Daily Dose of Real Estate for July 29

Historic housing bill (Bipartisan) targeting housing supply and affordability gets traction in the Senate. Economic growth is strong, inflation is moving lower, and employment numbers are wicked strong…go figure. Mom and Pop investors are ruffling the feathers and offers of FTHBs. New England, once known for its cold weather and personalities, now lays claim to the crown for the nations hottest housing market. CMBS issuance surges – why they surged might be the best question (risk transfers from portfolios?). Let’s get you caught up and out the door in 3 minutes. Tim

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KEY TAKEAWAYS

• Historic Bipartisan Housing Bill Advances: Sen Tim Scott (R-S.C.) and Ranking Member Elizabeth Warren (D-Mass.) announced markup of the ROAD to Housing Act of 2025, marking the committee’s 1st bipartisan housing markup in over a decade. The comprehensive legislation targets housing supply expansion, affordability improvements, and regulatory oversight reforms across federal housing programs 1
• New England Housing Markets Surge: Six New England metros dominated the top-10 hottest housing markets in June 2025, with Springfield, Mass. taking top honors and Boston-Cambridge-Quincy achieving the highest Market Action Index score at 55.90. This regional strength contrasts sharply with cooling in former pandemic hotspots like Phoenix, Miami, and Austin 2
• Federal Judge Blocks DOJ Redlining Settlement Termination: A federal judge rejected the Trump administration’s attempt to prematurely end ESSA Bank’s redlining settlement obligations, requiring the Pennsylvania-based bank to continue its $3 million community investment program for three more years. This decision represents another setback for administration efforts to terminate Biden-era enforcement agreements 3
• Treasury Reports Strong Q2 Economic Recovery: The Treasury Department announced that U.S. economic growth resumed in Q2 2025 with 671,000 payroll jobs created in the first five months of the Trump administration, while inflation remained stable despite ongoing tariff concerns. Monthly job creation accelerated significantly from Q1 levels 4
• FHFA Reports Declining Forbearance Activity: The Enterprises completed 19,474 foreclosure prevention actions in April 2025, while forbearance plans decreased from 8,294 in March to 7,603 in April. Total loans in forbearance dropped to 37,807 representing just 0.12% of total loans serviced, indicating continued improvement in mortgage performance 5
• Mortgage Servicing Costs Reveal Industry Disparities: MBA data shows performing loan servicing costs averaged $176 per loan in 2024, while non-performing loans cost $1,573 per loan—nearly nine times higher. Large independent mortgage companies achieved the lowest costs across both categories, demonstrating significant scale advantages in the industry 6
• Small-Time Investors Dominate Home Purchases: Individual investors are buying U.S. homes at the highest rate since property data firm Cotality began tracking 14 years ago, intensifying competition for traditional homebuyers who already face affordability challenges from elevated mortgage rates and limited inventory 7
• CMBS Market Surges to 15-Year High – Commercial mortgage-backed securities issuance reached $59.55 billion in the first half of 2025, marking a 35% increase from the previous year and the largest volume in more than 15 years, according to Trepp data. 1

RESIDENTIAL REAL ESTATE MARKETS

Overview: Regional housing markets show stark contrasts, with New England emerging as the nation’s hottest region while national homeownership rates stagnate at 65%. Small investors are increasingly competing with traditional buyers as market dynamics shift, creating additional pressure in an already challenging affordability environment.

New England Dominates Hot Markets

• Top Market Rankings: Springfield, Massachusetts leads the nation’s hottest housing markets for June 2025, followed by Hartford, Connecticut in second place. New Hampshire cities Concord and Manchester rounded out the top-5, demonstrating the region’s broad-based strength across multiple metros 8
• Market Action Index Scores: Boston-Cambridge-Quincy achieved the highest national Market Action Index score at 55.90, while Providence-New Bedford-Fall River ranked second at 51.63. Any score above 30 indicates a seller’s market, meaning these regions are experiencing significant seller advantages with limited inventory and strong buyer demand 2
• Pandemic Market Reversals: Former pandemic hotspots have cooled dramatically, showing how regional dynamics have shifted. Phoenix’s market action index plummeted from 100 in April 2022 to just 36 currently, Miami dropped from 68 to 31, and Austin declined from 100 to 31, illustrating the complete reversal from the pandemic-era boom 2
• Regional Economic Factors: New England’s housing strength reflects underlying economic stability, employment growth, and limited housing supply in desirable urban and suburban markets. The region’s higher education institutions, technology sector growth, and established infrastructure continue attracting buyers despite higher costs 2

