Dan Kaufman

Should We Be Worried About the Economy? A Look at the Latest Numbers and What They Mean for You

If you’ve been paying attention to the latest economic news, you might be feeling a bit uneasy. Some fresh data points have raised concerns about where the economy is heading. But before we jump to conclusions, let’s break it down.

First, the Good News

The Federal Reserve’s preferred inflation measure, the Personal Consumption Expenditures (PCE) price index, is showing signs of cooling. In January, it rose 2.5% year-over-year, a slight dip from December’s 2.6%. That’s a step closer to the Fed’s target of 2% inflation, which could eventually lead to lower interest rates.

Now, the Bad News

This positive inflation news was overshadowed by a sharp drop in consumer spending, which fell 0.2% in January (or 0.5% after adjusting for inflation). That’s the biggest monthly decline since early 2021. The slowdown was especially noticeable in big-ticket items like automobiles.

Why is this a problem? Consumer spending drives nearly 70% of the U.S. economy. If people start cutting back, economic growth slows down.

A Shrinking Economy?

The Federal Reserve Bank of Atlanta’s latest GDPNow forecast is raising eyebrows, predicting a 1.5% contraction in the economy for the current quarter. Just a few days earlier, that same forecast projected 2.3% growth—a major downward revision.

One key factor? Trade. The latest data shows the U.S. merchandise trade deficit jumped over 25% in January to an all-time high of $153.3 billion. This surge in imports, likely driven by businesses stocking up ahead of potential tariffs, is dragging down GDP growth.

Is Recession on the Horizon?

Some economists, like Jay Hatfield of Infrastructure Capital Advisors, think so. He argues that tight monetary policy (high interest rates) is squeezing the economy. Investors seem to agree—bond markets are flashing warning signs, with the 10-year Treasury yield dipping below 4.25%, signaling concerns about economic slowdown.

At the same time, former President Donald Trump’s proposed tariffs—including a 25% tariff on Mexico and Canada and an additional 10% tariff on Chinese goods—are adding to market uncertainty. These trade barriers could increase costs for businesses and consumers, pushing inflation expectations higher.

A Different Perspective from Commercial Real Estate Experts

Despite the troubling headlines, John Chang of Marcus & Millichap thinks some of these fears may be overblown. He points out that some data—like consumer sentiment—may be skewed by political bias. For example, surveys show that: • Democrats’ confidence in the economy dropped by 30 percentage points. • Republicans’ confidence increased by 24 percentage points. • Independents’ views remained unchanged.

His takeaway? “When you consider that the politics in our country are split pretty evenly, the net impact will probably be close to neutral.”

What This Means for Real Estate and Investors

For those of us in real estate and investment circles, this economic turbulence presents both challenges and opportunities. • Higher interest rates are making financing deals tougher, but they could also slow down development, reducing competition in the long run. • Slower consumer spending might impact retail and hospitality properties, but it could also lead to more demand for multifamily housing as homeownership becomes less affordable. • Trade disruptions could shake up supply chains, but they might also create opportunities for industrial real estate as businesses seek to reshore manufacturing.

Looking Ahead

While the near-term outlook is uncertain, Chang believes that growth could rebound in Q2, possibly hitting 4% annualized GDP growth. He also argues that over a five-to-seven-year horizon, these short-term fluctuations are unlikely to have a major impact on commercial real estate returns.

So, should we be worried? Cautious, yes. Panicked, no. The economy is in a transitional phase, and while we’re seeing some warning signs, there are also reasons for optimism.

What are your thoughts? How are these economic trends affecting your business, investments, or real estate decisions? Let’s discuss.

Small Lots, Big Opportunities: The Future of Smart Development in LA

Alright, developers and investors, let’s talk about a game-changing opportunity in Los Angeles. If you’ve been watching the market, you know the biggest challenges we face—high land costs, zoning headaches, and skyrocketing construction expenses. But LA’s new Small Lots, Big Impacts initiative is flipping the script, and if you play it right, this could be one of the smartest bets in town.

The Play: Unlocking Value in Small Parcels

Here’s the deal—LA is filled with small, underutilized lots that have been sitting there, doing nothing. Historically, these lots have been tough to build on because the economics didn’t make sense. Either they turned into oversized single-family homes, a handful of bulky townhomes, or they just sat vacant because large-scale development wasn’t viable.

