My metro screen keeps putting two markets on top that every broker I talk to says to skip

On the ground the tell isn't the advertised concession, it's whether the leasing office is still offering it in week three of a tour or leading with it on the phone. When they lead with it, the property is behind budget and everyone within a mile is going to match. When you have to ask twice, it's on its way out.

Also worth calling three properties in that node as a prospect, not as a buyer. Ten minutes each. You'll learn more about where effective rent actually is than the rent comp grid in any OM.

@bramble your permit number and your delivery number are measuring different years and I think that's the whole confusion. Permits down 45 percent tells you about units hitting the market in 2027. The stuff that's giving away eight weeks free right now got permitted in 2022 and 2023 and it's still leasing up. So both things you're being told can hold at once and neither one settles the timing question.

What I'd want is a quarter by quarter delivery schedule for a three mile ring, not the metro. That's the number that decides if you're competing on price for the next eighteen months.

A screen ranked on deliveries as a percent of existing stock will keep surfacing recovering Sun Belt metros, because those are the markets that took the supply wave hardest and are correcting hardest. The output is doing what you asked of it.

Whether it answers your question depends on one assumption: that supply is spread evenly enough inside the metro for the metro-level ratio to describe the submarket you'd actually buy in. It generally isn't. Deliveries cluster in a handful of nodes, so a metro running 3 percent of stock can contain submarkets at 9 percent and submarkets at zero. Rerun the same ratio in a three mile ring around each candidate and the ranking will move, sometimes hard.

The permit collapse and the concession overhang operate on different clocks. Pipelines contracting 40 to 50 percent shows up in deliveries roughly eighteen to twenty four months later, which is the 2027 occupancy story. What sets rent this quarter is what's in lease-up now. So your brokers can be right about the next four quarters while your screen is right about the four after that. The question is what you're paying for the gap between those, and whether your hold is long enough to see the second one.

On basis: compare like to like. A builder's $235k should include land, financing carry, and impact fees, and your $165k should be adjusted for the capital the asset needs to compete with that product. Sector-wide, values sit 20 to 30 percent under the 2022 peak while replacement cost is up close to 39 percent since 2020, which is where the gap comes from. That gap is a reason to look, not evidence the asset underwrites.

Underwrite the forward NOI on re-based insurance and taxes, and confirm current financing terms in writing with your lender before you lean on them.

Your builder quote at $235k, ask them what that assumes for insurance during construction and how old the number is. Costs on the trades side stopped climbing at the 2021 pace but they didn't come back down, and the guys quoting me now are pricing labor availability more than materials.

Following this because I'm on the other end of it. I have money and no operating capability, and every version of this exposure I've been shown is a blind pool where somebody else picks the submarket. @bramble is doing the ring analysis himself, which is the part I'd be paying a fund 1.5 percent to do and would never actually see the output of.

I'd throw out the trailing permit variable entirely, or at least stop ranking on it. It's directionally true everywhere right now, so it doesn't separate your fourteen metros, it just adds noise that correlates with the delivery ratio you already have.

What separates markets is absorption per delivered unit and where job growth actually sits relative to the node. I'd rather own at $175k a door in an infill pocket with three competing projects than at $155k on the edge with nine.

On your decision, touring two months in two metros isn't a commitment. The mistake would be moving to metros four and five because they feel safer while paying 15 percent more per door for a smaller basis gap. If the duller markets have less forward supply and you underwrite them at the same exit cap, show me that comparison side by side. My guess is the gap narrows a lot once you re-base taxes on a sale in Texas.

The bit that stuck with me is @thatch calling the leasing offices as a prospect. That's free and it's better data than the screen.