The real estate development industry has a predictable problem, according to Erik Hayden, founder of Urban Catalyst, when market conditions shift, the biggest players move in lockstep, creating opportunities for those willing to think differently.
Hayden notes that institutional developers and major homebuilders often move in unison during market downturns, following each other’s actions rather than acting independently.
Hayden highlights a striking example of herd behavior in Silicon Valley, where no market-rate multifamily apartment construction started between June 2022 and April 2025. While some below-market-rate projects continued due to federal subsidies, the broader market for standard apartments came to a complete halt. He notes that apartments have long been a central part of the region’s housing supply, particularly since 2011, when land constraints made high-density infill development the most viable option.
The freeze occurred despite exceptionally strong demand. Hayden emphasizes that the Bay Area’s housing needs far outstrip current construction, with developers unable to keep up even if every available parcel were built on. This mismatch between demand and new supply illustrates how synchronized pauses by major developers can create pronounced market distortions, leaving opportunities for those willing to act differently.
Hayden sees the halt in apartment construction as part of a larger pattern among major developers, who often respond to market uncertainty with abrupt, short-term measures. He describes how single-family home builders, for example, cut staff and shelve projects based on quarterly performance rather than long-term strategy.
This reactive approach opens opportunities for developers willing to take a longer-term view, investing in projects that may take five, seven, or even 25 years to complete. Hayden notes, however, that smaller operators face significant challenges competing with industry giants like Blackstone, Carlisle, KB Homes, and DR Horton, whose deep resources and strategic planning make them formidable competitors.
Hayden’s strategy focuses on observing what major developers and private equity funds are doing—and just as importantly, what they are not doing. By spotting these gaps, smaller operators can identify opportunities that larger players overlook, especially during periods when new homes struggle to sell across California.
He notes that institutional developers often move in unison, reacting collectively to market stress. This synchronized behavior was evident in 2022 when rising interest rates prompted major players to pull back at the same time, contributing to the complete halt in market-rate apartment construction in Silicon Valley.
Hayden’s firm has positioned itself to capitalize on this dynamic. While acknowledging that Urban Catalyst’s first fund will lose money due to timing, he says the firm is “pivoting” its approach and expects better performance from later funds that can take advantage of the current market dislocation.
The firm recently started construction on a 286-unit apartment building, one of the few market-rate projects to break ground during the construction freeze. According to Hayden, this project was “ready to build for four years, sitting there” before financing became available again in late 2024.
Whether Hayden’s contrarian approach proves successful remains to be seen, but his analysis of institutional behavior patterns offers a framework for understanding how market cycles create opportunities for those willing to move against the crowd.
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