Daily Dose of Real estate for August 22

Zombie condo apocalypse? The condo market feels like the walking dead, and properties abandoned during the foreclosure process are stacking up. Home sales are seeing some modest gains in volume and sales price. However, homes on the market reaching pre-pandemic levels at a precarious time in housing – negative home price growth net year? Maybe buy that drone that your kids’ have been asking for their birthday. Drone land survey market is expected to be over $14B. Big day for Jerome Powell as he wraps up at Jackson Hole and markets look for signals of a rate cute next month. 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.

  🔑 Key Takeaways

• Zombie foreclosures surge 7% nationally – Properties abandoned during foreclosure process reach 9,847 units, with Chicago leading at 1,058 properties as lenders delay completion amid market uncertainty 1
• Condo market collapse accelerates nationwide – Prices dropped 12%-26% in 21 major cities through July, with Oakland leading at -26%, as the condo bubble unwinds from pandemic-era peaks 2
• Mortgage servicers shift to proactive delinquency prevention – Industry experts emphasize early borrower engagement as economic pressures mount, with consumer debt reaching “new all-time highs” daily 3
• Home sales surprise with 2% July increase – NAR reports existing home sales rose to 4.01 million units, defying analyst expectations of decline, with inventory reaching highest levels since May 2020 4
• Powell faces high-stakes Jackson Hole speech Friday – Fed Chair delivers final Jackson Hole address under intense Trump administration pressure to cut rates, with 88% market probability of September cut 5 6
• August mortgage surge defies seasonal trends – Mortgage brokers report unexpected buyer and refinance activity as rates hit yearly lows, with homes now selling below appraisal values 7
• Trump targets Fed Governor Lisa Cook – FHFA Director Bill Pulte requests DOJ investigation into Cook for alleged mortgage fraud, potentially allowing Trump to reshape Fed leadership 8
• Drone surveying market is experiencing explosive growth, with the U.S. market projected to reach $14.55 billion by 2030 as government adoption increases and companies like ZenaTech expand their Drone-as-a-Service footprint 5
• Wells Fargo’s exit from third-party commercial servicing through its sale to Trimont will create a new leader in the securitized CRE servicing market, with Trimont managing $640 billion in U.S. loans post-acquisition 2

  🏠 Residential Real Estate Markets

Market Overview: Residential markets show mixed signals with overall sales increasing while specific segments face severe corrections. Zombie foreclosures are rising as lenders delay completions, condo prices collapse nationwide, and traditional home sales surprise with unexpected growth despite affordability challenges.

ZOMBIE FORECLOSURES SURGE AMID MARKET UNCERTAINTY

• National increase: Zombie foreclosures up 7% to 9,847 properties nationwide as lenders delay foreclosure completions amid market volatility
• Geographic concentration: Chicago leads with 1,058 zombie properties, followed by Cleveland (524), Detroit (467), Baltimore (378), and Philadelphia (321)
• State-level impact: Illinois tops with 1,469 total zombie foreclosures, Ohio second with 1,179, Pennsylvania third with 806
• Market dynamics: Properties remain in foreclosure limbo as homeowners abandon properties but lenders hesitate to complete process due to uncertain market conditions
• Neighborhood impact: Zombie properties create blight, reduce surrounding property values, and burden local municipalities with maintenance costs
• Vacancy correlation: Overall U.S. vacancy rate holds steady at 11.5%, but zombie foreclosures represent concentrated distress in specific markets 1

CONDO MARKET COLLAPSE ACCELERATES NATIONWIDE

• Price declines: 12%-26% drops across 21 major cities through July, representing unwinding of pandemic-era bubble that saw 50%-70% increases
• Worst performers: Oakland (-26%), Austin (-24%), Saint Petersburg (-23%), Fort Myers (-19%), Sarasota (-19%) lead steep declines
• Monthly trends: 20 of 21 cities experienced month-over-month price declines in July, with Florida markets showing accelerated deterioration
• Year-over-year impact: 19 cities show negative annual growth, topped by Saint Petersburg (-15.0%) and Fort Myers (-14.6%)
• Multiple headwinds: Special assessments, HOA fee explosions, insurance cost spikes, Fannie Mae “Condo Blacklist” restrictions, and investor exodus
• Historical context: Oakland condos now at lowest prices since January 2016, Austin back to April 2021 levels 2

JULY SALES DATA SURPRISES ANALYSTS

• Sales increase: Existing home sales rose 2.0% month-over-month to 4.01 million units seasonally adjusted annual rate, defying expectations
• Annual comparison: 0.8% year-over-year gain marks positive territory despite affordability challenges
• Inventory surge: 1.55 million units available, up 15.7% from July 2024, representing 4.6-month supply
• Price moderation: Median price of $422,400 shows minimal 0.2% annual increase, suggesting affordability improvements
• Regional variations: Sales increased in Northeast, South, and West regions; declined in Midwest
• Market dynamics: Wage growth now “comfortably outpacing home price growth” according to NAR Chief Economist Lawrence Yun 4

