The Vertical: Jake’s Weekly Brief

From the front lines of housing, development, and capital: June 11 2025

Author

Jake Heller
June 11, 2025

MARKET SNAPSHOT 

  1. The $430 K / 43× wealth gap between owners and renters is now a structural demand problem.

  2. Insurance premiums +38 % since ’19 - already killing deals in Miami & NOLA; factor double digit hikes into 2026 pro formas.

  3. Vacancy at a 10 yr high while rents flat - Sun Belt absorption lags supply; underwrite 6‑8 % vacancy through 2026.

  4. Public builders’ land banking adds ~15 % to lot cost - a Wall St. optics game that private builders can’t match.

  5. Brightline West (Train from CA to LV) —> TOD pivot in Rancho Cucamonga shows how new rail can flip land values in car centric suburbs.

THE $430 K WEALTH DIVIDE

Median homeowner net worth: $430 K. Median renter: $10 K (Fed Survey). Since 2019 the gap has widened sharply as equity gains lock out would be buyers.

Why it matters: Future demand dries up if entry level product doesn’t exist. Target sub $300 K infill, small‑lot, ADUs, and middle housing before the chasm swallows your pipeline.

Where Prices Ran Hottest (2020 → 2025)

  • Hinesville +90 %, Knoxville +87 %, Savannah +85 %

  • Bay Area +24 %, Midland +25 %, Baton Rouge +26 %

High growth SE metros still have momentum; laggards signal caution on entitlement timelines.

INSURANCE: THE HIDDEN DEAL KILLER

Premiums +38 % nationwide since 2019 (vs. income +22 %).

  • Average hit: +$500/yr - Miami +$1 478/yr.

  • A 30 % spike wipes out 10–12 % of affordable listings in NOLA & OKC.

Operator move: Stress test every deal with a 15 % premium jump by 2026; if returns still pencil, proceed.

MULTIFAMILY: THE OVERSUPPLY TRAP

Yardi May 2025

  • National rent $1, 761 (+1 % YoY)

  • Occupancy 94.4 % - lowest since 2014

  • Sun Belt vacancies: Austin, Dallas, Phoenix <93 %

Action: Underwrite 6‑8 % vacancy and flatten rent curves in Sun Belt assets; shift capital to high barrier metros with <3 % new supply.

THE LAND BANKING SHELL GAME

Public builders option dirt at ~11 % carry, add ~15 % to finished lot cost, and get rewarded with higher PE multiples for “capital efficiency.” Works only for interchangeable suburban product multiple builders would backstop. Creative infill? Off the table.

Playbook for privates: If you can’t secure <8 % option terms, push sellers into JV or assume full carry and price risk honestly. Don’t compete on a rigged Wall St. metric.

CAPITAL PULSE - MORTGAGE APPS

Week ending 6 / 6 / 25 (MBA)

  • Apps +12.5 % WOW (week over week)  • Purchases +10 %  • Refis +16 %

  • 30‑yr conforming ~6.93 %

Rate chop during holiday week unlocked pent up shoppers. Treat as noise until we see a multi week trend.

EMERGING HUBS & LOCAL INTEL

Brightline West TOD

Brightline West is the nation’s first true high speed rail system - a 218-mile all electric line connecting Las Vegas to Rancho Cucamonga, with speeds up to 200 mph. Travel time: ~2 hours. Construction prep is underway throughout the I-15 corridor, including Victorville and Devore.

  • Rancho Cucamonga scrapped parking minimums near stations; front of lot parking now banned.

  • 3, 000 unit mixed‑use on former golf course underway.

Watch‑list: Land within ½‑mile of stations; entitlement clock just accelerated.

New Home Outliers (John Burns Research)

Only 4 metros rated “strong” this spring: Indianapolis, Chicago, San Diego, Orange County. All undersupplied vs. pre pandemic norms. Builders there average 4-5 sales/community/month while Florida & Texas slog at 1-2.

MARKET SIGNALS (Rapid Fire)

  • Canadian buyer share in Naples ‑13.5 pp YOY —> luxury FL demand softening.

  • Metros with luxury homes <$1 M shrank from 30 —> 7 since 2020 —> high end inflation still raging.

  • Draft OZ rewrite sunsets current zones end 2026 and forces 33 % rural designations —> expect capital flight from urban infill deals.

WEWORK’S QUIET COMEBACK (CRE ANGLE)

  • Post Chapter 11, 170 locations, positive EBITDA 6 months straight.

  • Pivot to enterprise & management agreements dovetails with landlords needing plug and play flex.

Why you care: Flexible footprint demand is migrating up market; mixed‑use and TOD developers can de risk office components with managed flex models.

YOUR PLAYBOOK

  1. Model affordability shocks: insurance + entry level supply gaps.

  2. Adjust underwriting: 6‑8 % vacancy, flat rents in over built metros.

  3. Exploit the chasm: entitle <$300 K product where wealth gap = future demand.

  4. Stay skeptical of “capital efficient” land deals that ignore real cost of carry.

  5. Follow infrastructure: TOD nodes (Brightline) and flex office demand (WeWork 2.0).

Need entitlements or permits in Southern California?

JDJ Consulting Group: We get housing approved. Faster.

  • Flat fee feasibility memos: $1 K (Reply to get a sample)

  • Permit expediting: submittal —> RTI

  • Zoning & entitlement strategy: zero fluff

From duplexes to 500 + units, we move housing forward.
jdj‑consulting.com

See you next week. - Jake