Wall Street Bets $6B on Real Estate: Is This the Bottom?

Price cutsThe housing market never stops moving. And this week the headlines are packed with stories every real estate investor needs to know. I’m Dave Meyer and I’m joined today by our expert panel Kathy Ficke, Henry Washington and James Dard. And in this episode we’re covering major developments from hedge fund activity to the evolving difference in rental and housing affordability to the markets with the biggest price cuts. So whether you’re waiting on the sidelines or actively making offers, these are the stories shaping the market right now. Welcome to On the Market. Let’s dive in. Henry, James, Kathy, good to see you. Thank you all for being here. Good to see you. What’s up buddy? Henry, I’m going to pick on you first, tell us your story. Tell us all your story,The danger of golf, for example.Yeah, I did. I did have a dangerous golf outing today I have a very swollen hand in wrist. Yikes. From taking a dive out of a golf cart that was careening towards a cliff. ThisJust sounds like an action movie.I assure you it was as graceful as Jason Sathan diving out of a moving group.Yes, exactly. All right. Now you told us a story. Tell us your real estate story. What headline are you bringing to us today?Yeah, so I picked an article from the Wall Street Journal and this article is titled New Real Estate Fund Halls in Billions to Buy Distressed Properties.
So just when you thought hedge funds were out of the business, they are now back. Brookfield Asset Management has recently raised 5.9 billion in the first quarter of 2025, and they are going to use this to buy distressed real estate that brings their total to 16 billion, and this is the largest in their firm’s history. What they are looking to do is make strategic acquisitions. They’re focusing on acquiring assets like apartment buildings and warehouses that are priced at 20 to 40% below their peak values. And they are positioning to capitalize on falling prices due to uncertainty in the market, specifically in the commercial and multifamily real estate spaces. So in other words, they’re going to plan to buy up assets at a discount and they are hoping to capitalize on opportunities that tariffs bring into the picture. So they’re basically saying that due to the implications of higher construction costs due to tariffs, they’re banking that existing properties that aren’t being constructed from the ground up are going to go up in value. So they’re trying to gobble up some of those assets. Now, I like that theory in hopes that the values of the existing assets go up.I’m so glad you brought this article to us because so often people are reading the headlines and thinking that as an investor it applies to them and it does in the sense that you should do everything opposite because it doesn’t apply to you. It’s home buyers that generally those articles are talking about. Even when this article says real estate, they’re not talking single family homes here, they’re talking commercial real estate that is on sale. But investors need to look at headlines and read it from an investor perspective, which again, is usually the opposite. And when you see big hedge funds coming in at a time like this, it’s really a good sign. This is the time of opportunity.Yeah, I agree. I think a lot of times when you see these institutional funds, it can signal a bottom for the market. It’s not always that case, but if you think about what happened in 2011, 12, that’s when a lot of hedge funds institutional investors started buying residential real estate and that helped set the bottom for a market that had been falling for 3, 4, 5 years. And in commercial, there’s no saying it would be the same, but that market’s been falling for three years now. And so having this level of volume and money coming into it could be a good sign for saying the bottom and reversing trends. How much are they raising to Henry here? A 16 billion. It says6 billion pocket change for them. ButYeah, honestly, it’s not enough to set a bottom, but if this is one fund, if this is sort of evidence of other activity in the market that could help start things grow again.I was just talking to someone from San Francisco and I said, how bad are things there? And he said, well, you can get a condo in San Francisco for 2014 prices. Wow. Oh my gosh. So you have to look at that. Okay, so it’s still really expensive even in 2014, but it’s almost like reversing the clock 10 years. It’s just, again, it’s a buyer’s market that means it’s time to buy. Prices are down, inventory’s up. Prices aren’t down a lot, but in some places 2014 values, if you love San Francisco, this would be the time to jump in.It’s funny you say that because one of their acquisitions in this fund was or is a portfolio of troubled San Francisco apartment loans.Oh’s. So funny. Yeah, and then condos in Florida are on sale too, so it doesn’t sound like they’re interested in that, but our audience might be,Do they already acquire this or they just raised it? Sometimes I feel like these hedge funds are like, oh, wouldn’t this be a good thing if we can buy this stuff for pennies on a dollar, let’s just get it ready to go. I feel like this was already said 18 months ago when rates shot up and I didn’t see them going on a buying spree either. I mean, if