release edition [006] read time [7 minutes] Welcome to The Multifamily Download, a weekly newsletter where I provide institutional insights to help you build an exceptional career in Real Estate. Today at a Glance:
Unlock your information advantage:JobsIf you've been reading The Multifamily Download in 2025, then you won't be surprised to hear that the economy may be sputtering. While headlines, companies, and news outlets continue to parrot that the economy is strong, many signals continue to indicate that trouble may be on the horizon. This week's signal: Jobs. Yesterday, the Bureau of Labor and Statistics announced the January 2025 employment situation summary which includes their revision to the 2024 total non-farm payroll figures, and both were staggering to the downside. January jobs came in at just 143,000, which was well below the 169,000 estimate. Additionally, the total non-farm payroll jobs added in 2024 was revised downward by 610,000. I wrote about the revision for the year-ending March 2024 a few weeks ago in The Multifamily Download 004, when the same statistic was revised downward by 818,000 over the previous 12 month period. As you can see below, the trend of non-farm payroll growth is rapidly decelerating. There was an average of just 166,000 monthly non-farm payrolls added in 2024. For context, 2023 averaged 255,000 monthly non-farm payrolls added (+54% above 2024) and 2022 averaged 401,000 monthly non-farm payrolls added (+142% above 2024). As you may have guessed, because of this steep decline in job growth, the average weekly hours worked for private employees plummeted to just 34.1 hours in January of 2025. For context, the trough in 2020 was also 34.1 in March, and the low in the GFC was 33.7 in June of 2009. According to the Bank of America graph below, U.S. private payrolls excluding education/health as a % of total payroll growth is at just 40%, which is comparable to past recessionary periods. Said differently, job growth is deteriorating rapidly for private sector jobs when excluding jobs that are inflationary in nature, such as education (which is directly [property taxes] or indirectly [Government loans] subsidized by tax dollars) and healthcare (which is funded by the many for the few). Yet somehow, our economy continues to defy the Fed's aggressive rate hikes, Government deficits (that create inflation), record-levels of consumer debt, sustained elevated interest rates, record immigration, and low SFR home sales. I'll let you decide how you think this will play out. You can read the full BLS January jobs report here. TariffsIf you recall, it was just one week ago when President Trump announced 25% tariffs on both Canada and Mexico if they elected not to comply with his stern request to do their part in halting illegal immigration and fentanyl drug flows. As the markets began to react negatively to the tariffs, I posted the below on Twitter/X early the next morning.
Honestly, I was surprised to see how negatively the markets initially reacted to the tariff news after it had been openly discussed for many months during the recent Presidential campaign season. Furthermore, did the markets really think that President Trump would enact policy that may jeopardize his elected mandate to reduce American consumer costs, get rid of 'transitory' inflation, and lower tax liabilities? I'm not an economist, and I realize that tariffs can create short-term inflationary pressures, but President Trump's narrative on tariffs has always been to benefit Americans over the long-term. To me, the President's goals are clear:
Tariffs, if implemented properly and maintained sustainably, should accomplish these goals. A look back at recent U.S. tariffs on washing machines, solar panels, and steel validate this thesis. In fact, the solar panel tariff program worked so well that former President Biden doubled the tariff from 25% to 50% in late 2024 before he departed office. The reality is that tariffs financially incentivize companies to relocate their manufacturing production to the U.S. thereby creating new jobs for American workers. These companies also benefit from supply-chain efficiency, real wages often rise, and consumer costs typically come down over time. (By the way, if consumer costs don't decrease over time, then U.S. consumers will naturally revert to buying internationally, and companies will respond by reallocating production back to international facilities. This is called capitalism). Just last month automaker giant Stellantis announced they'll be reopening a Michigan manufacturing facility and restoring 1,500+ UAW jobs. Additionally, several of the MAG 7 companies recently announced massive CapEx spending plans for 2025, including Amazon at $100B, Microsoft at $80B, Google at $75B, and Meta at $65B. While I don't know how much of these CapEx dollars will be spent in America, all four companies are based in the U.S., so logic follows that much (if not all) of this spending will be done domestically. Another example is Norway, which has a 25% VAT that's applied equally to all goods, domestic and imported, yet their inflation rate is below 2%. I realize that tariffs and VAT are not the same, but here's one perspective worth considering: America is just 4% of the world's population, but produces 30% of the GDP and contains 70% of the MSCI World Index, so the logical question that many are asking today is this: Why does U.S. policy allow for other countries to undercut American-made goods and services in order to sell to the powerful pool of American consumers? When it comes to tariffs, it's clear that Canada and Mexico are far more dependent on America than America is on them. This is why the leaders of both nations spoke with Trump less than 48 hours after he announced the 25% tariffs. Again, as shown above and below, Canada and Mexico are far more dependent on the U.S. than the U.S. is on them. This cannot be overstated when it comes to tariff conversations and negotiations. Creating incentives to produce and buy domestically is better for the environment, better for the U.S. economy, better for the U.S. worker, and better for the U.S. taxpayer. Again, I'm not an economist, so do your own research to formulate your own opinions, but it seems clear that tariffs are a tool that America should be utilizing in one way or another. After all, tariffs have historically been a large component of U.S. government revenue as shown below. (Footnote: If you haven't read it yet, add "The Art of The Deal" to your reading list. You'll be glad you did.) Absorption2024 was a historic year for Multifamily, and the latest CBRE national report shows why. Below are several key takeaways that stood out. The report is packed with excellent data, and I would strongly consider reviewing it here when you have the time. P.S. If you enjoy real-time, relevant CRE data then you'll love The CRE Research Vault. Absorption- Q4 2024 absorption was the highest on record and 12 times more than pre-pandemic Q4 average. - On an annual basis, demand outpaced the addition of 451,000 units by 18% and more than double absorption in 2023. Vacancy - Only 2 of 69 markets saw vacancy rise in Q4 2024 (Denver and West Palm Beach). - Vacancy rates in 30 markets are now below their pre-pandemic average (up from 19 in Q3 and 14 in Q2). - 11 markets had vacancy rates of <4% (up from 6 in Q3), while 22 had rates between 4% and 5% (up from 21 in Q3). Rent Growth- Average monthly rent increased 0.5% YoY to $2,176, but fell -1.0% QoQ, which is in line with typical Q4 seasonal performance. - The Midwest led regional rent growth with +2.8%, followed by the Northeast with +2.3%, and the Pacific with +0.4%. - Austin, San Antonio, and Phoenix had the highest negative rent growth in Q4 2024, with only Austin seeing improvement. - Negative year-over-year rent growth moderated to -1.1% in the Southeast and -2.5% in the South Central regions, but accelerated to -2.8% in the Mountain region. Weekly ListenThis week's listen is the Roth Recap Episode 8, hosted by Brandon Roth and featured guest Bo Diamond. Bo shares his journey from New York Private Equity to Northwest Arkansas, becoming a Multifamily operator, and he shares how he sources deals, raises capital, underwrites, asset manages, and much more. This is an excellent episode for newer and aspiring Multifamily operators. You can listen to the full episode here. Wrap UpThat's it for this week. I hope you found this edition of The Multifamily Download insightful and enjoyable. If so, would you consider sharing it with a friend or colleague? Simply send them this link. I always welcome your feedback. Reply and let me know what you'd like to see in the future. Thanks for reading. See you next week! Forwarded this email? Sign up here. Join me on LinkedIn | Twitter | Website |
The Multifamily Download · February 8, 2025
Tariffs, Multifamily Absorption, & More
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