**Walker Webcast: Peter Linneman and Willy Walker Discuss Housing During the Q2 2025 Recap**
It’s always a noteworthy discussion when Willy Walker and Peter Linneman come together for their quarterly Walker Webcast episodes. The July 7 edition was no exception, as Walker—the Chairman and CEO of Walker & Dunlop—and Linneman, economist and principal at Linneman Associates, analyzed key topics including job growth, economic policy, and the evolving office sector.
However, the main focus of the Q2 2025 recap centered heavily on housing, inflation—and yes, more housing.
**Rent Calculation, Fed Style**
A major point of discussion was the current state of inflation, particularly concerning how housing costs factor in. Linneman emphasized that when you strip away owner-equivalent rent (OER), real inflation has hovered around 1.5%. Yet, residential rent calculations by the Federal Reserve paint a much steeper increase.
Walker noted that, based on the Fed’s calculation, rents rose by 8% between August 2024 and May 2025. Referencing Linneman’s recent economic letter, Walker remarked, “You said that anyone who owns apartments and actually saw an 8% rent hike should give you a call.” Linneman’s response: “My phone has been silent.”
**Federal Funds Rate Cuts on Track**
Linneman had predicted back in the Q2 2024 webcast that the Federal Reserve would implement three cuts to the Effective Federal Funds Rate (EFFR) by the end of 2024—a forecast that proved to be accurate.
Looking ahead to 2025, he anticipates another 100 basis point reduction in the EFFR. “Everyone thinks I’m crazy at this point,” he said. “They thought I was crazy last year.”
**Construction Activity and Multifamily Growth**
Rate reductions have had ripple effects across the multifamily housing market. Referring to a recent RealPage report, Walker noted that almost 800,000 units were absorbed in Q2 2025, outpacing the delivery of 535,805 new units.
Despite this robust demand, new construction faces headwinds. According to Linneman, while lumber costs have moderated, the prices of materials like gypsum and cement remain at record highs. Contributing factors include ongoing infrastructure projects stemming from policies like the “Build Back America” legislation and significant construction of government buildings and data centers.
Linneman pointed out that the U.S. imports approximately 22% of its cement from Canada and Mexico, and trade policy challenges have pushed prices even higher. In total, building material costs are trending about 1% above the inflation rate, with labor costs also contributing to rising construction expenses.
**The Affordable Housing Challenge**
The housing market continues to grapple with a lack of supply and diversity in housing types. Linneman and Walker revisited a past proposal from the Trump administration, which examined using federal land to facilitate affordable housing development. Linneman noted that this approach—federal oversight of entitlement processes—would drastically change the current landscape, though it could also lead to legal battles.
Meanwhile, entrenched NIMBYism and ongoing underproduction have meant that more households are staying longer in single-family rentals and multifamily units. Walker observed, “They talk about wanting affordable housing, but the truth is, they really don’t.” He compared Houston and Los Angeles, pointing out Houston has successfully reduced homelessness due to its lack of stringent zoning restrictions. Los Angeles, by contrast, faces significant entitlement hurdles.
“Houston’s greatest asset, without a doubt, is affordable housing,” Linneman added. “All you have to do is copy their playbook.”
**Watch the Replay**
An on-demand replay of the July 7 Walker Webcast is available through Walker Webcast channels on YouTube, Spotify, and Apple. Viewers can also subscribe for weekly invites, replays, and articles related to upcoming episodes.
