Notes from the CCIM Forum: A Senior Investor's Read on Today's Market

The CCIM Spring Forum brings institutional investors, advisors, and operators into one room each spring to compare what's actually moving in their portfolios. This year's gathering in Philadelphia gave us a notebook full of things worth passing along, and we'll be working through them over the next several weeks.

We're starting with the keynote: Michael Litt, a global investor whose hour-long talk traveled from 700 BC to last quarter's earnings reports. His underlying argument was simple. Today's market isn't behaving the way most economists expected, the policy backdrop is genuinely unusual, and the temptation to react is the most expensive instinct in the room.

Here's what stayed with us, translated for clients and friends of HAYLEN in Silicon Valley and Southern California.

1. This is not 2008.

That was Litt's anchor point, and it's worth repeating because so many people still feel the gravity of the last crisis when they look at this one.

The numbers don't support the comparison. US banks are sitting on Tier 1 capital ratios above 14%, which is, by any historical standard, over-capitalized. Single-family mortgage delinquencies are near historic lows, even lower than the 2004 to 2006 stretch. Consumer debt service sits near 5.5% of disposable income, also historically low.

That doesn't mean nothing can go wrong. It means the system that broke last time has been rebuilt with much more cushion. The risks today are real, but they live in different corners of the economy.

2. Existing homes are now worth more than new homes. That's never happened before in US history.

This was the most striking residential takeaway of the morning. To keep new construction "affordable," builders are quietly cheapening the product. Smaller lots. Smaller garages. Fewer outlets. Lower-grade finishes. Less concrete. Existing homes, especially the well-built stock that defines so much of Silicon Valley and SoCal, haven't been re-engineered downward. They still have the lot, the basement where applicable, the higher-spec materials.

By Litt's math, existing homes are currently selling at roughly 60 to 70 percent of what it would cost to build them today. He thinks that gap closes toward 80 to 85 percent over time as construction inputs settle in at elevated levels.

What that means in practice depends on where you sit. If you own, the asset you already hold is, in many cases, more valuable than the new construction competing against it. That's a position of strength, not a reason to chase the market. If you're buying, the case for a quality existing home, on replacement-cost math alone, is stronger than it's been in decades. If you're selling, your home's story is no longer just location and condition. It's also: what would it cost to build this from scratch today? That belongs in the marketing.

3. Affordability isn't one number. It's three.

A theme Litt kept circling back to. People fixate on the mortgage rate and miss the rest of the picture. He breaks affordability into three components.

Construction costs are still elevated. Labor has run faster than wage inflation. Cement and concrete sit well above 2019 levels. Electrical components are similarly stuck.

Carrying costs have moved meaningfully. Property taxes are part of that, but insurance is the bigger story.

Mortgage rates matter, but only as one input among three.

In the mid-2000s, a 5% mortgage rate was enough to put the average home in the "affordable" band. Today, because of the other two components, you need closer to 4%. Florida is the cautionary tale. Insurance costs alone have rewritten the affordability equation there.

For our markets, the practical takeaway is that buyers waiting on a single number are probably waiting on the wrong one. The full cost stack is what actually moves a deal.

Rates change daily. Talk to your lender about what the full monthly carry actually looks like.

4. Commercial real estate is in a depression, not a recession.

Litt's word choice was deliberate. Under-construction has collapsed from roughly 70% of trend to about 25%. Construction costs sit roughly 40% above 2019. Rents, particularly in office, haven't kept up. The math doesn't pencil for new builds in most markets.

His view is that this is a long road. Cement, interest rates, rents, and construction costs need to meet. He doesn't see them meeting before the end of the decade.

For commercial owners and investors in our markets, the takeaways are familiar but worth saying plainly. Holding well-located, stabilized assets is the most defensible position right now. The interesting opportunity is value-add: acquiring quality assets where the equity and mezzanine layers have been impaired and senior bank debt is willing to extend. New ground-up development in most asset classes is hard to justify on today's cost structure, and that scarcity is, eventually, supportive of existing inventory.

5. The risk worth watching is private credit, but it isn't a system-breaker.

Litt was direct about where stress is showing up. Not banks. Not consumers. Private credit funds, especially those that lent heavily into 2021 to 2023 vintage SaaS and private equity deals. Some funds have already begun gating redemptions. He called it the canary in the coal mine.

His read: the private credit pullback isn't, on its own, large enough to take the broader system down. But it does pull liquidity out of certain corners of the economy, and at the margin it reduces the value of correlated assets.

The HAYLEN translation is simpler. If you've been told private credit is a money-market substitute, this is a good moment to have that conversation again with your advisor.

This is not financial advice. Just a flag worth raising.

What we're taking from the room

A few things settled in for us after the keynote.

The market isn't behaving the way most economists predicted because the policy backdrop is genuinely unusual. Confusion is a fair response. Reaction usually isn't.

The fundamentals beneath residential real estate in our markets remain structurally supportive. Quality existing homes are doing the work that new construction currently can't.

For most clients, the right posture is patience with a plan.

This is the first in a series of HAYLEN field notes from Philadelphia. Future posts will cover the capital markets panel, the residential outlook from NAR's advocacy team, and what we heard about Sun Belt dynamics versus our coastal markets.

If you'd like to talk through what any of this means for your own plans, we're here for it.