The Vertical: Jake’s Weekly Brief • July 2 2025

EXECUTIVE SUMMARY

• California cuts red tape: CEQA exemptions now cover 90 % of urban infill apartments.

• Affordability breaks: New home size back to 2009 and median buyers need a $17 k raise just to qualify.

• Stress surfaces: CMBS delinq 7.1 %, condo prices ‑2.2 %, DFW oversupplied.

• Capital still strikes: Home Depot buys GMS, Blackstone loads debt, Meta funds AI data centers.

• Workflow AI goes live: ARIA, Extruct, Dialora save hours and widen deal flow.

CEQA FAST TRACK: CALIFORNIA’S INFILL GREEN LIGHT

Law signed 6/30: Urban infill apartments exempt from CEQA if height ≤ 85 ft and consistent with zoning.

• Time savings: 6–12 months of EIR risk erased.

• Cost savings: Soft cost shave worth 100–200 bps on IRR.

• Caveats: Prevailing wage for 100 % affordable or > 85 ft; tribal/hazardous sites excluded.

MARKET SNAPSHOT – JUNE RESALES (NAR)

HARVARD 2025 HOUSING REPORT – WHAT MATTERS

Strategic takeaways:

• Pricing power is fragile: A 20 % inventory bump hasn’t dented record prices; affordability “elasticity” is nearly gone.

• Insurance is the new second mortgage: Rapid premium growth makes monthly PITI swing wildly-underwrite it like a rate shock.

• Rent relief is temporary: 2024’s supply surge masks future tightening as starts collapse.

• Small is the new starter: Plan for sub‑2 k sf detached and townhome product, pair with attainable price points.

• Demographics = retrofit wave: Expect doubling of 80 + households by 2045—accessibility upgrades are a growth lane.

Operator move: Map portfolio exposure to these pressure points, re‑rack pro formas, assume slower exits, and hunt value add where rents can still ladder up.

BUYERS NEED A RAISE

Median families now $17.7 k short of a typical home even with 20 % down.

• Only 11 large metros remain affordable (was 39 in 2020).

• Four CA metros demand six‑figure income jumps.

• SFR rents +41 % in five years → investors stay bullish on build‑for‑rent.

CONDO PAINS ACCELERATE

• Prices ‑2.2 % YOY, sales ‑12 %, inventory decade‑high.

• Florida leads declines (Deltona ‑32 %, Tampa ‑19 %) on HOA + insurance shock.

• 80 % more sellers than buyers → expect concessions & under‑ask trades.

DFW OVERSUPPLY – WINDOW OPENS

Rate shock left excess spec; absorption rebounds if builders pause.

• Land/lot distress quietly trading.

• BFR demand still solid.

• Entitle now for 2026; recap stuck deals.

DISTRESS DASH: CMBS WATCH (Trepp)

• Overall delinquency: 7.13 % (+5 bps MoM)

• Office: 11.08 % (+49 bps, record)

• Multifamily: 5.91 % (‑20 bps)
  Serious delinquencies (60 + days/REO) up 26 bps, the 2026 wall is inching closer.

INSURANCE ON TRIAL

Westwood now covers 20/25 top builders after absorbing Hippo’s channel. In CAT counties premiums sit 80 % above baseline.
Rule: No quote = no contract. Make coverage part of day one pricing or risk a busted closing.

CAPITAL FLOWS

• Blackstone: $2 B performing loan grab at 7 % discount.

• Meta: $29 B raise (3 B equity / 26 B debt) for AI data centers; 4 M sf Louisiana campus leads pipeline.

Signal: Private credit & hyperscalers are the 2025 land buyers.

PRO SUPPLY M&A: HOME DEPOT GRABS GMS

Home Depot’s SRS unit just outbid QXO for Gypsum Management & Supply (GMS) at $110/share - a $5.5 B EV deal.

• Footprint: Adds 320 wallboard/ceilings yards + 100 tool rental centers to SRS’s roofing empire.

• Scale: Combined SRS + GMS = 1,200 branches / 8,000 trucks; tens of thousands of job site drops per day.

• Strategy: Home Depot pushes deeper into “complex pro” trades it couldn’t reach 24 months ago.

• Timing tell: Both bids landed during an industry soft patch → insiders calling bottom within 12 mo.

Operator read: Expect sharper pricing power on interiors (drywall, steel stud, acoustical) as HD leverages SRS logistics. Negotiate supply contracts early.

PRICE PULSE (Cotality)

National index +1.8 % YoY—slowest since 2012. Midwest/Northeast still rising; FL/TX/HI/DC turning negative.

SENTIMENT CHECK – RCLCO

RMI back to 37 (stress). 63 % of execs expect recession inside a year; tariffs & labor cited. Keep 5‑10 % cost buffer and dry powder for 2026.

TROPHY MARKET CHECK – WHY THE TOP END STILL BUYS

Big picture: Trophy buyers are interest rate agnostic. Their bids keep land values sticky in elite ZIPs, limiting distress spill over into mainstream segments. Use these comps to justify high end exit pricing but don’t expect trickle down into mid‑tier inventory.

AI TOOLBOX – NEW DAILY DRIVERs

JDJ CONSULTING CORNER (SPONSORED)

Need entitlement or permitting help in SoCal? JDJ Consulting moves projects from idea to permit every day.
→ Let’s talk: jdj‑consulting.com

Questions, ideas, or a land chat? Hit reply—always up to dive in.

— Jake