A (0:01)

Walker and Dunlop brings you insights for life, Unique perspectives from impactful leaders. This is the Walker webcast with Willie Walker. I love going and speaking at universities across the country, and it's a real honor for me when I go to universities that I could have never gotten into. And in some instances that's a debatable point, but at mit, that's a very clear point that I could have never gotten into mit. So it's a real honor for me to be here today and talking to all of you. The other thing that I would say, my friend Sharmil Modi just walked in and Sharmila went to Harvard College up the road, but he was his class day speaker at Harvard. And if any of you get a moment, you ought to go take a look at Charmeel's class day speech because it's a real. It's a great one. With all that said, it's really fun to be at MIT today. And having gone to business school just up the river, it's always fun to come back to Cambridge and see the Charles river with all the activity going on and the crew shells. And I ran the marathon a number of times when I was here, and that was just last week. And I had three of my business school classmates who ran with me way back in the dark ages who all went and actually ran last Monday, which was really great for the three of them. So let me dive into the presentation. I want to get to Signal versus Noise. As Denise said, I I typically like questions during presentations, but I guess from an AV standpoint, it's better for us to wait until the end when we have the mic that's going to go around. So just if you got something that comes up in the middle of it, just hold the question and we can back up to the slide if you need to. But it's just easier from an AV production standpoint for us to do all the questions at the end when we've got the mic going around the room. So, title Signal versus Noise. What are we it seems like there's a lot of noise in the markets today, not just in the commercial real estate markets, but just sort of broadly. And so the idea was to just kind of dive into a little bit of the data that might be able to pull out signal versus Noise and what we're seeing in the markets. So let me dive in here. So what was expected in Trump 2, what was expected in Trump 2 is lower energy prices, immigration reform, lower taxes, increased M and A and deregulation. Those are the things that Sort of everyone said, this is what the second Trump administration is going to bring to the world that we live in. And on pretty much all of those, the Trump administration has been very effective at actually putting in policies that have sort of delivered on all of that. You can see here M and A back and being bolder than almost ever hasn't quite hit the peak of 2021 that you can see in the middle there. But number two, over the past decade as it relates to actual economic. The other thing on that black line is that's the number of transactions. So as you can see, the transactions are actually getting bigger. Right. As that goes down and the aggregate amount goes up, it's just bigger companies, more MA activity, which was something that we'd expected to see. And 2026, from both an M and A standpoint, as well as from an IPO standpoint, is looking like it's going to be a wildly active year in the capital markets. One of the big questions that I have is as companies like SpaceX and some of the AI companies go public, sort of, where does that capital come from? If SpaceX goes public for a trillion 5 valuation or a $2 trillion valuation, that's capital that has to come from somewhere. Are people selling other holdings and migrating into it? Are they getting out of a private credit position to go buy into those IPOs? Where's that capital come from? And what does that mean for the broader markets as you get trillions of dollars of IPOs coming out in 2026? Tax cuts. The Big Beautiful bill gave tax cuts across the board to every level. Every quintile of taxpayers has more in their pockets. I think one of the big things that people were projecting for right now, if you look, if you rewind the clock. When the Big beautiful bill got passed last summer, many people were saying, there's going to be a tax refund that goes to a great number of Americans and they're going to get an average check of $2,200 in May of 2026. And that's going to stimulate a lot of economic activity. And then the Iran conflict happened and sort of everything's kind of gone to the side. But in a normal course of business, you would have been getting these refund checks off of the Big beautiful bill that would have put $2,200 on average into people's pockets, which is sort of like the stimulus bill that went through during the pandemic, which would have driven a lot of retail spending. We'll see whether all that plays out. Given the backdrop of the macro situation today, border encounters, you can see here, the Trump administration clearly has been extremely, if you will, effective in implementing the border security that they had campaigned on and said that they were going to to. I will show later on something that shows the implications of this as it relates to the demand side of the equation on rental housing, not an insignificant issue. And then crude prices, one of the interesting things on this is you can see back here, when Trump came into office, crude prices were at 80 bucks a barrel. They got down over here on the far right in January, down into 56, $57 a