Home sellers and the housing market are finally starting to groan and give way with 11 states now seeing price declines and nearly 40% of sellers forced to cut their prices. Down payments are also dropping for homebuyers and now at a cycle low of 14.9%. And in a plot twist that surprised absolutely nobody, NYC’s new law requiring landlords to pay broker fees immediately vaporized over 1,000 rental listings. Meanwhile, multifamily is having its best quarter in a very long time, with 100,600 units absorbed. 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. Tim

🔥 Key Takeaways

• Home prices are declining in 11 states including Hawaii (-3.8%), Arizona (-1.6%), and Florida (-1.2%), marking the softest price growth in years with national gains at just 0.55% versus summer 2024 1
• Homebuyer down payments dropped to 14.9% in May, the first decline in over two years, as buyers stretch affordability with median down payments falling from 15.6% a year earlier 2
• Housing inventory surged 32% year-over-year to 826,000 single-family homes on the market as of mid-June, with nearly 40% of listings taking price reductions – the highest percentage in 15 years 1
• High-income earners face minimal housing burden with those earning over $150,000 spending just 15% of income on housing, while median earners allocate 25% – highlighting America’s bifurcated housing market 3
• Mortgage lock volume dropped 5.87% in May as rates climbed to 6.84% for 30-year conforming loans, while refinance activity plummeted with share falling from 21% to 16% 4
• Fannie Mae and Freddie Mac conservatorship exit gains momentum as bipartisan policy experts outline seven key principles for transition, emphasizing market stability and affordable housing preservation 5
• NYC’s FARE Act implementation caused immediate market disruption with over 1,000 rental listings wiped from StreetEasy within hours as the law requiring landlords to pay broker fees took effect 6
• Multifamily momentum accelerates: Q1 2025 posted 100,600 units of net absorption—the highest Q1 performance since 2000—while vacancy rates dropped to 4.8%, below the long-term average of 5.0% 2.
• Office market shows green shoots: Nearly half of tracked markets reported positive absorption in early 2025, with demand improving across almost all markets as the sector approaches a positive turning point 3.
• Silicon Valley office momentum: Walmart’s e-commerce division signed the largest Silicon Valley office lease since 2023, taking 340,000 square feet in Sunnyvale for up to 1,700 tech workers 4.

🏠 Residential Real Estate Markets

Overview: The housing market is experiencing its most significant shift since the pandemic, with inventory finally building to levels that pressure prices while buyers stretch affordability to dangerous levels.

Price Trends & Inventory

• National home price growth slowed to just 0.55% compared to summer 2024, representing the softest price performance in years as inventory normalization takes effect 1
• Eleven states now show year-over-year price declines: Hawaii leads at -3.8%, followed by Iowa (-2.0%), Arizona (-1.6%), Georgia (-1.3%), Florida (-1.2%), and Texas (-1.2%) 1
• Housing inventory reached 826,000 single-family homes as of mid-June, marking a substantial 32% increase from last year and the first return to pre-2020 inventory levels 1
• Nearly 40% of homes on market have taken price cuts from original listing prices, reaching a 15-year high for June compared to the “normal” rate of 30% 1

Buyer Behavior & Affordability

• Homebuyer down payments dropped to 14.9% in May, marking the first decline in over two years as buyers minimize upfront costs to enter an expensive market, down from 15.6% in May 2024 2
• High-income earners ($150,000+) spend just 15% of income on housing while median-income households allocate 25%, and those earning $75,000 or less spend over 35% – well above the 30% affordability threshold 3
• First-time buyers particularly benefit from lower down payment trends as FHA and conventional programs become more attractive relative to saving larger amounts in a high-rate environment 2

Regional Market Dynamic

• Sun Belt markets showing most dramatic inventory builds as population migration from northern states slows, reducing the buyer pool that previously supported rapid price appreciation 1
• Tennessee, Utah, and Washington identified as next markets potentially facing price weakness based on current inventory and migration trends 1
• Geographic arbitrage continues driving internal migration as remote work enables high earners to move from expensive coastal markets to more affordable inland areas 3

💰 Mortgage Markets

Overview: Mortgage market conditions continue deteriorating with rising rates crushing refinance activity while policy discussions around GSE reform gain momentum for the first time in years.

