When Sellers Retreat and the Fed Holds: Why Underwriting Discipline Wins This Cycle

5.8% of U.S. home listings were pulled off the market in April 2026 — the highest delisting rate since the pandemic shutdowns. Meanwhile, markets are pricing a 96-98% probability that the Fed holds rates steady at its June 16-17 meeting, with nearly 70% of economists now expecting no cuts for the remainder of the year. In this episode, Louis Hiza breaks down what these two signals mean for real estate investors — and why the operators who win this cycle will be defined by the quality of their underwriting, not their willingness to wait for better conditions. Topics covered: 

1. What the 5.8% delisting rate actually signals about inventory quality and seller motivation
2. Why the Fed hold is the backdrop, not the story — and what it means for financing assumptions
3. The most common underwriting mistake investors are making right now (building rate cuts into the base case)
4. Four specific disciplines for underwriting in a stable-rate, delisting-heavy market: DSCR stress testing, expense separation, local market specificity, and walk-away pricing
5. How the supply constraint thesis (construction starts at a decade low, input costs +6.2% YTD) creates a structural tailwind for existing asset holders
6. The timing question: why "is this a good time to buy?" is the wrong question — and what to ask instead
7. This episode is for investors and operators who want to deploy capital with precision in a market that rewards analytical discipline over market timing.

