Location Strategy Chartbook 05.03.25

Nonfarm payrolls increased a seasonally adjusted 177,000 for the month, slightly below the downwardly revised 185,000 in March but above the Dow Jones estimate for 133,000.

The unemployment rate, however, stayed at 4.2%, as expected, indicating that the labor market is holding relatively stable.

Average hourly earnings rose just 0.2% for the month, below the 0.3% forecast, while the annual rate of 3.8% also was 0.1 percentage point less than expected

A broader unemployment gauge that includes discouraged workers and those holding part-time jobs for economic reasons, or the underemployed, edged lower to 7.8%. The labor force participation rate ticked higher to 62.6%.

Heather Long, WAPO: Trump's federal government job cuts are starting to show up in the data.

• 8,500 federal gov't jobs lost in April

• 3,800 in March

• 8,600 in February

• More expected in the months ahead

• Note: This data excludes postal service workers

The US economy began 2025 with a contraction — the first since 2022 — driven almost entirely by trade. US businesses rushed to frontload imports before President Trump’s tariffs kicked in; the external deficit ballooned as a result; and that counts as a drag, the way GDP is calculated.

A long-run analysis suggests trade is the most volatile — as well as being the smallest – of the four components that add up to what’s known as the demand-side version of GDP. That’s an effort to measure the economy based on who purchases the goods and services it produces. Broadly speaking there are only four possible buyers: US households, US businesses, the US government, or foreigners.

US retailers expect a drop of 20-30% in imports in the coming months, writes Patrick Creuset, senior analyst for European transport, infrastructure, and construction sectors at Goldman Sachs Research, in a report. A decline of that scale in US import cargo volumes forms Creuset's base case, and it assumes tariffs stay mostly as they are, with China remaining as the focus, although that is far from certain.

Chinese exports to the US, worth more than half a trillion dollars last year, are suddenly hitting a wall of tariffs imposed by the White House. So what happens when that tide rebounds on the world’s other major economic area, the European Union?

Bloomberg Economics. Jamie Rush, chief European economist, has tried calculating the fallout on inflation in the region from Trump’s sudden jolting of global trade.

The model he has created suggests that 85% of Chinese goods exports to the US will halt, and that only a third of that will then flow into alternative markets. But proportionately, that’s still $75 billion more imports into the EU.

Freddie Mac reported that the Single-Family serious delinquency rate in March was 0.59%, down from 0.61% February. Freddie's rate is up year-over-year from 0.52% in March 2024, however, this is close to the pre-pandemic level of 0.60%.

Freddie's serious delinquency rate peaked in February 2010 at 4.20% following the housing bubble and peaked at 3.17% in August 2020 during the pandemic.

Fannie Mae reported that the Single-Family serious delinquency rate in March was 0.56%, down from 0.57% in February. The serious delinquency rate is up year-over-year from 0.51% in March 2024, however, this is below the pre-pandemic lows of 0.65%.

The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59% following the housing bubble and peaked at 3.32% in August 2020 during the pandemic.

WSJ: Would a $5,000-off voucher entice you into buying a new home?

Builder Taylor Morrison launched an email campaign this spring sending this offer to prospective house hunters. The discount is meant to offset President Trump’s tariffs, which are expected to push up prices for new homes soon. It is the latest profit-sapping endeavor that American home builders have resorted to in a sluggish market.

The spring buying season, when builders make close to 40% of their annual sales, is halfway over. Based on earnings released by listed builders, demand has been disappointing. America’s biggest builder, D.R. Horton, said revenue fell 15% in its latest quarter compared with a year ago, while PulteGroup’s sales dropped 2%.

This is before the pain of tariffs is really felt. Builder LGI Homes said this week that its suppliers sent notice that they plan to raise prices soon for some components imported from China. Builders rely on Chinese manufacturers for white goods, parts for heating and ventilation systems and porcelain fittings.

D.R. Horton and Lennar told investors that their building-materials providers are holding fire for now, but they expect import levies to push up construction costs later this year. Builders think new-home prices will rise by anywhere from $5,000 to $15,000 as a result of the trade war.

The timing is terrible. Affordability is already so stretched that builders have been offering sweeteners including mortgage-rate buydowns, price cuts and design upgrades to get deals over the line. The number of completed but unsold new homes sitting on their lots has reached the highest levels since 2009.

Electric car maker Tesla leased two massive warehouses near Houston as part of a nearly $200 million plan to build what it calls a 'megafactory' for manufacturing a type of battery storage system called a 'megapack.'

Tesla leased the 1 million-square-foot Building 9, a warehouse built in 2022 at the Empire West Business Park in Brookshire, on Houston's western outskirts, in March.

The automaker founded by billionaire Elon Musk also signed a deal that month for Building 10, a 616,000-square-foot warehouse under construction.

Tesla expects the project to bring about 1,500 advanced manufacturing jobs to the area.

The firm announced in 2021 that it would move its headquarters from California to Austin, Texas. Since then, the car maker has been on a building and leasing spree across Texas.

Jeremy Lumbreras and William Carpenter represented the landlord, Stream Realty Partners.

Blackstone Mortgage Trust has ramped up its commercial property loans after seeing an influx of capital from debt repayments and new capital raising.

The publicly traded lending arm of private equity giant Blackstone originated $1.6 billion in new loans in the first quarter. That was the highest level of quarterly originations in more than two years, and the firm currently has another $2 billion in originations set to close.

The burst of deals follows receiving $1.8 billion in loan repayments and raising $1 billion in new capital in the quarter.

While tariff policy has created greater uncertainty and a slowdown could weigh on the broader market over time, Keenan said that real estate values have already reset lower and set up an opportunity for investors.

“For well-positioned investors, volatility creates opportunity, and here at [Blackstone Mortgage], we are capitalizing in a turbulent market,” Keenan said. “We provide certainty and can grow our share while benefiting from the incrementally better risk-adjusted returns available as the market retrenches and our large-scale global origination footprint gives us a tremendous advantage in identifying the most compelling investment opportunities as the market evolves.”

With a current loan receivable portfolio of $19 billion, Blackstone Mortgage is looking to raise that balance after repayments on outstanding loans. The lender averaged about $750 million in repayments each quarter last year and received $200 million in the first quarter.

The inflow of capital from repayments added to the lender’s current balance of $1.6 billion in lending liquidity.

About 90% of Blackstone Mortgage's loan origination activity this year has been on multifamily, industrial, and self-storage properties. The office sector has become less of a focus for the firm.

“Our capital allocation strategy has translated to improved credit composition on our overall asset base,” Keenan said. “Our portfolio is 95% performing today, up from 88% at the trough. U.S. office exposure, once nearly 40%, is down to just 21% today, while multifamily industrial and self-storage are now nearly half.”

Last month, Blackstone Mortgage provided a $97 million loan for the refinancing of the 216-unit 7600 Broadway apartments in San Antonio, according to a commercial real estate collateralized loan offering. The bond deal raised $1 billion for the firm.

The company could return to the bond market again this year for an additional capital raise, Keenan said.