you look at right now distressed real estate in commercial in the third quarter, 2024 was 102 billion, and that’s not a small amount. My always question is how are they forecasting this? Because I would think the tariffs would cause less problems than the interest rates that we saw the hike on. And so why tariffs versus the interest rates? Or is that just the breaking point between the cost of money and the cost to build?To me, it just sounds like they’re doing what we do, but on a grander scale, they’re making sure that they’re buying at a deep, so they’re not just going out and acquiring assets. I think a lot of the single family hedge fund buyers, back when that got real popular, they were paying pretty close to retail for these assets in hopes that they could rent them out and then appreciation go up. But in this fund specifically, it looks like they’re buying at a pretty deep discount and then they’re hoping that the assets that they buy go up in value because new construction will be not as popular because of the tariffs. So it sounds like they’re banking on buying at a discount and if it doesn’t pan out, they hope at least they bought at a discount.But I still don’t understand why they think this is the tipping point. You don’t think so? I believe there’s a blend, but I also believe that rates are going to come down as costs start to rise. That’s truly what I do believe. I think rates could come down, which would actually help. And one thing we’ve also seen is flat rent growth. And so if rates do come down and rents go up, the construction costs are going to be a blip in the bucket. And also a lot of this stuff has already been built. I know in Washington alone, our permits for multifamily, there’s none coming out right now, so no one’s starting ground. So the tariffs are irrelevant at this point.Well, isn’t that kind of the idea? No one’s breaking ground and costs are going to go up, so they are trying to get in on that. I guess if you think rates are going to come down that much, that could happen. But if costs are going up and inflation goes up, rates might not come down. Maybe that’s what they’re betting on.Yeah, I don’t see anyone saying that rates are going to come down, but I would say from a hedge fund perspective, billion dollar funds, they’re looking at buying quality assets that are cheaper than they were and that historically go up in value. And San Francisco is one of those places that historically goes up in value. So if you can ever find that window where there’s a discount, they know to jump in on that. The only thing that would stop that is if there was a massive earthquake, but you know what? We’ve had those and could be we overcome. Yeah, so it just seems like they know pricing what it is now compared to what it used to be, what kind of cashflow it would bring in today. And I don’t know, James, I think that they’ve been pretty active. Maybe not as visibly because I think a lot of the hedge funds may have been coming in as rescue money, private equity coming in to save some of these projects and taking a higher priority. I think they’ve been active with so many loans that have come due so many commercial loans.Yeah, this article does say that they’ve deployed about a quarter of the funds that they’ve raised so far, so not a ton, but they’re moving. Some of itWe will see. I don’t know why I felt like this was the talk 18 months ago and then maybe it’s just my disappointment. I thought I was going to see some better deals on multifamily and I just, you know what? I didn’t see. Yeah, I know there was some needles in the haystack, but that’s about it. Not muchDid you hear Brian Burke, Brian Burke commercial. His little rhyme is dive in 25, fix in 26, heaven in 27. I think that’s what he said last time I talked to him. So he thinks, yeah, it’s going to go down more this year and then the buying opportunity comes towards the end of this year into next year. Oh, and 28 is too late. That was the last thing he said. So I don’t know. He knows way more about commercial multifamily than I do, but that’s what he’s predicting at least. All right, let’s move on to our second story here today. Kathy, what do you got for us?Well, this is an article from Mortgage Technology and it’s entitled May, 2025 Mortgage Monitor, ice Mortgage Monitor, first Time Home Buyers Comprise Record Share of Agency Purchase Lending in Q1.Really?It’s crazy. And then it goes on to say, this is a quote from Andy Walden, head of mortgage and housing market research at ice. Ice is not maybe what you think it is. Different ice, bad timing for the choice of this name. But anyway, it’s Intercontinental Exchange Inc. And it’s the mortgage market. So this Andy Walden said, younger home buyers are picking up market share with lenders this spring with people aged 35 and under accounting for more than half of financed home purchases by first time buyers in Q1. So that’s so shocking. People under 35 are making up half.That’s crazy. Did it say what it was recently? I feel like the narrative is young folks, first time home buyers can’t buy homes right now.Well then it goes on to say first time home buyers are driving a record share. Now, this is not just people under 35, but just first time home buyers are making up 58%. This is pretty high historically, as far as I can remember. I