Lending Volume & Rates

• Total mortgage lock volume fell 5.87% in May as market conditions worsened across all loan categories, according to Optimal Blue’s latest Market Advantage report 4
• 30-year conforming mortgage rates climbed to 6.84%, up 16 basis points from April, while 10-year Treasury yields rose 26 basis points to 4.41% 4
• Refinance share plummeted from 21% to 16% in a single month, with rate-and-term refinances collapsing 44.4% and cash-out refinances falling 10% 4
• Purchase lock counts dropped 10% year-over-year when controlling for home price appreciation, indicating fundamental weakness during peak buying season 4

Alternative Lending Growth

• Non-QM loans represented 7.36% of May’s volume, continuing gradual upward trend as borrowers and lenders explore alternative qualification paths amid tighter conventional lending standards 4
• Treasury spread narrowed to 2.44%, representing a 10 basis point month-over-month contraction that pressures lender margins in an already challenging environment 4
• First-time buyer share declined modestly across both conforming and FHA loan locks as affordability constraints intensify for entry-level purchasers 4

GSE Policy Developments

• Bipartisan Policy Center released seven key principles for Fannie Mae and Freddie Mac conservatorship exit, marking significant policy momentum after 15+ years of government control 5
• Seven principles include: adequate capital and supervision, preserving 30-year fixed-rate mortgages, maintaining affordable housing goals, protecting taxpayers from bailouts, ensuring market liquidity, fair credit access, and clear regulatory oversight 5
• Capital requirements, affordable housing mandates, and government backing levels remain the most contentious aspects of any exit plan, requiring extensive consultation and gradual implementation 5
• Transition must be gradual and carefully managed to avoid market disruption, with policy experts emphasizing lessons learned from the 2008 financial crisis 5

📊 Economic & Political News

Overview: Consumer sentiment improved for the first time in months as trade tensions ease, while economists reduce recession probabilities despite ongoing inflation and employment concerns.

Consumer Sentiment & Trade Policy

• University of Michigan Consumer Sentiment Index rose 16% in June to 60.5, marking the first improvement in six months as tariff-driven economic anxiety eased with trade deal optimism 7
• Index remains 20% below December 2024 levels and well below the typical pre-pandemic range of approximately 100, indicating consumers remain cautious despite monthly improvement 7
• Americans relieved to see President Trump paring back trade war and tariffs, but remain on high alert for price increases at stores and gas pumps, according to Navy Federal Credit Union’s chief economist 7

Economic Forecasting Updates

• Oxford Economics reduced recession probability to 35% for the next year, down from higher projections but still well above the baseline 15% chance in any given year 7
• Official inflation measures proved milder than expected while the job market maintained resilience, though forecasters continue bracing for tariff impacts on employment and inflation later in 2025 7
• Fed funds futures price 97% likelihood of unchanged rates at the upcoming Federal Reserve meeting, with higher oil prices from Middle East tensions reducing odds of monetary policy easing 8
• Tuesday’s retail sales and industrial production figures will provide crucial economic health indicators affecting Fed easing expectations 7
• 90-day tariff pause expires July 8 with Treasury Secretary Bessent signaling possible extensions for partners in good faith, though no formal agreements exist yet 7

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🏢 Daily Dose: Commercial Real Estate Markets (Including Multifamily)

Market Disruption & Development

Overview: Regulatory changes are reshaping rental markets while major developments signal continued confidence in prime locations despite financing headwinds.

