The optimism that marked the start of 2025 has given way to a far more complex reality, according to a new report from Hines Research. Over the past few months, the economic landscape has shifted dramatically, with rising yields on the 10-year Treasury Note, growth downgrades, tariff shocks, mounting uncertainty and the looming risk that federal fiscal policies could stoke inflation. Yet, as Hines Research points out, this turbulence is not entirely new. The report emphasizes that deeper forces—deglobalization, demographic pressures, energy insecurity, and political division—have been building for more than 40 years. Globalization, a key factor behind decades of low inflation, is now in retreat, reshaping the economic environment.

Construction activity has fallen below historic averages even as demand persists, resulting in a supply-demand mismatch that Hines Research says is “being baked into the back half of this decade.” These conditions are creating short-term investment and buying opportunities, but the window may not stay open for long. Ultimately, the pent-up demand is expected to drive a new wave of building.

The report highlights the ongoing shortage in residential housing supply, which has left more individuals and families unable to afford homeownership. In the Americas, the supply gap is less severe, a result of capital market conditions before the Federal Reserve’s interest rate hikes that led to oversupply, particularly in the Southbelt region. Despite this, demand—bolstered by job growth—remains robust. As of the first quarter of 2025, residential fundamentals were slightly below average. Sunbelt multifamily markets are under pressure, with a current supply equal to three and a half years’ worth of long-term annual demand, while other regions average about two years. In cities including Chicago and San Francisco, the undersupply is even more acute, with less than a year’s worth of inventory, presenting opportunities for investors in most parts of the U.S.