Daily Dose of Real Estate for July 3

Republicans trying to avoid a ping pong match between the House & Senate as they work through negotiations on “One Big Beautiful Bill.” “Bundling” and “vertical integrations” might make it sound like 2007 but real estate never had to contend with this sort of competitor – Rocket completes the acquisition of Redfin. Unemployment numbers came in worse than expected adding fuel to the argument to lower rates. Maybe Director Pulte was right to investigate fraud (despite historically low DQ rates) because fraud is up and the costs per incident are beefy. Let’s get you caught up and out the door in 3 minutes. Tim 

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Key Takeaways

• Mortgage rates hit three-month low at 6.79%, triggering a 7% weekly surge in refinance applications and a 40% year-over-year increase. 1
• U.S. condo prices fell 2% in May, with Florida and Texas markets leading the decline as luxury condo sales slowed significantly in these regions. 2
• AEI Housing Market Indicators show first-time homebuyer activity decreased 5.3% year-over-year in June 2025, while repeat buyer activity fell 3.8%, indicating continued market cooling. 3
• Private sector shed 33,000 jobs in June, the first decline since March 2023, increasing the likelihood of a Federal Reserve rate cut as early as July. 4
• “One Big Beautiful Bill” Faces House Vote: After passing Senate, the bill faces a critical vote in the House, where Republican leaders are working to secure enough votes to meet President Trump’s July 4 deadline 11
• Rocket Companies completes acquisition of Redfin, marking a major consolidation in the real estate industry as the mortgage giant expands its reach into the brokerage sector. 5
• Mortgage fraud incidents surge 407% since 2022, with average financial losses of $16,829 per incident and total nationwide losses reaching $1.38 million. 6

Residential Real Estate Markets

Overview: Housing markets show increasing signs of cooling across multiple segments, with condo prices declining nationally and Sun Belt regions experiencing significant slowdowns. The luxury segment remains relatively resilient despite broader market challenges, while first-time homebuyer activity continues to decrease according to new AEI data.

• Condo market weakens: U.S. condo prices fell 2% in May compared to the previous year, with Florida and Texas markets experiencing the steepest declines at 4.3% and 3.8% respectively. 2
• Luxury condo segment hit hardest: Properties priced above $1 million saw sales volume decrease by 12% year-over-year in May, with Miami Beach experiencing a 17% drop in median condo prices. 2
• First-time homebuyer activity decreases: AEI’s Housing Market Indicators show first-time homebuyer activity decreased 5.3% year-over-year in June 2025, while repeat buyer activity fell 3.8%. 3
• Luxury single-family homes show resilience: Sales of homes priced above $10 million increased between February and May 2025 compared to the same period last year, with cash accounting for 88% of luxury transactions. 7
• Sun Belt slowdown continues: Florida homes now take a median of 73 days to sell, up from 55 days two years ago, as inventory builds and buyer urgency wanes. 8
• Mortgage rate lock volume declines: AEI data shows rate lock volume decreased 4.7% year-over-year in June, with conventional conforming loans seeing the largest drop at 6.2%. 3
• Housing inventory increases: According to FRED data, active listing counts continue to rise nationally, with inventory up 16% while new listings are down 2.9%. 9
• Multifamily permitting signals new supply: Significant increases in permitting activity observed in Dallas, Houston, and Orlando since late 2024 suggest the beginning of a new upcycle in multifamily housing. 10
• Record multifamily vacancy rates: Vacancy rates have reached 7%, the highest recorded since tracking began in 2017, with over 600,000 new units added to the market in 2024. 11

Mortgage Markets

Overview: Mortgage rates have hit a three-month low, spurring refinance activity while purchase applications remain relatively flat. Policy changes regarding cryptocurrency assets and alarming increases in mortgage fraud highlight evolving industry dynamics. AEI data shows declining mortgage rate lock volume across most loan types.

