release edition [066] read time [15 minutes] Welcome to The Multifamily Download, a weekly newsletter where I provide institutional insights to help you build an exceptional Multifamily career. Forwarded this email? Subscribe here. Today at a Glance:
Last week's newsletter was heavy. Consumer sentiment hit all-time lows, Multifamily CMBS delinquency hit all-time highs, and YoY March rent growth was the lowest ever recorded. These unfortunate facts are a snapshot of where we are today. But, where we are today is not necessarily indicative of where we're headed in the future. I believe strongly that the full picture requires looking at both sides of the coin. So this week, I want to make the case for optimism. Not blind optimism that says "everything is fine", but the kind grounded in data and in structural advantages that are easy to forget when headlines are loud, and taken from the observations of people I respect who manage real capital at scale. Each of these three perspectives have shaped my thinking over the past year plus, and I want to share each of them with you. Then, we'll dive into what these insights mean for the Multifamily sector. Today's newsletter is dense, and it's more of a Macro view than usual, so I hope you enjoy it. Hit reply and let me know if you do! The Structural Renewal CaseJames Thorne is the Chief Market Strategist at Wellington Altus and holds a PhD in Economics from York University. He is one of the more thoughtful macro voices I follow, and his 2026 thesis can be summarized in one sentence: America is not declining, it is adapting. Thorne argues that 2026 marks the end of pandemic-era stimulus and the beginning of a new cycle, rather than a continuation of what we have been living through for the past four years. He believes that America is entering a genuinely new cycle driven by credit markets, technology infrastructure, and redesigned policy frameworks. His evidence starts with liquidity. The Fed's quantitative tightening program, which spent the better part of two years draining liquidity from the system, has ended. The Fed is now reinvesting principal from maturing Treasuries and mortgage-backed securities, which means money is flowing back into the system rather than being pulled out. For anyone who follows capital markets closely, this is not a small shift. It is often the difference between headwinds and tailwinds. I have been writing about this dynamic since TMD 004, where I first argued that monetary supply, not interest rates, is the variable that matters most for inflation and asset prices. That is a non-Keynesian view, and I know it is not universally shared. But it is the lens through which I evaluate the economic machine in a capitalistic economy, from Fed policy to cap rate movement. Thorne's observation that the liquidity environment is actively improving confirms what I have been watching for over a year. Thorne's argument extends beyond liquidity. He points to a capital expenditure supercycle driven by AI infrastructure, energy production, and supply chain reconstruction. These are not speculative bets, but instead they are real investments being made by real companies in physical assets including data centers, transmission grids, gas turbines, and nuclear facilities. The spending will eclipse prior technology investment eras, and the productivity gains, while slow to materialize, will be substantial for patient investors, Thorne believes. His argument on the consumer is also worth paying attention to carefully. As rates fall, inflation cools, and real incomes stabilize, Thorne believes the U.S. consumer will reassert by late 2026. He views recent volatility not as a warning sign, but as a healthy reset that cleared out speculative excess and set the stage for a more durable expansion. The old rule holds, he writes: "Do not bet against the U.S. consumer". As I think about managing risk and future capital allocation, one line of his that has stuck with me amid a productivity-driven supercycle, is that the biggest risk is not in being overexposed, but in being underallocated. I am not saying I agree with everything Thorne writes. But the structural case is compelling with liquidity increasing, deregulation continuing, and AI-driven capital expenditure is just getting started amid ferocious demand. This is unlikely to be a backdrop for collapse, but instead, it's one for structural renewal and economic growth. Thorne's broader thesis connects to something I have believed for a long time. As I wrote in TMD 039, real estate is not a game to be won but an endeavor to be endured; and that slow growth is a gift, not a punishment. Thorne is making the macro version of the same argument. Today, the economic machine is messy as the system is in flux. But the system is adapting, Thorne says, and the people who endure through the adaptation period are the ones who stand to benefit on the other side. The Data CaseIf Thorne provides the narrative, Rick Rieder provides the proverbial receipts. In case you're not familiar, Rieder is BlackRock's CIO of Global Fixed Income and oversees more than $2 trillion in assets. He is an allocator, so when he shares a view, it is because he is positioning real capital behind it. As Rieder detailed in a long-form piece from last summer here, he paints a picture that I think is more constructive than most people in our industry realize. Let's start with inflation. Shelter inflation, the stickiest component of CPI for the past two years and the one most directly relevant to Multifamily participants, has moderated back toward pre-COVID trends on both a three-month and six-month annualized basis. Tariffs added roughly half a percentage point to core PCE, with perhaps another 0.4 points still to come. That is real, but it is a one-time level adjustment, rather than the start of a new inflationary spiral. In TMD 058, I flagged CPI at 2.4% year-over-year and raised the question of whether tariff pass-through would reignite the inflation cycle. Rieder's answer, backed by the allocation decisions of the world's largest asset manager, is no. The inflation storm that dominated the last three years looks largely behind us. The remaining pressure points, healthcare, insurance, education, are structural categories driven