The First Domino? Investors Pull Billions as Real Estate Bank Runs Return

0:04We are heading into the heart of the spring selling season. Normally, a time where things start to pick up, people start to come out of the woodwork, and the market gets a little bit of life back into it. But with everything going on here in 2026, is that going to happen this year? I'm Dave Meyer, here today with Kathy Fecky, Henry Washington, and James Daynard. And today, we're going over the latest headlines, the most recent data and news to help you make sense of what's actually going to happen this spring selling season. You're listening to On the Market. Let's get into it. James, Kathy, Henry, good to have you all here.

0:40Henry, how you doing, man? I'm fantastic, man. Great to be here, as usual. James, how are you? I'm good. Just got landed back in California. Go check on the flip. See how we're doing. Is this the like$10 million flip? It is, and I just want to get it done. I bet. I would too, with that holding cost. That holding cost, and hopefully that check at the end of the day. You know what? We're going to do a case study, cash on cash return. Henry, I want you to bring in a deal, and I'm going to bring in that deal, and we're going to show how much more money Henry's making than on a bigger flip. Henry might be making more cash-on-cash return, but I'm sure you won't trade checks with him, James.

1:18I guess we will see. For the record, if you want to trade checks, I'm in. Kathy, how are you doing? Well, I'm almost recovered from my daughter's trashy Vegas wedding, which was so fun, Elvis and all. But yeah, almost recovered. My voice is almost back. It was awesome. You sound good. You look good. It's all good. And congratulations again. Thank you. Well, we've got great stories for you to talk about what's going on in the housing market. I'm actually going to start today because I signed on to the news this morning and saw that mortgage rates hit a sixth month high. We're actually at about 6.4%.

1:58Ten year is going up today. So next week, the week the show actually airs, probably going to be up around six and a half again. I'm just going to say it just sucks. It made me really mad. I'm not happy about it. But I just wanted to ask you guys, like, how do you think this is going to play out? Because I was sitting here literally three weeks ago, seeing rates, touching fives for a second, thinking maybe we would see a breath of life back into the market this spring. But I kind of feel like this is going to send us maybe even in the opposite direction, even though we're seeing home sales at some of the lowest points we've seen in a decade.

2:35I feel like it could get worse. I'm curious what you guys are thinking. I mean, we definitely learned that real estate is extremely sensitive to rate changes. And things really picked up. We saw inventory levels drop when rates came down. Now they're going back up. So that probably means we're going to see increased inventory. those few hundred thousand people that were able to finally afford to buy now can't. They maybe waited thinking, oh, rates are going to go down further. I remember on the show, we're like, don't think that way. You have no idea. And here we are. You know, I think it's definitely going to slow things further down for this summer.

3:15This summer could be a rough summer for sales. But right now, there's a lot of activity still. I mean, we just sold three homes in the first couple of days. And buyers, they're still a little waffly. First one hooked, kicked off. Then we had two more offers come in right after that. So it's definitely moving right now. I think anything that you do on a disposition for the next 12 to 24 months, you really got to do it based on market timing. You got to hit that early spring market because whatever's going on with rates, the demand is way higher than the rates affecting. Just so everyone knows, we just saw a print the other day that it was the lowest new home sales for new construction that we've seen since 2022.

3:56It's not crazy. It's back to normal levels that it was in 2017, 2018, but we have a lot more inventory and building right now. So we're just going to be sitting on a lot more inventory there. We also, existing home sales were below 4 million in January. I think they're going back below that. To me, it's just a dramatization of sort of what we've been talking about, which is that It's going to be tough, but there's going to be more options for buyers. I think for anyone who's flipping, selling is going to get a little bit scary right now. But for buyers, I think that the amount of distressed sellers where people are just going to get frustrated in the spring and the summer is just going to go up.

4:36So as a long-term buy and hold investor, it is frustrating, but I'll take deal quality over a half a point on mortgage rates all day. And I think that's kind of where we're heading. No, I think that's important for people to think about though. Like what Dave just said is deal quality matters more than a half point. If you can pick up a 5%, 10 % discount in two years, you're way ahead of everything. Yeah. And so just what are you buying? What's the long-term performance? Not just what does it feel like today? I also think it's important that buyers have good representation because yes, rates might have gone up, but because of the lull it might create in the market, it gives you the opportunity to negotiate more.

5:17And so yes, you can ask for these concessions. You can ask for rate buy downs or you can ask for the seller to compensate somewhere else. So knowing what's happening in the market and understanding supply and demand in your market will help you get better deals even when rates start to go up. It's just you just have to be smarter now than you did previously when you buy a home if you truly want to get into a home at a reasonable price or be able to afford the home after you close on it. 100%. I think patience is the name of the game. It is so frustrating. You know, every time it feels like we're getting some momentum in the market back, even just a little bit, the pendulum swings back in another direction.

