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The Vertical: Jake’s Weekly Brief June 18th, 2025

The Vertical: Jake’s Weekly Brief June 18th, 2025

Jake Heller
June 18, 2025

Executive Summary: Why These Shifts Matter

Beyond surface level headlines about mortgage rates and seasonal activity, more permanent forces are at play:

Texas, Florida, and the Carolinas now dominate the US housing map
Builder confidence has fallen to a 2.5-year low
Residential permits are declining, particularly in single family
Labor shortages led to 19,000 fewer homes in 2024
U.S. homeowners still hold $34.5T in equity (near record highs)
New platforms like Flow and Juniper Square are reshaping operations and capital
Long run demographics (like falling fertility) are shifting household formation trends
Lennar’s earnings show a move toward tech and cycle efficiency amid softer margins
Office-to-housing conversions in cities like D.C. are rising, enabled by policy shifts
Macroeconomic conditions remain volatile (oil spikes, rates hold, war is abundant, and inflation lingers)

These aren’t just blips, they’re structural signals that shape where capital, construction, and policy are headed.

MARKET SNAPSHOT: HOME EQUITY & DEBT

Despite a $0.2T dip in Q1 2025 home values, U.S. homeowners still hold $34.5T in equity, with mortgage debt rising to $13.4T. That’s a 2.9% YoY increase in debt, but equity remains strong at 72% of total real estate value.

Even with a 10–20% price correction, equity-to-value ratios would remain above 65% - a sign of resilience, not distress.

MORTGAGE RATES EASE SLIGHTLY- WILL BUYERS RETURN?

Freddie Mac 30Y Fixed: 6.88%
Slightly cooler inflation and steady jobs data nudged rates lower. Inventory hit a post-pandemic high in May. Buyer sentiment improved: 1 in 4 respondents now say it’s a good time to buy (highest since March 2022).

Rates alone won’t unlock demand, but combined with seller concessions and higher inventory, expect an active summer.

BUILDER CONFIDENCE HITS LOWEST SINCE 2022

The NAHB Housing Market Index fell to 32 in June, missing expectations (36) and hitting the third lowest level since 2012.

Component Breakdown:

Present sales: 35
Next 6 months: 40
Buyer traffic: 21

Regional Readings:

Northeast: 44
Midwest: 39
South: 30
West: 22

The drop reflects soft demand, inventory pressure, and affordability concerns. Builders are increasing incentives and scaling back starts.

WHERE BUILDERS ARE BUILDING: ZONDA’S TOP 50 MARKETS

Zonda just released its Local Leaders list (the 50 largest new home markets in the U.S. by 2024 closings) and the geographic reshuffling is clear:

Texas still dominates. Dallas Fort Worth ranked #1 with nearly 44,000 closings, more than double Los Angeles. Houston, San Antonio, and Austin all ranked in the top 5. Texas accounts for 27% of all top 50 closings.
Florida surges. 12 Florida markets made the list, including Orlando, Tampa, Sarasota, and Miami. These aren’t just retirement hubs anymore, younger families are moving in.
The Carolinas rise. 8 Carolinas metros ranked in the top 50. Builders are targeting affordability, strong job growth, and migration away from pricier Florida markets.
California comeback. Tight resale inventory and incentives helped Riverside, Sacramento, and L.A. climb back up. Fresno made the top 50 for the first time.
Affordability = Velocity. Tucson, Vegas, and San Antonio all saw big volume gains, a sign that price-accessible markets are absorbing demand.

	Download the 2025 Local Leaders Report Here The report includes builder-level market share data, critical for understanding where public and private players are leaning in 2025. 402.92 KB • PDF File

PERMITS DECLINE IN APRIL

Single family permits (YTD): 320,259 (↓ 4.7% YoY)
Multifamily permits (YTD): 154,668 (↓ 1.5% YoY)

Regional single family trends:

Northeast: ↑ 5.7%
Midwest: ↓ 0.6%
West: ↓ 5.6%
South: ↓ 6.1%

Top MF permit growth metros:

Orlando: ↑ 126%
Houston: ↑ 55%
Vegas: ↑ 301%
NY Metro: ↓ 50%

Multifamily activity is concentrated. Single family remains soft across most major markets except pockets of resilience in the Northeast.

