Insights from the Walker Webcast: Peter Linneman and Willy Walker Discuss the Housing Market

The recent Walker Webcast on July 7 brought together two influential figures, Willy Walker, Chairman and CEO of Walker & Dunlop, and Peter Linneman, a renowned economist and principal of Linneman Associates. Their quarterly discussion tackled significant economic issues, with a sharp focus on housing, inflation, and job growth in the current market landscape.

Breaking Down Inflation and Rent Trends

Understanding Inflation Metrics

One of the standout topics was the discussion around inflation, particularly the concept of owner-equivalent rent (OER). Without accounting for OER, Linneman pointed out that actual inflation stands at around 1.5%. However, residential rents have had a substantial impact, contributing to a pronounced increase:

• Rent Increase: According to Walker, the calculation indicates that rents in the U.S. surged by 8% between August 2024 and May 2025. Linneman humorously noted that those benefiting from this increase should reach out to him, but he’s not received any calls yet.

The Federal Reserve’s Impact on Rates

Predictions for Interest Rate Cuts

During their previous discussions, Linneman predicted that the Federal Reserve would implement three cuts to the Effective Federal Funds Rate (EFFR) by the end of 2024—a prediction that has since materialized. Looking to the future, he anticipates:

• Efrr Reduction by 100 Basis Points: By the end of 2025, he forecasts a reduction of 100 basis points, challenging skeptics who view this as overly optimistic.

Trends in Construction and Multifamily Housing

Multifamily Housing Developments

Despite fluctuating interest and inflation rates influencing construction, there is positive news in the multifamily sector. Recent data from RealPage highlighted a significant absorption of nearly 800,000 rental units, outpacing the delivery of only 535,805 units.

However, this growth is juxtaposed against challenges besieging new building projects:

• Rising Material Costs: While costs for lumber have decreased, prices for gypsum and cement remain at all-time highs.
• Supply Chain Issues: Linneman noted that approximately 22% of the U.S. cement supply comes from Canada and Mexico, compounding pricing challenges further exacerbated by trade policies.

The Rising Costs of Construction

The conversation outlined increasing construction material costs being around 1% above inflation, with labor expenses compounding the financial burdens faced by developers.

Addressing the Affordability Crisis

The Housing Supply Dilemma

With the persistent demand for affordable housing, Linneman remarked on the previous administration’s initiative to utilize federal lands for construction. This could potentially revolutionize housing accessibility:

• Federal Land Utilization: Linneman stated that managing these lands at the federal rather than local level could streamline processes but may lead to legal challenges.
• The NIMBY Factor: The ongoing issue of "Not In My Backyard" (NIMBYism) has hindered the progress of housing production, resulting in a growing number of households remaining in multifamily and single-family rentals longer than anticipated.

Case Studies: Houston vs. Los Angeles

Walker and Linneman compared two metropolitan areas, discussing Houston’s effective approach to reducing homelessness versus Los Angeles’s struggles due to strict zoning laws. Key observations included:

• Houston’s Success: Walker highlighted Houston’s flexible zoning regulations as a major factor in its housing success.
• Learning from Best Practices: Linneman encouraged other cities to adopt Houston’s strategies to improve affordable housing availability.

Conclusion

The July 7 episode of the Walker Webcast served up thought-provoking insights into the pressing issues of housing, inflation, and construction. For those keen on further exploring these topics, on-demand replays are available through the Walker Webcast channels on YouTube, Spotify, and Apple. Tune in for engaging discussions and updates surrounding the dynamic housing market.

By staying informed, stakeholders can better navigate the challenges and opportunities within today’s housing landscape.