Market Commentary | June 20, 2025

Navigating Uncertainty

On June 18th, we found ourselves in good company. Central Bank Chair Jerome Powell spent much of his Wednesday afternoon news conference reviewing all the things the Fed does not yet know.  Primarily, whether businesses will succeed in passing tariff cost increases on to consumers (inflationary) or if consumers will resist by curbing purchases (recessionary). We admit not knowing, as well.

Uncertainty is growing. Homeowners, previously reluctant to abandon their 3% mortgages, have been worn down by the passage of time and the demands of life’s progression, and have finally put their houses up for sale. Many prospective buyers, frustrated that interest rates have not declined, have stepped away from the market, uncertain that purchasing a home is economically wise.

We don’t know how quickly the (until recently) hot sunbelt housing markets can absorb waves of new apartment supply. Will rising insurance, operating, and interest expenses overwhelm any earnings progress that can come from rising demand and higher rents?  If a recession arrives and impairs job growth, will apartment demand shrink as well? Apartment REIT share prices have fallen (we don’t really own any), but are they an opportunity?

We do know that high mortgage rates continue to make housing unaffordable even in markets experiencing a glut of new supply. Affordability is more important than ever, and over the last few decades, manufactured housing has served that need and been rewarded with continued earnings growth. All four Manufactured Housing Community (MHC) REITs (ELS, MHCUF, SUI, and UMH) reported strong results in 1Q25 earnings reports and forecasted near-term growth in rents and occupancy.

Historically, Manufactured Housing REITs have traded at markedly higher FFO multiples than their apartment peers, but this spring’s economic turmoil has beaten shares down dramatically. UMH Properties (UMH) is currently trading at 16.9x consensus FFO (a slight discount to the sector’s 17.1x average) and a 20% discount to Net Asset value. Dane Bowler recently published a full report on UMH’s impressive growth runway.

Even in times of uncertainty, we can still spot opportunities. We bought UMH and, if the price remains depressed, we’ll likely buy more.

Notes and Disclosure

Articles are provided for informational purposes only. They are not recommendations to buy or sell any security and are strictly the opinion of the writer. The information contained in these articles is impersonal and not tailored to the investment needs of any particular person. It does not constitute a recommendation that any particular security or strategy is suitable for a specific person.

Investing in publicly held securities is speculative and involves risk, including the possible loss of principal. The reader must determine whether any investment is suitable and accepts responsibility for their investment decisions.

Commentary may contain forward-looking statements that are by definition uncertain. Actual results may differ materially from our forecasts or estimations, and 2MCAC and its affiliates cannot be held liable for the use of and reliance upon the opinions, estimates, forecasts, and findings in this article.

Past performance does not guarantee future results. Investing in publicly held securities is speculative and involves risk, including the possible loss of principal. Historical returns should not be used as the primary basis for investment decisions. Although the statements of fact and data in this report have been obtained from sources believed to be reliable, 2MCAC does not guarantee their accuracy and assumes no liability or responsibility for any omissions/errors.

We routinely own and trade the same securities purchased or sold for advisory clients of 2MCAC. This circumstance is communicated to clients on an ongoing basis. As fiduciaries, we prioritize our clients’ interests above those of our corporate and personal accounts to avoid conflict and adverse selection in trading these commonly held interests.

Hypertext links to other sites are provided strictly as a courtesy. When you link to any of the sites provided on our website, you are leaving this website. We make no representation as to the completeness or accuracy of information provided on these websites. Nor is the company liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technologies, websites, information, and programs made available through this website. When you access one of these websites, you are leaving our website and assume total responsibility and risk for your use of the websites to which you are linking.