'We're Pretty Optimistic': Walker & Dunlop Execs On Housing, Consumers, Deregulation

Liquidity and capital that were benched on the sidelines for the past few years are back — and they are gaining momentum.

On the April 2 episode of the Walker Webcast, Walker & Dunlop CEO Willy Walker was joined by three Walker & Dunlop executives — Aaron Appel, senior managing director, capital markets; Kris Mikkelsen, executive vice president and co-head of investment sales and real estate finance; and Ivy Zelman, executive vice president, research and securities at Zelman & Associates, a Walker & Dunlop company — to discuss one of the industry’s most pressing questions: Where is capital being deployed in today's commercial real estate market? 

Appel said that the capital markets are “very strong” right now, seeing spreads tighten from 25 to 75 basis points at the start of the year in both the public and private credit markets. Commercial banks have started to reenter the capital markets after a two-plus-year hiatus. Insurance companies also have new money to invest. signaling that there’s no shortage of capital to go around, Appel said.

“We're pretty optimistic for this year and moving forward that we're starting a new bull market,” he said. “There's been an unbelievable amount of capital that's been raised in private credit, not just in commercial real estate but in corporate and other types of credit as well.”

Mikkelsen agreed that there’s a massive amount of liquidity in the credit space, with bright spots in the market including housing and industrial. Capital needs in the data center market are also unprecedented, he said.

Though the multifamily side of the housing market continues to maintain its status as a favorable asset class among investors, Zelman said that single-family housing still faces several hurdles, including affordability, higher-for-longer interest rates and increased tariffs. 

“The spring selling season has generally been disappointing for the housing market,” Zelman said. “Overall, there's been a slight improvement with respect to the existing market as inventory is now finally increasing and people are getting tired of waiting, but we're seeing more volume at the expense of price.”

Walker said that the University of Michigan’s Consumer Sentiment Index has “fallen like a stone” over the past several weeks, down to a level that the market hasn’t witnessed in a “very, very long time” — suggesting that there could be some storm clouds on the horizon as it relates to single-family housing. 

Consumer confidence is the No. 1 variable that will drive housing, Zelman said. Though interest rates will trump everything when it comes to stock valuations or stock prices, fundamentals are really driven by consumers feeling good about their personal situation, she said. 

“People are still on the sidelines saying they want to wait. They're worried about the economy, they're worried about their jobs,” she said. “So no question, it's probably No. 1 headwind.”

However, what paints a difficult picture on the for-sale side often has the opposite effect on the for-rent side, Mikkelsen said.

From 2015 to 2019, Mikkelsen said, average annual multifamily absorption was estimated to be about 265,000 units. As of fourth-quarter 2024, this figure hit 667,000 units — nearly two-and-a-half times the 2015 to 2019 period. This can largely be attributed to the major influx of new deliveries in 2022 and 2023 as well as pent-up demand for rentals as single-family homes become more unaffordable, Walker pointed out.

“We're doing a very good job absorbing a lot of this new product that we've delivered,” Mikkelsen said. “But the fact that principal and interest payments on the for-sale side to buy a new home are up 76% over the course of the last two to three years means the affordability math has just been flipped on its head.”

The amount of supply getting absorbed coupled with slowed construction starts and deregulation on a federal level positions existing multifamily assets for substantial rent growth over the next few years, he said.  

“There's a lot of the demand drivers in place to push rent growth at some point in the next two to three years,” Mikkelsen said. “The premise is better to be early than miss the train.”

As the Trump administration begins its four-year tenure, the commercial real estate market expects a “deregulatory, pro-business” environment soon, Walker said. This is something the new construction market is particularly excited about, Zelman said.

“The new construction market is optimistic that there will be deregulation as it relates to energy codes and environmental headwinds, even though that hasn't yet come to fruition,” she said. “On the flip side, there’s concerns related to other policies that offset that a little bit, like the risk of deportation and what it's going to do to the labor force.” 

Touching on the office market briefly, Appel said the sector has “absolutely”  turned a corner, adding, “I don’t even think that’s up for debate.”

There is a caveat, however. Office has turned a corner in the buildings people want to be in, Appel said, but not the market as a whole.

“If you're talking about a Class-A, high-rise office in the Plaza District in Manhattan, there's a tremendous demand for it, and there's a lack of supply,” Appel said. “You go to Los Angeles, Century City, with rents higher than they’ve ever been in downtown LA, [and] you can’t give the space away. It just depends on where you are.”

Appel said that “price alternative markets” are having a hard time attracting tenants and are most likely not going to come back. He also noted the sentiment change in the country around going to the office — a new tone set by the current administration.

“We've normalized a little bit and the ‘vacation’ is over, thankfully,” Appel said. 

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This article was produced in collaboration between Studio B and Walker & Dunlop. Bisnow news staff was not involved in the production of this content.

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