5:59And it's just uncertain. We don't know. They could go higher. Like, it's just super hard. So I think just sticking to the fundamentals is the name of the game right now. I mean, you got it. Yeah, we don't know. No one's going to be able to predict this one. And I know, Dave, you say you're frustrated and it makes you a little mad. But you also did tell everyone several times that you think rates are probably going to go up. You're just right. Yes, I don't like being right on this one. But yeah, I think it's just going to continue this way, though. There's just too much uncertainty. And bond markets and mortgage rates don't like uncertainty.

6:37So we're going to continue to see these swings. But, you know, I take solace, I think, as a long-term investor that we're going to be able to see some good deals. And that will be good in the long run, even though I was, you know, weren't y 'all hoping 2025 was just like the year we had and then 2026 was going to get better? But like that might not be the case. All right. Well, that's our first story today. Henry, you got something a little more uplifting for us, please? I mean, a little bit. a little bit. It's not bad. We're giving the audience the real stuff today, not the feel-good stuff. Yeah, it's getting real.

7:17Well, I'm bringing an article from the New York Times. So Duracell's former global headquarters in Bethel, Connecticut, it once housed about a thousand workers. It's on 43 acres, and it's now down to about 20 researchers that are living and working in the area. And what that's caused is the city to suggest that this current corporate headquarters be converted to housing. And it's sparked interest among this trend of, is there an opportunity to turn corporate buildings into affordable housing? And I said this maybe a year or so ago, I started saying this. I said, whoever figures out how to take commercial office space and turn it into housing is going to make a fortune because we have a surplus of commercial office space and we have a shortage of housing in most markets.

8:12And what piqued my interest about this article, there's no developer that has picked this up and decided they want to do the project, but it's the city that's proposing it. So they're basically saying we will help a developer by removing some of the roadblocks it takes to do this if they want to take on this project and turn it into housing. And I think that this could be the start of something that catches on nationally if a developer picks it up and it actually works out. Doesn't this feel like the unicorn that we've been talking about now for two years? Yes. Like, we got all these things, we just don't know how to execute on it because they're not wrong.

8:50Cutting into concrete and moving utilities around and the permitting, it's expensive. But, you know, I keep coming back to like, are they just thinking about this wrong? Like they have all these modular homes, right? Like you can buy modular homes, offset, they bring them on, they screw them together, they're wired, they're plumbed. Why do they have to tear these buildings apart? Why can't they just insert housing where things are elevated to where they don't have to trench up the slabs? I'm like, why are they worrying about all these things when there's a workaround every time? Like you got tall ceilings, you got the plumbing, why can't you just bring the house in slap it together put it in screw it in make a hallway like it just doesn't make any sense so i think i think once people start looking at it in an efficient way or there's some serious tax credits which a lot of these cities can't even afford but it could be done everyone's just looking at it the wrong way it's like you're going to the most expensive plan come up with a more thriftier plan and then this could really get some legs on it i just i'm kind of with james though i feel like there has to be a way to do it efficiently like Not every building, of course, but I saw some study that said it was like 10 % of commercial buildings would be eligible for something like this.

10:01I just have to believe it's higher if you just get creative. If you get engineers on it, if you get architects on it, you could figure this out. But to me, I think the big story here is that the government is supporting this. And I think that's the only way it's going to make sense because it's too expensive for developers to go and do this on its own. Meanwhile, if you were to go and develop something from scratch, like the time for an environmental review, it's going to take five, six years. But if the government can fast track this or create tax benefits or incentives for this, I think that's better than tax incentives for new development in terms of just speed to market.

10:36You'd have to believe this can happen faster than new development, at least in most municipalities. Yeah, I agree with you. I think what's exciting about this is we could have a potential case study here that once done and if done successfully, other cities may get on board and say, oh, well, we've got this complex over here that's just been sitting there. Because what's happening and what's really affecting the cities is when these companies move out of these office buildings, they're losing tax dollars. I think it said in this article that they get about a million dollars in tax dollars from this building.

11:10And so it's a benefit to them to go ahead and make it easier for somebody to come in and maintain this building than for Duracell to just leave and there be nothing there. And it's just sitting in this as this vacant property. So the cities do have a monetary incentive because if office isn't happening and people are leaving these buildings or giving these buildings back, it does not benefit the cities from a dollar and cents perspective. So getting out of the developer's way or paving a path for developers to come in and then provide something that their community needs is both beneficial to the people who need housing, but also beneficial to the city and local government because now they keep tax revenue coming in.

