Key Insights

Consumer Sentiment Takes a Hit

The University of Michigan’s consumer sentiment index plummeted to 57, rattled by tariff uncertainties that have spiked long-term inflation expectations to a 32-year peak of 4.1%. This drop suggests consumers are growing wary, which could lead to reduced spending and softer demand across real estate markets in the coming months.

Hotter-than-Expected PCE Inflation Pressures Fed

February’s Core PCE inflation rose 2.8% year-over-year and 0.4% month-over-month, outpacing expectations and highlighting stubborn inflationary trends alongside a 0.4% uptick in consumer spending. These figures reduce the likelihood of near-term Fed rate cuts, keeping borrowing costs elevated and challenging real estate affordability.

Tariffs and Rate Cut Timing Cloud Outlook

The Trump administration’s debate over a 20% universal tariff versus selective levies adds uncertainty to Goldman Sachs’ forecast of Fed rate cuts in July, September, and November, as broad tariffs could fuel inflation and delay easing, while a lighter approach might allow earlier relief. This tariff-rate cut dynamic hinges on inflation trends, with the Fed’s timeline shifting based on whether tariff policies amplify price pressures or permit growth-focused monetary loosening.

This Week in Real Estate: Key Events & Data

Quick Markets

30Y Mortgage: 6.79% (-3 bps)
10Y Treasury Yield: 4.21% (-14 bps)
FTSE NAREIT Index: 773.79 (+0.043%)
30-day SOFR Average: 4.34%

Market Pulse

The combination of hotter-than-expected Core PCE inflation, plunging consumer sentiment, potential broad tariffs, and Goldman Sachs’ forecast of three Fed rate cuts suggests a volatile economic environment where persistent inflation and tariff-driven uncertainty could delay monetary easing, potentially tightening real estate financing conditions through sustained higher interest rates

February Core PCE inflation hotter than expected – Prices rose 2.8% YoY and 0.4% MoM, delaying Fed rate cut expectations as consumer spending grew 0.4% (CNBC)

US consumer sentiment plunges – University of Michigan index falls to 57 as tariff fears drive long-term inflation expectations to 32-year high of 4.1%, raising concerns over spending cuts (Bloomberg)

Trump administration weighs broad tariffs – Debating between universal 20% tariffs or reciprocal levies, with potential sector-specific duties on critical minerals under review (WSJ)

Goldman Sachs predicts three Fed rate cuts this year – July, September, and November due to the economic impact of tariffs (Bloomberg)

Residential

Class A multifamily sales increased 20% in 2024 – Driving overall market recovery while investors avoid Class B and C properties despite limited distressed opportunities (GlobeSt)

Office

Midtown Manhattan office leasing up 10% from pre-pandemic levels – Demand remains strong in law/finance sectors, with CBRE forecasting 11.4M sq. ft. leased in 2025 (GlobeSt)

Market Mix

Post-pandemic liquor store visit growth decelerated in 2024 - Foot traffic increased only 4.0% compared to 6.7%-9.1% in prior years (Placer.ai)

M&A

JBG Smith seeking to sell D.C. luxury apartment building for $180M – The Batley at 1270 4th St. NE is listed at $25M below 2021 purchase (TheRealDeal)

Philadelphia Housing Authority acquires multifamily portfolio for $75.9M – Plans to convert 60% of the 381-unit portfolio into affordable housing (TheRealDeal)

Institutional Fundraising

$1.5B Asset-Based Credit Fund – Fortress Investment Group is seeking to raise $1.5B for its second asset-based credit fund that will invest in lender finance and receivables portfolios (Bloomberg)

$300M Multifamily Fund – Developer The Bainbridge Companies is seeking to raise $250M-$300M for its first multifamily fund (GlobeSt)

Proptech & Innovation

Proptech investor confidence rises to 6.4/10 in 2024 – Startups more bullish at 7.9/10, with 49% expecting easier VC access and 64% forecasting revenue growth (GlobeSt)