Marterra Market Monitor

Q1 is in the books. It's been chaotic in the best way possible.

We have three left. What are you going to accomplish this year?

From a residential transactional standpoint, 2023 and 2024 (approximately 4M per year) were the worst years since 1995. 2025 isn't shaping up to be much better. Home sales are a significant contributor to GDP, accounting for a substantial portion of consumer spending. So that is not great, but the good news is that it can't get much worse.

That was a rough start, so let's turn to some good news. Well--good news if you own a home. Bad news if you are betting on a housing crash.

This chart was making the rounds on the internet this weekend.

Here's TLDR.

📊 The average annual return over these 83 years is approximately 5.69% (shown as the red dashed line).

🏠 The housing market has shown long-term positive growth with only a few periods of decline, most notably during the 2007–2011 housing crisis.

🚀 Major booms occurred post-WWII, during the early 2000s bubble, and again in 2021, driven by pandemic-induced demand and low interest rates.

⚠️ Despite recent high interest rates, the 2022–2024 period still exhibits positive appreciation, indicating market resilience driven by inventory constraints and sustained demand.

Quick programming note: As I've previously shared, I am running for the Costa Mesa City Council. Christine and I are hosting a campaign kickoff event at our house on May 17th. If you would like to attend, please let me know.

Additionally, I will be hosting periodic coffee roundtables for Costa Mesa stakeholders. Again, please email me if you would like to attend.

I want to hear from you! What are your issues? ELABORATE HERE PLEASE

Campaign donations can be made at the link below.

https://www.efundraisingconnections.com/c/DTM2026

Single-Family Transactional Market: Due to tight inventory, we are seeing record home sale prices for homes that are in excellent condition. However, homes that are modestly updated, slightly updated, or have even the slightest thing a buyer could hold against them...are sitting. This is mainly driven by the fact that affordability is at an all-time low; most buyers are financially stretched, putting as much money down as possible, paired with the maximum they can afford in monthly payments, leaving little to nothing for repairs, even the slightest of issues.

We have a solution for this - we offer pre-sale renovations with zero out-of-pocket costs.

Mortgage Rates/Market: Mortgage rates are still savagely high. We've been working on something behind the scenes. We developed this program as we were raising our investment fund. The goal was to create something analogous to a homebuilder's preferred lender program which enables the builder to offer rate buy-downs or design studio credits. We have tested this program out with several of our buyers, and the feedback has been highly positive. If you're interested in learning more, please reach out.

We also offer this program to buyers of our listings, even if they are working with outside agents. This creates an additional incentive for potential buyers of our listings to choose our listings.

Commercial Real Estate (CRE): This month I wanted to highlight a transaction that was completed by a joint venture between two developers I used to work for, Shopoff Realty Investments and Lennar. The JV acquired the Amway South Campus in Buena Park, CA, for $60 million, with plans to redevelop the nearly 14-acre property into townhomes. The site includes two connected buildings totaling 370,000 square feet, currently occupied by Amway Corp. As part of the deal, Amway will enter into a 24-month sale-leaseback, allowing the new owners to generate short-term income while they work on securing entitlements for residential redevelopment.

JLL Capital Markets arranged $49 million in a two-year, fixed-rate stretched senior financing on behalf of the joint venture.

This deal is a good example of a "covered land play"—a real estate investment strategy in which a developer purchases an income-generating property with long-term redevelopment plans. The existing income (in this case, from Amway’s leaseback) helps offset holding costs. It makes it easier to secure financing, as the asset generates cash flow during the planning and entitlement phase. This approach enables the developer to leverage debt more efficiently, reducing upfront equity requirements while working toward a higher-value use of the land.

Macro Observations: It would be malpractice not to dive into the tariffs that are supposed to be implemented tomorrow.

As of writing this (3/30), the planned tariffs include:

1. Reciprocal Tariffs - These tariffs aim to match the import duties that these countries impose on U.S. goods.

2. 25% Tariffs on Mexico and Canada

3. 25% on foreign-manufactured automobiles and auto parts

4. 25% Tariffs on Countries Importing Venezuelan Oil

5. A to be determined tariff on the European Union

Taking a quick step back - basically

Tariffs get a bad rap - and that is not necessarily fair. We learned firsthand during the COVID-19 pandemic that there are certain things, for national security reasons, that we need to be able to manufacture (at least in a limited capacity) in the United States; medicines and steel are common examples.

Every country in the world has some form of tariffs, which demonstrates that some level of tariffs on at least some industries is a good idea.