National Homeownership Trends

• Stagnant National Rate: 65% of Americans owned homes in spring 2025, showing little movement from previous periods and indicating a national market that has plateaued after years of volatility. This stagnation reflects ongoing affordability challenges and limited inventory in many markets 9
• Regional Performance Variations: The Midwest significantly outpaced other regions in homeownership gains, benefiting from more affordable housing costs and stable employment markets. Meanwhile, the Northeast and West faced continued challenges from high home prices, elevated mortgage rates, and limited inventory relative to demand 9
• Housing Unit Distribution: Just under 90% of all U.S. housing units were occupied in Q2 2025, with roughly 10% remaining vacant. Owner-occupied homes comprised 58% of total housing units (86,159 units), while renter-occupied units made up 31.3% (46,355 units), showing the continued dominance of homeownership in the American housing market 10
• Demographic Trends: Homeownership rates vary significantly by age, income, and geographic location, with younger buyers facing particular challenges from student debt, high home prices, and elevated mortgage rates that have priced many out of homeownership opportunities 10

Investor Activity Intensifies Competition

• Record Purchase Levels: Individual investors are buying U.S. homes at the highest rate since property data firm Cotality began tracking 14 years ago, representing a significant shift in market dynamics. This surge includes both small-scale investors seeking rental income and larger investors capitalizing on market opportunities 7
• Competitive Advantages: Small investors often have cash advantages and can move quickly on properties, allowing them to outbid traditional homebuyers who require mortgage financing. This creates additional pressure in markets where owner-occupant buyers already face affordability challenges from elevated mortgage rates and limited inventory 7
• Market Impact Analysis: The increased investor activity is contributing to housing affordability challenges by removing potential owner-occupied homes from the market and converting them to rental properties. This trend is particularly pronounced in markets with strong rental demand and limited new construction 7

MORTGAGE MARKETS

Overview: Mortgage markets show mixed signals with rising refinance rates, improving foreclosure prevention metrics, and significant cost disparities between servicers. Federal regulatory enforcement continues despite administration efforts to terminate settlements, while FHFA data reveals continued improvement in mortgage performance.

FHFA Foreclosure Prevention Data (April 2025)

• Prevention Actions Completed: The Enterprises completed 19,474 foreclosure prevention actions in April 2025, bringing the cumulative total to 7,178,528 actions since conservatorships began in September 2008. Approximately 39% of these actions have been permanent loan modifications, demonstrating the ongoing effort to help struggling borrowers 5
• Forbearance Activity Declining: Initiated forbearance plans decreased from 8,294 in March to 7,603 in April 2025, while the total number of loans in forbearance dropped from 40,939 to 37,807. This represents just 0.12% of total loans serviced and 7.4% of total delinquent loans, indicating continued improvement in borrower financial stability 5
• Delinquency Rate Trends: The 30-59-day delinquency rate increased slightly to 0.91% while the serious delinquency rate decreased to 0.56% at the end of April 2025. This mixed performance suggests some borrowers are experiencing short-term payment difficulties while overall serious delinquencies continue improving 5
• Foreclosure Activity: Third-party and foreclosure sales fell 3% to 1,024 while foreclosure starts decreased 3% to 7,141, indicating continued low levels of foreclosure activity as prevention programs remain effective and economic conditions support borrower stability 5
• Payment Deferrals: Payment deferrals after completing forbearance plans declined from 7,885 to 7,218, suggesting that borrowers exiting forbearance are increasingly able to resume regular payments rather than requiring additional assistance 5

Current Rate Environment and Refinance Activity

• FHFA Refinance Data: Total refinance volume increased in April 2025 following a decline in mortgage rates in March, though rates subsequently increased to 6.73% in April from 6.65% in March. This demonstrates how sensitive refinance activity is to even small rate movements 5
• Cash-Out Refinance Trends: Cash-out refinances as a percentage of total refinances decreased from 65% in March to 56% in April as lower rates in March increased opportunities for non-cash-out borrowers to refinance for rate savings. This shift indicates borrowers are increasingly focused on rate reduction rather than equity extraction 5

