2026 Economic Update & Improving Leasing

release edition [053]

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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:

• Economy: Early 2026 Update
• Leasing: Questions I'm Asking
• Weekly Listen: The Distribution

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Economy

Last week, I shared my Top 10 Multifamily Predictions for 2026. If you missed them, you can read them here.

This week, I'm swinging the pendulum the other direction as I provide a variety of data sources and perspectives so that you can draw your own conclusions as to where you think the economy is headed in 2026.

If you're newer to The Multifamily Download (I'm glad you're here!) and you haven't previously read one of my economic updates, please know that I am not an economist, nor do I pretend to be one.

My focus with this section of today's newsletter is to empower you to think independently, instead of simply buying into what either of us knows to be true.

Yes, my perspective will inevitably shape the following commentary (bias is tough to avoid, after all), but please know that my hope is for you to read the below, evaluate it with an open mind, and then draw your own conclusions.

With my infamous "I'm not an economist" disclaimer behind us, let's begin. Enjoy!

Stock Market

By many popular measures, the Stock Market appears expensive (see: The Buffett Indicator).

Despite the consensus view that the stock market is historically expensive, market breadth is incredibly strong with all S&P sectors trading above their 200 day moving average for the fist time since November 2021.

Today, 68% of S&P 500 stocks are now above their 200-day moving averages, the highest reading since December 2024, and 70% of NYSE stocks are above this threshold for the first time since 2024.

Historically, similar breadth surges have preceded S&P 500 average gains of +17% over the following 12 months, according to The Kobeissi Letter.

Remarkably, this breadth and sustained S&P value ($6,940 as of 1/16/26) is despite the 3rd-largest net inflow to U.S. money market funds that occurred during the first week of January.

Since the start of 2025, US money market fund assets have risen +$954 billion, to a record $7.8 trillion.

Since the 2020 pandemic, assets in money market funds have surged +$4.2 trillion, or +116%, per Kobeissi.

As one of my favorite Equities Analyst Tom Lee has mentioned more recently, stock market rallies don't peak on fear.

The market continues to climb the "wall of worry" following the Liberation Day waterfall decline seen last April.

From my perspective, I'm curious to see how two opposing forces will play out in 2026.

On one hand, bullish optimism is rising (see AAII chart below), and investor euphoria always precedes a market top and subsequent pull back.

On the other hand, there's nearly $8T sitting in money market funds, some of which will begin flowing into "risk on" investments as the Fed Funds rate declines throughout 2026, which may provide buoying tailwinds for stocks and/or commodities.

Inflation & Interest Rates

As I begin this section, I think it's important to share the context that I am not a Keynesian thinker, and I do not subscribe to the overarching narrative that low interest rates cause inflation, or that high interest rates tame inflation.

I recognize this approach may ruffle a few Economist's feathers, but my hope is that this section can be read with an open mind and that an alternative perspective may be considered.

To begin, let's look back at the Federal Funds Rate since 2000.

Specifically, look at the Fed Funds Rate from 2009 until the recent rate hiking cycle began in 2022.

What do you notice? (not a trick question)

The Fed Funds rate was remarkably low.

Surely there was runaway inflation, right?

Well, no, actually.

As shown below, the measured CPI figure peaked in 2011 at 3.15% between 2009 and 2020.

If low rates don't cause inflation, what does?

Money printing.

The M1 Money Stock (shown below) didn't reach $1T until mid-2012, and then surged to $7.26T by January 2022.

M2 Money Stock (shown below) has followed suit, climbing from $4T during the GFC to $7.6T in January 2022.

Notably, the Velocity of M2 Money Stock moved downward during the post-GFC time period, which meant that each dollar of M2 generated less nominal spending than before.

For reference, the velocity of money is the frequency at which one unit of currency is used to purchase domestically- produced goods and services within a given time period.

