Welcome to the Skeptical Investor Newsletter. A frank, hopefully insightful, dive into real estate and financial markets. From one real estate investor to another.

(☝️ .07% from last week, 30-yr fixed mortgage)

This week, we’re talkin’ the weak jobs report but now with AI, homebuilders slamming the brakes, a city that just made building easier, and then a deep dive back into a beast I first hunted eighteen months ago: the insurance industry. Spoiler alert: insurance companies suck.

Let’s get into it.

Single-family starts have slipped to an eight-month low.

A 15.4% single-month drop to a pandemic-era low (Census). Meanwhile, the multifamily side is falling off a cliff, down 41.6%. Builders are, in aggregate, telling you they do not want to break ground into 6%-plus money and a market still digesting the last supply wave.

Supply is a pig moving through the python. The enormous wave of apartments that has kept rents flat, the wave born during the 2020 to 2022 Zero Interest Rate Policy era, is nearly through the system. When starts collapse today, deliveries collapse roughly 18 to 24 months later. That sets up a supply air pocket in 2027 and 2028, right about when I’ve argued rents turn back up.

Headline CPI inflation was running 4.2% year-over-year in the May reading, still uncomfortably hot (BLS), and the next print lands July 14. Yet payrolls just missed badly at 57,000 against a 115,000 expectation, with the prior two months revised down (BLS). Hot inflation, cooling jobs. That is a central banker’s nightmare, and it is why I think the pressure builds toward the Fed cutting rates, not a hike, as we move through the back half of the year.

Thus far, the labor market isn’t breaking; AI is shaping up to be a job accelerator, not the job-killer folks fear, that a lot of the soft hiring is companies quietly unwinding pandemic over-hiring and blaming the robots. Ramp’s Economics Lab, linking actual AI spending to workforce records across 21,559 U.S. firms, found that the heaviest AI adopters grew headcount 10.2% over the two years following adoption, with entry-level roles growing even faster at 12%.

Meanwhile, low-intensity AI adopters saw no meaningful change (Ramp Economics Lab).

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Nashville is officially a buyer’s market.

Finally! An investor gets a break and can pickup a deal (I am).

Redfin’s data has Nashville pegged as roughly the third most oversupplied major metro in the country, with about 104% more sellers than buyers, trailing only Austin (114%) and San Antonio (106%) (Redfin via TheStreet). Locally, the latest Greater Nashville REALTORS data showed 3,370 closings in May, up 6% year-over-year, even as inventory kept building (Greater Nashville REALTORS). Homes are sitting longer. Sellers are offering concessions and rate buydowns.

Now, many would say that, on paper, this looks like a “soft” market.

Not so.

The oversupply pressuring Nashville right now is the tail end of that ZERP apartment and construction wave of 2020-2021. But look back up at the Weekly 3: starts just cratered nationally, and the multifamily pipeline that feeds this glut is drying up fast. Nashville still has roughly 17,470 multifamily units under construction as of the most recent count (Multi-Housing News), but once those deliver, there is far less coming behind them.

At the same time, prices are up 5%+.

So the setup is this: the savvy investor can finally grab a deal in a soft, negotiable, concession-heavy market right now, while sellers are motivated and inventory is deep, precisely because the market is absorbing the last of a supply wave that is ending. A market with accumulating inventory and patient buyers is the kind of market that springs to life the moment mortgages cross that 6% rubicon and head toward 5.5%. When that happens, the deals dry up, competition returns, and the window closes. I’ve said before I give it roughly 12 months, absent another Middle East side quest from our lovely government.

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You could own real estate in China.

A little perspective, because I think American investors take the resilience of our housing market for granted.

China’s real residential property prices, adjusted for inflation, have now erased roughly 20 years of gains, with the Bank for International Settlements real index sitting at about 85 in Q1 2026, below where it started when the data series began in 2005 (The Deep Dive). New-home prices there have fallen for 35 straight months (The Deep Dive).

This is what an actual, structural housing collapse looks like. Oversupply built for a population that is now shrinking, wealth concentrated 70-80% in property, and a demand base that keeps deferring.

I’ve made this point before in my article “Are We in a Bubble?”, but it bears repeating.

U.S. real estate is the single largest, and one of the most resilient, asset classes on earth. It can really take a punch.

But what China is going through is a different species of problem entirely. Count your blessings, then go underwrite your next deal.

A year ago, I wrote a piece called “Insurance is on Fire,” and I argued something that got me a fair amount of angry email: that the homeowners insurance “crisis” was, in significant part, a repricing dressed up as an emergency, and that the industry was crying poverty on its way to the bank. Well, the 2025 numbers just landed, and folks, they did not make me any less skeptical.

In 2025, the U.S. property and casualty insurance industry posted a net gain of roughly $63 billion, nearly triple the $23 billion it earned in 2024 (Verisk/APCIA). Fitch pegged record net income of $135.9 billion, up nearly 49% year-over-year, on a near-record-low combined ratio of 93% (Fitch via Business Insurance). Industry surplus, the cushion of capital sitting above what they need to pay claims, swelled to $1.24 trillion (AM Best via Reinsurance News).

That’s one of the most profitable years the sector has ever recorded.

Now hold that $63 billion in your head, and look at what happened to your bill over the same stretch.

Since 2021, the national average cost of home insurance has climbed roughly 46% (Insurify). The national average premium is on track to cross $3,000 in 2026, a fifth consecutive annual increase (Insurify). Insurance now eats about 9% of the typical homeowner’s monthly mortgage payment, the highest share on record (HousingWire). Back in my 2025 piece I flagged that ICE number at 9.4% and called it understated. Eighteen months later it’s still climbing, and I feel pretty good about that call.