don’t have the data of what it used to be. And then Gen Z accounts for one in four loans issued to first time home buyers and the oldest of them is 28. So man, look at them go,Wow. Interesting. I feel like millennials and Gen Z have gotten so used to low affordability that just the fact that things didn’t get worse last year is relatively good and maybe they’re starting to jump in right now.Well, and I think they’re probably not buying in that condo in San Francisco that may be discounted, but not enough. They’re probably buying in more affordable places to make the numbers work. And quite honestly, if we’re looking at 200, $300,000 homes, the mortgage payment isn’t that different at 7% and maybe not that different from rent. Although I think one of you has an article on the difference between renting and owning. I’m sure it’s still more expensive to own, but they’re jumping in and good for them.Yeah, absolutely. That is encouraging. I mean, I think we’re in a softer market right now, which means maybe they won’t realize the appreciation right away, but it does mean in a lot of markets at least there’s better deals to buy. And this is an opportunity for people who have been waiting to potentially try and negotiate and find something that they actually can afford while there’s property is sitting on the market longer, there’s more inventory. I think it’s encouraging.Absolutely.I mean, well, if you look at this disparity between first time home buyers, average down payments and repeat buyers, the average down payments, that’s crazy. First time home buyers average down payments 50 grand repeat buyers, 134,000.Wow. But the question is how much did that repeat buyer make in equity and does it matter? Because typically they’re rolling it over and they’re doing pretty well if they own in the last couple of years.That’s a really good point. Yeah.I will say that we are seeing a lot of movement. And what I understand when I’m talking to flippers and developers across the nation, especially flippers, that there’s a lot of traction in those USDA, first time home buyer loan markets because they’re putting less down. And that’s why there’s a lot of people buying right now because they can still buy in affordable areas and the cost of rent versus purchasing is not that different. And then there’s good products for these first time home buyers, and that’s why there’s some movement in that market.Alright, well, I love the optimistic story. Thank you so much for bringing it to us, Kathy. We have two more stories, including we gave you a little preview of talking about the cost between home ownership and renting, and another one about 10 markets where we’re seeing big discounts, but these markets have really strong fundamentals. We’ll talk about both those stories when we come back. Welcome back to On the Market. I am here with Kathy Henry and James talking about our top stories for the week. We’ve talked about how younger home buyers are surprisingly jumping back in how hedge funds are back at it again. And I’m going to pick on another buzzword of the week or the month or the year, whatever it is, price cuts. You’ve probably heard a lot about this, that there are price cuts going on in a lot of markets and it really depends on the individual market. And I have the top 10 markets for price cuts right in front of me. I’m going to read them to you and I want to discuss what you think this means. But does anyone have a guess? Number one, Henry,It’s probably somewhere in FloridaWrong,James. I’m thinking because I’m living in it, I’m watching it Scottsdale, Phoenix. I’ve been seeingALot of priceCuts. Did you read the article?No. No. Literally I’ve been watching this, but the interesting thing to do, I started watching this and I’m like, wow, things are coming down quickly. That’s something you want to look at. The interesting part about that though is that the price cuts, the homes are already priced to 15% higher than they should have already. Right?Right. They’re just overpriced and they’re getting back to where they should be.I was watching this one neighborhood and Henry, don’t give me grief because the number I’m going to pull out right now, but the homes sell for a thousand bucks a foot in this neighborhood.That’s insane.A lot of these homes are listed at 1200 a foot and 1300 a foot, and they’re cutting off that. So it’s like also don’t be alarmed if there’s price cuts, if it’s still staying above what it was last year.Right. What James said is the important part before I share this list is that price cuts don’t always mean price decline. What it means, it’s a measurement of how well the property is priced, not a measurement of how aggregate property values are trending. Now sometimes, and honestly, often those two things go together, but that doesn’t necessarily mean they are. And I think we’ve talked about it on the show for years now, that there’s just some sellers who haven’t caught up with the times and are asking for the moon and they’re going to have price cuts. And there are some people who price it appropriately to move their properties and those probably won’t. So just keep that in mind. Alright, well now with no further ado, the top 10 markets for price cuts. 10 is Salt Lake City, which I was surprised by. That’s a very strong real estate investing market.