That’s where Small Lots, Big Impacts comes in. The city is pushing a new approach: smaller, well-designed, for-sale homes that make the most of these overlooked parcels. Instead of cramming in high-rises or letting prime real estate go to waste, this program is about smart, scalable infill development that works.

Why This Matters to You

This initiative isn’t just another housing policy—it’s a blueprint for profitable, sustainable development.

Here’s why you should pay attention:

• Preapproved Designs = Speed & Savings

The city launched a design competition, bringing in top architects to create innovative, space-efficient homes. The winning designs will be preapproved, meaning faster entitlements and fewer headaches. You get solid, marketable plans without the usual back-and-forth with the city.

• City-Owned Land Ready to Move

LA owns about 1,000 of these small vacant lots, and they’re starting with a test run of 10 sites. If this first batch is successful, there’s potential to scale across the 24,000 privately owned small lots identified in the city.

Translation? First movers can establish a competitive edge before the floodgates open.

• Lower Costs, Strong Margins Smaller homes mean less

construction cost, and with the city encouraging innovative, cost-cutting materials and techniques, your build expenses could shrink even further. Plus, with down payment assistance baked into the plan, buyers have more access to financing—making sales that much easier.

• High Demand, Limited Supply Let’s be real—LA’s starter home market is nearly nonexistent. The demand is there, but the supply isn’t. This program is creating a new asset class in LA real estate: compact, well-designed homes in prime locations that first-time buyers can actually afford. If you’re looking to tap into an underserved market, this is it.

How It Works

• The city pairs select small lots with preapproved designs, fast-tracking the development process.

• Homes will be between one and three stories, keeping them compatible with existing neighborhoods—no high-rise battles here.

• Proceeds from city lot sales will fund buyer assistance, helping you move inventory faster.

• If these first projects prove successful, thousands of private small lot owners could follow suit, opening up even more opportunities.

The Bigger Picture

Mayor Karen Bass is fully behind this, and the city’s partnering with groups like LA4LA and UCLA’s cityLAB to make it happen. This isn’t about packing more people into high-rises—it’s about showing that LA can densify smarter without sacrificing livability. If it works, it could change how infill development is done in this city.

Your Next Move

This is still in the early stages, which means the best time to get involved is now. Keep an eye on the design competition winners, track the City Council’s vote on lot sales, and start scouting for opportunities. If this program takes off, developers who move first will set the standard—and secure the best deals.

This is the kind of shift that reshapes markets. The only question is: will you be part of it? Let’s talk.

Florida’s Housing Market Shift: What Developers & Investors Need to Know

A Surge in Inventory Presents New Opportunities

Florida’s real estate market is seeing a dramatic shift as record-high inventory levels and falling prices reshape the investment landscape. For developers and investors, this presents a crucial moment to reassess strategies, identify new opportunities, and capitalize on emerging buyer-friendly markets.

In February 2025, a record-breaking 168,717 homes hit the market across the state—a staggering 40% increase year-over-year. This followed January’s historic high of 157,221 homes, marking two consecutive months of unprecedented supply growth.

What’s Driving the Inventory Surge? • High mortgage rates & home prices have slowed demand. • Listings are outpacing sales, leading to rising months of supply. • Sellers are adjusting expectations, making deals more negotiable.

For developers and investors, this means select markets are shifting in favor of buyers—a rare window to acquire property at lower prices, reposition assets, or explore development projects with less competition.

Where Are the Biggest Inventory Gains?

Among Florida metros, Orlando, Cape Coral, and Miami have seen the largest inventory surges: • Orlando: +43.8% YoY • Cape Coral: +42.7% YoY • Miami: +39.2% YoY

However, two Gulf Coast cities—Sarasota and Bradenton—stand out as key buyer-friendly markets where inventory surges and falling prices are creating opportunities for real estate investors and developers.

Sarasota & Bradenton: Hot Markets for Buyers

Why Investors Should Watch These Markets

Both Sarasota and Bradenton are experiencing: ✅ Increasing inventory → More choices & lower competition ✅ Falling prices → Better acquisition opportunities ✅ Longer time on market → More negotiating power for buyers

This shift signals a prime opportunity for investors looking to enter the Florida market at a discount, whether through buy-and-hold, fix-and-flip, or new development projects.

📍 Bradenton: Prices Falling, Inventory Rising

Bradenton, a high-growth market south of Tampa, has seen median home prices decline by over $100,000 since their peak in mid-2022.

