16 cities in 16 weeks: A peek into 2025

Over the past 16 weeks, I padded my frequent flier accounts and met with key executives in homebuilding, rental investments, building products, Proptech, and other industries in 16 cities.

Here’s a snapshot of what I learned, which we are using to guide our forecasts and business strategy for next year.

Watch John's video recaps on LinkedIn

Key takeaways

• Rental market growth: While leasing activity has slowed recently, much-better-than-expected occupancy rates suggest stronger-than-expected rent growth in late 2025 and beyond. We now expect construction to recover sooner than anticipated and more robust rent growth in 2026.
• Building products company challenges: The prospect of rising tariffs and a prolonged slowdown in remodeling looms over building products companies, which are scenario planning for an uncertain 2025. We have already dialed back our remodeling forecast due to anticipated higher home equity loan borrowing rates and consumer uncertainty.
• Homebuilder shakeout: Top-performing homebuilders with solid balance sheets and streamlined land-banking relationships are making it difficult for other homebuilders to compete. Also, high levels of unsold standing inventory will likely require more price discounting than expected. We expect the bigger builders to grow and many others to shrink or sell their businesses, resulting in fewer homes built next year than originally anticipated.
• Heavy tech investments: Real estate companies embrace AI and data analytics to make faster, smarter decisions. The relatively young single-family rental companies are much further along in this endeavor. Older companies are hiring new Chief Technology Officers who are overwhelmed with the migration of legacy data systems. This is particularly challenging for builders who outsource much of the sales and construction process. We will continue hiring new talent to integrate AI into our business and assist our clients with their tech investments.
• Urban ghost towns: I stayed downtown in many of the cities, where it was apparent that office vacancy is high and downtown retail has struggled. The homeless problems are quite pronounced.
• Inflation is local: While much of our attention has been focused on the federal government’s impact on inflation, travel was a great reminder that inflation is local. Rent increases are driven by local demand and supply, which is most impacted by local government policies toward job creation and apartment development. Rent prices vary dramatically across the country. Food and gas costs vary significantly, too. Domestic migration patterns clearly show that people are moving from expensive areas to less expensive areas to offset local inflation / cost of living.?

Rental: staying strong despite challenges

It’s been a tough couple of years for rental investors and landlords, but they’re still optimistic as their lenders work with them to restructure their loans.

• Adjusting strategies: Dedicated rental companies have laid off workers to cut costs and/or pivoted from scattered single-family rentals (SFR) to build-to-rent (BTR). Many companies with multiple real estate investment strategies have abandoned new rental housing investments altogether while shifting to investing in stressed properties, including their own.
• Moving the bottom up 18 months: By far, the biggest rental topic was our demographers’ finding that excessive?immigration filled up 600K more rental households?than usual, which has pulled the bottom of the multifamily construction forward 18 months (600K divided by the usual 33K multifamily starts per month). Private equity funds with dollars to invest are now looking more seriously at restarting construction, which will increase multifamily starts more than anticipated.

Building products: a changing landscape

Building products manufacturers and distributors are struggling after 2 years of flat to falling revenue, although their balance sheets are strong, and margins are still good for many. Many building products execs revealed their surprise at the lack of remodeling activity, which continues today.

We continue to investigate?18 different categories of building materials, especially those most dependent on multifamily construction or most susceptible to tariffs. We plan to adjust our forecasts quickly next year as we gain more information, on tariffs in particular. In the meantime, companies have started stockpiling inventories from overseas in anticipation of tariffs.

Housing investments are ‘kind of boring’

Many investors find homebuilding stocks pricey compared to history. However, some investors feel history is no longer relevant, as these companies are capitalized and managed differently than in the past. Rising mortgage rates have had little impact this time around. Steady performance in the sector has some investors calling housing “kind of boring” compared to their volatile histories.

There is big separation in homebuilder income statement performance:

• One-third of public builders have operating margins under 10%.
• One-third have margins between 10% and 15%, with some sacrificing margins for a higher return on equity due to land-banking initiatives.
• The top margin performers, boasting margins over 15%, tend to excel in land development, and many have targeted active-adult buyers who are not “locked in” with a low mortgage rate and are paying cash for homes.

Tech is taking over

Data, AI, and algorithms are the buzzwords of the moment. Many builders have recently hired CTOs to advance their companies’ tech capabilities.?SFR companies are way ahead of the game, using powerful software to manage their properties.

AI is not only on our clients’ minds. These conversations have affirmed our decision to invest more of our profits than usual in R&D. Since we commit to sharing one-third of our pre-tax profits with team members each year, this is an investment that all of our team is making. Fortunately, we are doing this for the long-term good.

Final thoughts

Three times a year, I gather with a diverse group of 200+ CEOs across various industries. One of my conclusions this year is that businesses that sell to businesses are doing well—and so are businesses that sell to affluent consumers. Other businesses are not doing as well.

Whether adapting to tariffs, embracing new technologies, or finding ways to profit during slow times, housing and real estate companies are finding ways to stay competitive. The industry is evolving, and those who adapt quickly are already leading the way into a stronger future. It is an exciting time to be in the housing research and consulting industry.