11:52Yeah. Unfortunately, this also says 10 to 30 % of office buildings are realistically convertible due to a lot of reasons. But yeah. They need some Jimmy construction on this thing. Just float the plumbing. Just do it. Put your sewer lines outside the building. Box it in. Make it look nice. throw an accent on it. Then you put everything should be elevated like a basement back in the 50s. Like that's why they built them up. So you don't have to rip it. I think we should come up with a box we can build ourselves and we should sell these. There you go. Should we be talking about the fact that Duracell only has 20 employees?

12:30Right, there's a whole nother article we need to discuss here, but yes. Amazon batteries are killing Duracell. All right, well, those are our first two stories. Henry, that is uplifting. I mean, not for Duracell, but maybe this is a template. So I do think you are bringing some good news today. We do have to take a quick break, but we have two more news stories right after this. Most investors spend all their time talking about their high level returns, but that's not the number that actually matters. What actually matters is what you keep after taxes, and that's where multifamily real estate quietly stands out.

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14:59Welcome back to On the Market. I'm here with James, Kathy, and Henry sharing the latest news from the housing market and the economy. Henry and I have shared our stories. Kathy, what do you got for us? Well, you know, I'd really love to be positive, make this a positive show, but it's just not what it's going to be today, you guys. Nope. Sorry. This is from our buddy, Ken McElroy. He's the big multifamily guy, been around for a long time. Kiyosaki, invest with him, like you probably know his name. He came out with a blog called The Liquidity Problem. No one is talking about. Very interesting article.

15:34So what we do know is that after COVID, there was so much money creation, right? That was quantitative easing, they call it. And then the Fed announced, okay, we got to pull that back. And they did quantitative tightening to the tune of about 2.3 trillion pulled out of the financial system. That's a tiny bit from what was put into it. But it's super important to understand the manipulation of money in today's system. When you're flooding the market with money, like during COVID, that generally drives prices up because there's more money chasing deals. When you pull that money back out, there's just less money, right?

16:12And less access to it. And that is kind of the cycle that we've been in. So this kind of led to Blackstone saw a record redemption request of$3.8 billion from its fund. Investors basically trying to get their money back from these funds that they're in that basically lend money to commercial real estate investors. So bottom line, what this article is saying is there's less cash available, money being pulled out of the system and investors looking to get their money back, not so bullish on lending, right at a time when you have so many multifamily investors needing to refinance. They need the money, they need the lenders to come and bail them out, and that money won't be as abundant as it has been.

17:01So he sees this as more struggle for those multifamily operators who are in trouble needing to refinance now, those loans coming due. He says it's approximately$875 billion in commercial and multifamily mortgage debt to mature in 2026, and even larger waves in 27 and 28. So we'll see with the new Fed president how it's going to go. Are we going to have quantitative easing? Are we going to have quantitative tightening? But in this moment, it could get even more difficult for those in trouble trying to refi and at the same time opportunity for those looking for deals in multifamily. I just want to sort of give a little bit of background here.

17:42But basically, what Kathy's talking about is a problem, not just in commercial real estate. This is kind of a concern spreading throughout the economy that there is trouble in the private credit market. So if you look back at 2008, a lot of the trouble came from banks. And there was Dodd-Frank, a lot of legislation that made it harder and made more rules about who could lend to commercial real estate operators, but also just to businesses or anyone who needed money. Because banks couldn't make those loans, a lot of the money that is needed for these deals and for these businesses now comes from private investors.

18:18So this is what they mean by private credit. It's someone like me. I do private lending, but this is on a much bigger scale. So Blackstone does this. BlackRock does this. It's become a booming industry. Recently, a company called Blue Owl, which is a private credit company, was the first domino to fall. And there's a lot of fear that that shows problems in the entire system. So a lot of people are like, oh, if Blue Owl falls, I'm going to pull my money out of BlackRock. Merrill Lynch pulled money out of it. Jamie Dimon, the CEO of Chase, came out and said when there's one cockroach, referring to Blue Owl, there are probably more, saying that there's probably trouble in the system.

18:55And so that doesn't even necessarily mean there's bad loans in commercial real estate. There probably are. But it just means that the people who provide this money and this liquidity to the system might no longer want to provide money to the system. And as Kathy pointed out, that comes at a really bad time. It's nowhere near the size of the residential mortgage industry where even if there was a run on this money, it would not be like 2008 in terms of size. But with everything else going on in the economy right now, it does kind of just feel like it's one more thing that could tilt us towards a recession or create some problems in the stock market or in commercial real estate, as Kathy said.

19:32I mean, this is, if you want to know like what my late night can't sleep thinking about, it's private credit right now. This worries me a lot. Oh my gosh, I didn't know that. Wow. Well, yeah, that's why he says over the next 12 to 18 months, There's going to be some great deals in commercial real estate, specifically multifamily. And it's interesting that you said that. Yeah, there's so much regulation with banks, but not private credit. Exactly. So I don't know if that get regulated or if investors are just like getting smarter. That's what people are saying, Kathy, though. It's like it's totally unregulated.

