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

(👇 .02% from this time last week, 30-yr mortgage)

Bond markets repriced the rate-cut path this week spiking mortgage rates up last week. But the longer term story is more interesting — more on that below.

This week, we’re talkin’ the end of the Powell era at the Federal Reserve, April jobs report looked great on the surface yet problems brew, purchase mortgages are the highest since 1990, and the advertised rent is often fiction.

Plus, Nashville’s suburbs are booming! — Rutherford, Williamson, Sumner, Wilson counties are all catching their stride.

Let’s get into it.

Bonus! — Yardi Matrix this week revised its 2026 multifamily completion forecast up to 458,731 units, +2% from the prior 415–441K range. (Yardi, May 6) I wrote last week that the supply wave was cresting. Yardi just complicated that — a bit. More on what this actually means below.

Friday, May 15, Powell’s term as Federal Reserve Chair ends.

Frankly, good.

He and his predecessor Janet Yellen dismissed the obvious inflation signals for ~a year in 2021-2022 and I will never forgive them for that (even though his tenure since has been measured and well done, but that’s just too late).

You shouldn’t either.

So now we turn to a new Fed leader, Kevin Warsh.

If the Senate floor vote lands where Senate Banking did — 13–11, fully partisan, the first such Fed-chair committee vote in history — Kevin Warsh takes the chair Friday.

And this handover matters more for real estate investors than the bond market is pricing in.

The Fed funds rate (aka “interest rates”) is what most headlines go after. But this only deals with assets priced 2 years or less. Leaving out 30-yr mortgage rates.

Thus, the long end of the curve (aka the bond market) is what actually sets mortgage rates, and the value of every cash-flowing asset in this country. Warsh has spent the last two years telegraphing that he intends on turning the Fed’s eye to the bond market.

In his April 21 confirmation testimony, Warsh laid out three commitments that should be on every landlord’s whiteboard:

Powell’s Fed paused QT in early 2024 and ran it at a trickle for two years. A Warsh Fed appears willing to push QT harder.

Just look at how the Fed’s balance sheet has ballooned in recent years.

$9 Trillion in 2022?!….This is why Inflation.

Here is the part that doesn’t show up on CNBC.

More QT (aka selling bonds off the balance sheet) means fewer Treasuries the Fed is holding, which means more Treasuries the private market has to absorb. More private-market supply at the long end = higher long-term yields, even if the funds rate stays put or eventually drifts lower.

The 10-year Treasury sits around 4.4% as I write this.

The historical mortgage-to-10-year spread is 160–180 basis points (aka 1.6%-1.8%). We’re currently running closer to 200 basis points today.

A Warsh-led acceleration of QT can keep the spread wide and the 10-year sticky — meaning mortgage rates in the low-to-mid 6s could be the floor, not the ceiling, for the next 12 months.

For commercial multifamily, the implication is uglier. Cap rates don’t move with the funds rate — they move with the 10-year and the credit spread. If the 10-year holds 4.3–4.6% through year-end while the credit spread for multifamily widens (we’re seeing some of this in Sun Belt distressed paper already), 5.75% cap rates do not become 5.25% cap rates next year. They become 5.85%.

This is the opposite of what every “buy now, refi later” operator in 2024 was assuming.

And is bullish for the future of multifamily operators.

But Warsh is entering a Fed where the FOMC committee (who votes on interest rates) is sharply divided.

And because of this, it would be a sage decision from Warsh to focus on the bond market/balance sheet in order to lower mortgage rates, and not wade through the swap of short term interest rate cuts.

Steelman — the bull case for Warsh-as-RE-tailwind:

But, what if this is wrong?

The strongest opposing argument to my point, is politics: Warsh is Trump’s chair.

Trump has been openly hostile to high rates and has publicly criticized Powell for not cutting fast enough. A Warsh Fed that meaningfully tightens financial conditions — by accelerating QT and keeping long rates elevated — would be picking a fight with the White House.

