What do you get when you mix excess inventory in residential sales with a wave of new, high-quality multifamily housing set to open in 2025…we’re about t find out. Unironically, new home sales plummet. Mortgage applications eke out a “W” with a 1% rise from last week. Chairman Powell remains hawkish and interest stay where they were – don’t sleep on next month’s meeting. CRE playing class warfare with A properties surging while B and C properties hang way back. 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.

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Key Takeaways:

• Inventory Surge: Unsold housing inventory reached $698 billion in April 2025, the highest since at least 2012, with 35% more sellers than buyers—the largest gap since 2013. 1
• Home Price Growth Slows: Case-Shiller National Home Price Index registered a 2.7% annual gain in April, down from 3.4% in March, with regional variations showing stronger growth in the Northeast and Midwest while the Sun Belt cools. 2
• Affordability Crisis Deepens: Only 3 of the 50 largest U.S. metro areas (Pittsburgh, Detroit, and St. Louis) remain affordable for median-income households under the 30% rule. 3
• New Home Sales Plummet: Sales of new single-family homes dropped 13.7% in May to 623,000 units, pushing supply to a 3-year high as high prices and mortgage rates dampened demand. 4
• FHA Insurance Premium Reduction: HUD has proposed reducing FHA Multifamily Insurance Premiums to 0.25% for all FHA Multifamily Insurance Programs to align with President Trump’s price relief initiatives. 5
• Mortgage Applications Rise: Mortgage applications increased 1.1% from the previous week despite rates edging higher to 6.88%, driven primarily by FHA refinances. 6
• Fed Maintains Rates: The Federal Reserve continued its pause on federal funds rate cuts, maintaining the target rate at 4.5% to 4.25% amid ongoing inflation concerns and uncertainty around tariff policies. 7
• Walker & Dunlop fund closes: The company’s seventh discretionary equity fund closed at $135 million, focusing on multifamily and industrial real estate across the U.S

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Residential Real Estate Markets

OVERVIEW: The housing market is showing clear signs of transition with inventory levels reaching multi-year highs and price growth slowing across many regions. Regional variations are becoming more pronounced, with the Northeast and Midwest outperforming the previously hot Sun Belt markets. Affordability remains a critical challenge nationwide.

• Case-Shiller Index Shows Cooling Market: The S&P CoreLogic Case-Shiller U.S. National Home Price Index registered a 2.7% annual gain in April, down from 3.4% in March, marking the most modest pace in nearly two years. 2
• Regional Price Variations Intensify: New York City led major metros with a 7.9% annual gain, followed by Chicago (6%) and Detroit (5.5%), while Tampa saw prices fall 2.2% and Dallas declined 0.2%. The Midwest and Northeast are now setting the pace for price increases as the Sun Belt cools. 2
• FHFA House Price Index Declines: The FHFA’s seasonally adjusted House Price Index fell 0.4% month over month in April, though it rose 3% on a 12-month basis. The Middle Atlantic region had the largest monthly gain at 1.2%, while the West South Central region posted a 1.3% decline. 2
• Record Inventory Levels: Unsold housing inventory reached $698 billion in April 2025, the highest since at least 2012 when Redfin began tracking this data. There are approximately 35% (or 503,000) more sellers than buyers—the largest percentage in records dating back to 2013. Just one year ago, sellers outnumbered buyers by only 6.9%. 1
• New Home Sales Drop Sharply: Sales of new single-family homes fell 13.7% in May compared to April, reaching 623,000 units on a seasonally adjusted, annualized basis. This was 6.3% lower than May 2024 and well below both the six-month average of 671,000 and the one-year average of 676,000. 4
• Affordability Crisis Widespread: Only 3 of the 50 largest U.S. metro areas (Pittsburgh, Detroit, and St. Louis) remain affordable for median-income households under the traditional 30% rule. The typical home priced at $440,000 in May 2025 would require 44.6% of the typical household’s income to afford. 3 8
• Market Power Shifting to Buyers: According to a recent survey by Real Brokerage, 43% of agents surveyed said their local market favored buyers in May, while 29% reported balanced market conditions. Only 28% said sellers still had the advantage. 9

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Mortgage Markets

OVERVIEW: The mortgage market continues to navigate high interest rates, with applications showing modest increases despite rates remaining elevated. Regulatory changes are focusing on affordability measures and security enhancements, while lenders adapt to new compliance requirements.