barrel. The back of the envelope number on what that means to inflation is that for every $10 change in the price of a barrel of oil, you pick up about 20 basis points in the CPI. So as you went from 80 bucks a barrel down to 60 bucks a barrel, you're picking up $20, or you're picking up almost 40 to 50 basis points in the CPI, because oil flows through everything. And so in that, you could have seen from going up here down to there that the probably new Fed chair, Kevin Warsh, would come into his new role with a backdrop of inflation sort of being under control. And then all of a sudden, Iran hits and we see where oil prices have gone. And so now you go to the other end of that. So from 60 to 100, do the math. You're adding almost a percentage point to the CPI print, if oil prices stay up at that level. And on consumer sentiment, this is the one side to it all. You kind of look at where the stock market has gone. I got a chart in a second on that. But this is the one that I think probably confounds people in the Council of Economic Advisers as well as the President himself, which is that they look at the stock market doing great. They look at all the innovation that's happening in our country, they look at our country versus other countries and they say, man, we, we are doing a great job. And then they look at this chart and they say, oh, but the consumer isn't sort of behind us. The consumer isn't feeling good. The consumer isn't right now feeling any better off than they were when Trump came into office back here. You can see it's actually fallen kind of off a cliff. And so clearly forget about the politics of all that in the midterm elections. This is one of those data points that I'm sure as they look at all the other charts of what they set out to do and have delivered on, they look at this and they Say, well, what are we missing here? As I said, where are we on the equity markets? This slide's a pretty interesting one. If you look at inauguration day where you had the 10 year is the black line and the blue line is the s and P500 and those two were inverted. And in the first year of the administration they drove the cost of debt down and they drove the equity markets up. And most people would look at that and say, hey, we're doing a great job. Then all of a sudden obviously they converge together at the beginning of the Iran conflict and then you can see the recovery that's happened. The question I would have right now is, if you will, how real is that recovery? Do these two charts continue to move away from each other and S and P continues to go up and the cost of debt continues to go down? Or do they turn around and get back to the two convergence points you see on this in July of last year and then in March of this year. K shaped economy. You hear a lot about this. This slide back to January of 23 really shows you what has happened as it relates to consumer spending on the upper portion of the economy and the lower portion of the economy. So since 23 in the Great tightening where the cost of debt went up, credit card payments go up, the cost of flying on an goes up. Everything else you can see here that the top third of the economy earning over $250,000 annually, that's actually a smaller than a third are the ones driving the spending. And then the rest, which is earning less than 75k annually, has sort of fallen off precipitously. A lot of people have talked about the sort of the fatigue or that the the US consumer is going to kind of give up. So far that hasn't played out. You look at consumer credit card default rates. While they have gone up significantly since the post pandemic era where they got to historic lows, they're no different than they have been on a historic average as it relates to both DQS delinquencies as well as default rates. And so the consumers actually held in better than many people had thought. But the K economy here really does show you that the majority of consumer spending is happening in the top part of the economy, not in the lower parts of it. How has the K economy played into multifamily? This is kind of an interesting slide for two reasons. One, you can clearly see here on the 76 basis point difference between class A and class C multifamily that there is a huge difference of the newer product, more amenitized, has a big pricing advantage. But then look at vintage for a moment because I think vintage is really interesting. You sort of ask yourself how is it that assets that are newer or from 2020 until today are trading at a higher cap rate or as you all know, a lower value than a 2010 or 2000s vintage? And the issue on that one is the fact that Core Capital has basically pulled out of the commercial real estate market over the past couple years. And it's been that value add capital that has actually been active in the market for the past couple years. Hence those investors of Value Add Capital are driving down cap rates. And the pullback in Core Capital is what has made Class A newly delivered actually trade at a higher cap rate or a lower value. But as you can see here, I spoke to Avalon Bay's development group last week and Avalon Bay is going right at that higher end product. And what they're building and what they own is directly targeted at the upper part of the K economy. And as a result of that, they're seeing rent growth and they're in the right markets with the right clients. This is an interesting, this is on