Mortgage lenders are waking up to 38% fewer employees than in 2021. Renters in Indianapolis are feeling the squeeze with 10.8% higher rents, though San Franciscans are finally catching a break as rents there continue their downward spiral. Banks are tightening lending standards. CRE Delinquent loan volume is up 41% from the start of 2024, with office properties facing the greatest challenges. Let’s get you caught up and out the door in 3 minutes. Tim 

Today’s newsletter was prepared by our AI platform ALFReD. Know Better. Work Smarter. Be More Successful. 

Key Takeaways:

• Median U.S. asking rents rose 3.1% year over year to $1,752 in April, marking the seventh consecutive month of increases, with the Midwest seeing the strongest growth at 5.2% 1
• Housing inventory has crossed a significant milestone, with over 1 million homes for sale for the first time since December 2019, signaling a potential shift in market dynamics 2
• Mortgage lenders have shed 38% of their workforce since the 2021 peak, with employment dropping to 285,000 in April 2025, reflecting the ongoing challenges in the mortgage industry 3
• Median existing home prices stand at $403,700, up 2.7% year over year, while new construction faces potential cost increases due to tariffs 4
• The Federal Reserve’s Senior Loan Officer Opinion Survey shows banks tightened lending standards and experienced weaker demand for residential real estate loans in Q1 2025 5
• The Northeast and Midwest dominated April’s hottest housing markets, with Manchester-Nashua, NH, and Springfield, MA, tying for the top spot 6
• CRE Delinquent loan volume is up 41% from the start of 2024, with office properties facing the greatest challenges.

Residential Real Estate Markets

The housing market is experiencing a significant shift as inventory levels rise and regional performance varies widely. Meanwhile, the rental market shows steady growth with notable regional differences.

• Inventory milestone reached: Active listings have crossed the 1 million threshold for the first time since December 2019, up 31.1% year-over-year for the week ending May 3, 2025, potentially shifting power from sellers to buyers after years of supply constraints. 2
• Supply metrics approaching balance: The months-of-supply metric has reached 4.0 months in March 2025, the highest in eight years. Market analysts consider 5.5-6 months as the threshold where downward pressure on prices typically begins.
• Rental market growth continues: Median U.S. asking rents increased 3.1% year over year to $1,752 in April, marking the seventh consecutive month of growth. The Midwest leads with 5.2% growth, followed by the Northeast (4.1%), South (2.8%), and West (1.9%). 1
• Regional rental variations: Indianapolis topped the nation with a 10.8% year-over-year increase in asking rents, while San Francisco saw the largest decline at -3.2%, highlighting significant regional differences in rental market performance. 1
• Northeast and Midwest dominate hot markets: Manchester-Nashua, NH, and Springfield, MA, tied for the top spot in Realtor.com’s April 2025 Hottest Housing Markets report, with properties in these areas receiving more views and selling faster than the national average. 6
• Washington D.C. inventory surge: The nation’s capital has experienced a record 25% increase in housing inventory, partly driven by federal employee layoffs, demonstrating how quickly local economic conditions can impact housing markets. 7
• Home prices remain resilient: Despite increasing inventory, the median existing home price stands at $403,700, up 2.7% year over year, though Fannie Mae projects more moderate growth of 4.1% for the remainder of 2025 and just 2.0% in 2026. 4 8
• New vs. existing home price gap narrows: The median price for a new single-family home in Q1 2025 was just $14,600 more than an existing home. New home prices have declined for eight consecutive quarters (-2.32% year-over-year in Q1), while existing home prices have risen for seven straight quarters. 9

Mortgage Markets

The mortgage industry faces significant challenges with substantial job losses, tightening lending standards, and weaker demand, though mortgage rates have stabilized and purchase applications show surprising resilience.

• Massive job losses in mortgage sector: Mortgage lenders have shed 174,500 jobs (38% of workforce) since March 2021, with employment dropping from 459,500 to 285,000 in April 2025, highlighting the severe impact of higher interest rates on the industry. 3
• Historical comparison shows pattern: The current 38% employment decline mirrors Housing Bubble 1, when mortgage lender employment plunged 62% from 505,000 in February 2006 to 193,000 by January 2012, though the current contraction remains less severe. 3
• Banks tighten lending standards: The Federal Reserve’s Senior Loan Officer Opinion Survey for Q1 2025 shows banks have tightened standards for all residential real estate loan categories, with jumbo mortgages facing the most stringent adjustments. 5
• Loan demand weakens: Banks reported weaker demand across all residential real estate loan categories in Q1 2025, creating a challenging environment that potentially limits the pool of qualified buyers and constrains sales activity. 5
• Mortgage rates stabilize: The 30-year fixed-rate mortgage remained flat at 6.76% this week according to Freddie Mac, with rates now 30 basis points lower than the same time last year. 10
• Purchase applications show resilience: Despite elevated rates, purchase applications have posted positive year-over-year growth for 14 consecutive weeks in 2025, with recent data showing an 11% week-over-week increase and a 13% year-over-year rise. 11
• MISMO seeks feedback on mortgage insurance process: The real estate finance industry’s standards organization is requesting public comment through June 5, 2025, on revisions to the Mortgage Insurance Activation API Implementation Guide, which would allow lenders to send closing date information to MI companies without leaving their system of record. 12
• Guild Mortgage reports mixed results: The company saw a 35% year-over-year increase in loan originations for Q1 2025 ($5.2 billion total, 88% purchase), but reported a $23.9 million net loss due to a $69.9 million valuation adjustment on mortgage servicing rights. 13

Economic & Political News

Overview: Credit conditions are tightening across multiple sectors while economic indicators show mixed signals, with particular concern about the impact of tariffs on housing and construction costs.