However, widespread significant increases in tariffs have the very real potential to shock the system. Don't believe me? Just watch the stock market when tariffs are discussed.

What is challenging about the tariffs discussion is the level of uncertainty regarding if, when, on what, how much, and to whom tariffs will be levied. Even as I am writing this, I'm dreading what seems to be an inevitable change in the proposed tariffs.

Recession probability for the next 12 months is now 35% (↑ from 20%)Recession probability for the next 12 months is now 35% (↑ from 20%)Recession probability for the next 12 months is now 35% (↑ from 20%)Investors and businesspeople dislike uncertainty because it hinders effective planning, forecasting, and resource allocation, thereby increasing risk. I expect stock market volatility, mainly, to persist for the foreseeable future.

I hear two competing explanations (at least two that give the administration the benefit of the doubt) for how the tariffs are being rolled out.

1. 4d chess - the administration is creating leverage out of thin air to negotiate better deals for the American public. Ultimately, where we end up with tariffs will be significantly less dramatic than the current proposal, you know, the Art of the Deal.

2. On-shoring manufacturing - the tariffs are being implemented, and they will be significant enough to force companies that want to sell to the American consumer (which is almost everyone) to manufacture their goods in the US. While on-shoring manufacturing has obvious benefits for specific sectors of the American workforce and the environment, it will result in significant near-term costs for American consumers.

Goldman Sachs published a research paper over the weekend in response to expected policy changes from the administration. The main takeaways from their paper were:

Core PCE inflation forecast for year-end 2025 is now 3.5%
Q4/Q4 GDP growth for 2025 revised down to 1.0%
Recession probability for the next 12 months is now 35% (↑ from 20%)

The main driver of the revision in their estimates was the reciprocal tariffs, as opposed to the previous assumption of targeted tariffs. The only thing that I am sure of is that nothing is certain, and the administration has shown a willingness to change course, so we can likely throw this entire section out because by the time this newsletter is published, our tariff policy will likely be different.

What's The Good Word: This month, I wanted to delve specifically into the California economy. California currently ranks as the 5th largest economy in the world. In many respects, California's economy drives a significant portion of our nation's economy. It's tough to have a booming US economy and a slumping California economy.

Early in the month, we posted a job opening for a role supporting our property management company, and I was immediately inundated with inquiries. The sheer volume of outreach was overwhelming, but more than that, the caliber of people who reached out was incredible; many of them had just been laid off from seemingly well-paying jobs.

This got me thinking, how is California doing right now? This may not come as a surprise to you, but it doesn't appear to be doing very well.

California reported zero net job growth in January 2025, maintaining the state's position with the second-highest unemployment rate in the nation. January marked the 13th consecutive month with over one million Californians out of work.

Rob Lowe and Adam Scott, yes them, had an interesting discussion on how no one shoots TV and Movies in California anymore (it starts at 4:46). The conversation starts out be Rob Lowe explaining how it is cheaper for them to fly 100 people to Ireland to shoot his show The Floor than it is to shoot it in Los Angeles.

The entire conversation is depressing, but it's just one example of how complicated our operating environment in the State has become and how it impacts our economy. I'm personally devastated by this, as we completed construction of four build-to-rent townhomes in Hollywood.

Speaking of building, how many permits do you think have been issued to rebuild homes from the LA fires? The answer is 3.

LA has issued THREE building permits since the fires started in the first week of January. Remember, this was an expedited process.

So many of our challenges are self-imposed. We need to start taking State and Local governance seriously - did I mention I'm running for Costa Mesa City Council?

Project Updates: We have several active projects; here is a quick update on one.

Bucknell, Costa Mesa: We just bought deal 3 for our fund. This one is a quintessential...THE ugliest house on a GREAT street. The street is killer. Treelined, and a whole bunchof upgraded homes.

The home has an expanded floor plan, but the original layout wasn't optimized for how people live now. We will completely reconfigure the interior layout, upgrade the home's systems and modernize the home's aesthetic design.

Thanks again for reading, and I would like to thank our agents and property managers who provide valuable insights from their day-to-day in the field. Without them, this email wouldn't be very useful or interesting.

If there is anything you need: vendors, lenders, or others, please let me know. We have an extensive network of the best and brightest in the industry.

I geek off this stuff; if you want to grab a coffee or chat about anything related to real estate, the market, or investing, please do not hesitate to reach out.

If you don't want to receive these updates in the future, please smash the unsubscribe button below. No hard feelings; I do it ruthlessly. Lastly, if you found the above informative, please share it with a friend or drop me a line.