Hello Brick Brief readers, 

Happy Monday. In recent news Fed Chair Powell signaled a likely September rate cut (!) , Blackstone bet on data center infrastructure, and Zillow forecast a 0.9% home value drop in 2025.

🪙 Powell Balances Jobs Risk and Tariff-Driven Inflation
Fed Chair Jerome Powell signaled a September rate cut is more likely than not, noting that a cooling labor market is easing wage pressures and keeping inflation expectations anchored. Lower policy rates would reinforce the recent 25 bp drop in mortgage yields, support cheaper financing, enable potential cap rate compression, and provide a modest lift to real estate valuations even as tariffs push goods prices higher.

⚡ Blackstone Bets on Data Center Infrastructure
Blackstone’s $1.6B purchase of Shermco reflects a strategic move into the electrical backbone of hyperscaler expansion. With a $400B data center buildout straining power grids and driving utility M&A, reliable testing and maintenance of electrical systems is a choke point that positions Shermco at the center of this wave.

🏡 Zillow Sees Housing Strain Amid Mortgage Relief
Zillow forecasts home values dipping 0.9% in 2025 and rent growth slowing to multi-year lows, a sign affordability and labor market weakness are weighing on demand. Mortgage rates have fallen to 6.55%, down 25 bps in the last month, temporarily boosting buyer purchasing power by $20K and creating a late-summer buying window.

30Y Mortgage: 6.55% (-7 bps) 

10Y Treasury Yield: 4.27% (-5 bps)

WSJ Prime Rate: 7.50%

FTSE NAREIT Index: 777.61 (+1.66%) 

30-day SOFR Average: 4.35%

Powell signals a likely September rate cut as the Fed scraps its inflation overshoot framework, balancing political pressure, cooling jobs, and lingering tariff-driven inflation

Powell opens door to Sept. rate cut - Fed faces White House pressure and internal discord while unveiling a new framework that refocuses on inflation and employment under an independent mandate (Bloomberg)

Bond market rallies on Powell signal – Fed Chair hints at September rate cut with futures pricing 80% odds despite lingering inflation risks (Bloomberg)

Fed abandons 2020 inflation overshoot strategy – Policymakers retire framework that let prices run above 2% target after it fueled the post-pandemic surge, reaffirming commitment to strict inflation control alongside jobs mandate (WSJ)

Stagnant job market emerges as economic risk – Hiring slows to 3.3% while layoffs stay near record lows, leaving Fed wary that even modest cuts in hiring or a slight uptick in layoffs could trigger broader job losses (WSJ)

Canada removes many retaliatory tariffs on U.S. goods – Carney softens stance to restart trade talks while keeping steel, aluminum and auto duties in place, drawing political criticism at home (Reuters)

Fed Chair Jerome Powell described an economy that faces both rising unemployment risks and new inflation pressures from tariffs, leaving policy makers with little room for error.

• The labor market has slowed sharply, with job growth averaging 35,000 per month in the past three months compared to 168,000 in 2024.
• Unemployment has edged up to 4.2% but remains low, creating a “fragile balance” where weaker demand and weaker supply have held the job market steady.
• Risks to employment are tilted to the downside, as layoffs could rise quickly if the slowdown deepens.
• GDP growth has cooled to 1.2% in the first half of 2025, down from 2.5% in 2024, mostly due to weaker consumer spending.
• Tariffs are beginning to push goods prices higher, with core PCE up 2.9% YoY. The effects will build over coming months as tariffs work through supply chains and distribution networks.
• Powell called tariffs a “one-time” price shock, but stressed that “one-time” does not mean “all at once.” Adjustment will take time, and shifting tariff rates could prolong the process. He warned that higher wages or rising inflation expectations could turn this into a lasting inflation problem.
• The labor market is cooling, so firms are hiring less and workers have less leverage to demand higher wages. With slower wage growth, businesses face less pressure to raise prices, which helps keep inflation expectations anchored.
• Longer-term consumer inflation expectations remain well anchored around 2%, but Powell cautioned that if they move higher, actual inflation would follow.

 Takeaway: Powell pointed to data showing inflation expectations remain grounded and wage pressures are easing, which keeps inflation risk contained even as tariffs push prices higher. He struck a more dovish tone than I expected, as I thought he would stay noncommittal heading into September. Lower policy rates would reinforce the recent 25 bp drop in mortgage yields this month, support cheaper financing, enable potential cap rate compression, and provide a modest lift to real estate valuations.