In other words, it is the number of times one dollar is spent to buy goods and services per unit of time. If the velocity of money is increasing, then more transactions are occurring between individuals in an economy.

Sustained CPI inflation requires not just more M1/M2, but also a willingness of banks to transform reserves into loans, strong private and public demand for spending, and limited slack in labor and product markets (so companies can raise prices).

Without those conditions, increases in M1/M2 can coexist with low CPI inflation, often showing up instead as elevated asset prices and swollen bank balance sheets versus inflation that shows up in consumer price increases.

Earlier this week, I commented the below on a LinkedIn post about inflation, and I thought it may be timely to share here with you:

I plan to publish a longer newsletter in the future where I address the relationship between inflation, interest rates and the economy in more detail, but today I'll leave you with one final thought:

To avoid inflation, money printing must lead to productive economic activity (hiring, business expansion, new business creation, etc). Printing money that primarily inflates asset prices eventually erodes the middle class of society.

Government Spending

Speaking of Money printing, the U.S. government's interest payments are now approaching $1.5T annualized and constitute 15% of spending in FYTD 2026 as shown below ("net interest").

The deficit is problematic because it increases the debt burden on U.S. citizens while also, perhaps more importantly, risking ever-higher interest rates due to more issuances of T-bills, notes, and bonds to effectively finance this debt.

If more Treasury debt must be issued than current market demand will bear, then rates will rise until an equilibrium is met and those Treasury instruments are purchased by the market.

Keep an eye out for new issuance treasury demand.

It's strong today, and that's a positive indicator for the health of the U.S. economy, but it's something worth watching.

For more on this topic, here's a whitepaper from State Street that you may enjoy reading.

Consumers

I'll admit, this one has been a head scratcher.

I called the top of the consumer bubble in late 2023 in an email to my father, as I didn't foresee a path forward for average consumers amid record inflation and a softening job market.

Then, again, I called the top in Spring 2025, in a quasi-Michael Burry epiphany moment while I was driving to work.

However, thanks to robust real wage growth (wage growth > CPI inflation) alongside continued asset price inflation, consumers have done fairly well, all things considered.

According to this latest Q3 2025 consumer data from the NY Federal Reserve, total household debt increased by $197 billion to reach $18.59 trillion in 3Q 2025 including Credit card balances rising by $24 billion from 2Q 2025 to $1.23 trillion and auto loan balances holding steady at $1.66 trillion.

Notably, as shown in the graph below, serious delinquency ("DQ") for the age cohorts 18-29 and 30-39 have effectively doubled over the past five years.

Some of the uptick in DQ by these age cohorts is undoubtedly skewed by missed federal student loan payments that were not previously reported to credit bureaus between 2020Q2 and 2024Q4 but are now appearing in credit reports.

Consequently, student loan delinquency rates remained elevated after a sharp rise in the first half of 2025. In 2025Q3, 9.4% of aggregate student debt was reported as 90+ days delinquent, as compared to 7.8% in 2025Q1 and 10.2% in 2025Q2.

According to this recent "Consumer Checkpoint" from Bank of America: (a) credit and debit card spending rose 1.8% YoY in December 2025; (b) the "K-shaped" consumer story continues, with higher income card spending rising 2.4% YoY and lower income rising just 0.4% YoY, and; (c) consumers were price conscious in 2025, while all eyes now shift to expected tax refunds in 2026 alongside an ambiguous slow-to-hire, slow-to-fire labor market.

I've been somewhat perplexed by the resiliency of the consumer, but I suppose the combination of sustained real wage growth and a positive reversal of the Velocity of M2 money cures a lot of domestic consumer issues.

I welcome your reply if you have any insights.

Home Prices / Sales

As I shared last week, U.S. housing market dynamics are shifting quickly.

The total percentage of mortgages outstanding at 6%+ now exceed those at 3% or lower, and the "lock in" effect is beginning to shake loose as new construction supply is mounting and builders continue to offer significant economic incentives via buy downs.

