Daily Dose of Real Estate

Daily Dose of Real Estate for August 18

Florida’s cold streak continues with 4 out of 5 coolest housing markets now in Florida. “I’m not coming in and I’m not leaving” – the Catch-22 causing the great American mobility crisis. Fed Powell is back at it this week in Jackson Hole where we’ll get a peak into the near certainty of a rate cut next month. A uniquely American development – Consumer sentiment is down considerably but retail spending up! CMBS special servicing maintains an uncomfortable altitude of nearly 10%. The multifamily development party that was ignited by record low COVID-era rates is now ending as you might expect with multifamily developers walking away from incomplete projects that no longer pencil out. Let’s get you caught up and out the door in 3 minutes. Tim

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Table of Contents

KEY TAKEAWAYS

Florida’s housing market has dramatically reversed from red-hot to ice-cold, with four of the five coldest markets in the country now located in Florida, marking a stark contrast to 2023 when Southern cities dominated the hottest markets list 1
Building material prices surged 2.8% year-over-year in July, marking the largest increase in over two years, with construction machinery parts jumping 31.4% and metal molding/trim rising 25.6% due to tariff impacts on steel, aluminum, and copper products 2
U.S. apartment asking rents posted their biggest increase in 2.5 years, rising 1.7% to a median of $1,790 in July as shrinking apartment supply coincides with growing renter demand fueled by high homeownership costs 3
America’s mobility is stalling as the “lock-in effect” intensifies, with over 81% of homeowners holding mortgage rates below 6% and refusing to budge, while federal job insecurity causes buyers to back out of contracts amid employment uncertainty 4 5
Mortgage rates remain stubbornly high despite Fed rate cut expectations, with the average 30-year mortgage rate at 6.61% as of August 13, and analysts warning that Fed cuts may not meaningfully lower mortgage rates below 6.5% 6 7
The CFPB is implementing sweeping regulatory changes under the Trump administration, including plans to roll back existing rules and slash supervision of nonbank companies while defining authority over abusive financial practices 8
Jackson Hole Economic Policy Symposium begins August 21-23, with Fed Chair Powell expected to address producer inflation, tariff impacts, and rate cut timing amid intense pressure from President Trump to lower borrowing costs 9 10
CMBS special servicing rates climbed to 9.89% in December 2024, nearing 10% for the first time in four years as distress continues mounting across commercial real estate portfolios 1
Chicago’s CRE market faces significant distress with Emerald Empire entering forbearance on $430 million in Fannie Mae debt tied to its 400-building rental portfolio, while fraud allegations plague other multifamily operators 2
South Florida multifamily developers are abandoning construction plans as the cycle ends, with Clara Homes listing its entitled Wynwood site for $10.9 million after securing Live Local Act approvals for a 147-unit tower 3
Washington’s data center boom strains hydropower resources as Grant County faces 79 pending applications requiring double Seattle’s power demand, raising sustainability concerns despite economic benefits to rural communities 4

RESIDENTIAL REAL ESTATE MARKETS

Regional housing dynamics have completely reversed from pandemic patterns, with Florida markets cooling dramatically while Northeast cities experience unprecedented demand.

THE GREAT REGIONAL REVERSAL

Florida dominates coldest markets list: Cape Coral-Fort Myers, Punta Gorda, North Port-Sarasota-Bradenton, and Naples-Marco Island now rank among the five coldest housing markets nationally 1
North Port-Sarasota-Bradenton’s dramatic fall: Dropped from top 5 hottest markets in 2023 to bottom 5 coldest in 2025, representing one of the most significant market reversals in recent history 1
Northeast markets surge: New Haven-Milford, Connecticut jumped from 82nd place in 2023 to 1st place in 2025—an 81-position leap that exemplifies the dramatic regional shift 1
Ranking methodology: Home value appreciation carries 40% weight, followed by employment levels, job growth, population trends, homes listed for sale, and typical selling times 1

CONSTRUCTION COSTS SURGE

Building material prices jump 2.8% year-over-year: Largest increase in over two years, directly attributed to Trump administration’s aggressive tariff policies on steel, aluminum, and copper 2
Metal-based materials hit hardest: Construction machinery parts up 31.4%, metal molding/trim up 25.6%, fabricated steel plate up 14.3%, nonferrous wire and cable up 10.5% 2
Energy costs volatile: Jumped 3.9% between June and July alone, though still 8.1% lower than one year ago 2
Tariff impact: 50% tariffs on steel and aluminum products and semifinished copper products flowing directly through to homebuilders already struggling with elevated borrowing costs 2