HOME PRICES APPROACHING CRITICAL INFLECTION POINT

• Price trajectory: National home prices may turn negative year-over-year for first time since 2023 based on Altos Research data
• Peak timing: Prices peaked at $223/sqft in late May, approximately 2% above 2024 levels
• Supply breakthrough: 860,000 single-family homes on market represents return to pre-pandemic normal levels
• Market rebalancing: Three years of rising inventory finally exceeds tepid buyer demand
• Buyer advantages: Homes selling below appraisal values, increased negotiation power, average 28 days on market versus 24 days year-ago
• Cash activity: 31% of transactions versus 27% year-ago, indicating market caution and investor participation 9 10

  💰 Mortgage Markets

Market Overview: Mortgage markets experience unusual late-summer activity surge while industry fundamentally shifts toward proactive borrower assistance. Rate environment improvements drive refinance and purchase activity, but servicers prepare for economic pressures through early intervention strategies.

INDUSTRY SHIFTS TO PROACTIVE DELINQUENCY PREVENTION

• Strategic pivot: Servicers moving from reactive crisis management to proactive early engagement as economic pressures mount
• Consumer debt crisis: Reaching “new all-time highs” daily according to BOK Financial’s Michael Merritt
• Cost inflation impact: Housing materials, repairs, insurance, and property taxes creating unprecedented borrower stress
• FHA vulnerability: Particular acute pressures despite stable overall delinquency rates across industry
• Trust building: “Transparency as the biggest foundation” requiring empathy and precision in borrower interactions
• Early intervention: First meaningful interaction may occur during routine service calls or escrow inquiries, requiring consultative approach 3

AUGUST ACTIVITY SURGE DEFIES SEASONAL PATTERNS

• Unusual timing: Mortgage brokers report unprecedented late-summer activity contradicting typical seasonal slowdowns
• Rate environment: 30-year fixed rates at lowest point of 2025 driving both purchase and refinance activity
• Refinance resurgence: Homeowners responding to rate drops despite not matching pandemic-era lows
• Purchase dynamics: Buyers making offers and gaining acceptance easier than recent months
• Technology impact: Enhanced platforms providing time for meaningful relationship building beyond rate factors
• Market adaptation: “Golden handcuffs” effect of pandemic-era rates still constraining some homeowner mobility 7

FEDERAL AGENCY POLICY DEVELOPMENTS

• FHFA investigation: Director Bill Pulte requests DOJ probe of Fed Governor Lisa Cook for alleged mortgage fraud involving dual primary residence applications
• Political implications: If Cook resigns or removed, Trump could immediately appoint replacement aligned with low-rate preferences
• GSE digital assets: Sen. Lummis introduces 21st Century Mortgage Act requiring Fannie/Freddie to consider cryptocurrency in eligibility
• Target demographics: Only 36.6% of under-35 Americans own homes while 67% of crypto holders are under 45
• Independence concerns: Investigations claimed “free from political considerations” but target threats to Federal Home Loan Banks and GSEs 11 12

LENDING CONDITIONS AND MARKET DYNAMICS

• Application trends: MBA reports 1.4% decline for week ending August 15, w/ refinance applications down 3%
• Purchase strength: Applications increased 0.1% and continue running “well ahead of last year’s pace”
• Rate environment: Average 30-year fixed at 6.68%, slight increase from previous week, FHA rates at competitive 6.39%
• Market structure: Refinance share decreased to 46.1% of total applications, ARM activity at 8.6%
• Buyer resilience: Purchase activity stronger despite economic headwinds and affordability challenges
• Competitive dynamics: Traditional bank constraints creating opportunities for private lenders and alternative financing 13

  📊 Economic & Political News

Market Overview: Federal Reserve faces unprecedented political pressure as Chairman Powell prepares final Jackson Hole speech. Trump administration intensifies attacks on Fed leadership while economic data presents mixed signals for monetary policy direction.

POWELL’S HIGH-STAKES JACKSON HOLE ADDRESS

• Market expectations: 88% probability of September rate cut priced into markets ahead of Friday speech
• Political pressure: Trump’s “Too Late” nickname and demands for aggressive rate cuts create unprecedented Fed independence challenges
• Speech theme: “Labor Markets in Transition: Demographics, Productivity, and Macroeconomic Policy” addresses dual mandate complexities
• Historical context: Current pressure represents “greater threat than any time during my lifetime” to central bank autonomy
• Policy complexity: Mixed signals from inflation data, employment reports, and tariff impact concerns
• Term timeline: Powell’s term expires May 2026, allowing Trump to choose successor aligned with administration preferences 5 6