StepStone Real Estate Spring 2025 House Views

Real estate markets are shifting from a risk-on approach at a perceived market bottom to caution, as participants evaluate the impact of tariffs and other US policy changes. We are effectively entering a new cycle. The previous cycle ended with volume recovering, reasonable fundamentals, some elevated carrying values, many balance sheets still over-leveraged, and a rising pace of workouts.

Now, amid near-record-low consumer confidence, expectations of slower growth and increased inflation are growing globally, particularly in the US. Most central banks had shifted toward easing, but inflation may challenge that approach. Long-term interest rates remain near historical averages, having recovered from the extreme lows of the COVID period. Volatility is elevated and may persist until new policies and their implications become clearer.

Periods of market turmoil call for a return to fundamentals. In real estate, this means focusing on income, identifying opportunities, and ensuring thoughtful portfolio diversification.