So the steelman is: Warsh’s public hawkish framing is a confirmation strategy. Once confirmed, the actual policy path will be much more dovish than he’s signaling, and the long end could rally hard if QT pauses again.

I think there’s something to this — Warsh is too smart to fight the President he serves under in his first six months. But the bond market is not pricing in this scenario one bit.

Polymarket has June FOMC at 97.4% no change in rates, and the year-end 2026 path implies just a single cut at best. If the dovish steelman is right, every long-duration asset is mispriced — and that’s an unusually large asymmetric upside. It’s the trade I’d take if I were running a hedge fund…But I’m not.

As an operator in real estate underwriting deals this week, I’m planning around what Warsh has said.

Not what he maybe, could, might do.

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Here’s a thought that should be keeping multifamily owners awake, especially in the booming Sun Belt.

Yardi Matrix said the national average advertised asking rent hit $1,758 in April (Yardi). That’s the headline most operators are pricing off — the number that your broker quotes when pitching you a deal.

But the advertised rent and the effective rent are two very different numbers right now.

The gap is concessions.

The continuing offer of free months of rent, parking credits, gift cards, “look-and-lease” specials, and waived application fees that landlords are throwing at prospects to fill units. Concessions don’t show up in the asking rent. They show up in the effective rent the tenant actually pays over a 12-month lease.

And in 2026, concessions across the Sun Belt are still absolutely enormous.

CRE Daily and ALN data for early 2026:

For comparison, gateway markets like NYC, San Francisco, Boston, and Chicago — markets that didn’t overbuild and have been ripping for rent growth — are running concession rates in the 10–20% range.

Concessions are normal, but many locations are still quite elevated.

This is the most bifurcated rent market we’ve seen in two decades.

The math is unforgiving.

Let’s look at an example: A unit advertised at $1,758/month with 1.5 months free over a 12-month lease ($2,637 in concessions, divided across 12 months) is actually $1,758 × 12 = $21,096 minus $2,637 = $18,459 in annual rent revenue. Divided by 12 = $1,539/month effective rent.

That’s a 12.5% discount to the asking number.

In Phoenix, a $2,200 luxury unit offering 3.5 months free is collecting roughly $18,700 over 12 months — $1,558 effective rent. A 29% discount on the asking number. (CALCULATED: $2,200 × (12 − 3.5) ÷ 12 = $1,558.33, derived from CRE Daily concession reporting.)

The Yardi headline asking rent of $1,758 — flat YoY at -0.2% (Yardi) — implies a market that has stabilized. The effective rent paints a very different picture: in five Sun Belt metros, rents have collapsed 10–20% below what the headline says.

Why does this matter to investors who don’t own in those metros?

Three reasons:

1. Comparable sales math is broken in many deals right now. Cap rates calculated off asking rent overstate NOI. Brokers — including the decent ones — generally price off a trailing 12-month effective rent roll, but pro forma renewals are often calculated off the asking number. If your underwriting assumes the trailing concessions burn off at renewal and you collect asking rent in year two, you’re betting on a market shift that hasn’t happened yet and may not happen until 2027 at the earliest. (So always hire a great broker ;).

2. The “rent trough has been confirmed” narrative needs an asterisk. I wrote last week that two independent reads (Yardi and Apartment List) confirmed rents had bottomed. That’s still true on the asking side and on average nationally. On the effective side, in the metros that built hard in 2021, rents are still falling — they’re just falling via the concession line item instead of the asking number. Yardi’s own forecast revision up for 2026 supply (458,731 units, +2% from prior — Yardi, May 6) means more supply has to be filled with more concessions. Effective rents in Phoenix and Denver may not bottom until late 2026 or early 2027.

3. The opportunity set for buyers is different than it looks. A 1980s Phoenix C+ asset listed at a 5.5% cap on asking rent is likely a 4.5% cap on effective rent — meaningfully overpriced. The same asset two zip codes over, in a submarket with less new supply (think established 1990s product, not lease-up Class A), might be a 6.0% cap on effective rent with real upside as concessions burn off. The institutional money has figured this out. The small investor is missing this story if they are only looking at current NOI / CAP rates.