Yale study warns DOGE lease terminations are jolting CRE – Early cancellations risk $565M in DC office value losses and $12B CMBS exposure (Bisnow)

Zillow projects weaker home values and rent growth in 2025 while Redfin notes falling mortgage rates give buyers a temporary boost, with new construction concentrated in Southern and mid-size metros

Home values forecast to dip 0.9% in 2025 – Existing sales pegged at 4.09M, up just 0.6% YoY as affordability and weak labor market weigh on demand (Zillow)

Rent growth slows to multi-year lows – Single-family rents projected up 2.5% and multifamily just 1% in 2025, both revised downward from earlier forecasts (Zillow)

Homebuilder Hovnanian profit plunges 77% YoY to $16.6M – Heavy use of mortgage buydowns cut margins as the builder prioritizes sales pace over price, with Q4 revenue outlook set at $750M–$850M (WSJ)

Mortgage rates fall to 6.55% – Buyers gain $20K in purchasing power since May as Fed signals September cut, creating a short late-summer buying window (Redfin)

New home construction hotspots emerge – Realtor.com ranks Fayetteville, AR, Boise, ID, and Nashville, TN among top metros as Southern and mid-size markets dominate new build activity (GlobeSt)

Office-to-residential conversions could unlock $207.9B – Cushman & Wakefield finds reimagining underused downtown offices offers vast value creation as vacancies average 26.3% across major U.S. cities (GlobeSt)

Siemens Energy signs 242K SF office lease in Orlando, FL – Company will relocate workforce to Lake Nona Town Center by 2027 in city’s largest office lease since 2009 (REBusinessOnline)

Trans-Pacific container rates fall to pre-Red Sea crisis levels – Asia-U.S. freight prices slide on early peak imports, tariffs, and vessel overcapacity despite ongoing attacks (FreightWaves)

Gap Inc. Q2 visits up 3.6% – Old Navy leads with 4.8% growth as middle-income shoppers return, though tariffs and lagging Athleta/Banana Republic remain headwinds (Placer.ai)

Meta signs $10B+ cloud deal with Google – Six-year agreement will supply servers, storage and networking as Meta ramps AI data center buildout (Reuters)

377 U.S. hotels opened in H1 2025 - Adding 41,078 rooms, up 30% YoY, with growth led by upper-midscale but largest additions from luxury resorts like Gaylord Pacific and Universal Orlando (CoStar)

Blackstone acquires Texas-based electrical services firm Shermco for $1.6B – Energy Transition Partners buys company from Gryphon Investors as part of electrification push (Bloomberg)

Insight: It’s always worth paying attention to Blackstone’s moves and the thematic bets they are making. Shermco is set to benefit from the data center boom because its core business in testing and maintaining electrical systems for data centers, semiconductors, autos, and other industries directly addresses the infrastructure bottlenecks created by hyperscaler-driven expansion. This ties into Brick Brief’s theme that hyperscalers are fueling a $400B data center buildout in 2025, which is already straining power grids and driving utility M&A and consolidation. Blackstone is buying in because reliable grid and electrical infrastructure are a critical choke point as this buildout accelerates.

Friendly’s restaurant chain acquired by Legacy Brands International - Deal led by longtime franchisee Amol Kohli through Brix Holdings with plans to expand into the South and Southwest (CoStar)

CBRE Investment Management buys renewable energy financier ClearGen – The firm backs distributed solar and wind projects as Trump tightens tax credit rules (Bisnow)

Ventas buys Long Island, NY senior housing portfolio for $600M – REIT acquires six communities from Harrison Street and B2K Development, with B2K retaining management under incentive structure (Bloomberg)

Cal Poly Pomona buys Pomona, CA student housing for $126M – University acquires 177-unit, 636-bed The Current from Gilbane to support record enrollment  (CommercialObserver)

Independence Realty Trust buys Orlando, FL multifamily for $87M – REIT acquires 403-unit M2 at Millenia from BLD Group and JBS Capital, assuming $59.5M CMBS loan (MultiHousingNews)

Boston developer Chip Norton files for $70M bankruptcy – Franklin Realty’s owner faces creditor claims tied to Worcester’s Mercantile Center, Business Center and Wellsworth Hotel projects (TheRealDeal)

Restaurant chain On The Border rejects 70+ leases in bankruptcy – Tex-Mex operator moves toward sale with 60 locations still open as judge approves auction procedures (CoStar)