by regulation and market structure, not by interest rates. Said differently: the Fed has done its job on the things monetary policy can actually influence (though I will standby my position that short term interest rates have been too high for too long). On the broader economy, Rieder makes a point I think is underappreciated by CRE operators. Services now represent 70% of U.S. consumer spending, and it is a structural advantage. A service-driven economy is built to absorb shocks, not amplify them. Manufacturing downturns and goods-sector disruptions, including tariff impacts, hit a smaller and smaller share of total economic activity. Rieder's framing is blunt in that service economies do not go into recession. They slow down, they adjust, and they keep moving. He expected equity returns in the range of 10-15% for 2026, with real volatility along the way (which we've experienced recently in a very real way, with the S&P demonstrating another v-shaped recovery after a waterfall decline). On corporate health, the numbers are somewhat striking. S&P 500 return on equity currently sits around 19%, well above the long-run historical average of approximately 14%. Companies are generating more than $1 trillion annually in combined dividends and buybacks. Cash as a proportion of total assets has grown from 11% to nearly 17% over the past two decades, while debt relative to free cash flow has been cut nearly in half over the same period. Corporate America is not fragile, but rather, it is perhaps more fortified than it has been at almost any point in modern history. For those of us in Multifamily, one of Rieder's most relevant observations is his characterization of the current environment as the "golden age of fixed income." Starting yields across U.S. and European investment grade markets sit in the top third of their long-term historical ranges. Securitized products, including mortgage-backed securities, offer meaningful yield premiums over government bonds with strong structural protections. The cost of capital is still elevated for borrowers, but the income side of the equation has rarely been this attractive for the lenders and allocators who fund our deals. When capital is hungry for yield, it finds its way into real assets including Commercial Real Estate. We're seeing this demonstrated by the extremely healthy debt capital markets despite interest rate and geopolitical uncertainty. Rieder also frames AI not primarily as a revenue story, but as a cost and margin story. Companies across industries are deploying technology to reduce headcount and raise productivity. Labor costs represent roughly 55% of business sector output, he writes. So even modest reductions in labor's share of costs translate into hundreds of billions of dollars in incremental corporate profit. Those additional free cash flows will translate directly into stronger balance sheets, more aggressive capital deployment, and, eventually, perhaps more capital available for real estate investment. The point is this: The data does not support the narrative that the U.S. economy is on the brink. Rather, it supports the narrative that America is navigating a bumpy but structurally sound transition. The Sentiment CaseTom Lee at FundStrat is the most publicly bullish strategist on Wall Street, which means he is easy to dismiss. Although difficult at times (see: 2025 year-end Crypto misses), I would encourage you to listen to Tom with an open mind. Lee's framework is built on a simple but powerful observation. Since 2020, investors have navigated six distinct "extinction-level events":
Each one, on its own, would have been enough to rattle markets and reshape entire industries, especially considering that all six happened within a five-year window. And yet, we are still here. The economy grew, corporate earnings expanded, and the labor market, while cooling rapidly, has not yet broken. Perhaps most importantly (and to my surprise), the U.S. consumer has bent mightily, but has not collapsed. Lee's argument is that this relentless string of shocks has compressed investor sentiment far below where fundamentals actually sit. People are not just cautious. They are exhausted. And exhausted investors systematically underestimate the upside, because the muscle memory of crisis is still fresh. (see: recency bias) In TMD 038, I shared my five-step process for spotting trends. Step 5 is to ask: how does the person sharing this information benefit from sharing it? It is the "talking your book" filter that I apply to every piece of data or commentary that I read or hear. Lee's framework invites the same question, but aimed in the opposite direction. When the consensus is unanimously bearish, when every operator, every LP, and every broker can recite the bear case from memory, it is worth asking: How much of that pessimism is based on current data, and how much is based on the emotional heartburn of the last four to five years? Something to think about entering Q2 2026. Lee's year-end target for the S&P 500 is 7,700. While it sounds ambitious, the underlying logic is sound. When everyone is positioned for the worst, positive surprises have an outsized effect. The coiled spring does not need everything to go right. It just needs a few things to stop going wrong. He is also making a structural argument that I find directly relevant to our industry. Lee believes the U.S. entered a long-term labor shortage era around 2018 that will persist through 2035. The math is demographic: fewer working-age adults entering the labor force, more boomers retiring, and immigration policy creating uncertainty around the replacement pipeline. That shortage is forcing companies to spend aggressively on technology and automation, which drives capital investment, employment in growth sectors, and, ultimately, demand for housing. (see: Whitepaper "The AI Layoff Trap". More on this in a future edition of TMD!) More workers in technology and infrastructure means, perhaps, more renters. More renters means more demand for well-located, well-operated apartment communities. That is the supply-demand story that underpins everything we do. One topic that I want to revisit is from TMD 050, when I wrote that 2026 would bring "Heavy Headlines" and "the beginning of