RENTAL MARKET REBOUNDS

Rents post biggest increase in 2.5 years: Median U.S. asking rents rose 1.7% year-over-year to $1,790 in July, marking strongest growth since January 2023 3
Supply-demand imbalance: Shrinking apartment supply coinciding with growing renter demand fueled by high homeownership costs 3
Construction permits plummet: Multifamily housing permits down 23.1% since pandemic construction boom as sluggish rents and high borrowing costs made construction less attractive 3
Regional leaders: San Jose leads with 8.8% increase to $3,569, followed by Chicago (8.6%), Washington D.C. (8.5%), Pittsburgh (7.7%), Philadelphia (7.5%) 3
Supply shortage examples: San Jose apartment permits down 74.5% since pandemic, Philadelphia down 62.1% 3
Florida/Texas still declining: Jacksonville rents down 3.5%, Austin down 2.6% due to oversupply from pandemic building boom 3

INVENTORY AND AFFORDABILITY CHALLENGES

Extreme inventory shortages: Carmel-by-the-Sea inventory 41.5% below pre-pandemic levels vs. 16.9% below statewide in California 11
Florida oversupply contrast: Active listings among highest in nation, creating vastly different market dynamics across regions 1
Compounding costs in Florida: Home prices rising plus skyrocketing insurance premiums and increasing property taxes creating perfect storm of affordability challenges 1

MORTGAGE MARKETS

Despite expectations for Fed rate cuts, mortgage rates remain elevated while regulatory changes reshape the lending landscape.

RATE REALITY CHECK

Current mortgage rates: Average 30-year mortgage rate at 6.61% as of August 13, despite widespread expectations for Fed rate cuts in September 6
State-by-state variations: Texas leads at 6.79%, Oregon 6.75%, Michigan 6.71%, Nevada 6.68%, while New Jersey offers most competitive at 6.13% 12 13 14 15 16

CFPB REGULATORY OVERHAUL

Most significant regulatory changes in CFPB history: Trump administration directing rollback of existing rules while planning to fire most employees 8
Supervision cuts planned: Agency plans to slash number of nonbank companies it supervises, potentially reducing oversight of mortgage servicers and debt collectors 8
Authority redefinition: CFPB defining its authority over abusive practices by financial companies, potentially impacting mortgage lending standards and consumer protections 8
Medical debt rule: New rule to erase medical debt from credit reports could improve credit scores for millions, potentially expanding qualified mortgage borrower pool 8

ECONOMIC & POLITICAL NEWS

Broader economic indicators reveal unprecedented mobility constraints and policy pressures affecting real estate markets nationwide.

AMERICA’S MOBILITY CRISIS

Lock-in effect intensifies: Over 81% of homeowners hold mortgage rates below 6%, creating powerful incentive to stay put and avoid higher rates 4
Cascading economic effects: When homeowners can’t move, they also can’t easily switch jobs, relocate for opportunities, or respond to changing family circumstances 4
Buyer demand thresholds: 40% of prospective buyers would enter market if rates dropped below 6%, another third would buy if rates fell below 5% 4
Federal job insecurity: Government employment uncertainty in D.C. area causing buyers to back out of contracts due to fears of job losses 5
Homeownership rate decline: Dropped by full percentage point since early 2023, reflecting challenges facing potential buyers 17

JACKSON HOLE SYMPOSIUM

Fed symposium timing: Annual Economic Policy Symposium runs August 21-23 with intense focus on Powell’s remarks about September rate decision 9
Presidential pressure: Trump repeatedly calling for rate cuts to stimulate mortgage markets and broader economic activity 10
Current Fed funds rate: Maintained at 4.25% to 4.5% with no cuts since December 2024, creating challenging political environment 10
Key address topics: Producer inflation trends, tariff impacts on consumer prices, labor market softening, housing conditions, rate cut timing 9

CONSUMER SENTIMENT DECLINE

First decline in four months: Michigan Consumer Sentiment Index fell to 58.6% in August preliminary reading, surprising economists expecting continued improvement 18
Inflation expectations surge: Consumers anticipating 4.9% price increases over coming year, significant jump reflecting tariff concerns and economic uncertainty 18
Soft vs. hard data disconnect: Consumer sentiment deteriorating while retail sales show continued spending growth, complicating Fed decision-making 18

TRUMP ECONOMIC POLICIES

Growth projections: Moody’s Analytics projects policies will avoid recession but constrain growth to 1.7% annually—well below historical averages 19
Tariff impacts: Emerge as largest contributor to both inflation and economic drag, offsetting positive effects from tax cuts and increased spending 19
Unemployment outlook: Projected to peak at 4.7% in 2027 with fewer jobs created compared to baseline scenarios 19

COMMERCIAL REAL ESTATE MARKETS (INCLUDING MULTIFAMILY)

CMBS & CRE FINANCING

Commercial mortgage-backed securities markets are showing mounting stress as special servicing rates approach critical thresholds while loan losses continue accumulating across portfolios.

Special servicing rates climbed 36 basis points to 9.89% in December 2024, marking a 311 basis point increase throughout the year and approaching the 10% threshold not breached since November 2020 1
CMBS loan losses totaled $39.3 million in December 2024 across 16 loans with an average loss severity of 54.71%, while the 12-month moving average loss severity retreated to 62.38% 5
Delinquency rates pulled back slightly to 6.56% in January 2025, declining just 1 basis point as office sector delinquencies showed some improvement but overall distress remains elevated 6
Market participants expressed cautious optimism at the CREFC January 2025 conference in Miami, acknowledging renewed liquidity in certain sectors while recognizing ongoing challenges in office and retail properties 7

MULTIFAMILY MARKET SHIFTS

South Florida’s multifamily construction boom is definitively ending as developers pivot from building to selling entitled sites, while operating cost pressures reshape underwriting standards nationwide.