multifamily investment sales volumes. So a couple things jump out to me on this slide. First of all, look how consistent the market was from 2015 to 2020. Like you sit there and you're like, oh, there'll be one year that's good and one year that's bad and whatever. I mean, it's literally like right on top of each other for an entire five year period up to the pandemic. And then obviously we have a big dip down and then we have this big spike back up. The thing to keep in mind here is we're talking about kind of a recovery of the markets right now. And you'll hear Myself and other CEOs of services firms talk about the markets are recovering, the markets pretty much recovered. If you look at the average volume for the last year, it's back to pre pandemic levels. The thing about it is that a lot of us look at this and say, investors in Walker and Dunlop look back and they say, well, why aren't you back at these volumes? Who knows whether we ever get back to those types of volumes. But from a normalized market standpoint, you can see the hiking period, the trough, and now we're in that recovery period. But as it relates to overall volumes, we're pretty much as far as multifamily investment sales, we're sort of back to pre Pandemic levels. This is a interesting slide which doesn't take all of you with your MIT soon to be degrees to understand this. Hindsight's obviously always 2020 vision, but go back and look at the spread. Okay, so this is cap rates versus the 10 year light blue is the cap rate. The dark line is the ten year treasury. Okay? And then the bottom one is W and D tracked institutional sales. So this is multifamily institutional sales and the volume of multifamily institutional sales. Okay. Obviously you've got the pandemic that comes in right here in this moment. And so you have no activity during the pandemic. Everyone's gone home, nothing's happening. But look at the spread between cap rates and interest rates. It does not take an MIT degree to realize that this is a really good time to be buying commercial real estate and buying multifamily. The spread between what you're paying in interest rates and where you are from a cap rate standpoint. And then of course, everyone sees this and they go, great, now it's time to buy and look at what happens to volume. Everyone gets the memo here and they get to a point here. The problem with that is you really didn't want to be a buyer right here. And by saying what I just said, I'm insulting every single Walker Dunlop client. So I know this is going out on our webcast and to everyone who's going to be watching in on this, I'm not trying to be, but hindsight's 2020 vision and almost not all the deals that happened here are quote unquote in trouble. But this is sort of a vintage of deals here where cap rates and interest rates have compressed, where that's not a great vintage. If you bought there, you're probably not getting into your promote. And I just put this out here because as you go into your careers and you see a chart like this, you just sort of say, you know, let's make sure we're looking at the data when we can see a spread like that and say, let's take advantage of it. And then you see this collapsing of the two and you sort of say, maybe now's not the time for me to be buying. What's amazing to me is the amount of institutional capital that sees all of this. And they say we need in on the party, like, gotta go, let's go buy. And they made a buy here or here that they now look back on and say, maybe we shouldn't have jumped into the party at that point. So this Slide is on debt volumes. The thing I love to look at is that when we pull this from the Mortgage Bankers association, so this isn't our data, but I will also tell you, I've been in this industry for almost a quarter century and I have yet to be presented with by either my team or the Mortgage Bankers Association. A slide that goes down here. It's always up and to the right. Somehow or another, the future always looks nice. And it obviously doesn't always go that way because back in right here where they were projecting it to continue to go to the right, we fell off quite dramatically. The one thing to keep in mind on this chart is that this is all based off of maturity volume, maturity schedules. So it sits there and says, okay, you did a huge amount of debt in 2020 and 2021, right? A billion five between those two years. A trillion five? Excuse me, not a billion five, a trillion five. And you sit there and you say, okay, most of it was 10 year paper. Project out 10 years and you go 2029 and 2030, you got to redo all that paper. A lot will be redone in between. But you know, from a maturity standpoint, these two years are going to be significant years given the amount of volume that went on in these two years. The thing to keep in mind that is very different is the following. In 2020, just on our agency volume at Walker and Dunlop, we did $20 billion of lending with Fannie Mae and Freddie Mac. And in 2020 at W& D, we did not do a single five year loan, not one zero out of $20 billion. In 2020, we did not do a single five year loan. It was all 10 year paper, some seven year paper and some longer than that. But the great majority of it was tenure. So all that $20 billion that we did in 2020 is set to refi in 2030. Now go to 2025. Last year, of our $16.8 billion of lending with the agencies, 63% was five year paper, 63% was five year paper. So what