** Side note, I’d watch NYC. The developing political situation could smash down cap rats/rents in the next 12 months.

Steelman — the bull case on Sun Belt asking rents:

Again, lets do a little devil’s advocate and make the argument for the opposite case.

The strongest opposing argument is the one institutional buyers are using to justify writing checks into Phoenix, Denver, and Austin right now: concessions are temporary. They are a tool deployed during lease-up and tight rental cycles.

Emphasis on cycles.

As deliveries slow into 2027 and absorption catches up (CBRE just reported Q1 absorption finally beat completions for the first time in three quarters — CBRE), concessions in these metros will fall back toward the 10–15% range. At which point the asking rent becomes the effective rent, and an underwriting that anticipated that transition will look brilliant.

This is a legitimate and defensible argument. Concessions historically are cyclical, not structural.

And I agree with it.

But, the question is just timing. Which is extremely difficult even for us experienced operators.

Here’s where one needs to be careful with the steelman: the supply wave in the Sun Belt is not done. It’s slowing fast, especially in areas like my home market of Nashville, but it’s not over.

2026 completions are slightly up. And housing analyst Jay Parsons sees Orlando, Austin, Miami, Nashville, and Phoenix at 4–5% stock additions through 2027. The 2027 delivery cohort that everyone is hoping shrinks is still being permitted right now. Phoenix multifamily permits are up year-over-year in 2025. The concession burn-off may not start in earnest until 2028.

Counter point to the counter point: these places are booming!

Case in point, the Nashville Chamber of Commerce sees 70+ people per day moving to the area. And its not stopping.

So, how to guard yourself against a still too much supply problem?

Act institutional.

An institutional real estate buyer, with a 10-year hold, underwriting short term 2027–2028 concessions is taking a reasonable bet. A retail or syndicator buyer with a 3–5 year hold needs to assume effective rent is the rent. Mixed-up timeframes is how deals lose money.

And lastly,,,lets look at some of that Nashville growth.

For a decade, when anyone said “Nashville is growing,” they meant Nashville proper — the urban core. The Gulch, East Nashville, Germantown, the SoBro stadium district. That’s where the cranes went up. That’s where the corporate relocations are landing. That’s where the price-per-square-foot kept setting records.

That story is still very much true. But it’s no longer the interesting story.

The Suburbs are booming! Middle Tennessee suburbs — Rutherford, Williamson, Sumner, Wilson — are finally getting their moment.

Davidson County added approximately 9,300 residents in 2025, the #1 raw growth number in Tennessee. Real headline, real growth. But on a rate basis, Davidson grew about 1.3% — solidly in the middle of the Middle Tennessee pack.

Rutherford County (Murfreesboro, Smyrna, La Vergne) grew more than 13% from April 2020 to mid-2025 — roughly 3% per year, more than double the Davidson rate (Fox Moving 2026 Migration Report).

Williamson County (Franklin, Brentwood) has been one of the fastest-growing U.S. counties for a decade and added another estimated 12,000-plus residents in 2025. Sumner (Hendersonville, Gallatin) and Wilson (Mt. Juliet, Lebanon) are growing at similar or higher rates as well.

What’s driving it isn’t a single corporate announcement. It’s the compounding of three structural forces:

One — corporate relocations are landing in the suburbs as often as the core now.In-N-Out is building a 100,000-square-foot, $125.5 million Eastern Territory office in Franklin, opening late this year. Mars Petcare’s expanded headquarters is in Franklin. Williamson County’s tax base is broadening every quarter.

Two — remote work has redrawn the catchment. Twenty-six percent of recent Nashville-area movers are remote workers for non-Tennessee companies (Fox Moving). A remote worker doesn’t need a 15-minute commute to The Gulch. She needs a good school district, a quiet street, and a backyard. Murfreesboro and Hendersonville have all three at $200/sq ft. Davidson costs roughly twice that.

