Location Strategy Chartbook 09.20.2025

Although the Federal Reserve lowered interest rates, as universally expected, on Wednesday, it’s far from clear that the US central bank has embarked on a new policy-easing cycle.

“You could think of this, in a way, as a risk-management cut,” Fed Chair Jerome Powell said in a news conference following the 25-basis-point cut in the benchmark rate, to a target range of 4% to 4.25%.

He said the move reflected “the much lower level of job creation and other evidence of softening in the labor market” apparent in data in recent weeks. As for where the economy is headed from here, however, he flagged risks to both of the Fed’s main mandates: price stability and full employment.

He was also reasonably clear in saying these risks are coming in part from President Donald Trump’s policies. Reduced immigration has contributed to the slowdown in job creation, and “perhaps all of the increase in inflation over the course of this year” comes from goods prices, which have been affected by Trump’s tariff hikes.

It’s not US trading partners who are paying those tariffs, he specified. Powell also cautioned that price pressures are expected to “continue to build over the course of the rest of the year and into next year.”

But “our tools can’t do two things at once,” the Fed chief said—in other words, tame inflation and support the job market. So policy isn’t on any preset path now.

Hiring levels have slowed, and surveys show consumers are more concerned about the probability of a layoff and more pessimistic about their ability to quickly find another job.

Respondents to the most recent University of Michigan Consumer Sentiment Survey place the probability of a layoff in the next five years at higher than 20%, near the all-time highs reached during the coronavirus pandemic and subsequent lockdown in 2020.

In the Federal Reserve Bank of New York’s Survey of Consumer Expectations for August, respondents rated their probability of finding a new job within three months after a layoff at less than 45%. That represented a 6-percentage-point drop between July and August, and was the most pessimistic reading in more than 12 years since the bank has conducted the monthly survey.

LS Comment: Heard from many potential homebuyers: fear and volatility is the top reason why they are on the sidelines. They can afford it fully employed, but are stretched (40s DTI) and once they take on a higher PITI, they have wiped out their cash cushion to buy and can’t save to withstand job loss

Commercial real estate sales in Orange County, California, remain below levels from the days of historically low interest rates, but a strong year-over-year surge indicates growing buyer interest and increasing buyer engagement. Market participants have noted that bid-ask spreads remain formidable but have narrowed. Combined capital investment across the office, industrial, retail, and multifamily sectors in Orange County totaled $2.1 billion in the second quarter, up 38% from the same quarter a year prior.

Retail leads the rebound, with sales volume soaring to nearly $500 million in the second quarter, up 148% from a year prior. Year-to-date sales of retail buildings already exceed last year’s annual total. Deal flow is also rising fastest in the retail sector — nearly 90 retail sale transactions closed in the second quarter of 2025, up from just over 50 a year prior.

The U.S. hotel industry is made up of 691 submarkets. Each month some of the submarkets gain revenue per available room, or RevPAR, compared to the same month in the prior year. In a healthy environment, the ratio of submarkets gaining revenue is higher than the percentage of submarkets losing ground.

In 2025, however, the number of U.S. hotel submarkets growing RevPAR compared to the same in 2024 is slowing. In January, around 60% of submarkets recorded RevPAR increases. By July, this figure had fallen to 48%, meaning that more than half of all submarkets experienced declines. To frame the downward trend, we compared the current trajectory with patterns observed during the two most recent recessions, excluding the COVID-19 pandemic: 2001 and 2008.

According to the National Bureau of Economic Research, the 2001 recession started in March 2001 and ended in November of that year. The 2008 recession started in December 2007 and ended in June 2009.

During both downturns, the number of submarkets gaining RevPAR by month deteriorated sharply. In January 2001, around 71% of submarkets reported gaining revenues. That number dropped to around 7% in September, caused by an almost complete travel stop after the 9/11 attacks, and ended up at 22% in December. In January 2008, around 68% of submarkets reported RevPAR growth. This number steadily declined, reaching only 17% in December.

The RevPAR outlook for 2025 continues to be negative, and national RevPAR for the year is expected to decline by 0.1%. Part of the reason is the ongoing uncertainty in travelers’ minds, which hinders forward booking trends for groups, affects travel decisions for business travelers and slows leisure demand. Slower demand will likely translate into more submarkets seeing RevPAR deceleration as well.

