The Real Signal #151 - Calling The Bottom In Private Equity Liquidity and Ground Up Multi Production
Plus: Changes In Apartment Construction Volumes 2024-25 and Banks Sitting On Massive Unrealized Losses
Low Point In Private Equity Liquidity and Ground Up Multi Production
Scott Choppin Note:
Was in attendance at the ReConvene Conference in Santa Monica, CA this week, where the conversations in this excellent conference often veered into comments about the lack of liquidity in the capital markets. We’ve been feeling it too.
Here was the answer I most often gave:
So here’s where I think we are and where we are going:
We’ve been in a recession for ground up and value add multi since 2022. That’s three years into the largest downturn in ground up volumes since 2009.
PERE liquidity is also at it’s lowest, even lower than 2009 (graph below shows YTD 2025 below 2009, expect it will stay below). Seems likely that 2025 is the trough, as it seems less likely to fall further. Either way it’s ‘25 or ‘26 for the bottom. Will need to track this stat next year to see if it rises or falls above or below ‘25.
The timing seems right for a recovery. I don’t mean it’s guaranteed, just that we are “ripe” to a certain degree given the timing, i.e. 3 years + into a recession. Versus if we were just turning down, we would not be due, that timing would be too soon.
We are seeing “green shoots” i.e. early quiet signal of recovery in the ground up markets, evidenced by the following signal:
Return of entrepreneurial equity sources, those that can see through the present economic and political upset, beyond the present time, around the corner, to a recovery in ‘26 and beyond.
New entrepreneurial entrants into the construction lending spaces, with more aggressive lending terms, including the return of non-recourse debt offers. The new funds are bucking for and are taking market share from old guard lenders.
The graph below showing an upturn in new unit volumes, which will likely lead equity to bottom this year and upturn next year. Certain markets like the IE, show increased production, see graphic and post below for YOY multi production increase in the IE at 154%.
All this overlayed on an existing base of demand in certain markets. Example: Inland Empire had 3% YOY rent growth, from last year to this year.
All this could be disrupted temporarily by black swan events, economically or politically, but won’t derail the longer term cyclical upturn. In many markets, renters are in need of more new housing, and supply in certain markets like California is still deeply constrained. The longer run cycle for ground up multi is positive.
Changes In Apartment Construction Volumes 2024-25
”Here are the 20 metro areas with the greatest increase and decrease in apartment construction from 2024 to 2025.
A lot of red Southern cities in the green, but Chicago, Madison, MSP, Portland, San Jose, San Francisco all in the top 10 for greatest declines.”
Scott Choppin Note: In California, big blue cities in greatest decline (notably not shown is the City of Los Angeles, itself being in huge decline). Red cities in California with greatest growth, i.e. Riverside and Fresno (surprised by this one). Riverside is where we are most active in our UTH housing model). Just goes to show, developers and home builders always vote with their feet first and foremost.
Banks Sitting On Massive Unrealized Losses
“U.S. Banks are now sitting on $395 Billion in unrealized losses as of Q2 2025”
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