• HUD Proposes FHA Premium Reduction: The Department of Housing and Urban Development has proposed reducing mortgage insurance premiums to 0.25% for all FHA Multifamily Insurance Programs. This aligns with President Trump’s January 2025 memorandum on “Delivering Emergency Price Relief for American Families.” 5
• Green Housing Categories Eliminated: The proposal would eliminate the MIP categories established in 2016 (Green and Energy Efficient Housing, Affordable Housing, and Broadly Affordable Housing), which HUD states are “misaligned with the presidential memoranda and would become economically obsolete.” 5
• Mortgage Applications Rise 1.1%: Applications increased from the previous week according to MBA’s Weekly Mortgage Applications Survey. The Refinance Index increased 3% from the previous week and was 29% higher than the same week one year ago, while the Purchase Index decreased 0.4%. 6
• Rates Edge Higher: The 30-year fixed mortgage rate increased to 6.88% last week despite slightly lower Treasury rates. “The combination of the ongoing conflict in the Middle East, current economic conditions, and last week’s FOMC meeting resulted in slightly lower Treasury rates. However, mortgage rates still edged higher but remained in the same narrow range,” said Joel Kan, MBA’s Vice President. 6
• FHA Enhances Security Requirements: The Federal Housing Administration has announced a critical security update requiring all FHA Connection users to implement phishing-resistant multi-factor authentication by July 28, 2025. Users who do not meet the requirement by the deadline will lose access to FHAC, potentially disrupting their ability to process or service FHA loans. 10

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Economic & Political News

OVERVIEW: Economic indicators are sending mixed signals, with the Federal Reserve maintaining its cautious stance on interest rates. Inflation shows signs of moderating, but policy uncertainty and credit rating concerns continue to impact financial markets and housing affordability.

• Fed Holds Rates Steady: The Federal Reserve has maintained its target rate of 4.5% to 4.25%, continuing its post-2024 pause for federal funds rate cuts. Despite previous reductions of 100 basis points in late 2024, mortgage rates have remained in the high 6% range. 7
• Economic Projections Revised Downward: The Fed reduced its 2025 GDP forecast from 1.7% to 1.4% (year-over-year rate from the fourth quarter). Chair Powell linked policy uncertainty as a complicating factor for economic growth during his press conference. 7
• Unemployment and Inflation Forecasts Adjusted: The Fed slightly increased its 2025 forecast for the unemployment rate from 4.4% to 4.5% and raised its core PCE inflation projection from 2.8% to 3.1%. Chair Powell noted that the housing market suffers from both long-run and short-run issues, involving affordability and a structural housing shortage. 7
• Mixed Inflation Signals: May’s consumer price index report showed tamer inflation than expected, causing bond yields to fall below 4.4% on June 12. However, the 30-year mortgage rate remained relatively steady between 7.1% and 7.2%. 1
• Manufacturing and Service Sector Contraction (SitusAMC The RECAP – Quarterly Report): The ISM Manufacturing Purchase Managers’ Index showed a contraction in service-sector activity, while May had a stronger-than-expected jobs report. These mixed economic signals have contributed to the Federal Reserve’s cautious approach. 1

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Industry News

OVERVIEW: The real estate industry is adapting to changing market conditions through leadership transitions, innovative property conversions, and technological advancements. Commercial real estate is seeing significant shifts in demand patterns, while multifamily developers navigate new supply dynamics.