Three — Tennessee’s unemployment edge is widening. The state print stayed at 3.6% in February (TN.gov, Apr 16), well below the national 4.3%. The Nashville MSA is around 3.0%. That’s a job-creation story strong enough to pull workers from neighboring states, and most of those new hires can’t or won’t pay Williamson County prices on day one. They go to Rutherford or Wilson and bid for inventory.

For investors, here’s what changed this week and why it matters.

The April Greater Nashville Realtors report (released May 7) printed: Davidson single-family median $503,340, up just 0.7% YoY (Nashville Post, May 7). Months of supply in the core is now around 6 — the textbook line between buyer’s and seller’s market.

The suburbs are running a different race. Rutherford and Wilson are seeing rent growth and price appreciation in the 3–5% YoY range, with absorption tight, days-on-market in the 40s, and much less new multifamily competition than Davidson. Translation: better cap rates, healthier rent growth, less concession pressure, and demographic tailwinds that compound for the next decade.

I’m not telling you to abandon Davidson. I own here and I’ll keep owning here. The core has its own story — Oracle’s East Bank campus, Starbucks’s $100M corporate hub, the long-term institutional appeal of a downtown that’s still in its early innings.

I’m telling you the suburbs are no longer the “second-best” Middle Tennessee trade. They’re the operator’s window — the place where a disciplined buyer with a solid relationship, a renovation crew, and a 5–10 year hold can still buy at numbers that make actual sense.

That’s the kind of opportunity that doesn’t stay open forever. The institutional money has been mostly buying Davidson and Williamson because those are the markets the screens cover. Rutherford and Wilson aren’t in most institutional buyboxes — they’re just under the screening minimum. That’s the gap.

For a Nashville-area investor who actually knows the streets, the schools, the developments, the path of growth, and knows which renovation will pay back fastest in a Murfreesboro single-family vs. a Madison fourplex — this is your window. Find a great broker to work with. (Like us!)

There is a bullish through-line for us real estate investors this week — but it’s a more disciplined one than last week’s.

Powell hands the gavel to Warsh on Friday. The long end of the curve is going to stay sticky.

The labor market is frozen, not falling. That’s bad for would-be buyers and good for landlords with stabilized assets.

The average mortgage check just hit an all-time high since 1990. The transaction count is still weak, but the quality of buyer demand is concentrated at the top.

Rental rates are far more complicated than the headlines — and the operators who recognize that, and underwrite to effective rent, are the ones who don’t give back the basis they earned in 2024–2025.

And Nashville’s suburbs are finally getting their stride. Rutherford, Williamson, Sumner, Wilson — these are not the screens institutional money runs. That’s the gap an operator can exploit.

The cycle has changed shape since 2022. The easy money — bid up basis, ride the rate-cut narrative, refi in 18 months, sell to the next syndicator — that trade is gone.

It’s been gone for two years.

The investors who pretend it’s coming back are the ones writing 70-cents-on-the-dollar of replacement cost checks to the next buyer.

The trade that is here is more boring and more durable: discipline, basis, submarket selection, renovation eye, tenant quality, real cash flow at the wire, no rate-cut assumptions, no asking-rent assumptions…

Stop it with the “Phoenix bounces back in 18 months” story you are telling yourself.

In the words of Howard Marks:

The investors who were too early to the post-supply Sun Belt trade in 2024 are still grinding through their concessions. The ones who waited and bought right basis in late 2025 and 2026 are looking smart. The ones who hold tight, find the operator’s window in the right submarkets, and underwrite to effective rent — they’re the ones who will look smart 18 months from now.

I’m not bulled up on the whole market this week. I’m bulled up on the operators who know the difference between asking and effective, between core and suburbs, between cycle hope and basis discipline.

Famed investor Ken McElroy said as much this week. And I agreed.

That’s a more selective bull case than last week’s. But it’s also a more honest one.

I’m (still) bulled up.

Until next time. Stay Curious. Stay Skeptical.

Herzliche Grüße,

-The Skeptical Investor

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