📉 Key Market Trends in Bradenton (as of January 2025): • Median home price: $432,000 (↓ from $549,000 in 2022) • Homes sitting longer: 67 days on market (+40 days vs. pandemic peak) • Inventory surge: 1,900 active listings (exceeding pre-pandemic levels) • Manatee County single-family sales: +22% YoY, but inventory still outpacing demand

🔹 Investor Takeaway: With homes sitting longer and inventory continuing to rise, motivated sellers and discounted deals are becoming more common. This is an ideal time to negotiate lower purchase prices or acquire rental properties before demand rebounds.

📍 Sarasota: Luxury Prices Cooling Off

Sarasota, a prime luxury and second-home market, has seen steep price declines in recent months.

📉 Key Market Trends in Sarasota (as of January 2025): • Median home price: $575,000 (↓ from $725,000 in July 2023) • Time on market increasing: 67 days (+40 days vs. pandemic peak) • Sarasota County single-family home sales: +6.8% YoY, but with a 30% surge in listings

🔹 Investor Takeaway: The price declines in Sarasota signal a shift in buyer sentiment, creating opportunities to acquire high-end properties below market value. Investors targeting short-term rentals, luxury flips, or second-home buyers could benefit from this cooling market.

Townhomes & Condos: The Sector Most Impacted

While single-family homes are seeing price adjustments, townhomes and condos are experiencing an even steeper slowdown, particularly in Sarasota and Bradenton.

📉 Condo & Townhome Market Trends: • Sarasota median condo price: $347,000 (-17.4%) • Manatee County median condo price: $335,990 (-6%) • Days on market exceeding 85 days → More negotiating power for buyers • 8+ months of supply → Favorable conditions for investors looking to acquire rental properties or flip units

🔹 Investor Takeaway: With condos and townhomes lingering unsold, motivated sellers are more likely to accept lower offers. Investors should look at long-term rental or short-term rental potential, as well as value-add renovation opportunities to increase returns.

What This Means for Developers & Investors

Short-Term Implications

📉 Price Corrections Are Creating Buying Opportunities: Investors and developers can secure properties at discounts, especially in Sarasota and Bradenton.

🏗️ New Development Feasibility Is Improving: With less buyer competition, land acquisition and development costs could become more favorable.

💰 Rental Market Could Strengthen: If homeownership affordability remains a challenge, demand for long-term rentals in Florida will likely increase.

Long-Term Market Outlook

🚀 Once Interest Rates Ease, Demand Will Return: Investors who buy during the dip could see significant appreciation once conditions stabilize.

🏡 Florida’s Population Growth Remains Strong: Despite short-term slowdowns, long-term demand for housing in Florida remains intact.

🏠 Supply Won’t Stay High Forever: Historically, Florida’s real estate cycles are highly responsive to market shifts—meaning today’s buyer’s market could shift back to a seller’s market in the coming years.

Final Thoughts: How to Take Advantage of This Market Shift

🔹 Investors: Now is the time to secure properties below market value, negotiate aggressively, and prepare for long-term appreciation.

🔹 Developers: With construction costs stabilizing, land acquisition and new builds could become more viable, particularly in areas where prices have cooled.

🔹 Flippers & Short-Term Rental Investors: The luxury market cooling off in Sarasota could provide high ROI opportunities for those willing to make strategic renovations.

With record inventory levels and price declines, Florida’s real estate market is offering rare opportunities for investors and developers to acquire properties at a discount. The question is—are you ready to act?

Let’s discuss your strategy—drop a comment or DM me! 🚀

Strange Times in America: Institutions, Uncertainty, and the Road Ahead

A friend from Brown recently shared a troubling story with me:

“An engineer in the Coast Guard I know, who had served for 20 years, was just fired because he was in a new position for less than two years—technically making him probationary.”

Another friend, an academic physician in the Midwest, told me:

“All of the researchers at my hospital are freaking out. Most of them rely on NIH funding, and studies that have been years in the making could be shut down, leaving people high and dry.”

A colleague working in government infrastructure in New England put it bluntly:

“Everything is being called into question right now. We’re not sure what’s going to be real. It’s an awful environment.”

