is the pricing of multifamily hasn't really adjusted yet.
00:54It's still really reflecting that like 2024 pessimism when we're starting to see fundamentals that are very strong and indicating
01:01that rents will start to rise and that cap rate compression will start to happen.
01:06So from an investor's perspective, you guys are more upbeat about the outlook, except for those who are renting or
01:12like that becomes a problem.
01:14Right.
01:15So affordability issues.
01:16Apartment renting is far more affordable than buying a house right now.
01:21Interest rates are still relatively high.
01:23And what's crazy is how high construction costs are.
01:27They're 40% above where they were pre-pandemic.
01:30Why is that?
01:31Inflation.
01:32It's just inflation.
01:33It is.
01:34And tariffs.
01:35Yeah.
01:36All of that is playing.
01:37Right.
01:37Into it.
01:38Okay.
01:38So you focus on workforce housing.
01:41Correct.
01:41Tell us a little bit about like, what is that?
01:43Who's getting squeezed in that market specifically?
01:46Yeah.
01:47So, I mean, the tenant base that we're working with, they're not a rent burdened tenant base right now.
01:53So our tenants are making more than three times income on the rents that they pay.
01:58And, but what is happening is the supply of what's coming online, even suppressed, is almost no new supply coming
02:08in for affordable housing.
02:09So it does indicate that rents should start to rise.
02:12And that is hard for a population that could be struggling financially.
02:17It's so interesting.
02:18And what I do like about your perspective is coming from the investor perspective, right?
02:22In terms of, no, I mean, right?
02:23Like that is a big part of our world.
02:26But there is a balance of when things get much more, you know, expensive, it squeezes out perhaps a consumer
02:32from being able to spend more money.
02:34I am curious, though, then, I guess it's cyclical.
02:40And so when prices start to go up, so if you expect prices to go up, good for investors later
02:45in the year, will you start to see then another bunch of more supply come on?
02:49Would you anticipate?
02:50Or is it tariffs and costs are kind of keeping everything in check right now?
02:54We already know what the supply is going to look like through the end of 2026 and through all of
02:592027 based off of construction starts.
03:02It's about 18 to 24 months from when you start construction to delivering that supply online.
03:07Right.
03:07We already know how suppressed it was over the last year.
03:09So we are going to have that high demand that's outpacing supply at least for the next year and a
03:15half.
03:16Okay.
03:17What about bottlenecks to more construction?
03:20Like sometimes you look at this environment and you think to yourself, let's just build more, right?
03:24Right.
03:25Is that possible?
03:26Well, this is a problem right now is because costs are so high.
03:30So we are trading, we're buying our properties far below the cost of replacement and we're selling them below the
03:35cost of replacement.
03:36And so how does new construction compete with that?
03:40So it is tough, but there will be a point when supply is going to have to come back.
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