The development boom of 2021–2023 feels like a fever dream now. For a stretch, it was hard to miss. Multifamily rents were surging by double digits, migration was fueling demand in secondary markets, cap rates kept compressing, and developers could lock in debt at 3%. If a deal didn’t pencil back then, it was probably never a good deal to begin with.

That window has firmly closed.

In the past 18 months, the environment for ground-up development has flipped. Today, only the most resilient, underwritten-to-the-teeth projects are getting off the ground. Elevated interest rates, flat rent growth, tighter loan terms, and softening valuations have put a cap on all but the most compelling opportunities.

But this is where real estate’s cyclical DNA comes into play—and why now might be the moment for contrarians to step in.

Why Developers Are Pulling Back (And Why That’s the Signal)

The natural reaction to an uncertain market is to sit on your hands. And that’s exactly what many are doing. Across every sector—from multifamily to self-storage—projects that seemed viable just 18 months ago are being shelved, repositioned, or quietly sold.

Everyone’s waiting. But what are they waiting for?

• A Fed pivot?

• Cap rate stabilization?

• Clearer pricing comps?

• Rental growth to rebound?

All valid. But by the time these signals turn green, you’ll be competing with everyone else again. Supply will ramp, construction pricing will tighten, and you’ll be fighting for labor and materials at a premium.

This is why smart capital gets in early—during the lull, not the rebound.

What the Market’s Missing: Construction Pricing Is Quietly Falling

The Wall Street Journal recently pointed to tariffs as a potential driver of higher future construction costs. While it’s true that tariff impacts are hard to model—could be 0.5%, could be 15%—there’s a far more tangible factor at play right now: the sharp drop in construction demand.

Contractors are hungry.

With a thinning pipeline and fewer new starts, we’re seeing aggressive pricing across the board. General contractors that were quoting sky-high margins during the boom are now cutting profit and overhead just to stay busy. We recently repriced a project that came in 7% lower than an identical bid 18 months ago. In certain markets, construction costs are down as much as 10% from 2022 peaks.

This shift won’t last forever. Once developers rush back in, labor costs will climb, subs will get choosy again, and timelines will stretch.

So What’s the Play?

You underwrite through today’s lens—but plan for tomorrow’s conditions.

If interest rates stay higher for longer, you’re protected by lower basis and conservative leverage. If rates drop, rent growth returns, or cap rates compress, you’re ahead of the curve with a cost structure that’s impossible to replicate 12 months from now.

That’s the contrarian edge.

Real estate rewards those who move when others hesitate. Yes, it’s uncomfortable. But if you wait for certainty, you’ll be too late.

Now is when you lay the groundwork—quietly, methodically, and with discipline—so when the market turns, you’re not scrambling to catch up. You’re already building.

Daniel Kaufman is the founder of Kaufman Development and a real estate investor focused on transformative growth markets across the U.S. Subscribe for more insights at danielkaufmanre.com.