Too early for a rally cap??? Because mortgage rates are moving down. Still on the wrong side of 6% but improving. More news confirming the surge in resi home inventory. Mortgage DQs increased more than any other consumer debt category – goals. CMBS fighting for the top DQ spot w/ delinquencies now at Q4 2020 levels. Insult to injury is many CRE assets face loan maturities between 2025–2027, with refinancing hurdles due to higher interest rates and declining valuations. 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

• Existing-home sales increased 0.8% in May to a seasonally adjusted annual rate of 4.03 million, though sales remain 0.7% below May 2024 levels, as high mortgage rates continue to constrain market activity. 1
• Housing inventory has reached 1.54 million units, up 20.3% from May 2024, providing homebuyers with more options and signaling a return to pre-pandemic market conditions. 1
• The median existing-home price hit $422,800 in May, up 1.3% year-over-year, marking the 23rd consecutive month of price increases and a record high for May. 1
• Mortgage rates decreased for the fourth consecutive week, with the average 30-year fixed rate falling to 6.77% on June 26, down from 6.81% the previous week. 2
• The OCC reports that 96.1% of mortgages were current and performing at the end of Q1 2025, down from 96.4% a year earlier, with serious delinquencies rising to 1.4%. 3
• VantageScore data shows mortgage delinquencies increased more than any other credit product in May 2025, with 30-59 day delinquencies up 5.4% month-over-month. 4
• Fed Chair Powell testified to Congress that the economy remains solid w/ low unemployment, but inflation is still above the 2% target, leading the Fed to maintain interest rates at 4.25-4.5% while monitoring tariff impacts. 5
• Blackstone has purchased another $2 billion in discounted commercial real estate loans, continuing its strategy of acquiring distressed CRE debt 1
• CMBS delinquencies rose to their highest level since Q4 2020, with six loans totaling $134.2 million resolved with $64.7 million in losses in April 2025 2
• CRE sentiment remains upbeat with 93% of industry experts expecting activity to remain stable (48%) or increase (45%) in the second half of 2025, despite persistent tariff concerns 3

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Residential Real Estate Markets

Overview: May’s housing data shows modest improvement in sales activity alongside substantial inventory growth, creating more balanced market conditions. Regional performance varies significantly, with the Northeast leading in both sales growth and price appreciation while the West continues to struggle with affordability challenges.

• Sales Activity: Existing-home sales increased 0.8% in May to a seasonally adjusted annual rate of 4.03 million, though still 0.7% below May 2024 levels. 1
• Regional Performance:
  • Northeast: Sales up 4.2%, prices up 7.1% (median $513,300)
  • Midwest: Sales up 2.1%, prices up 3.4% (median $326,400)
  • South: Sales up 1.7%, prices down 0.7% (median $367,800)
  • West: Sales down 5.4%, prices up 0.5% (median $633,500) 1
• Inventory Growth: Total housing inventory reached 1.54 million units in May, up 6.2% from April and 20.3% from May 2024, providing 4.6 months of supply at the current sales pace. 1
• Price Trends: The median existing-home price hit $422,800 in May, up 1.3% year-over-year and marking the 23rd consecutive month of price increases. This represents a record high for the month of May. 1
• Market Dynamics: Properties typically remained on the market for 27 days in May, down from 29 days in April but up from 24 days in May 2024, indicating buyers have more time to make decisions. 1
• First-Time Buyers: First-time homebuyers accounted for 30% of sales in May, down from 34% in April and 31% in May 2024, reflecting ongoing affordability challenges. 1
• Expert Outlook: “Lower interest rates to attract more buyers and sellers to the housing market. If mortgage rates decrease in the 2nd half of this year, expect home sales across the country to increase due to strong income growth, healthy inventory, and a record-high number of jobs,” said NAR Chief Economist Lawrence Yun. 1

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Mortgage Markets

Overview: Mortgage rates have edged lower for the fourth consecutive week, providing modest relief to homebuyers. However, concerning trends in mortgage delinquencies have emerged, with both OCC and VantageScore data showing increases in late payments. The CFPB continues to monitor lending patterns across different neighborhood income levels.