Here’s the mechanism I want you to understand. When an insurer wants to raise your rate, it files with the state and points to catastrophe losses and reinsurance costs. Fair enough, some of that is real. But 2025’s monster profit was driven, in the industry’s own words, “more by unusually low catastrophe losses rather than a fundamental shift in industry risk” (Verisk/APCIA). Translation: they priced in disaster, it didn’t happen, and they kept the difference. The premiums are sticky on the way up and slow to come down.

If you want the legitimate cost driver, it isn’t hurricanes anymore. It’s severe convective storms, the meteorologist’s term for the hail, tornado, straight-line wind, and thunderstorm complexes that increasingly hammer the middle of the country. These have now overtaken tropical cyclones as the costliest insured peril of the 21st century, generating more than $50 billion in insured losses for three straight years (Insurify/Aon).

Hail alone shreds roofs, and roofs are the single most expensive routine claim in the book.

This is where it stops being abstract for us: construction costs in Tennessee (and higher in much of the nation) have roughly doubled, from about $180 to $350 per square foot since before the pandemic (MoneyGeek), which means every hail-damaged roof costs the insurer far more to replace, and that flows straight into your renewal. Tennessee homeowners are seeing annual increases in roughly the 6% to 15% range depending on the carrier and your roof’s age (Bridgeway Insurance, Thompson Insurance). Watch for one quiet trick in particular: wind and hail deductibles are increasingly written as a percentage of dwelling coverage, not a flat dollar amount. On a $400,000 home, a 2% wind/hail deductible means you eat the first $8,000 of a storm claim before a dime of coverage kicks in (Thompson Insurance). That’s the industry keeping headline premiums competitive while quietly shifting risk back onto you.

The Insurance ‘Tax’

Insurance isn’t a nuisance line item, it’s a lever on your entire equity position. Researchers at Florida State University found that a 10% rise in the price of homeowners insurance drives a 4.6% decline in home prices (FSU via The Hill).

Sit with that.

The thing quietly compounding on your renewal statement is, at the margin, deflating the value of the asset itself, and squeezing the DSCR on every rental you underwrite. If you’re a landlord, the Federal Reserve has documented that higher property insurance costs get passed through into rents, which sounds great until you remember your tenants have a ceiling on what they can pay, and in an oversupplied market like Nashville right now, you may eat that cost rather than pass it on.

Stop treating your insurer as a partner and start treating it as a counterparty.

Hot Pro tip: on typical asphalt shingle roofs I never ever use insurance. I pay cash. The increase in premium and having to tell the next insurance company on my next property that I made a claim in the last 5-7 year makes it a terrible financial decision to use insurance on something that a roof (unless its fancy/commercial and super expensive).

For a financially strong investor (I hope you all are), the move is often to raise your deductible as high as you can comfortably self-fund, and effectively self-insure the small and mid-size stuff with a dedicated cash reserve per property. In Tennessee, bumping a deductible from $1,000 to $2,500 can cut a premium 10 to 20% (Bridgeway Insurance).

I set my deductibles at the max the bank will let me, usually $10k.

This is because insurance should be for exist existential use only, in my opinion.

You’re not buying insurance to cover a $8,000 roof repair you could self-fund; you’re buying it for the catastrophic loss that would actually wreck you. Pay for the tail risk, self-fund the noise, and pocket the premium difference into that reserve. Just be honest with yourself about whether you actually have the reserve, because self-insuring without the cash behind it is just being uninsured with extra steps.

If you’re going to self-fund the small stuff, you want to actually know the condition of your roof and systems before a storm forces the question, and before a claim adjuster does. A decent moisture meter and a basic roof/attic inspection kit runs a few bucks and can tell you whether that 12-year-old roof is a renewal-repricing time bomb before your insurer figures it out first.

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The great distortion of the 2020 to 2022 Zero Interest Rate era is finally, grindingly, working its way out of the system.

The apartment glut that flattened your rents is nearly through the python. The construction that fed it just seized up. And the cost of owning the asset, taxes, and especially insurance, keeps ratcheting up regardless of what the Fed does with interest rates.

That last one is the quiet lesson. We spend all our energy staring at the mortgage rate, the one number the Fed touches, while insurance compounds in the background and does real damage to affordability and to home values. The industry posted a record, near-$136 billion year while telling you it’s under siege (Fitch). That’s not a conspiracy, it’s just an asymmetry, and asymmetries are where disciplined operators make their money.

Housing markets across the country have deep inventory right now. More choice means better deals and more motivated sellers The market is still absorbing the last of a supply wave that is ending. If you have the cojones, this window will reward the patient and the prepared, and it may not stay open long once rates break lower. Buy the deal because the deal pencils, insure it like a counterparty, and keep a fat reserve for the roof and HVAC systems if old.

The late Sam Zell, who built one of the great real estate fortunes of the last half-century by buying what everyone else was too scared to touch (they didn’t call him “the Grave Dancer” for nothing), put the whole discipline into six words:

“If everyone is going left, look right.” -Sam Zell

Right now, in real estate, damn near everyone is going left: they see deep inventory, patient buyers, and sellers cutting deals, and they read it as a market to avoid.

Look right.

That is precisely the setup that rewards the operator who does the homework and the math while everyone else is busy being afraid.

I’ve spent this whole newsletter arguing that the returns in real estate come from understanding the whole machine, not just the mortgage rate: the supply cycle, the cost structure, the local market, the counterparties. That’s actually the entire thesis of the book I wrote, The 5 Ways Real Estate Investors Make Money and Build Wealth, which walks through how the returns really stack up across cash flow, appreciation, loan paydown, tax benefits, and inflation, none of which depend on you calling the next Fed meeting correctly. That’s rather the point. Understand the machine, let the noise pass through.

Until next time. Stay Curious. Stay Skeptical.

Herzliche Grüße,

-The Skeptical Investor

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