Regulatory Enforcement Continues

• DOJ Settlement Blocked: U.S. District Court Judge Michael Baylson rejected the Department of Justice’s attempt to prematurely terminate ESSA Bank’s redlining settlement agreement. The Pennsylvania-based bank must continue fulfilling its 2023 agreement terms for three more years, including maintaining a $2.92 million loan subsidy fund for communities allegedly discriminated against 3
• Broader Enforcement Pattern: This decision represents another significant setback for the Trump administration’s efforts to end redlining settlement obligations established during the Biden administration. Federal courts have terminated five agreements among the 15 deals lenders made with the previous administration, while the largest $31 million settlement with a Los Angeles-based lender remains completely untouched 3
• Industry Implications: The continued enforcement of these settlements signals that fair lending obligations remain a priority for federal courts, even as the current administration seeks to reduce regulatory burden on financial institutions. Lenders must continue compliance efforts and community investment programs 3

MBA Servicing Cost Analysis Reveals Industry Disparities

• Stark Cost Differences: Fully-loaded mortgage servicing costs of performing loans averaged $176 per loan in 2024, while non-performing loans averaged $1,573 per loan—nearly nine times higher. This dramatic difference highlights the significant operational challenges and resource requirements for managing distressed loans 6
• Scale Advantages Clear: Large independent mortgage companies and banks with average servicing portfolios of 1.8 million and 1.6 million loans respectively achieved the lowest costs at $127-132 per performing loan. Mid-size servicers with portfolios of 195,000-240,000 loans faced costs approximately $100 higher per loan, demonstrating significant economies of scale in the industry 6
• Industry Consolidation Drivers: Large IMBs garnered the lowest costs for both performing and non-performing loans while representing the fastest-growing peer group, suggesting continued consolidation pressures as smaller servicers struggle to compete on cost efficiency 6

ECONOMIC & POLITICAL NEWS

Overview: Strong Q2 economic recovery continues with robust job creation and stable inflation, while significant tax policy changes provide real estate market relief. Historic bipartisan housing legislation advances as Federal Reserve faces mounting political pressure and leadership uncertainty.

Historic Bipartisan Housing Legislation Advances

• ROAD to Housing Act of 2025: Senate Banking Committee Chairman Tim Scott (R-S.C.) and Ranking Member Elizabeth Warren (D-Mass.) announced markup of comprehensive housing legislation, marking the committee’s first bipartisan housing markup in over a decade. The legislation represents a rare moment of bipartisan cooperation on housing policy during a period of significant political polarization 1
• Supply and Affordability Focus: The bill specifically targets housing supply expansion through regulatory barrier removal and promotion of innovative construction methods including modular and manufactured housing. These provisions address the fundamental supply-demand imbalance that has driven housing affordability challenges across the nation 1
• Comprehensive Policy Provisions: Key elements include expanding homeownership access for first-time buyers, reducing homelessness through targeted programs, addressing critical appraisal shortages that have slowed transactions, and promoting veteran housing opportunities. The legislation also emphasizes fiscal responsibility in program implementation 1
• Regulatory Oversight Improvements: The bill strengthens housing regulator oversight, streamlines coordination between federal housing programs, and ensures performance accountability across agencies. These reforms address longstanding concerns about program efficiency and effectiveness in federal housing policy 1
• Legislative Timeline: The committee executive session is scheduled for Tuesday, July 29, 2025 at 10:00 AM ET in 538 Dirksen Senate Office Building, with markup expected to advance the legislation toward full Senate consideration 1

Treasury Reports Strong Q2 Economic Recovery

• Robust Job Creation: The Treasury Department reported that 671,000 payroll jobs were created in the first five months of the Trump administration, demonstrating strong labor market momentum that supports housing demand and mortgage performance 4
• Accelerating Growth: Monthly job creation increased significantly to 150,000 in Q2 from 111,000 in Q1, indicating that economic momentum is building and supporting consumer confidence in major purchases like homes 4
• Key Economic Indicators: The unemployment rate remained historically low at just over 4%, while inflation readings were stable-to-lower despite ongoing energy price volatility and tariff implementation concerns. This combination supports Federal Reserve policy flexibility 4
• GDP Growth Projections: Wall Street Journal forecasters project Q2 GDP growth at 2.3% annualized, representing a significant rebound from Q1’s 0.5% decline. The median forecast range spans 1.6% to 2.7%, with the One Big Beautiful Bill’s retroactive aspects already boosting capital expenditures and economic activity 4