you're getting here is you've got all of these maturities in 2020 and 2021, as well as all the maturities in 2024 and 2025 that are all going to p because the market has shifted. Now why did the market shift? A lot of people look at where cap rates are right now and I'll show you a slide in a second as it relates to buyer sentiment, seller sentiment and builder sentiment. But they look at cap rates right now and they say I don't want to sell at this elevated cap rate. And so because they don't want to sell at this elevated cap rate, they say let's just kind of refi the asset. But I don't want to put 10 year financing on it because if I decide to sell it in year three, I, I've got a lot of yield maintenance that's left in the mortgage that I have on the property. So I want to go shorter. Let's go five. And so first of all, it's prepayment flexibility, why they've gone five. And the other thing is just the steepness of the yield curve. Five year borrowing has been significantly cheaper than 10 year borrowing. And a lot of the deals that need to get redone in 25 and 26 were bought back. Maybe they were bought in 21 or 22 with a 3 or 45 year instrument on them. And that cost of financing has made it that the performance of the asset is such that they need every dollar they can possibly get. And so as a result of that, they're going shorter at a cheaper cost of capital than going longer at a higher cost of capital. And so that has made a very interesting dynamic in the market. A, that everyone's borrowing short and B, you're going to get this big pile up in 2030 and potentially 2031, depending on what volumes are in 26 of 5 year and 10 year paper that all needs to get redone at the same time. One of the things we're talking to a lot of our customers about is you may not want to have a refi coming up in this window and you might want to try and push out if you possibly can and not have it come up for refinancing at the exact same time. So here's the buy build sentiment slide for one second. Take a look here. Remember where we were in 21 and 22 when I was talking about that volume spike? Okay. This should remind you of one thing. Markets are made by buyers and sellers. But if nobody wants to sell, you really don't have a market. Okay, everyone back here was a seller. All the dark blue is the sales. Everyone was a seller. It's like, I love that cap rate. Let's go, let's sell it. Okay. And you could see the buyer sentiment is the light blue, which was, you know, a lot of people you say, are you a seller or a buyer? It was like, no, I'm more of a seller today than I am a buyer. But, but obviously there are plenty of buyers to buy and as you can see, the build sentiment moved from Q3 21 and pretty much went straight down until right here in what is that, Q3 of 24. So everyone was, I'm a buyer or a seller, but I'm not a builder. And now all of a sudden, you can see the build sentiment coming back out. Okay, the interesting thing, look at how much is in light blue. So there are all these buyers out there. They're like, I want to buy, I want to buy, I want to buy. But there are no sellers. At the end of Q4 of last year, only 4% of survey respondents were actually sellers. And I have Also, we've bought 18 companies at Walker and Dunlop. And I've always said that companies are sold, they're not bought. If we want to go buy a company and wildly overpay for it, we can go buy a company. But if you want to actually go make a good deal, you're going to find a willing seller who wants to sell their company to Walker and Dunlop and become part of Walker and Dunlop. That's how good M and A is done. And so similarly in the property markets, you can see here, right now, we are in a buyer's. It's not a buyer's market because there are too many buyers who want to buy. It's actually a seller's market. But sellers right now don't want to sell. One of the reasons why we are getting. Let me go back real quick here. One of the reasons you've got this amount of volume in the sales market is because of this slide. So this is capital flows, so capital called capital distributed and five year rolling net distributions cumulative. And as you can see on the five years net distributions cumulative, we are way, way negative. So what's ended up happening is that LPs who have invested in commercial real estate, private equity funds have sat there and they've said, look, you called all this capital back here, the light blue is all capital calls. And you haven't redistributed any of that capital back to me. So you want to go raise private equity fund six, private equity fund seven, you need to return capital to me before I'm going to give you another dollar for your next fund. And so that is what's driving you. Look at this buyer seller sentiment. Nobody really wants to sell yet. You go back here and you say, but the sales market is actually reasonably active. That's because investors want their money back. And it's that sort of forced transaction volume that's going on in the market today. That is really driving volume. It's not because they're saying I love that cap rate and want to sell into the market. It's it's because they need to return capital to their LPs and until they do that, they're not going to get capital for their next fund. You can see here this slide is pretty interesting as it relates to private credit versus commercial real estate. So you can see the light blue is non traded REITs. The