Opportunity Zones: A Quiet Revolution in Housing Policy

The Opportunity Zones program may be the most effective pro-housing supply policy in America today. Our estimates find the OZ program has caused the construction of 300,000 new housing units at a cost of just $26k/unit, dominating other housing tax incentives.

Monthly Consumer Price Inflation (CPI) Report – March 12, 2025

• Rose 0.2% on the month and 2.8% year-over-year, which were below expectations
• Core CPI (excludes food and energy) also rose 0.2% on the month and 3.1% annually, which were also below expectations
• What It Means: A lower-than-expected inflation print provides the Fed more room to cut rates in the months ahead if the employment market shows weakness

• CPI rent inflation (a notably lagged measure of rents) continues its rapid cooling and is now within just 36 basis points of pre-COVID norms.
• If you exclude rent/shelter inflation, headline CPI is already at 2.0% (the Fed’s target)

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The government’s CPI data is for the month of February. The Truflation index is a private data company that measures inflation based on real-time inputs. It has shown a sharp decline starting at the end of February and is now down to only 1.32%:

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Apartment retention in February hit the highest level in 2.5 years. It was also the highest February retention rate in 15 years, behind only February 2022.

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Another reason why tenants are continuing to rent instead of trying to buy a home:

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25% of jobs added in the US economy over the past two years were government jobs, up from 5% in 2021 and 7% in 2022. If hiring turns into net layoffs in 2025, it could severely impact the jobs market (leading to the Fed cutting interest rates faster than anticipated).

Of the nation’s 50 largest markets, only 11 had average effective asking rents below $1,400.

The Greensboro/Winston-Salem market in North Carolina, with rents at only $1,235, came in just behind San Antonio and Memphis for the lowest rents in the county.

Source: RealPage

The Monthly BLS Jobs Report – March 7, 2025

• The unemployment rate rose 0.1% to 4.1%.
• The U6 underemployment rate rose sharply, by 0.5%, to 8.0%, its highest level since October 2021. Compared to the regular unemployment rate (called ‘U3″), the U6 rate includes:
  • (1) people who want to work but haven’t looked for a job in the past 4 weeks
  • (2) people who are working part-time but would prefer full-time work.
• Those who are not in the labor force but want a job now rose a sharp 414,000 to 5.9 million, the highest number in over three years.
• 151,000 new jobs were created (below expectations of 170,000), and this report only showed a decline of 11,000 federal workers. This likely means the majority of federal worker firings will come in the months ahead.
• What It Means: A weaker employment market makes the Fed more likely to cut interest rates.

Challenger, Gray & Christmas Monthly Job Cuts Report – March 6, 2025:

• What It Is: Monthly report that tells us how many job cuts companies in the U.S. have planned.
• U.S. employers announced 172,017 layoffs for February, up 245% from January and the highest monthly count since July 2020 during the Covid panic. It marked the highest total for the month of February since 2009 during the global financial crisis.
• More than one-third of the total came from Elon Musk’s efforts to reduce the federal headcount. Challenger put the total of announced federal job cuts at 62,242.
• January’s planned reductions brought the total through the first two months of the year to 221,812, also the highest for the period since 2009 and up 33% from the same time in 2024.
• What It Means: Weak employment data will make the Fed more likely to cut interest rates in the coming months

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March ADP Jobs Report – Released March 5, 2025

• What It Is: Monthly report that gives an estimate of how many new jobs were added (or lost) in the private sector in the U.S. It’s put together by a company called ADP, which processes payroll for millions of workers.
• Private employers only added 77,000 jobs in February on expectations of 148,000
• From ADP’s Chief Economist: “Policy uncertainty and a slowdown in consumer spending might have led to layoffs or a slowdown in hiring last month. Our data, combined with other recent indicators, suggests a hiring hesitancy among employers as they assess the economic climate ahead.”
• What It Means: A weaker payroll report makes the Fed more likely to cut interest rates in the coming months

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• Truflation: What Is It? Truflation is a platform that tracks inflation (the rise in prices of goods and services) in real-time. Traditional inflation data, like the ones published by government agencies, is usually updated monthly and can be a bit slow. Truflation, on the other hand, uses real-time data from different sources, like prices from websites and stores, to calculate inflation more quickly.
• The Truflation rate dropped from 2.17% to 1.46% this week, the lowest inflation reading since January 11th, 2021, led by Transport & Utilities Services going from 2.60% for 1.79%, Core going from 2.11% to 1.4%, and Goods going from 1.07% to 0.76%.
• What It Means: The Truflation real-time data helps predict the delayed government inflation data that the Fed uses to make decisions on interest rates.