• Current Rates: The average 30-year fixed-rate mortgage declined to 6.77% on June 26, down from 6.81% the previous week, marking 23 straight weeks below 7%. 2
• Expert Predictions:
  • “Policymakers are talking about maybe a quarter cut in July. But turmoil in the Middle East, in conjunction with tariffs, just leads to a lot of unknowns.” — Jay Crowell, Cornerstone Home Lending
  • “Average rates for July should average around 6.875% for a 30-year fixed and 6.375% for 15-year fixed.” — Ralph DiBugnara, Home Qualified 2
• Delinquency Trends (OCC): The OCC Mortgage Metrics Report shows 96.1% of mortgages were current and performing at the end of Q1 2025, down from 96.4% a year earlier. Seriously delinquent mortgages (60+ days past due) increased to 1.4% from 1.2% a year ago. 3
• Foreclosure Activity (OCC): Servicers initiated 19,868 new foreclosures in Q1 2025, a 12.3% increase from the previous quarter and 18.7% higher than a year ago, indicating growing financial stress among homeowners. 3
• Delinquency Trends (VantageScore): Mortgage delinquencies increased more than any other credit product in May 2025, with 30-59 day delinquencies up 5.4% month-over-month and 60-89 day delinquencies up 3.2%. 4
• Regional Delinquency Patterns: The South and Midwest regions experienced the highest increases in mortgage delinquencies, with states like Mississippi, Louisiana, and Alabama showing the most significant deterioration in payment performance. 4
• Loan Modifications: Servicers completed 42,963 mortgage modifications in Q1 2025, with 73.4% reducing borrowers’ monthly payments. Among the modifications, 94.2% were “combination modifications” — changing multiple loan terms, such as interest rates, terms, and principal. 3
• CFPB Monitoring: The Consumer Financial Protection Bureau continues to track mortgage lending patterns across different neighborhood income levels, with particular attention to disparities in origination volumes that might indicate shifting access to credit. 6

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Economic & Political News

Overview: The Federal Reserve maintains its cautious stance on monetary policy as inflation remains above target despite improvements. Employment data shows stability with regional variations, while concerns about the impact of tariffs on economic growth and inflation persist.

• Fed Policy: The Federal Open Market Committee (FOMC) has maintained the target range for the federal funds rate at 4.25-4.5% since the beginning of the year, taking a wait-and-see approach before considering any adjustments. 5
• Powell’s Congressional Testimony: Fed Chair Jerome Powell characterized the economy as being “in a solid position” despite elevated uncertainty, noting that the Fed is “squarely focused on achieving our dual-mandate goals of maximum employment and stable prices.” 5
• Inflation Data: Total personal consumption expenditures (PCE) prices rose 2.3% over the 12 months ending in May, while core PCE prices (excluding food and energy) rose 2.6%, both remaining above the Fed’s 2% target. 5
• Tariff Impact: Powell stated that “increases in tariffs this year are likely to push up prices and weigh on economic activity,” with near-term inflation expectations rising in both market- and survey-based measures. 5
• Employment Trends:
  • Payroll job gains averaged 124,000 per month in the first five months of 2025
  • The unemployment rate stood at 4.2% in May, remaining relatively stable over the past year
  • The labor market is considered to be at or near maximum employment 5
• State Employment Data: Unemployment rates were higher in May in 3 states, lower in 2 states, and stable in 45 states and D.C. Twenty-four states and D.C. had jobless rate increases from a year earlier, while only 4 states had decreases. South Dakota had the lowest rate at 1.8%, while D.C. had the highest at 5.9%. 7
• Consumer Credit Concerns: TransUnion reports that student loan borrowers are showing signs of financial stress, with delinquency rates rising across multiple credit products for consumers with student loan debt. This trend could impact housing demand as these consumers delay homebuying. 8
• Economic Outlook: Despite challenges, most measures of longer-term inflation expectations remain consistent with the Fed’s 2% goal, providing some optimism for eventual normalization of monetary policy. 5

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Commercial Real Estate Markets (including Multifamily)

Market Trends

• Blackstone’s Loan Acquisition: Blackstone has purchased another $2 billion in discounted commercial real estate loans, continuing its strategy of acquiring distressed CRE debt at favorable prices. This move highlights the ongoing opportunities in the distressed debt market. 1
• Market Sentiment: According to Avison Young’s 2025 mid-year outlook, 93% of industry experts expect CRE activity to remain stable (48%) or increase (45%) in the second half of 2025, showing cautious optimism despite challenges. 3
• Tariff Concerns: Tariff negotiations continue to weigh heavily on industry sentiment, with 67% of industrial respondents warning their market could lose out due to tariffs. Developers are expected to pause new projects in the latter half of the year due to costs and tariffs (34%), feasibility (24%), and overall risk (21%). 3
• Investor Appetite: 88% of industry experts anticipate investor appetite will be somewhat higher (44%) or significantly higher (44%) in the second half of 2025, particularly in markets that offer long-term value and stability. 3
• Blackstone’s Industrial Sales: Blackstone and its subsidiary Link Logistics have sold over $1 billion in industrial properties across South Florida in six separate deals since November, including a 26-property portfolio sold to Longpoint Partners for $331.3 million. 5