dark blue is non traded business development corporations. Most of that is private credit funds. And you can see here that it was all commercial real estate in 2020. In 2021, BDCs or private credit started to come out, but it was still predominantly commercial real estate. And then boom, from 22 it was all commercial real estate. That falls off a cliff. And then bdcs or private credit start to grow. The real question now is what happens with the redemption queues in private credit and does that end up flowing back into commercial real estate private equity? That's right. Now I would say to you that commercial real estate, private equity will benefit from the rotation out of private credit funds. And this just shows you here the redemption cues that are there and what I was just talking about. You can see that the redemption cues on the non traded REITs have come down significantly and you can see the redemption cues on the non traded BDCs going up quite significantly. This slide, you've all seen it, heard it. An effective or a functioning market is when you've got average starts and your average completions relatively close to each other. That's one of the reasons, quite honestly, why you're back here with very consistent sales volume is because you've got supplies and deliveries, construction starts and deliveries all kind of paired up. But obviously the pandemic kind of turned everything on its head. You get back to that quarter where everyone's like, wow, I got to get into this market, I'm going to go make an investment. And boom, we get lots of shovels going in the ground and starts start to spike and you're still with a delivery number that's normalized. And then all of a sudden deliveries, all these construction starts turn into deliveries. And what everyone sees in this slide obviously is that because you had starts come down significantly, you're seeing deliveries come down with the starts. So that is going to create what should be an undersupplied market. But what we've seen is that you're looking at this slide and this is your multifamily demand slide. Okay? And what everyone was looking at was, okay, starts have gone down, deliveries will go down. And if you were looking at that back in here, you're like, demand, which is this coin bar. Demand's just going to keep on going up. So demand keeps going up, supply and starts go down. And it's a great market. We can start to push rents. Except, as you can see on this, for the last three quarters, demand has fallen off. And demand has fallen off significantly. And one of the big questions there is why has demand fallen off when the price of multifamily housing is so much cheaper than single family housing? So that's not the market losing in the competitive battle with single family. Let me just show you really quickly on single family versus multifamily, and I'll come back to that other slide. So this darker line is what the cost of home ownership is on principal and interest on a mortgage payment. The bar charts are the median price of a single family home in America. Okay? And the blue is the average cost of renting in America. So you go back to 2019, 2020, and you were much better off, much better off buying a single family house right here for an average price back then of $280,000. Much better off buying your $280,000 home, putting a mortgage on it. And your principal and interest were down here at less than $1,200 a month. And the average rent in the United States back then was 1,400 bucks a month. You were 200 bucks in the black on a monthly basis for having your single family home and paying your P and I on your mortgage than you were renting. And then all of a sudden, as you can see, because of the pandemic, the cost of single family homes started to skyrocket. And that's this bar chart going all the way up where you move from the average median price being at 270 all the way up to what was that, 430 over that period of time? Well, to buy that $430,000 home and pay principal and interest on your mortgage, as you can see on this line, it skyrocketed and you went upside down on your cost of home ownership versus the cost of renting. And look, the cost of renting went up significantly from 21 to 23, but then has basically plateaued since then. But the important thing about this is to think about it from a structural standpoint, that right now it is significantly cheaper to rent than it is to own a home. And until mortgage rates come down and this bar chart continues to fall down. And no one's wishing that we lose value in single family homes in America. But until the values continue to come down and the cost of borrowing continues to come down, it's still going to remain much, much cheaper to rent than to own a home. So if that's the case, multifamily is holding up really well against single family. People aren't like saying, oh, it's cheaper for me to own a single family home than to rent. So then what is it that's making that chart as it relates to demand come down? And the only thing that you can come back to really is immigration and the fact that the border has been closed, that there isn't a huge amount of illegals coming in, and that legal immigration numbers have not gone up. And so I think this slide is a very important one to keep in mind as it relates to how household formation, demand drivers for multifamily as well as single family. And until the government does something as it relates to