CONSTRUCTION LABOR SHORTAGE: 19,000 HOMES UNBUILT

A new NAHB/HBI report puts hard numbers on the skilled labor deficit:

19,000 homes not built in 2024
$6.3B in lost market value
Nearly 2 month average delays
Smaller builders most affected

Labor has become a fundamental underwriting input, not just a scheduling variable. Builders must now model for persistent workforce drag.

LENNAR Q2: MARGIN COMPRESSION, TECH PUSH

Q2 2025 Results:

20,000+ homes delivered
22,601 homes sold
ASP (average sale price): $389K (↓)
Gross margin: 18% (↓), lowest Q2 since 2018 and 2nd lowest in 10+ years
Net margin: 9.2%
Cycle time: 132 days (↓ 12% YoY)
Land controlled: 532,000 sites (↑)

Strategic updates:

Tech rollout (ERP, Palantir land system)
17K new homesites acquired
48% of buyers using government loans, up from 40%

Lennar is prioritizing volume, cycle time, and tech driven cost reductions over price growth. This may set the tone for other publics heading into Q3.

DEMOGRAPHICS: FERTILITY DROP CREATES FUTURE HEADWINDS

Global fertility has halved since 1960; 76% of countries will be below replacement by 2050.
39% cite financial strain; 19% cite housing insecurity as key barriers to family formation.
Average Gen Z debt: $94K (vs. $60K for millennials)

Lower household formation may reduce demand for single family homes in suburban markets, while boosting multifamily rentals in urban cores.

CAPITAL MARKETS: JUNIPER SQUARE RAISES $130M

The GP/LP platform used by 2,000+ firms just raised a new round at a $1.1B valuation, backed by Ribbit and Fifth Wall.

600,000+ LP accounts
$1T+ in equity tracked
Launching AI agent suite for fund ops and compliance

Automating compliance and reporting could cut fund op costs by 10–15% especially for mid sized GPs struggling with manual admin.

ALTERNATIVE HOUSING: FLOW EXPANDS, INVESTORS DOUBLE DOWN

Marc Andreessen’s a16z doubled its stake in Adam Neumann’s Flow. The platform owns 3,000+ units and is expanding in Miami, Atlanta, and Saudi Arabia.

Focus: brand first rentals, community, AI/data enabled ops
Condos now being sold under Flow House brand
Planning retail and flex office builds in Miami World center

Flow is betting on “community as product.” Their yield focused hybrid (condo + rental) strategy could challenge REITs on margin and retention.

HOUSEHOLD NET WORTH: STILL GROWING, BUT COOLING

Total net worth (Q1 2025): $169.3T (↓ 0.9% QOQ)
Real net worth (inflation-adjusted): ↑ 1% YoY
Per capita real net worth: ~$496K

We’re not in a boom, but households remain historically well capitalized, offering a demand floor in most price bands.

OFFICE TO HOUSING: D.C. GOES ALL IN

Washington, D.C. is converting vacant office buildings into housing at an unprecedented pace, 6,533 units in the pipeline, +12% YoY.

Highlight project: The Accolade - 243 luxury units 1 block from the White House - opens August 2025. Studio rents start at $3,221.

Challenges:

1980s/90s office buildings have tough floorplates
Expensive structural overhauls
Only 14% of D.C. office sf is suitable for conversion

Policy: 20 year tax abatements for resi conversions + 15-year “Office to Anything” incentives for commercial reuse.

Adaptive reuse is surging but requires subsidy + design innovation. Watch these test cases closely.

MACRO WATCH: FED HOLDS, OIL SPIKES

The Fed is holding rates steady in June, while markets eye a potential cut by October. Meanwhile, oil spiked after Israel struck Iranian sites.

May Jobs: +139K - soft but stable
Inflation: Holding near Fed’s 2% target
Trump: Called for a 100 bps rate cut
Energy risk: Could reignite input cost inflation

No rate relief yet. Monitor Q3–Q4 funding conditions. Energy and material volatility may ripple into hard costs.