These are strange times in America, when even the most stable careers, projects, and institutions suddenly seem precarious. The President is upending longstanding alliances, cozying up to strongmen—perhaps because that’s what he aspires to be. Career professionals are being cast aside arbitrarily. Scientists and researchers are left scrambling. Infrastructure projects that have been planned for years are at risk of being tossed out entirely.

For years, I’ve felt that our two-party system has been broken. The Democrats have become defenders of aging institutions, even as those institutions struggle to function effectively. Meanwhile, today’s Republican Party seems increasingly defined by a “burn it all down” mentality. Institutional mistrust and polarization—along with Joe Biden overstaying his welcome—led to last November’s election results.

Most Americans, I believe, exist in the middle ground. We recognize that institutions need reform, but we also know that a chainsaw isn’t the best tool for modernization. The growing number of prominent candidates planning to run as Independents in 2026 is proof that more people are looking beyond the traditional party system for solutions. I expect this trend to accelerate as both parties become increasingly unpopular.

Meanwhile, buried under the political noise, the economy is flashing warning signs. January’s inflation numbers remained stubbornly high, and consumer spending is softening. People are slowly realizing that Trump doesn’t have some secret plan to lower costs—if anything, his policies (tariffs, mass deportations, economic nationalism) are likely to make inflation worse.

The headwinds are picking up. Uncertainty isn’t a great environment for most people—or markets. And yet, uncertainty may be the only thing we can count on in the near future. Plan accordingly.

Banks Shake Off CRE Jitters—What This Means for Real Estate Investors & Developers

After months of uncertainty, banks with significant commercial real estate (CRE) exposure are showing signs of stabilization. While challenges remain, S&P Global Ratings has upgraded six banks from negative to stable, signaling renewed confidence in the sector.

For real estate investors and developers, this shift is a key indicator of improving market conditions and greater lending stability—critical factors for financing new deals and navigating upcoming CRE debt maturities.

What’s Driving Bank Stability?

S&P highlights six factors that have strengthened the banking sector, creating new opportunities for real estate professionals:

1️⃣ Economic Resilience: The U.S. economy is holding steady, with 2% GDP growth expected over the next two years and unemployment stabilizing at 4.2%. A strong economy supports CRE demand and investment.

2️⃣ CRE Valuations Finding a Floor: While office properties remain under pressure (down 36% since 2022), the sector’s decline slowed to just 1% in 2024—a sign of stabilization. Multifamily, industrial, and retail valuations improved, reinforcing confidence in non-office CRE investments.

3️⃣ Reduced Office Loan Exposure: Larger banks now hold just 11% of their portfolios in non-owner-occupied CRE, and office loans make up only a low-single-digit percentage of all loans. This reduces systemic risk and minimizes potential banking disruptions.

4️⃣ Improved Asset Quality: While CRE loan delinquencies have ticked up to 1.7%, overall charge-offs remain low at 1.9% over the past two years, indicating controlled losses.

5️⃣ Stronger Bank Balance Sheets: Deposits have rebounded from $18.3 trillion in 2023 to over $19 trillion in 2024, while unrealized losses on securities have declined by $200 billion, further strengthening liquidity.

6️⃣ Continued Profitability: Banks are expected to maintain healthy earnings, with an industry-wide return on equity projected at 10.5% to 11.5% in 2025—a sign that they are well-positioned to weather CRE headwinds.

What This Means for Real Estate Developers & Investors

✅ More Lending Stability: As banks strengthen their balance sheets, financing for CRE projects may become more accessible, especially for well-structured deals in resilient asset classes like multifamily, industrial, and retail.

✅ Opportunities in Distressed Assets: Office properties have seen major price corrections, but signs of stabilization suggest that opportunistic investors could find undervalued assets at a discount.

✅ Refinancing Risks Still Loom: The biggest challenge ahead? $4.5 trillion in CRE loans need refinancing by 2028, some outside the banking sector. This could lead to selective lending and increased demand for alternative financing solutions (private lenders, debt funds, and creative capital structures).

The Bottom Line

While the CRE sector is not out of the woods, stabilizing bank outlooks and improving market fundamentals suggest a more favorable lending and investment environment ahead. Developers and investors who adapt to shifting conditions—by targeting high-performing asset classes and securing strategic financing—will be best positioned for growth in the evolving CRE landscape.

At Dan Kaufman Real Estate, we stay ahead of market trends to identify high-impact real estate investment opportunities. Want to discuss strategies for navigating the shifting CRE market? Let’s connect.