20:03So no one has any idea the quality of these loans. They can all be garbage and no one knows. So like that's the challenge. And I think it's not just commercial. Like you could also see this in DSCR loans. Most of the money that DSCR lenders lend out come from private money. The other thing that you should know is that a lot of this private credit, they're actually money that they borrow from banks. So it could spread into banks. Like the whole thing is so convoluted. It's not that, you know, I'm looking at it and saying, oh, my God, it's so bad. It's that no one knows. And like just based on history, no one knows what's going on in the financial system.

20:38It doesn't usually end well. So it's just a little concerning. But it makes sense because some of the loans that were being made in multifamily, it's just like you scratch your head and say, would you do that? It was really coming down to 0 % financing or even more where you'd be able to borrow all the money to acquire the deal plus the renovation costs. I was a lender back in 2006 and I saw the crazy that was going on. A lot of that was private credit. It was banks too. It was everybody getting greedy. The only reason the banks didn't do it this time is they couldn't. Exactly. They can a little bit by investing in private credit.

21:17It's crazy. So when these redemptions come in, where does the money go? They're shifting it somewhere, right? They're taking it from one bucket, putting it in another, typically, unless they're burning through cash at a rapid rate. Sometimes when I think about these things, I'm like, well, where are they shifting it to? Are they chasing a higher yield? Because I mean, one thing I will say is that the hard money space is like at all time highs for like there's a lot of money available in hard money. It's like, are they shifting into a different type of loan or are they just getting out of the business all the way?

21:48I'll just tell you what I did because I pulled my money out of a private credit fund last week. I'm going on the bank run right now. I'm just going to sit on cash and wait till the deals get better. But it's different in real estate because I think it's like hard money is backed by a hard asset. A lot of these other private credit things, the Blue Owl, you look at these things that are sort of more part of the mean financial system. They're lending to software companies, which don't have any assets. And so I think that's why a lot of people are worried about that. So I don't know, James. I think it could go back into the stock market of people.

22:21I think people are going to be holding on to cash, if I had to guess. Mattress money. Mattress money's back. I think it is. This article does go on to say that BlackRock had to cap withdrawals from its$26 billion lending fund after investors tried to withdraw 9.3 % of the net asset value. And Blue Owl permanently ended quarterly liquidity payments in one of its, like you said, that's the one that probably caused all the dominoes to fall. So yeah, I think they just say, yeah, you don't get your money back. You don't get to withdraw anymore. Yeah, that's why I took my money out of one. It's not because that fund was doing bad.

22:58I was just like, it's like a bank run, right? It's like if everyone else spooks, I'm going to be the first to spook. I don't know if that's a good way to think about it, but that's what I'm thinking. But I do think that means more deals, Kathy. But the thing that worries me about multifamily is when liquidity tightens, like you're saying, it's like the plumbing and the financial system, there might be good deals, but no one's going to lend on them. Like that's going to be the challenge. I think this is like what was going on in 2010, right? Pricing was great, but it was hard to get money. I think banks and private lenders have learned their lesson and it won't be as tight.

23:30And again, the private credit market is much, much smaller than the mortgage or the MBS market or the CMBS market. So it's not the same scale, but it is, you know, there are trade-offs with these kinds of things. Makes sense. All right. More uplifting news for everyone. Thank you. Thanks, Kathy. We got one more quick break, but we'll be back with James's headline right after this. Here's the truth about passive investing. If the strategy isn't right on day one, the returns won't save it. Multifamily real estate offers structural advantages. Many investors are overlooking, including depreciation that can help offset taxable income while cash flow continues.

24:08BAM Capital builds its investment with that reality in mind. They are focused on solid operators, tax efficiency, and long-term performance. For investors who want real estate exposure without being landlords and who care about consistency over hype, this is a smarter way to allocate capital. Learn more at biggerpockets.com slash BAM. Most investors spend more time chasing deals than reviewing their insurance. But a quick coverage check can be fast, easy, and one of the smartest ways to protect and even improve your property's cash flow. As the months get colder, frozen pipes, icy walkways, and seasonal wear and tear can increase the likelihood of claims.

24:46And traditional insurance companies aren't always built to handle these claims quickly or smoothly. That's why more real estate investors are turning to Steadily. They focus exclusively on landlords, whether it's a single family rental, a BRRRR builder's risk policy, or midterm holiday guests. You get fast quotes, flexible coverage, and protection for property damage, liability, and even loss of rental income. Now is the perfect time to review your rates and coverage. Get a quote in minutes at biggerpockets.com slash Landlord Insurance. Steadily. Landlord Insurance designed for the modern investor.