• Refinance surge: Applications increased 7% from the previous week and were 40% higher than the same week one year ago as the 30-year fixed rate fell to 6.79%. 1
• Current mortgage rates:
  • 30-year fixed (conforming): 6.79% (down from 6.88%)
  • Jumbo 30-year fixed: 6.78%
  • FHA 30-year fixed: 6.53%
  • 15-year fixed: 6.06%
  • 5/1 ARM: 5.99% 12
• Mortgage rate lock volume declines: AEI reports a 4.7% year-over-year decrease in June, with conventional conforming loans experiencing the largest drop at 6.2%. 3
• FHA/VA loan share increases: According to AEI data, government-backed loans now represent 37.2% of all purchase mortgages, up from 35.8% a year ago, as affordability challenges push more buyers toward lower down payment options. 3
• Cryptocurrency as mortgage asset: FHFA Director Bill Pulte has ordered Fannie Mae and Freddie Mac “to prepare their businesses to count cryptocurrency as an asset for a mortgage,” representing a significant policy shift. 13
• Mortgage fraud skyrockets: Scams have increased by 407% over the past three years, with average financial losses of $16,829 per incident and total nationwide losses reaching $1.38 million. 6
• Phishing most common scam type: Fraudsters are exploiting the rapid pace of real estate transactions and the shift to digital processes to target vulnerable consumers. 6

Economic & Political News

Overview: Economic indicators show signs of cooling with unexpected private sector job losses increasing the likelihood of Federal Reserve rate cuts. However, persistent inflation concerns and Fed Chair Powell’s skepticism about rate cuts’ impact on housing complicate the outlook.

• Private sector job losses: U.S. employers shed an estimated 33,000 jobs in June, the first decline since March 2023, significantly missing economists’ predictions of a 100,000 job increase. 4
• Fed rate cut odds increase: The unexpected job losses have raised the likelihood of a July rate cut to about 25%, up from around 20% last week, according to the CME FedWatch tool. 4
• Rising unemployment projected: Economists expect the unemployment rate to hit 4.6% by June 2026, up from its current level of 4.2%, which would be the highest since September 2021. 14
• Powell skeptical about rate cuts’ housing impact: Fed Chair Jerome Powell expressed doubt that lowering interest rates would necessarily reduce housing costs, arguing that a long-term supply shortage is the primary cause of elevated house prices. 15
• Inflation concerns persist: May 2025 inflation data exceeded economist expectations, complicating the Fed’s ability to cut rates despite signs of economic weakness. 7
• “One Big Beautiful Bill” Faces House Vote: After passing Senate, the bill faces a critical vote in the House, where Republican leaders are working to secure enough votes to meet President Trump’s July 4 deadline 11
• Deficit Concerns: The nonpartisan Congressional Budget Office estimates the bill will add approximately $3.4 trillion to the national debt over the next decade, raising concerns among fiscal conservatives 12
• Tariff-driven inflation risks: Economists warn that potential tariff increases could push inflation higher in coming months, raising the bar for Fed rate cuts. 16

Commercial Real Estate Markets (including Multifamily)

Commercial Real Estate Markets

Overview: The commercial real estate market shows signs of stabilization despite significant challenges in specific sectors, with office properties facing record delinquencies while multifamily demonstrates resilience amid high vacancy rates.

• Market Stabilization: Moody’s has moved its CRE Credit Compass to neutral for 2025 from unfavorable in 2024, with improved conditions expected to continue into 2026 1
• Record Office Delinquencies: CMBS office delinquency rates hit 11.08% in June 2025, surpassing previous records from December 2024 (11.01%) and July 2012 (10.7%) 2
• Sector Performance: Four of five main commercial property types showed higher delinquency rates month-over-month, with retail rising to 7.06%, lodging jumping 42 basis points to 6.81%, and the overall CMBS delinquency rate reaching 7.13% 2
• Price Trends: Commercial real estate prices declined 10.47% year-over-year as of July 2024, showing improvement from the 13.39% decline in April 2024 3
• Distressed Property Opportunities: Industry expert Robert Martinek (EisnerAmper) predicts significant discounts on delinquent properties once extensions and deferrals are exhausted, citing a Minneapolis building that sold for $15 million after being purchased for $95 million 4
• Tenant Incentives: Building owners in struggling markets (particularly California, Dallas, and Houston) are offering unprecedented incentives to attract tenants, including 12 months free rent and $150 work letters, up from the previous $50-$75 standard 4
• Office Conversion Trend: New York City is seeing a turnaround with 10 million square feet being converted from office to residential space, including affordable housing components 4
• Multifamily Bright Spot: Multifamily was the only major sector where delinquency rates fell, dropping 20 basis points to 5.91% in June, while Camden Property Trust reported a 0.8% increase in same-store revenues in Q1 2025 2 5
• Supply Cycle Signals: Despite record high multifamily vacancy rates of 7%, permitting trends suggest the start of a new supply cycle with markets like Dallas, Houston, and Orlando seeing consistent increases 6

Commercial Real Estate Financing

Overview: CRE financing is evolving with strategic acquisitions, legislative developments, and innovative approaches to loan sizing that aim to balance competitive offerings with appropriate risk management.