increasing the amount of legal immigration in the United States, that demand side of the equation is going to be questionable. Let's dive into a couple specific markets and then I'm going to open it up for Q and A in a sec. So before we started, I was asked about sort of what markets are hot and what markets are not and the oversupplied markets. So if you look at this slide and you look at these MSAs of this is the top 10 markets right now, and you sort of said, I hear all of the Sun Belt job growth companies relocating from California to Texas, you would sit there and say, okay, that would mean that San Francisco isn't a place that I want to be. Happens to be at the very, very top of the list. San Jose is a place I don't want to be. Happens to be number two on the list. Look at the cities here that are doing really, really well right now. And oh, by the way, look at the trailing five year population growth. Negative 4.5, negative 1.2, negative 0.9. Who's the winner on this list? We've got a whopping 2.8% growth in Cincinnati, Ohio over the last five years. Not exactly boom from a population growth standpoint. Okay. But none of these markets had any real new supply into them over that five year period. So they don't really need the new population to come in to get the type of rent growth that they've been able to get. So these right now are the darling markets that while 2% rent growth doesn't sound that great in Comparison to this list, it looks really good. So now look at all these markets. These are all your oversupplied markets. These are all the markets that all those shovels back in that previous one of starts into deliveries. This is where they all went. And as you can see here, look at the population growth in all of these. So at this one, our winner here was 2.8%. Look at these population growth numbers, almost all of them in double digits. It's where the jobs are, it's where the people are moving, except for the fact that they've all been wildly oversupplied. And so you might sit there and say, well, I like the long term growth of Austin, Texas. No doubt. I think you've got to like the long term growth opportunities for Austin, Texas. Except for the fact that in real estate, when you have oversupply to the degree that Austin, Texas has had you, you're going to have negative 7.7% trailing 12 rent. It's not rent growth, it's negative rent over the last year. Denver, Colorado, number two, negative 7.4%. Two really, really hard markets to be an owner in today. Do they both have Austin more than Denver? Do they both have really, really good fundamentals to them? Without a doubt. Has Austin turned into a really affordable market almost overnight? 100% single family and multifamily Austin. If you were, if I was starting Walker and Dunlop today and I had to pick a city to move to, Austin has so many things going for it, including it's super affordable today. Super affordable. So if you say start today and go forward, Austin's a great market except for the fact that you're probably going to have to feed that asset if you went and bought one for a period of time. Because we're still trying to absorb all the oversupply that was in that market. So one of the big things that Peter Linneman, who comes on the webcast on a quarterly basis and I constantly debate is Peter is very much prone towards Cleveland, Ohio and Cincinnati, Ohio, sort of kind of boring midwestern markets. And to anyone who I just offended by calling Cincinnati and Cleveland a boring market, excuse me, but it's kind of steady, Eddy. You're never going to get this big surge in supply and as a result of it, if you buy well put low leverage on it, it's going to turn into a really good investment for you. These markets are the ones that there's a lot of what I call brass and glass there. People are like, man, I can go into Austin and I can buy it and I'm going to sell it at like a 3:2 cap rate at some point. And by the way, I got a lot of clients who were investors in Austin, either built or bought back in 2013 and sold in 2018 or 19 at a 3:2 cap rate and made just enormous returns on multiples on their money. So a lot of these markets you can make a lot of money. But right now as it relates to do you want to be an owner in them? I was just in Phoenix two weeks ago. Phoenix is still way oversupplied. The one other thing about Phoenix, the building of the new Taiwan Semiconductor plant there. Fascinating to see the amount of work and the kind of ecosystem that's going on in Phoenix right now around that investment. And it's obviously not just that they're going to build a chip manufacturer there, it's all the ancillary services that need to be built out there. I met with a gentleman who is working with Taiwan Semiconductor as it relates to all the other kind of services that they need, the plants and how the plants feed products into the actual chip manufacturer. But then the multifamily and the retail and the office and everything that needs to be around that huge investment, all of tens of billions of dollars. It's really quite something and will be a great growth driver for the Phoenix market over the next couple years. So in summary, before we go to Q and A, a couple things on noise. You hear a lot about $200 barrel. We're not going to $200 oil on a barrel. Trump won't let it happen, period. The President will stop the conflict before we even get close to that. So there's a lot of fear mongering about