• Cushman & Wakefield Leadership Transition: The company is experiencing a significant leadership change, with Brett White stepping down as board chairman and Steve Plavin from Blackstone taking over. This is part of a broader board overhaul aimed at enhancing strategic direction under CEO Michelle MacKay. 12
• Brokerage Posts Profit After Previous Losses: Cushman posted a $2 million profit in Q1 2025, reversing a $28.8 million loss from a year earlier. The changes come amid ongoing industry pressures, including high borrowing costs, slower deal activity, and post-pandemic recovery challenges. 12
• Major Office-to-Residential Conversion Funded: RXR Realty, Apollo Global Management, and SL Green have secured $575 million in funding for converting the 5 Times Square office tower into a multifamily residential community. The project will create 313 affordable housing units, with construction set to begin by year-end and completion anticipated by 2027. 13
• Multifamily Supply Wave Coming: The multifamily market is undergoing significant changes, with a wave of new, high-quality housing set to open in 2025. After this surge, construction may slow due to rising costs. Cities like Miami remain strong, but rent in some Sun Belt areas may flatten or fall as supply increases. 14
• Rental Demand Remains Strong: Many renters continue to be priced out of homeownership, maintaining demand for rental units. More people are moving back near work due to return-to-office policies, though long-term demand patterns may shift as millennials start families and look for single-family homes. 14

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Commercial Real Estate Markets (including Multifamily)

Overview: Commercial real estate markets continue to show a bifurcated performance as of June 26, 2025, with high-quality assets maintaining strength while Class B and C properties face challenges. Transaction volume has declined, but financing remains available for select projects. Policy changes aimed at boosting housing supply are underway, and mortgage applications have shown modest increases despite ongoing servicing challenges.

Market Trends

• Transaction slowdown: CRE transaction volume fell nearly 23% month-over-month in April 2025 to the lowest level since April 2024, with all property types experiencing a decline as investors remain cautious amid economic uncertainty. 1
• Market bifurcation deepens: Trophy and Class A buildings maintain strong demand while Class B and C properties struggle, particularly in the office sector. Urban core properties in Manhattan, Miami, and D.C. with modern amenities and transit access continue to attract tenants as companies enforce return-to-office policies. 2
• Multifamily shift underway: A significant wave of new, high-quality housing is set to open later in 2025, though construction may slow afterward due to rising costs. Cities like Miami continue to show strength, but rent growth in some Sun Belt areas is expected to flatten or decline as supply increases. 2
• CMBS delinquencies climbing: Delinquencies have risen to their highest level since Q4 2020, with mixed-use and office properties contributing significantly to the increase, signaling potential distress in certain market segments. 1
• Mortgage complaints persist: CFPB data reveals 746 mortgage-related complaints recorded in June 2025, with “Trouble during payment process” (367 complaints) and “Struggling to pay mortgage” (163 complaints) being the most common issues. Conventional home mortgages account for 404 of these complaints, highlighting ongoing financial pressures. 4

Financing Activity

• Walker & Dunlop fund closes: The company’s seventh discretionary equity fund closed at $135 million, focusing on multifamily and industrial real estate across the U.S. The fund has already deployed over 50% of its capital commitments and aims for 15%+ net returns by targeting underutilized and mispriced assets in markets with limited competition. 5
• California multifamily development secures financing: JLL Capital Markets arranged $182 million in construction financing and joint venture equity for Hillcrest Apartments, a 333-unit multifamily development in Thousand Oaks, California. The package includes a $117.2 million senior loan from Bank OZK, demonstrating that select development projects can still attract capital despite broader market challenges. 6
• Major hotel refinancing completed: Driftwood Capital provided $35 million in mezzanine financing for the refinancing of the Sheraton Dallas hotel (Texas’s largest with 1,841 keys). This financing is part of a broader $300 million refinancing by a joint venture sponsored by Chartres Lodging Group, replacing a 2024 $270 million CMBS loan and indicating continued liquidity for trophy hospitality assets. 7
• Bank lending divergence continues: Large banks continue reducing their CRE exposure while smaller institutions increase theirs, creating a two-tiered lending environment that may impact borrowers differently depending on their banking relationships and property types. 1