BHPA - https://bhpropertyadvisors.com/

Transcript

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Welcome to Beyond IRR. This podcast examines real estate investments through the lens of structure, risk, and capital durability, not just headline returns. I'm your host, Louis Heiza. This podcast is sponsored by Beacon Hill Property Advisors. We're going to start this episode off with a statistic fresh off the press here, early June 2026. That is that nearly 6% of all U.S. home listings, uh 5.8% to be exact, were pulled off the market. This is the highest delisting rate since the pandemic shutdowns of March of 2020. According to Redfin, this is not a blip. It ties with December 2025 for the highest monthly delisting share in six years. And in Florida and Texas metros, the numbers were even more pronounced. Now, next week, June 16th and 17th, the Federal Reserve convenes under a new chairman, Kevin Walsh, for what will be his first meeting leading the FOMC. And the market consensus is as close to unanimous as it gets 96 to 98% probability of no rate change. Reuters polled economists last week, and not a single one expects a cut. So rates are staying at the 3.5% to 3.75%, and nearly 70% of surveyed economists now believe the Fed will hold that all year. So these two facts, sellers retreating at pandemic era rates, and the Fed signaling no relief on borrowing costs, creates an environment that is genuinely unusual. And the way an investor responds to it reveals more about their underwriting discipline than almost any other market condition. So what are these dealistings actually telling us? The instinct when you see a headline like sellers pulling homes at near record pace is to read it as bearish. Sellers are discouraged, demand is weak, the market is struggling. But that reading I think is incomplete. When a seller lists a property and fails to attract acceptable offers, they face a choice: reduce the price to meet where buyers are, or pull the listing and wait. So what the 5.5% delisting rate tells you is that a meaningful share of sellers chose to wait. They believe their price is right and the market is wrong. For a buyer, particularly in this case an investor, that creates a specific condition. The remaining inventory on the market is increasingly composed of two categories, motivated sellers who need to transact regardless of the price, and properties that have already been repriced once or twice and are sitting closer to fair value. The aspirational listings, the ones priced 10% above comps because the seller just wants to see what happens, those are the ones being delisted. What's left is a cleaner, more realistic deal pool. And if you're an investor running disciplined on a writing criteria, that's a better environment to deploy capital than one where every listing is priced to perfection and every offer is competing against 12 others. Now there's a more nuanced or important nuance here worth noting. Redfin also found that 2.5% of homes on the market in April belong to sellers that have previously delisted and then relisted within the prior 12 months. That means a portion of today's inventory includes sellers who have already tested the market once, failed, and kept are now coming back with recalibrated expectations. So those are conversations worth having. Now, all this is in the context of the Fed hold, and that's kind of a backdrop to this. It's not the full story. I want to push back on the framing that the Fed meeting is the thing to watch. It isn't, not this week at least. When 96 or 98% of the market is pricing in unchanged rates, the meeting is informational. It's not catalytic. The statement language will matter, particularly any shifts in how Warsh is characterizing inflation risk or the labor market, but the base case is already priced into mortgage rates, cap rates, and deal spreads. The more relevant question for real estate investors is what the no-cut environment means for underwriting assumptions. And the answer is straightforward. The financing conditions that you see today are the financing conditions you need to underwrite against. This is not a market where you can build a rate cut into your base case and let it do the work in year two of the hold, year three, et cetera. You need to basically be underwriting that the rates that are you're being quoted today are going to be the rates for the foreseeable future. And I see operators making this mistake more often than really any other right now, is they're underwriting to the current rent, current occupancy, and projected refinance rate that assumes one or two cuts by mid-2027. And it creates an income projection that pencils, but only because of future financing improvement is carrying some of the weight. And if that improvement doesn't arrive, and the Reuters poll suggests most economists think it won't, you're left with an asset that was underwritten to a scenario that didn't happen. So the discipline here is to build your base case at current rents and treat any future rate relief as upside rather than baseline. If the deal doesn't work at 6.5% on a 30-year AM, it doesn't work. And if it does work at 6.5% and you later get 5.5% a year or two from now, then you outperform. That asymmetry is the reward for conservative underwriting, but you only get it if you're honest about what today's cost of capital actually is. So disciplined underwriting in this environment, let's go through what that looks like. So let's get specific because no uh, you know, be disciplined is advice that everyone nods to, but almost nobody operationalizes. So, first thing here. You got to stress test your debt service coverage at the rate you'd face today, not the rate you originated at. So if your current loan was originated in 2021, let's say at 3.5%, and it matures in 2027, run your DSCR at 6.5% or 7%. What is that? What does your breakeven occupancy look like at that rate? If it's above 88%, you're in a tighter band than you might realize. You might still be covered, but you need to know how much room you have and what happens if vacancy ticks up two or three points. Uh, second piece of advice here: separate revenue assumptions from expense assumptions. So this is where I see the most optimistic pro forma's break. An operator projects 3% annual rent growth, which is reasonable in some markets, but models expenses at 2% growth. In reality, insurance costs in many markets are growing at 8% to 15% annually. Property tax reassessments are catching up with the 21-22 transaction prices. Maintenance costs have inflated with material and labor. And if your revenue and assumptions and your expense assumptions are moving at materially different rates, your NOI projection is a fiction, even if it's even if each individual line looks defensible. Third bit of advice: underwrite the market you're buying into, not the market average. So this connects directly to the delisting data. As I mentioned earlier, Florida and Texas metros lead the nation in delistings, meaning those are the markets where seller expectations and buyer reality are the most misaligned. If you're acquiring in, say, Tampa, Austin, or Dallas, you need to be underwriting a local inventory dynamic, not national vacancy averages. A market where 7 or 8% of listings are being pulled has a different negotiating environment than the one where properties are trading quickly. Use that information. This is going to be the investors and operators who are really diving into local numbers and using those in their projections are the ones who are going to have the cleanest and probably most accurate underwriting. And that's the kind of discipline we're talking about is drilling down into local numbers, especially in this environment where different localities are experiencing uh different environments. Uh, fourth bit of advice, define your walkaway number before you make the offer. So this sounds elementary. You know, that's pretty basic real estate investing or really any uh acquisition, whether it's a you're buying a new car or uh stocks. Sounds elementary, but it's the single most effective discipline in a delisting heavy environment. So the temptation when you find a motivated seller is to stretch on price because you feel the urgency on the other side. You think there's a good deal there. This has got to be a great deal. It's a motivated seller. I've read all about motivated sellers. They're perfect. I want to buy from a motivated seller. That kind of emotion might cause you to stretch on the price a bit to get the deal done. But the reason the seller is motivated is often the same reason the asset requires careful underwriting. The economics are tight, the location is competitive, or operating history has gaps. So know your maximum price, know what DSCR it produces, and walk away if you can't get there. Let's turn now to the timing question. I want to address the elephant in the room because I know it's what most listeners are actually thinking about. Is this a good time to buy? So the honest answer, and this is obviously just my opinion, uh, is that it depends entirely on the asset, the market, and your capital position. But let's go through what I'm seeing as uh kind of the macro setup. Here's the number. So new construction starts are at their lowest level since 2016. Construction input costs are up 6.2% year to date through April. The development pipeline is structurally constrained by tariffs, financing costs, and labor markets. So all that means the supply that would compete with your acquisition in the future, let's say 2028-29, is being reduced right now. So every month that new starts stay depressed, the future competitive landscape for existing asset holders gets better. At the same time, delistings are compressing the available inventory into a pool of more realistically priced assets with more motivated sellers. Interest rates are stable and priced in. And there is significant institutional capital waiting to deploy. For example, Kane Anderson just closed up 5.1, I believe it was, billion dollar fund. Commercial real estate transaction volume hit $112 billion in quarter one. Lending activity is at a five-year high. So the capital is there. The supply picture is constructive for holders. The deal pool is getting more honest. That's what the delisting tells me at least. So what separates the operators who capture this window from the ones who miss it is the quality of their underwriting, not their willingness to act. That's never been in question amongst investors back to the history of time, but the rigor with which they evaluate what they're acting on. The delistings tell you the market is uncomfortable. The Fed hold tells you financing conditions aren't getting easier, but at the same time appear to be relatively stable. The supply pipeline tells you competition is shrinking. The question is whether your analysis is sharp enough to find the deals that work within those constraints, and whether you have the conviction to execute on them when most of the market is waiting for conditions to feel better. Conditions don't have to feel better. The math just has to work. And right now, for disciplined operators underwriting to reality rather than hope, there are deals to be found when it does. So, fun fact to close out this episode: the term delisting in real estate has an interesting parallel to the stock market. In public equities, delisting usually means a company has been removed from an exchange, often involuntarily due to failing to meet listing requirements. In real estate, it's the opposite. The seller is the one making the voluntary choice to withdraw, but the market signal is structurally similar in both cases. It means the price discovery mechanism isn't working at the level the seller expected. In the stock market, that's usually a sign of fundamental deterioration. In real estate, it's more often a sign of aspirational pricing meeting reality. And that distinction between fundamental weakness and pricing recali calibration is exactly the kind of nuance that makes disciplined underwriting worth the effort. Hope you got some uh information out of this market update episode, and we'll see you next week. Thank you for listening to Beyond IRR. This podcast is produced by Beacon Hill Property Advisors, where we focus on bringing clarity, structure, and rigor to real estate investment analysis. If you want to evaluate deals beyond headline metrics and better understand the mechanics driving performance, you can learn more about our tools and approach at bhpropertyadvisors.com. You can also connect with us directly for demonstrations, resources, and additional insights. Until next time, analyze deeply, allocate wisely, and always go beyond IRR.