Nine is San Antonio tied for seventh and eighth is Orlando and Dallas. So Henry, you were definitely on the right track with the Florida and Texas here. Sixth and fifth were tied Denver and Nashville, fourth Raleigh, North Carolina, third, Jacksonville, second Tampa, so a lot of Florida and then one was Arizona. But I think the thing that really stood out to me here was like, these are good investing markets. You talk about these markets, it’s Raleigh, salt, lake City, Nashville, Dallas, these are all markets that people have been clamoring to get into for years. And so curious what you guys make of this. James, you invest in Phoenix. Does it scary out of the market? Does it make you more excited to invest there? How do you interpret it?I actually get more excited when people read one headline and then they run with it. You have to, as an investor, you have to dig into it. And so as I’m learning Phoenix and learning Scottsdale, I’m going, okay, well I’m seeing price cuts. Do I want to avoid this neighborhood or not? But then I go back and go, well, the data says that they’re already priced 20% higher price per square foot than they were the year before. And so it’s all a perception thing and you always got to take that next step into, okay, is that market reclining now? Do I think Phoenix is going to have issues? Yeah, there’s a lot of expensive stuff for sale and if people don’t price their homes correctly, they’re going to go down. But I’ve also seen some very healthy parts of Phoenix where I’m excited about buying because things are selling. They’re selling at full price, and you really just have to break down the segment. And as I’m learning to invest in Phoenix, that’s what I’m doing. What pockets are in the affordability spots and focus on that. Because if people are freaked out, but you can identify the good pockets, that’s where you want to invest.And if you’re watching your market like James does, and I watch my market, this is kind of good news for me because if I’m going to list a property like a flip for sale, I’m going to look at all those comps. Hopefully they are on the market overpriced. I’m going to make sure that I remodel my property to look better than theirs and then I’m going to list it below theirs because I want to capture all eyeballs that are going to go look at those properties. Now they’re going to come see mine and hopefully they’ll make a bid on mine before they make a bid on theirs. If I look better and I’m priced lower, it forces you to be more strategic.And I think from a buyer’s perspective too, sellers have a healthy fear of the market now. I think for years they were sort of acting with impunity. It’s like, why not just throw another 50 grand onto the asking price for a while? You were getting it. You were getting it. Yeah. But now seeing that poorly priced inventory is not selling, I think it’s a good thing for everyone. It sort of causes a reality check in a way where people are going to have to be more honest and thoughtful about what the true value of a property is. And to me, that just helps the whole housing market become healthier hopefully over the next couple of years. And I know people don’t see that, but we’ve talked about on the show, I do think we’re trending slowly in that direction.And you just need to know your strategy. If you are trying to flip properties, look at Denver inventory has increased year over year, 45%, so you better price it, right? But if you are a buy and hold investor, if you are a rental property investor, you’re probably not selling. You probably care more about if rents are going down or up. If there’s more demand for what you have and if everything’s going well, then this is your opportunity to increase your portfolio to buy in areas that maybe just didn’t make sense before, but they might now be, because why not make a ridiculous low ball offer in an area that has 45% increase in inventory? Who cares if it upsets them? Just do it. You never know.So I like the word justified offer rather than low ball.Okay, that’s better. Yeah. I got food thrown at me once for getting too lowAnd all. I think you’re right though, Kathy, I haven’t been investing in Denver and I haven’t in a few years, but I’ve been looking at deals the last couple of weeks and they look better and better. And you’re seeing people price more appropriately. You’re seeing things sit on the market longer and it’s becoming attractive again. I personally believe in the long term upside of Denver. I’ve lived there. I understand it. I know it. They’ve had an oversupply issue for sure. Absolutely. But those things get worked out. It’s the same thing I think in a lot of these other markets here. These are places where people want to live. And you have to think the reason why they’re oversupplied is because builders were feeling good. They were looking at the data and saying, Hey, a lot of people are moving here. And that can create short-term, weird dynamics between supply and demand, but they’re following long-term demand trends. And so I’m not saying to go out and buy everything, there’s going to be a lot of junk as there has been, but to me seem to present an opportunity if you’re disciplined about it, that these are really good markets where you’re going to have more motivated sellers for the first time in 10 years, I don’t know, a long time. And so that might be an opportunity for people to consider,Especially Denver, because it seemed like a pretty investor heavy city with a lot of people learning how to flip. And they might’ve put a lot of money in a property and found out they cannot sell it for what they thought they just might need to get out of that hard money loan. SoCallMe.Call me. Yeah. It’s also another good argument for why you need a good seasoned, experienced real estate agent, because an inexperienced agent might just run the comps and say, all right, let’s throw this thing on the market for this price point. But an experienced agent will understand the neighborhood, understand if homes in that neighborhood are overpriced and understand how to get you the most eyeballs and looks on your property.Yeah, that’s a great point.Or understand how to help you negotiate making a justified offer on an existing property.Alright, well we have one more story when we come back from this quick break. Stick with us. Welcome back to On the Market. I’m here with James, Kathy and Henry talking about the stories that stood out to us this week. So far. We’ve talked about hedge funds back to