• Broad credit tightening: The Fed’s Senior Loan Officer Opinion Survey reveals banks tightened standards not only for residential loans but also for commercial and industrial loans to firms of all sizes while experiencing weaker demand, potentially impacting economic growth. 5
• Commercial real estate lending contracts: Banks tightened standards for all commercial real estate loan categories in Q1 2025, with construction and land development loans seeing the most significant tightening, suggesting a comprehensive pullback in real estate financing. 5
• Labor market remains stable: Nonfarm payrolls increased by 177,000 in April, and the unemployment rate held steady at 4.2%, according to the Bureau of Labor Statistics. 14
• Inflation continues to moderate: The consumer price index rose 2.4% year over year in March, down significantly from the 9.1% peak in June 2022, showing progress toward the Fed’s 2% target.
• Q1 economic contraction: GDP fell 0.3% in the first quarter, primarily due to slower consumer and government spending and a surge in imports ahead of tariff implementation, though most economists expect a return to positive growth in Q2.
• Tariffs to increase housing costs: The National Association of Home Builders estimates that new home prices will increase by approximately $9,200 on average due to tariffs on imported building materials, potentially worsening affordability challenges. 15
• Tariff revenue analysis: The Peterson Institute calculates that a 10% across-the-board tariff would generate $1.575 trillion in government revenue over 10 years, but doubling the rate to 20% would yield only $791 billion due to decreased economic activity. 16

Commercial Real Estate Markets (including Multifamily)

Commercial real estate markets are showing signs of stabilization in early 2025, with office investment rebounding, multifamily navigating supply challenges, and financing activity increasing despite elevated interest rates. The sector faces a significant wave of loan maturities while embracing technological innovations in servicing and financing.

Office Market Recovery

Office investment is gaining momentum after years of post-pandemic uncertainty:

• Q1 2025 office sales reached $10.1 billion across 486 transactions and 61.6 million square feet—a substantial 48.5% increase from Q1 2024. 1
• Average sale prices rose to $181.46 per square foot, reflecting a 13.7% jump from Q4 2024. 1
• Early Q2 transactions are averaging $536.74 per square foot, signaling strong investor demand for premium assets despite ongoing hybrid work challenges. 1

Multifamily Market Dynamics

The apartment sector faces temporary oversupply in high-growth markets:

• Denver exemplifies current challenges with vacancy rates at 6.9% and rents declining 1.5% year-over-year following a 4.8% inventory increase in 2024. 2
• Multifamily remains the dominant property type for commercial lending, accounting for an estimated $326 billion of the $498 billion in total CRE lending in 2024. 3
• National multifamily supply forecasts for 2025-2027 have increased by approximately 2%, driven by extended construction timelines. 4
• Construction completion times have reached multi-year highs: garden-style properties (718 days), mid-rise projects (837 days), and high-rise properties (1,043 days). 4

Financing Trends

CRE lending is rebounding amid a significant wave of loan maturities:

• Commercial real estate lending increased 16% to $498 billion in 2024, though still 39% below 2022’s volume. 3
• Dedicated mortgage banking firms closed $411 billion in loans, a 34% increase from 2023. 3
• An estimated $957 billion in CRE mortgage maturities are coming due in 2025, driving demand for refinancing. 3
• Depositories remain the leading capital source for CRE mortgage debt, followed by life insurance companies, pension funds, private label CMBS, GSEs, and investor-driven lenders. 3

Loan Performance

CMBS delinquencies continue to rise, particularly in office and multifamily sectors:

• The overall CMBS delinquency rate reached 6.57% in December 2024, up 17 basis points from the previous month. 5
• Delinquent loan volume is up 41% from the start of 2024, with office properties facing the greatest challenges. 5
• Recent sales data suggests investors are beginning to see value opportunities in select distressed assets. 1

Market Outlook

Despite challenges, selective growth opportunities are emerging:

• Investors are increasingly differentiating between property quality tiers, with Class A assets commanding premium pricing. 1
• The multifamily sector remains fundamentally sound with strong demographic tailwinds despite temporary supply challenges. 4
• Transaction volumes are expected to increase as interest rates potentially moderate later in 2025. 3
• The $957 billion in CRE mortgage maturities due this year will create both challenges and opportunities across all property sectors. 3

Industry News

Overview: Employment trends in the mortgage industry reflect broader market cycles, while strategic partnerships and leadership changes continue to reshape the competitive landscape.

• Mortgage employment reflects market cycles: The 38% reduction in mortgage industry employment since 2021 highlights the sector’s vulnerability to interest rate fluctuations, though current employment levels (285,000) remain well above the post-Housing Bubble 1 low of 193,000 in January 2012. 3
• Key executive appointment: Andrew Leff has been named head of national business development at Evergreen Home Loans, bringing extensive experience from previous leadership roles at Wells Fargo, Bank of America, and Chase to help navigate challenging market conditions. 17
• High-profile legal case: The Department of Justice has opened a criminal investigation into New York Attorney General Letitia James over alleged mortgage fraud claims involving properties in Norfolk, Virginia, and Brooklyn, New York, potentially impacting mortgage fraud enforcement more broadly. 18