One Big Beautiful Bill Delivers Significant Tax Relief

• SALT Deduction Expansion: The State and Local Tax deduction cap was raised from $10,000 to $40,000, indexed annually until 2030, providing substantial relief to homeowners in high-tax states where property tax burdens have increased significantly in recent years 12
• Fiscal Impact and Reforms: Despite the tax relief, the bill achieved $400 billion in deficit reduction and $1.5 trillion in mandatory savings reforms, representing the largest such reforms in history according to OMB Director Russell Vought. This demonstrates fiscal discipline alongside tax relief 12
• Real Estate Market Benefits: The SALT deduction increase provides substantial relief to homeowners in high-tax states like New York, New Jersey, and California, where property tax burdens have made homeownership increasingly expensive and reduced housing affordability 12

Federal Reserve Faces Mounting Political Pressure

• Presidential Criticism: President Trump has renewed sharp criticism of Fed Chair Jerome Powell, calling him “too late” on rate adjustments and suggesting he “might need to force something” regarding monetary policy. This represents escalating tension between the administration and the central bank 13
• Rate Cut Demands: Following May’s strong jobs report, Trump demanded a full percentage point rate cut, with Vice President J.D. Vance joining calls for cuts and describing current high rates as “monetary malpractice.” This political pressure complicates Fed decision-making 13
• Leadership Uncertainty: Trump indicated he will announce Powell’s replacement “very soon,” adding significant uncertainty to monetary policy direction as officials navigate tariff impacts, inflation concerns, and economic data. Markets are closely watching for signals about future Fed leadership 13

COMMERCIAL REAL ESTATE MARKETS (INLCUDING MULTIFAMILY)

CRE MARKETS

• CMBS Market Surges to 15-Year High – Commercial mortgage-backed securities issuance reached $59.55 billion in the first half of 2025, marking a 35% increase from the previous year and the largest volume in more than 15 years, according to Trepp data. 1
• Manhattan Multifamily Investment Plummets – Manhattan multifamily investment volume dropped 79.4% year-over-year in the first half of 2025, with only $191 million in transactions across the borough during the six-month period. 2
• Major Institutional Activity in NYC – JP Morgan acquired the 418-unit Riverbank multifamily property in Manhattan for $243.5 million, with JLL arranging $128.3 million in acquisition financing for the deal. 2
• Barings Exits Hudson Yards Area Asset – Barings sold the mixed-use Riverbank property near Hudson Yards for $244 million to an institutional investor, with the 44-story building featuring 418 residential units and 18,000 square feet of fully occupied retail space. The Northeast multifamily market has shown resilience with 2.4% rent growth over the past four quarters. 3
• NYC Office Market Shows Activity – June 2025 saw significant office building transactions in Manhattan, with major deals including 1345 Avenue of the Americas ($850M CMBS financing), 5 Times Square office-to-residential conversion project, and Independence Plaza multifamily refinancing, demonstrating continued institutional interest despite market challenges. 4
• Major Mixed-Use Development in Texas – Whole Foods Market signed as anchor tenant for a $3 billion mixed-use development in Frisco, Texas, marking a significant retail commitment in the rapidly growing Dallas-Fort Worth suburb and highlighting the continued expansion of mixed-use projects in high-growth markets. 5

CRE FINANCING

• Chicago Multifamily Refinancing – Canyon Partners Real Estate provided a $106.3 million senior loan to refinance The Saint Grand, a newly built 21-story mixed-use tower in Chicago’s Streeterville neighborhood featuring 248 market-rate apartment units and 46,946 square feet of retail space. 6
• Record-Breaking NYC Office Deal – Blackstone and Fisher Brothers secured an $850 million CMBS loan for 1345 Sixth Avenue, coinciding with Blackstone’s acquisition of a 49% stake in the Midtown office tower – marking Blackstone’s first major Manhattan office market move since 2022. 1
• Massive Multifamily Refinancing – Vornado Realty Trust and Stellar Management obtained $675 million in CMBS debt for Independence Plaza, their 1,328-unit multifamily complex in Tribeca, where 40% of units are either rent-regulated or designated affordable. 1
• Office-to-Residential Conversion Funding – RXR, SL Green, and Apollo Global Management secured $561.6 million from Corebridge Institutional Investments for their office-to-residential conversion of 5 Times Square, planning to convert the 38-story building into up to 1,250 housing units.