What does this mean?

Supply is being less artificially constrained by would-be home sellers that previously refused to sell their home simply to preserve their record-low mortgage rates.

As this trend continues, keep an eye on sales volume.

2024 was historically weak, reaching levels not seen since 1995, and 2025 wasn't much better.

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.

To conclude, here's a LinkedIn comment I wrote earlier this week:

Future

To close this economic update, I'd like to share what I wrote in this previous Economic Update from October 2025, because I believe it still holds true today. Here's how I concluded TMD 042:

"If consumers can make it out of this restrictive rate environment relatively unscathed, and enter into a lower rate, lower inflation environment (like we experienced in the post-GFC era) with better job and wage growth opportunities, then I think the future will be extremely bright for America.

After all, when's the last time that all of the below factors were true simultaneously?

The U.S. border is secure, illegal immigrants are self-deporting in masse, China is effectively uninvestible, $10T+ in foreign-direct investment commitments are coming to the United States, a technological boom is beginning (A.I. / data centers / infrastructure), the ultra-Keynesian Fed chair is <6 months from being replaced, the three letter agencies seem to be on the same page working to defend American interests, fiscal policy is a focal point by the Government (DOGE, tariffs, spending), deregulation is occurring, tax cuts have been extended, and peace deals are being reached in the Middle East.

In short, I'm sanguine on the next few years (thanks to Rick Rieder for adding this word to my vocabulary).

What about you? How do you see the next 3-5 years playing out?"

My question remains: What's your view on the next few years?

Leasing

The Multifamily market has been remarkably soft over the past six months due to a challenging combination of lingering elevated supply and softening renter demand.

More supply means more choices, and this means that landlords will compete to retain their existing residents.

The net result of this elevated retention is lower traffic and ever-softer demand.

As a Multifamily operator, here are a few questions that I'm thinking about in 1H 2026 from a leasing perspective:

1. Lead Follow Up

When a new lead comes in, what's the time to call? Time to email? How many times is a prospect followed up by our on-site team? What messaging are we sending prospects on an automated basis?

2. Technology

What systems are currently and/or being implemented? Is the team trained on how to use these systems properly or optimally? Is technology helping the team operate faster and more efficiently?

3. Automation & A.I.

What tools can be implemented to reduce or remove administrative burden at the property level? Could A.I. tools be used to replace or augment manual follow up efforts?

4. Personnel

Does the on-site staff care about the work they're doing? Are the incentivized properly? Are the capable of producing at the level required amid a more challenging market with fewer leads and tours?

5. Marketing

Where are dollars being spent currently? Are those dollars optimized to the most productive marketing channels? If not, how should they be reallocated?

6. Tour Path

How does the typical tour path present to new prospects on their initial tour? Is the path clean? Is the community noisy? How does the landscaping look?

7. Capital Projects

How do the common area amenities present to current residents and prospects? Are there projects that have been previously delayed that need to be completed in 2026? Are the contractors being held honest with their pricing and quality via an RFP process?

8. Feedback Loops

How frequent are property operations calls occurring? Are property managers communicating the right insights and details on a consistent enough basis to make accurate strategic decisions?

There are (obviously) many variables when it comes to leasing, and my job as the owner/operator is to understand the variables that create successful leasing activity.

How are you thinking about leasing and property operations today?

Weekly Listen

This week's listen is The Distribution Podcast by Brandon Sedloff, Chief Real Estate Officer of Juniper Square with his esteemed guest Willy Walker, Chairman and CEO of Walker & Dunlop.

In this episode, they discuss Willy's career journey from nonprofit work and private equity to leading Walker & Dunlop, his lessons from scaling a family-owned company into a public, diversified real estate platform, how public market expectations changed strategic planning and capital allocation decisions , the state of multifamily in 2025, including supply, rent trends, and capital flow, and the origins and impact of the Walker Webcast as a long-term communication and trust-building tool.

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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