Financing Activity

• CMBS Delinquencies: Rates rose significantly in Q1 2025, reaching their highest level since Q4 2020. Six loans with a collective balance of $134.2 million were resolved with $64.7 million in total losses in April, with an average loss severity of 48.22%. 2
• Delinquency Improvement: April’s loss severity of 48.22% represents an improvement from March’s 81.27% across $157.5 million in losses, though the 12-month moving average monthly disposed balance increased to $173.5 million. 2
• Capital Source Comparison: MBA reported Q1 2025 delinquency rates across all capital sources: CMBS (6.42%), banks and thrifts (1.28%), life companies (0.47%), Fannie Mae (0.63%), and Freddie Mac (0.46%). 6
• Jersey City Refinancing: Cushman & Wakefield arranged an $81 million refinancing deal for One Grove, a 200-unit multifamily property in Jersey City. 7
• San Diego Development: Safehold Inc. closed on a ground lease and leasehold loan for a 259-unit multifamily development in San Diego’s East Village neighborhood. 8
• Houston Master-Planned Community: Trez Capital provided $58 million in financing for phase one of Preservation Creek, a new master-planned community in Alvin, within the Houston metropolitan area. 9
• Connecticut Portfolio Acquisition: FPA Multifamily acquired a 693-unit portfolio in Connecticut for $121 million, demonstrating continued investor interest in multifamily assets. 10

Banking & Servicing

• Distressed Office Opportunities: Trepp identified 279 US office loans with occupancy below 60% and a total loan balance of $9.02 billion—prime candidates for distress-driven acquisitions. More than half of these loans (52%) have a DSCR below 0.89x, signaling severe cash flow challenges. 11
• Maturity Wall Challenges: Many assets face loan maturities between 2025–2027, with refinancing hurdles due to higher interest rates and declining valuations. Unlike in the post-GFC period, rate relief isn’t on the horizon, and the “extend-and-pretend” window is closing. 11
• Industry Standards: MISMO published a new standard applying SMART Doc V3 Verifiable Profile functionality to security instruments, enabling seamless exchange of data and related documents between trading partners. 13
• ICE Performance: Intercontinental Exchange, Inc. (ICE), a major player in CRE trading platforms, reported strong Q1 2025 performance with net income reaching $797 million and stockholder equity at $27.97 billion. 4

Regulatory Updates

• Connecticut Regulations: Recent updates to Connecticut’s regulations on services to commercial real properties outline tax implications and services categorized as sales, impacting how commercial properties are taxed and maintained in the state. 14
• California Disclosures: California’s financial disclosure guidelines for brokers and financers emphasize transparency in CRE transactions, which could improve trust and efficiency in the industry. 15
• NYC Housing Policy: Proposed changes by apparent mayoral primary winner Zohran Mamdani could impact New York City’s housing sector, particularly the roughly 960,000 rent-regulated units. Mamdani has proposed a rent freeze on apartments subject to rent control or rent stabilization. 16

Industry News

Overview: The real estate industry continues to evolve through strategic mergers, significant refinancing deals, and new development projects. Meanwhile, rising delinquency rates in commercial and multifamily mortgages signal potential challenges ahead, particularly in the office and retail sectors.

• Chicago Brokerage Merger: Baird & Warner acquired Dream Town, creating a combined company with nearly 3,000 agents and staff operating from more than 30 offices across the Chicago area. Steve Baird remains president and CEO, while Dream Town founder Yuval Degani assumes the role of president of brokerage services. 9
• Major Refinancing Deal: The Wharf, a prominent mixed-use development in Washington, D.C., secured a $1.15 billion refinancing loan, marking the largest refinancing of a private real estate project in modern D.C. history. The development includes residential, office, retail, and entertainment spaces. 10
• Transit-Oriented Development: 13th Floor Investments unveiled plans for Link at Boca, a transit-oriented development in Boca Raton, Florida, featuring an eight-story multifamily building with 340 apartments and over 24,000 square feet of retail space. 11
• Commercial Mortgage Delinquencies: Commercial and multifamily mortgage delinquency rates increased in Q1 2025, with CMBS delinquencies reaching 6.42%. Office and retail properties show the highest stress levels as they navigate changing market conditions and financing environments. 12
• Student Loan Impact: TransUnion reports that 7.2% of student loan borrowers were 30+ days past due on their payments in May 2025, up from 6.8% in April. These borrowers also show higher delinquency rates on auto loans, credit cards, and personal loans compared to consumers without student debt. 8
• Credit Performance: VantageScore’s CreditGauge shows overall consumer credit performance deteriorated in May, with early-stage delinquencies (30-59 days past due) increasing across all major credit products. Mortgage loans showed the largest increase at 5.4% month-over-month. 4
• Technology Trends: Artificial intelligence and automation are increasingly driving demand in the real estate sector, especially for data centers and high-end office spaces. AI integration is becoming a competitive advantage for brokerages, enhancing agent productivity and client service capabilities. 13
• Consumer Credit Health: The percentage of consumers with subprime credit scores (below 600) increased to 18.7% in May 2025, up from 17.9% a year earlier, potentially limiting the pool of qualified homebuyers in the coming months.