the end for several prominent MF names." I still believe there will, unfortunately, be sponsors who over-leveraged in 2021 and 2022 and will face challenging consequences. But, Lee's optimism and my Heavy Headlines prediction are not contradictory. Rather, they are two sides of the same coin. The Multifamily operators who do not survive the shakeout are precisely the reason the coiled spring exists for those who do. Meaning, distressed assets will get repriced, overbuilt markets will eventually absorb, and capital that has been trapped in bad structures can get recycled into better ones. The pain for some is the opportunity for others. It's not pretty, but this is how cycles work, and it's how markets find equilibrium once again. As recently as last week, Lee called a market bottom, noting that stocks held firm through escalating geopolitical tensions and then surged when conditions de-escalated. His broader point, drawn from historical pattern analysis: In the last eight major conflict events, equity markets bottomed very early in the crisis, not at the end. Lastly, Lee has two insights that have stuck with me. (1) "markets climb a wall of worry", and (2) "markets don't peak on bearish sentiment". To that end, the latest AAII survey shows that the market is still far more bearish (42.8%) than bullish (31.7%). This data, on it's own, is bullish. What This Means for MultifamilyI'm not an economist, but here is my read on how these three perspectives intersect with our world. If Thorne is right that liquidity is increasing and the consumer reasserts in the second half of 2026, that is a tailwind for leasing demand and rent growth. If Rieder is right that inflation is cooling and the income environment is historically attractive, that is a continued tailwind for refinancing, recapitalization, and new debt origination. If Lee is right that sentiment has overshot to the downside and a long-term labor shortage is driving sustained technology investment, that is a tailwind for employment, household formation, and renter demand. None of this erases the supply overhang, the distress wave forming, or the challenges I wrote about in last week's TMD. Those are real, and a bear case does exist, but so does a bull case that deserves some airtime, too. Here are a few practical implications to consider: If you are an operator with upcoming debt maturities: The rate trajectory likely favors you. Rieder's "golden age of fixed income" thesis suggests lenders and allocators are actively seeking yield, which means the refinancing and recapitalization environment should improve as 2026 progresses. If you can bridge to the second half of the year, the other side may look better than today. This is not a prediction that rates will plummet, but rather an observation that capital availability will likely continue to expand and rotate into the U.S. seeking safe-haven in real assets including Multifamily. If you are underwriting new acquisitions: Thorne's liquidity thesis and Lee's sentiment thesis both point to the same conclusion that this is a window where disciplined buyers with capital access can acquire assets below replacement cost while the market is still pricing in maximum pessimism. The margin of safety is wider today than it will be in 12 months. As I wrote in TMD 008, avoiding bad deals is more important than buying good ones. But when the basis is right, the risk-adjusted returns available today are compelling even with only inflationary growth assumptions. If you are an LP evaluating sponsors: Pay close attention to which Multifamily operators are leaning in with discipline versus which are sitting on the sidelines indefinitely. The best risk-adjusted vintages in real estate tend to come from periods exactly like this one, when sentiment is low, supply is peaking, and the macro is quietly inflecting. Ask your GPs/Sponsors what they are seeing in the market, ask what they are buying and why, and ask how they arrived at those conclusions. Rational, justifiable, and strategic decision making is imperative when markets are volatile. If you are focused on leasing and operations: The consumer reassertion thesis from Thorne and the labor shortage thesis from Lee both suggest renter demand has a floor that is higher than the current narrative implies. Double down on retention, and keep concessions targeted and strategic rather than broad-based. And prepare your leasing infrastructure for a demand recovery that may arrive faster than expected. (I don't know if it will, but if it does, be ready). My big takeaway is this: Multifamily investors simply need to avoid the trap of assuming that today's less-than-ideal conditions are permanent, because they aren't. This doesn't mean act foolishly, but instead to make strategic, data-driven decisions. I will close with something Thorne wrote that I keep coming back to: downturns are features, not bugs, of healthy markets. I believe better days are coming, so stay patient if you can. Weekly ListenThis week's listen is Episode 609 of The Meb Faber Show featuring Rick Rieder of BlackRock. I referenced Rieder's writing extensively in this issue, but hearing him talk through his framework in long form is a different experience. In this episode, he covers the current state of markets, what he expects the Fed to do versus what he thinks they should do, why he believes 2026 will reward investors over gamblers, and the difference between concentration in equities and diversification in fixed income. You can listen to the full episode here. Wrap UpThat's it for today. I hope you found this edition of The Multifamily Download insightful. That is it for this week. I know The Multifamily Download has been heavy on the cautionary side recently, and I wanted to give the other side of the argument a fair hearing. I hope this issue gave you something to think about, and if this landed for you, please forward it to someone who could use a dose of measured optimism this week. And as always, hit reply anytime. I read every one. See you next Saturday! Forwarded this email? Sign up here. Join me on LinkedIn | Twitter | Website |
The Multifamily Download · April 18, 2026
Glass Half Full: The $2 Trillion Bet Against Consensus
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