The Signal

Construction spending climbs while housing supply pulls back

Total construction spending hit $2.2031T in August, up 0.85% from $2.1845T. That is the number that sets your hard cost per square foot on a 20 ft clear, 14x14 door shell. It is still rising. Meanwhile housing starts dropped 5.2% to 1.221M and permits slipped to 1.398M. Fewer new homes means fewer new garages, and the homes that do get built in Buford, Fort Mill and Forney come with HOA covenants and two-car bays that will not take a 38 ft fifth wheel.

Industrial production rose to 103.95 in September from 103.27. Small-bay flex rides that curve more than it rides warehouse leasing. On the adjacent comp side, self-storage construction debt is still clearing: $20M for a Fort Lauderdale project through JLL, $24M to Basis Industrial in Wayne, NJ. Those are institutional-sized checks for a product that rents by the month. Garage condominiums sell the unit outright, which is a different capital event entirely. No public absorption or price-per-foot index exists for this asset class. That opacity is the opportunity and the risk.

RV shipments down but durable goods spending up two percent

RVIA counted 23,230 September shipments, down 9.2% against 25,684 a year prior. Nine-month total is 230,511, off 13.7%. Consumer sentiment printed 48.1, down 6.96% from 51.7, and real disposable income edged down to $18,410.5B. Total vehicle sales fell 3.55% to 16.378M. Unemployment ticked to 4.2%. That is a soft consumer across the board, and anyone underwriting new garage condo absorption on 2021 RV volume is underwriting fiction.

The counterweight matters. Durable goods spending rose 2% in August to $2.4436T, the highest print in the set. And the installed base is the actual demand driver, not new shipments. Every rig sold in the 2020 through 2024 boom still needs somewhere to live, and HOA covenants across Gwinnett, York and Mecklenburg counties have not loosened. Storyteller Overland drew owners to its inaugural STO Fest in the Mojave this month. Owner communities are forming around these vehicles, and community is what converts a renter into a buyer. We have no current collector car index or powersports registration data in today's signals.

Five percent tens meet tightest high yield spreads

The 10-year closed at 5.00% on October 23 versus 4.96% prior. SOFR sits at 3.93%. The 10Y-2Y spread widened slightly to 0.32. Thirty-year mortgage rates eased to 7.32% from 7.40%, which matters because a meaningful share of garage condo buyers finance the purchase against personal balance sheet strength shaped by housing. High yield spreads tightened to 3.30% from 3.38%. Credit is open. The base rate is the problem, not risk appetite.

CRE loan delinquency fell to 1.53% from 1.56%. CBRE is warning on repriced deals and a capital markets slowdown, and Blackstone wrote down real estate values this month. At the same time BKM Capital is pushing through a $3B industrial spending program, Town Lane closed $1.9B over target, and BREIT is near a $1.7B CMBS loan on industrial. Capital wants small-bay industrial. It is pricing it harder. For garage condo sponsors, the practical read is that construction debt exists but underwriting assumes slower sellout. Presale velocity is the covenant that gets tested.

Opportunity Zone reporting rules updated in Federal Register

On September 28 the Federal Register published a correction to the IRS rule on Information Reporting Regarding Qualified Opportunity Zones and Updated Qualified Opportunity Fund Certification and Decertification Procedures. If you hold garage condominium inventory inside a QOF, this touches your certification and annual reporting mechanics, not your underlying gain deferral. Read the actual document before your next filing cycle rather than relying on last year's workflow.

Separately, the mechanic most garage condo buyers underuse is cost segregation. A 490 to 1,080 sq ft suite is not one depreciable number. An engineering study splits the purchase into 5-year personal property, 15-year land improvements and 39-year structure. In a garage suite, overhead door operators, dedicated electrical runs, mezzanine finishes, lighting, HVAC for a climate-controlled bay, plus exterior paving, striping and site lighting frequently reclassify meaningfully out of the 39-year bucket. Business-use owners may also look at Section 179 on qualifying equipment. Rates and percentages change by statute and by placed-in-service year. This is general information, not tax advice. Run it with your CPA.

We map capital sources across private lenders, family offices and funds, and run cost segregation studies for owners of qualifying commercial property.