• Strategic Acquisition: Franklin BSP Realty Trust closed its $425 million acquisition of NewPoint Holdings, expanding its multifamily operations to include agency and mortgage servicing 7
• Legislative Impact: The Senate’s “One Big Beautiful Bill” proposes permanent tax code changes benefiting CRE, including full expensing, 100% bonus depreciation, and making the 20% Qualified Business Income deduction permanent 8
• Housing Incentives: The bill expands the Low-Income Housing Tax Credit program and makes Opportunity Zones permanent with revised criteria, potentially boosting affordable housing development 8
• Foreign Investment Protection: Section 899 was removed from the Senate bill, avoiding new withholding taxes on foreign investment in U.S. real estate that would have affected sovereign wealth funds and other cross-border capital sources 8
• Market Outlook: While the bill may boost GDP through tenant demand, it’s also expected to put upward pressure on interest rates, with the higher cost of capital likely outweighing revenue gains and potentially widening the buyer-seller valuation gap 8
• Loan Sizing Innovation: CRE lenders are being advised to use multiple metrics simultaneously for optimal loan sizing rather than relying solely on traditional approaches, according to industry experts 9
• Comprehensive Metrics Approach: Successful lenders are combining Loan-to-Value (LTV), Debt Service Coverage Ratio (DSCR), and Debt Yield metrics to structure more competitive loans while maintaining appropriate risk levels 9
• Deal Generation Strategy: Proper loan sizing is emerging as a critical factor for lenders to win more deals in the competitive CRE financing landscape, with different metrics becoming constraining factors depending on property type and market conditions 9

Commercial Real Estate Servicing

Overview: The CRE servicing sector is adapting to changing market conditions with strategic acquisitions and evolving approaches to managing distressed assets.

• Servicing Expansion: Franklin BSP Realty Trust’s acquisition of NewPoint Holdings adds mortgage servicing capabilities to its platform, creating what the company describes as a “one stop shop” for commercial real estate financing solutions 7
• Distressed Asset Management: With rising delinquency rates across most CRE sectors, servicers are preparing for an increase in distressed asset management, particularly in the office sector where delinquencies have reached a record 11.08% 2
• Extension Strategies: Industry experts note that many servicers are currently managing distressed assets through extensions and deferrals, but these strategies are expected to become less viable as market conditions evolve 4
• Workout Opportunities: As extensions become less viable, servicers anticipate an increase in workout scenarios and potential liquidations, creating opportunities for investors to acquire distressed assets at significant discounts 4

Industry News

Overview: Major industry consolidation continues with Rocket Companies completing its acquisition of Redfin, while commercial real estate markets show divergent performance across regions and sectors. Young adults’ financial challenges are reshaping demand patterns across multiple property types.

• Rocket-Redfin merger complete: Rocket Companies has officially acquired Redfin as of July 1, 2025, bringing together one of the nation’s largest mortgage lenders with a major real estate brokerage and listing platform. 5
• Regional REIT performance diverges: Sunbelt apartment markets are struggling due to oversupply, contrasting with stronger performance in coastal markets that are experiencing better occupancy rates and pricing stability. 17
• Office sector shows recovery signs: Premium office assets are seeing increased tenant engagement as companies implement return-to-office plans, with West Coast markets potentially poised for a rebound similar to New York City’s recovery. 17
• Quality assets outperform: REITs with prime locations and strong balance sheets are better positioned to handle market volatility, while industrial REITs face a more uneven path due to trade and macro risks. 17
• Young adults reshape CRE demand: Financial challenges faced by young adults (41% of recent college graduates are underemployed) are shifting consumer behavior toward essential and value-oriented purchases, impacting retail and multifamily housing demand. 18
• Office demand under pressure: Fewer young workers are entering high-wage office roles, and many prefer hybrid work arrangements, affecting office space demand and location preferences.