that that ain't going to happen. Runaway inflation. One of the big things to keep in mind is that one of the main reasons the inflation print has stayed as high as it is is because of owner's equivalent rent and because of multifamily rent growth that for whatever reason the CPI continues to get a false read off of. But owner equivalent rent is 25% of the CPI and nobody's ever paid owner equivalent rent ever. I own three homes and I don't pay rent to anyone. I pay a mortgage. But that owner equivalent rent of what would you rent your house to someone else for today? No one's ever paid it. It's a completely made up number. So if you call me today and say what would you rent your house in Denver, Colorado for? I'll come up with some number and I'm Going to kind of triangulate off of some number I heard down the street. They'll tell me last month you said it was X. This month is it up or is it down? And I'll give you my gut reaction of I should charge more, I should charge less. That's the way they go about determining owner's equivalent rent and it's 23% of the CPI makes no sense. So in the CPI number that has stayed elevated is an elevated owner equivalent rent number that shouldn't be there. I'd be interested to see whether Kevin Warsh, when he comes into the Fed thinks about doing something to adjust it. It's one of the reasons why so many economists don't focus on the CPI but focus on the pce because the PCE has a lower weighting on housing than the cpi. But the bottom line on all this stuff is I told you about oil and the impact of oil. Oil stays high for a very long period of time. It will have an impact on the cpi. But I don't think we're going to have runaway inflation as many people are fear mongering higher interest rates. I don't predict interest rates. Okay. But what I would say is the following. You have a new Fed chair who is coming in and there's no doubt that he has heard the President clearly that he wants to get the cost of borrowing down. The second thing on all that stuff is you are either going to have Kevin Warsh being successful at lowering rates or you'll have a sell off in the equity markets that should have people move to safety in Treasuries. The interesting thing since Iran is that you actually didn't see that happen. Typically when there's an international conflict like Iran, people flee into, they jump into safety and you would have seen yields on the ten year go down. That didn't happen this time, which is a little concerning. And at the same time, if you do get a significant sell off in the equity markets, there's no doubt that you're going to get the 10 year going down. Death of the blue states and blue cities. I just showed you numbers on why they're not dead and probably aren't going away. There's lots of talk about all this great migration to the lower tax, high growth states, but from a real estate standpoint, those states are still struggling. And then transaction volumes remain muted. I showed you there might be a narrative out there that says transaction volumes are muted, but at least in multifamily, on the sales side, it's sort of back to the normal on the signal CRE capital flows will drive transaction volumes up and cap rates down. Okay, I showed you that rotation of capital from LPs that is going to continue. That doesn't stop. The capital hasn't gone back to them. They'll continue to ask for their capital. And fund managers who want to raise their next fund are going to have to recycle that capital. That recycling of capital means that they're putting it into assets as they sell them and refinance them. More capital flows mean cap rates come down. You then go from a I don't want to sell market to I'm ready to sell market and transaction volumes come. That's the way it will happen. Multifamily, significantly more affordable than single family. That's there. That's structural right now. That doesn't change quickly. Prices of single family have to come down materially and the cost of borrowing has to come down materially for that to change. So for quite some time, multi continues to win over single. Sunbelt will continue to attract jobs and families. No doubt about that. You saw the job growth numbers that I put up there. They are the long term winners right now. Unless blue states can figure out how they can get their tax policies in place to to retain and attract new investment. Population growth problem without increased legal immigration. That is a really important one. And by the way, the administration can work on that. They can say we only brought in 700,000 legal immigrants last year. Let's bring that up to a million. Let's bring that up to a million too and start processing more legal immigrants to the United States. And then the final rates will come down due to cuts or the sell off in the equities. Pretty. You know, again, I don't try and predict where rates are going to go. I get asked about it all the time. I'm smart enough to leave that to economists and not myself. But you just think from a signal standpoint there'll be plenty of noise in there but from a long term outlook standpoint we should be in pretty good shape. Where rates should come down either from a sell off in equities or that Kevin Warsh is effective as the Fed chair and bringing down the short end of the curve and the long end should follow at some point. That is it for my prepared remarks. I am up for any and all questions, so let's dive in.