their old Wiley ways, how younger folks are getting into the housing market, how there are a lot of price cuts in great cities with good long-term fundamentals. James, what’s the story you’re bringing us?Alright, I’m bringing, it was an article published on bankrate.com and it’s renting is increasingly more affordable than buying in most large US metro cities. I actually thought this article was very, very informative as far as investment strategy goes. And what it talks about is it talks about in the West coast, the most expensive cities where it’s actually dramatically more expensive to own than rent. That trend is continuing. And so it is 190% more expensive to own than to rent in San Francisco. In San Jose, 180 5, Seattle one 19, Denver 96, salt Lake City is 90. And I think that’s also why we’re seeing some adjustments like what you’re talking about in Denver in 2024, it was 78%, and in 2025 it jumped up to 96 point a 5%. Wow. That’s a huge difference.So that means rents went down because prices in Denver have been sort of flat, so it didn’t get more expensive to own a home. So it must’ve gotten cheaper to rent.And I mean 2024, I think from what I understand from people in Denver, it kind of started really falling off the tail end of 24. So that might change a little bit, but this is really good information as you’re investing in a city for predictability and what do you want to do? What do you want to invest in? And is it the right strategy? What that tells me is people that want a house hack in San Francisco, Seattle not the greatest play. No, you can rent and go buy something or invest elsewhere and do better by your savings, but then other major metro cities that are more affordable. If you look at Detroit, it’s 2.3%. And in 2024 it was only 2%.AndSo there’s been a widening gap. And so the reason I felt this was interesting is a, I do think San Francisco, Seattle, San Jose, they’re proving they’re pretty strong markets with buyers because if they jumped up 10%, the buyer pool is still pretty healthy
Because they could weather that storm to buy. But it also tells me that I do believe part of this is because rents are flat. If you look at Seattle rents, were really flat 2023 into 2024, and we’re starting to see a jump in rents in this quarter right now. And so as we look at buying, if we see that big gap, even though rates are high right now, if you can go buy a good rental, you might see some serious rent growth or vice versa. You might see single family housing coming down, one of the two are going to break. And so there’s either going to be rent growth or housing price cut. It’s a big deal. And as we forecast into uncertain times and to look at each city, not every state, every city’s the same. And that’s where you really have to break it down. I know in Detroit, I’d be house hacking like crazy, right? That makes all the sense in the world.This is one of the major changes over the last few years that for a while it was sort of a no-brainer to house hack anywhere. But now, I don’t know, if you lived in Seattle and San Francisco, you might be better renting and investing in the Midwest, investing in the southeast. It’s like,I don’t know.I don’t think that’s that bad. It’s a decent idea.House hacking is how I got started in the San Francisco Bay Area.You house hack now,And I do still house hack in a very expensive market, so I kind of disagree. I feel like expensive markets are the market to house hack. But the thing is, you have to be able somehow to do it. And like I said, you’ve got to see, you can still get a loan as a first time home buyer with 3% down FHA and in the San Francisco Bay area, because it’s expensive. You can get a pretty high loan and you can, I think it was 1.3 million for a fourplex. So that’s how we did it. We bought a really big house and we kind of turned it into a fourplex and we were able to live in the nicest part of the house. We partitioned everything off so that there was no sharing of kitchens or bathrooms or anything, but we were kind of able to live in the nicest part of the house in a great school district for our kids for almost nothingBecauseWe rented out the other three units. So I’m a huge fan of house hacking in expensive markets.That totally makes sense to me, Kathy. That’s how I started too. But when you look at it, the amount of money you would have to put down, you can often earn a higher return if you were just to invest in the southwest or southeast or something and buy a cheaper property. You have to actually go do that. But I do think it’s a good option. And what I’m personally learning and doing is in these expensive markets rather than house, heck, James knows this because he helped me buy it. But a live and flip is I think a more desirable owner occupied strategy because you’re not dependent on that rent, but the upside in appreciation and value is there. And so it’s two sides of the same coin of owner occupied strategy. But I did the math and the math to me, in an expensive market says, do a live and flip over a house hack. Now you need to have more capital to do that because you can’t just put 3.5% down, but it is something to consider.That’s what I was going to say is it just depends on how much money you have and if you can qualify, if you could qualify for a million dollar mortgage with just 3% down with being able to count the rental income, good for you. But if you can’t, then by all means go buy an investment property in the Midwest instead.Alright. Well James, thank you so much for bringing this story as well. Any other stories you want to tell us?We got some more zombie houses coming up soon.Congrats. James’s show got renewed for a second season, a million dollar zombie flip,And there’s so many dirty houses we get to go look at. Just like my favorite thing in life is to want to throw away my shoes after I walk out of a house. I’m ready.All right, well, thank you all for bringing these stories. Really appreciate it. James, Henry, Kathy, we’ll see you very soon. And thank you all so much for listening to this episode of On The Market. Before we go, make sure to follow on the market wherever you get your podcast and subscribe to our YouTube channel where we share all sorts of exclusive content and analysis. We also have a new weekly newsletter just for on the market where our analyst, Austin Wolf, keeps you updated and informed on everything happening with specific market data. Again, I’m Dave Meyer. Thank you all so much for listening. We’ll see you next time.