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• MacroEdge Job Cuts Tracker: What Is It? Developed to provide transparency into public job cut announcements and layoffs.
• Job cuts surged in the month of February
• What It Means: A weaker jobs market makes the Fed more likely to cut interest rates in the months ahead

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Among U.S. states, the largest surge in unemployment from December 2023 to December 2024 was in South Carolina with the rate jumping 170 basis points.

Source: RealPage

Multifamily REITs currently trade at discount of about 12% relative to their Net Asset Value. A discount to NAV means the stock prices is lower than the total value of the properties the company owns.

For example, if the total valuation of the company is $880 million, but the REIT (and the market) believes they can sell every property they own for $1 billion, then the stock trades at a 12% discount to its NAV.

The table below highlights specific multifamily REITs and their discount to NAV (the “P/NAV” column).

The graph below provides a historical view of all public REIT types going back to 1996, illustrating the fluctuations in price-to-NAV, where values above 100% represent a premium and values below 100% indicate a discount.

Sources: Multi-Housing News & Seeking Alpha

MSCI Real Capital Analytics reported multifamily property prices rose 0.7% month-over-month. The chart below (red line) shows that multifamily prices bottomed in February 2024, and over the last 5 months prices have been moving higher at a speed that nearly matches the pre-pandemic trend.

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The Monthly PCE Report – released 2/28/25

• What It Is: Personal Consumption Expenditures: Measures how prices are changing in the economy.
• The PCE price index (the Fed’s preferred inflation measure), increased by 0.3% month-over-month as expected, bringing the annual rate to 2.5%
• Core PCE, which excludes food and energy, also rose 0.3% month-over-month, bringing the annual rate to 2.6%
• PCE Supercore fell to just 0.22% month-over-month from 0.38% last month. Supercore focuses only on the least volatile items like rent, medical services and other goods that have more predictable prices changes.
• What It Means: The report was good (but not great), and provides some room for the Fed to continue cutting if the employment market shows weakness in the coming months

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The Atlanta Fed’s GDPNOW model, forecasting US economic growth, just downgraded its estimate of Q1 2025 GDP growth from positive 2.3% to negative 1.5%. A slowing economy makes investors more likely to be defensive (buy treasuries) and makes the Fed more likely to cut interest rates.

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Bloomberg Economics estimates that if DOGE attempts to go for savings of $600B per year, GDP could fall by 2% by the end of this year, the unemployment rate could rise by nearly a percentage point, and CPI year-over-year could fall by nearly 0.9 percentage points.

The Fed has a dual mandate, low inflation and low unemployment, so this scenario would dramatically speed up their rate cutting cycle over the next 18 months.

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The Case-Shiller Home Price Index reached a new all-time high this month, rising over 4% from the prior year. Affordability remains near record lows for home buyers:

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The median new single-family home prices spiked to $446,300 this month. The 2-month change is now up to +12.6%, which is the largest increase since November 2014. Rising home prices push affordability even further way for current renters.

The median age of first-time home buyers continues to rise, creating more demand for rental units:

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Annual U.S. household income needed to purchase typical U.S. home has risen by 79% over the last 5 years.

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• US consumer spending on healthcare and government expenditures accounted for over 50% of US GDP growth in Q3 2024.
• Consumer spending on healthcare services alone accounted for 25% of GDP growth in Q3 2024. Government spending accounted for 28%, a combined total of ~53%.
• The majority US economic growth now comes from healthcare and the government through taxes and debt.
• Since January 2023, the government has created more jobs than the tech, finance, construction, and manufacturing sectors COMBINED.
• If DOGE continues cutting these jobs, the Fed will be far more likely to accelerate rate cuts in the coming months.