📢Good morning — today’s Signals are brought to you by CRE360 Signal™.
The U.S. consumer economy is sending mixed but revealing signals.
Retail is weakening, especially in discretionary categories, while housing is not strong — but stabilizing in an early, uneven recovery phase driven by large national builders.
This divergence now shapes CRE underwriting across retail and residential asset classes.
📌 Home Depot & Retail Bifurcation
Home Depot cut 2025 guidance after Q3 revenue fell 3.4% YoY to $36.4B. Comparable sales dropped 3.1%, showing softer big-ticket spending and reduced project activity.
This isn’t a collapse — but a meaningful signal that discretionary retail is under strain.
Lenders are already pricing this shift:
spreads on conduit loans for discretionary-anchored retail have widened 15–25 bps since Q2.
Meanwhile, necessity-anchored centers remain stable with steady rent collections and consistent foot traffic.
Why It Matters
Retail risk is migrating.
It’s no longer a “retail sector” story — it’s tenant category selection.
Big-box discretionary anchors face pressure; necessity retail continues to behave defensively.
📌 Residential Construction: A Controlled, Measured Pullback
Housing starts fell to 1.31M SAAR in August (–6% YoY).
Single-family starts are down 4.9% YTD, and multifamily starts have dropped nearly 20% YoY.
Permits are lower by 11.1% YoY, reflecting financing and cost constraints.
But the system is still moving:
611,000 single-family homes are under construction
Completions remain above 1.6M SAAR
Builders’ approach is selective, not panicked
This is not strong housing.
It’s steady housing, held up by backlog and disciplined pacing.
Why It Matters
Construction is cooling without breaking.
Builders are finishing the pipeline and recalibrating new starts — a sign of stabilization, not retreat.
Large operators with balance-sheet depth can continue building; smaller builders feel the pressure.
📌New Home Sales: Momentum Rebuilds, Driven by Large Builders
New home sales rose to 800,000 SAAR, up 20.5% MoM and 15.4% YoY, tightening months’ supply from 9.2 to 7.4.
Prices held at $413,500, supported by incentives, smaller models, and availability.
The structural shift is clear:
the top 100 builders now control 73% of the market, with D.R. Horton and Lennar capturing 25%.
Why It Matters
The new-home market’s improvement is real — but narrow.
It’s powered by institutional builders with capital, land control, and incentive tools.
This is not broad housing strength, but builder-driven recovery inside a market constrained by locked-in resale supply.
Retail and housing aren’t telling opposite stories — they’re revealing how households make decisions under pressure.
Discretionary retail weakens first, hitting tenants with less durable spending.
Housing stabilizes earlier, but only because large builders can offer incentives and because resale inventory is structurally locked by sub-4% mortgages.
This cycle rewards:
Necessity retail over discretionary anchors
Institutional builders over capital-constrained operators
Markets with tight supply over markets with price-driven growth narratives
The operators who price risk based on household behavior, not outdated sector assumptions, will navigate 2026 more effectively.
🔭 Outlook — What’s Next
Q4 earnings from major retailers and builders will clarify demand resilience.
Expect wider spreads between discretionary vs necessity retail CRE.
Watch builder land buys — they’re the earliest indicator of future supply.
Builder sentiment and mortgage rates will determine the slope of recovery.
Multifamily correction may weigh on some for-sale markets but won’t unlock resale inventory.