NYC FARE Act Creates Immediate Market Impact

• Over 1,000 rental listings disappeared from StreetEasy within hours of the June 12 implementation as landlords adjust to covering broker fees instead of tenants 1
• REBNY filed immediate appeal on Thursday seeking to halt the law while legal challenges continue, but initial market shock demonstrates far-reaching impact on rental dynamics 1
• Law operates on simple premise: Any broker publishing a rental listing is assumed hired by property owner, making landlord responsible for commission payments 1

Hudson Yards Expansion Gets Green Light

• City Council approved changes to 2009 Western Rail Yards rezoning, enabling Related Companies to develop up to 4,000 housing units (primarily rental), office building, hotel, and 6.6-acre public park 1
• Minimum 625 affordable apartments secured by Adams administration as part of approval process 1
• $600 million sale exploration of 35 Hudson Yards portions (office, retail, fitness, hotel condos) while excluding 143 residential units shows strategic asset management 1

🏠 Multifamily Market Surge

Overview: The multifamily sector is experiencing its strongest performance in decades, with demand significantly outpacing supply and driving down vacancy rates while boosting investor confidence.

Record-Breaking Absorption Performance

• 100,600 units of net absorption in Q1 2025—highest Q1 performance since 2000 and more than three times the pre-pandemic average 2
• Fourth straight quarter where tenant demand exceeded new unit completions, creating sustained momentum 6
• National vacancy rate fell 20 basis points to 4.8%, dropping below long-term average of 5.0% for first time in recent cycles 6

Supply Pipeline Cooling at Healthy Pace

• Only 70,600 new units delivered in Q1 2025 following record 450,000 units completed in 2024, with deceleration expected to persist throughout year 2
• Average monthly rents increased 0.9% year-over-year to $2,184, with growth expected to strengthen due to reduced supply and continued healthy absorption 2

Investment Activity Surges

• $28.8 billion in transaction volume for Q1 2025—33% year-over-year increase with multifamily capturing largest share (33%) of commercial real estate investment activity 2
• Regional leaders: Midwest (3.3%), Northeast (2.7%), and Pacific (0.9%) regions led annual rent growth 2
• Top absorption markets: New York (8,600 units), Atlanta (7,000), and Phoenix (5,300) posted highest net absorption totals 2

🏢 Office Market Recovery Signals

Overview: Office markets are showing early signs of stabilization with improving absorption trends and selective leasing activity, though challenges persist for legacy properties.

Absorption Trends Improving

• Nearly half of tracked markets reported positive absorption in early 2025, with demand improving across almost all markets bringing aggregate absorption closer to positive turning point 3
• Flight to quality persists with newer, highly amenitized and energy-efficient buildings commanding disproportionate share of leasing activity 3
• Occupier confidence gradually improving with increasing green shoots emerging in leasing dynamics, though overall demand recovery remains slow and concentrated in top-tier product 3

Major Lease Activity

• Walmart’s 340,000 square foot lease at Tech Corners in Sunnyvale marks largest Silicon Valley office deal since 2023, housing up to 1,700 e-commerce tech workers 4
• $30 million in renovations completed by Jay Paul Company for the two office buildings, with Tech Corners campus maintaining historical full occupancy 4
• Legacy office stock faces mounting obsolescence risks, driving elevated vacancy rates and prompting owners to consider repositioning or conversion strategies 3

🏢 Industry News

Overview: Major regulatory changes and significant development activity highlight the dynamic nature of real estate markets, with NYC’s broker fee law creating immediate disruption while major projects advance.

Regulatory & Policy Changes

• NYC’s FARE Act took effect Wednesday after a judge denied the Real Estate Board of New York’s request for preliminary injunction, requiring landlords to pay rental broker commissions instead of tenants 6
• Over 1,000 rental listings wiped from StreetEasy within hours of implementation, exactly the market disruption opponents had warned about as brokers adjust to new commission structure 6
• REBNY filed appeal notice Thursday seeking to revive legal challenge and halt the law while litigation continues, though StreetEasy expects listing decreases to be temporary 6