Clara Homes listed its Wynwood site for $10.9 million after paying $7.7 million for the nearly half-acre property and securing Live Local Act approvals for a 22-story, 147-unit tower, citing high inventory levels and lengthy approval processes 3
Developers who “bought at the top of the market” and were “overleveraged” are now facing reality as interest rates remain elevated and rent growth disappoints in oversupplied markets like Wynwood 3
Operating expenses grew at a 4.15% compound annual growth rate from 2015-2024, with insurance premiums posting the sharpest spike at 11.77% annually, forcing lenders to abandon traditional 3-5% expense escalators 8
Average debt service coverage ratios dropped from 1.6-2.0x pre-2021 to 1.35x in 2025, reflecting compressed margins and tighter lending standards as markets like Miami saw insurance costs rise 252.96% over the decade 8

DISTRESS & WORKOUT ACTIVITY

Chicago’s commercial real estate market showcases the bifurcated nature of current conditions, with significant distress alongside institutional investor interest in trophy assets.

Emerald Empire entered forbearance on $430 million in Fannie Mae financing tied to its 400-building Chicago rental portfolio acquired from Pangea Properties for $600 million in 2022, as rising interest rates and deteriorating property conditions preceded the payment relief request 2
Fraud allegations mount against multifamily operators Chikoo Patel and Shai Wolkowicki, who face nearly $20 million in claims from lenders and investors across deals from Chicago to Springfield, with Old National Bank pursuing foreclosure on a $16 million downstate deal 2
ACORE Capital filed a $187 million foreclosure lawsuit against longtime hotel operator Su-Mei Yen, whose family controls the Best Western Grant Park and Homewood Suites on Wabash, alleging missed deposits and unpaid fees on a loan now accruing $60,000 daily in interest 2
Chinese EB-5 investors expanded their fraud lawsuit against the Yens to $18 million, claiming misused funds and derailed visa applications in addition to the ACORE Capital foreclosure action 2

INSTITUTIONAL INVESTMENT ACTIVITY

Downtown Chicago’s high-rise multifamily market is attracting institutional capital despite broader market distress, as investors seek value opportunities in supply-starved markets.

Brookfield listed its 502-unit Sky55 tower and adjacent senior building on South Michigan Avenue, while the State Teachers Retirement System of Ohio marketed its 481-unit Streeterville property, both featuring high occupancy and rising rents 2
Institutional interest reflects a broader “Midwest moment” as investors seek value opportunities in markets with stronger fundamentals than coastal gateway cities, with wealthy buyers pursuing waterfront properties in Lake Geneva even when off-market 2
Simon Property Group successfully accessed debt markets with a $1.5 billion senior note offering to refinance $1.1B in maturing debt, leveraging 96% mall occupancy and $59 per square foot average base rent 9
Manhattan’s office market received a significant boost with RXR’s $1.08 billion acquisition of 590 Madison Avenue, the largest office deal in Manhattan since March 2022, signaling renewed confidence in trophy office properties 10

DATA CENTER & INDUSTRIAL EXPANSION

Washington state’s data center boom is creating economic opportunities while straining infrastructure in rural communities, highlighting the tension between growth and sustainability.

Microsoft and other operators built 21 data center buildings in Quincy (population 7,500), contributing 75% of property tax revenue and funding new amenities including a medical center and renovated high school 4
Grant County faces 79 pending data center applications requiring combined power roughly double Seattle’s entire demand, with the Grant County Public Utility District acknowledging hydropower and water resources are “maxed out” 4
Quincy’s poverty rate dropped from 29.4% in 2012 to 13.1% in 2023, with data center technicians earning approximately $60,000 annually without college degrees, nearly double the local median income 4
Long-term employment remains limited with the average large data center employing about 150 people permanently despite thousands of construction jobs during development, raising questions about sustainable economic impact 4

MAJOR TRANSACTIONS & RETAIL CONSOLIDATION

Recent transaction activity reflects the bifurcated market, with trophy assets commanding premium pricing while retail consolidation continues reshaping portfolios.

Macy’s confirmed closure of 66 locations as part of its “Bold New Chapter” strategy announced in February 2024, with Trepp analyzing CMBS loan exposure across the affected properties to assess portfolio impacts 11
Todd Michael Glaser and Posner Group seek a $169 million flip of a Miami Beach waterfront estate purchased for $105 million in July, with the 2.3-acre property also listed for rent at $495,000 monthly 3
CRE CLO distress rates climbed to 11.8% in July, reversing June’s improvement as maturity pressures mount with over 65% of loans now past maturity, though pre-maturity delinquencies fell 478 basis points to 12.9%