With absorption outmatching the number of completed projects during the first half of the year, the San Antonio multifamily market might finally be turning a corner.

For most of the past three years, the dynamic in the San Antonio multifamily market has been dominated by seemingly ubiquitous construction. Between the beginning of 2022 and the end of 2024, developers brought more than 25,000 new apartments to market in San Antonio.

In only three years, the San Antonio real estate market expanded its apartment inventory by 13.5%. This rate of growth was 45% faster than the nation as a whole during this period.

Now, this dynamic is changing, as supply is no longer towering over demand in South Central Texas. Construction has slowed throughout 2025 thus far, with developers bringing roughly 6,250 units to market between January and mid-September. While this still represents an average rate of project completions in the San Antonio apartment market, it was about 4,700 behind the year-to-date figure for 2024 at this time last year.

Furthermore, this gap is expected to widen during the balance of the year. By late 2026, San Antonio is expected to arrive at what many local market observers are describing as a “supply cliff.”

ten31: Brookfield is moving to buy a controlling stake in prefab home giant Yes! Communities at a $10B+ valuation, in what would be one of the biggest real estate M&A deals of the cycle. If a deal w/ the seller, Singapore SWF GIC, does go through, Brookfield would control tens of thousands of manufactured homes x 300 communities across the US, per the FT, w/ a focus on the Midwest & Southeast. It’s among the biggest-ever bets on lower-tier heartland housing.

Yes! was launched in ‘08 by Gary McDaniel & Steve Schaub, w/ backing from PE shop Stockbridge Capital, and began amassing properties from players such as Berkshire-backed Clayton Homes. By the time the Singaporeans came knocking in ‘16, Yes! had grown to 178 communities. GIC & another institutional investor acquired 71% of the firm at a $2B+ valuation, w/ Stockbridge holding on to its 29% stake. Right around the time of that deal, Yes! also landed $1B in financing from Fannie, representing the agency’s largest deal in manufactured housing at the time.

Its homes are generally small, single storey houses that come with a garden. The company rents homes and also offers purchase options for customers, in which they buy their unit over time but lease the land from the company.

YES Communities: Communities provide planned resident activities and events throughout the year. Amenities such as pools, playgrounds, activity centers, dog parks, and clubhouses

Home-building slumped last month, as mortgage rates remained high and amid an uncertain environment for building-materials prices.

Here are the main takeaways from the Commerce Department’s report released Wednesday:

Housing starts, a gauge of new residential construction, fell to 1.307 million in August from an marginally upwardly revised 1.429 million in July.

Economists polled by The Wall Street Journal anticipated a higher 1.37 million starts.

Starts were 6.0% lower than a year earlier.

Residential permits, another measure of trends in housing construction, tumbled to 1.312 million, from a upwardly revised 1.362 million in July. Economists expected 1.37 million.

While active housing inventory is rising in most markets on a year-over-year basis, some markets still remain tight-ish (although it's loosening in those places too).

As ResiClub has been documenting, both active resale and new homes for sale remain the most limited across huge swaths of the Midwest and Northeast. That’s where home sellers this spring had, relatively speaking, more power.

In contrast, active housing inventory for sale has neared or surpassed pre-pandemic 2019 levels in many parts of the Sun Belt and Mountain West, including metro area housing markets such as Punta Gorda and Austin.

Many of these areas saw major price surges during the Pandemic Housing Boom, with home prices getting stretched compared to local incomes. As pandemic-driven domestic migration slowed and mortgage rates rose, markets like Tampa and Austin faced challenges, relying on local income levels to support frothy home prices.

This softening trend was accelerated further by an abundance of new home supply in the Sun Belt. Builders are often willing to lower prices or offer affordability incentives (if they have the margins to do so) to maintain sales in a shifted market, which also has a cooling effect on the resale market:

Some buyers, who would have previously considered existing homes, are now opting for new homes with more favorable deals. That puts additional upward pressure on resale inventory.

In recent months, that softening has accelerated again in West Coast markets too—including much of California.

At the end of August 2025, 14 states were above pre-pandemic 2019 active inventory levels: Alabama, Arizona, Colorado, Florida, Hawaii, Idaho, Nebraska, Nevada, Oklahoma, Oregon, Tennessee, Texas, Utah, and Washington.