Daily Dose of Real Estate

Daily Dose of Real Estate for September 12

Building materials costs surge despite weak employment numbers and soft PPI. HPA is running squarely below the rate of inflation but still largely positive. South Dakota leads home price growth at 6.2% year-over-year – joined by New Jersey, Connecticut, Rhode Island, and West Virginia as top five states with more than triple the national rate. The employment market is quickly flashing warning signs with the latest unemployment claims data sending rates down. Mortgage rates are ducking, dodging, and diving their way towards 6% and the originations markets respond enthusiastically (survive til 2025!). Foreclosures, yes they’re still a thing, are back with vengeance – up nearly 20% YoY. Secretary Bessent meeting with candidates to replace Chair Powell next Spring. Multifamily Dominates CRE Activity and led July’s transaction activity – benefiting from high rental demand and homeownership affordability challenges. Let’s get you caught up and out the door in 3 minutes.

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Table of Contents

KEY TAKEAWAYS

Federal Reserve poised for first rate cut of 2025 with 90% probability of 25 basis point reduction at September 17 meeting, driven by weakening labor market and unemployment claims hitting four-year high at 263,000 1 2
Mortgage rates plummet to 11-month low at 6.35%, marking the biggest weekly drop of 2025 and triggering strongest borrower demand since 2022 with applications surging 9.2% 34
Housing market shows mixed signals with home prices rising just 1.4% year-over-year in July 2025 (half the inflation rate) while seven major metros turn buyer-friendly for first time in years 5 6
Building material costs surge with year-over-year price growth advancing significantly, led by concrete and steel products experiencing double-digit increases that could impact new construction affordability 7
Foreclosure activity accelerates for sixth consecutive month with 18% year-over-year increase in August, signaling financial strain amid high costs and interest rates 8
Industry consolidation continues as Christie’s International Real Estate hires M&A specialist G. Scott Hurlock to lead expansion efforts amid ongoing brokerage consolidation trend 9
Transaction Volume Peaks: July 2025 marked the highest CRE transaction volume of the year, with mid-cap deals ($50-$100M) surging 24% to 72 transactions as investors shift toward more manageable assets 1
Delinquencies Rising: Commercial mortgage delinquencies increased across most major capital sources in Q2 2025, with CMBS loans posting the largest increase at 6.36%, up 0.45 percentage points from Q1 2
Distressed Capital Deployment: Cottonwood Group closed a $1 billion distressed CRE fund, doubling its original target, with $300 million already deployed as the firm positions for a “once-in-a-decade opportunity” 5

RESIDENTIAL REAL ESTATE MARKETS

Overview: The residential market is experiencing a notable cooling in price growth with regional divergence intensifying. Home prices are rising at half the inflation rate while buyer-friendly conditions emerge in major metros for the first time in years.

NATIONAL PRICE TRENDS

Home prices increased just 1.4% year-over-year in July 2025 – nearly half the Consumer Price Index inflation rate, marking significant shift from previous rapid appreciation 5
Monthly decline of 0.2% between June and July 2025 – atypical for July, last seen in 2022 and during 2006-2008 period, following year of relatively flat prices 5
Home price appreciation consistently below inflation rate for most of 2025 – gap widening in recent months, making housing relatively more affordable compared to other goods and services 10

REGIONAL MARKET PERFORMANCE

South Dakota leads price growth at 6.2% year-over-year – joined by New Jersey, Connecticut, Rhode Island, and West Virginia as top five states with more than triple the national rate 5
Florida, Texas, Montana, and Washington D.C. report negative home price growth – Florida and Western markets continue persistent price declines 5
Affordable Midwest markets gaining momentum – Chicago, Indianapolis, Cleveland, Tulsa, Louisville, Philadelphia, and New York metro area experiencing price increases 5

NEW CONSTRUCTION FEATURES

Typical newly completed single-family home featured 2.1 parking spaces in 2024 – garages remain dominant parking solution across most markets 11
Higher-end homes average 2.4 parking spaces – homes priced above $500,000 feature more elaborate parking solutions including three-car garages 11
Affordable homes under $300,000 average 1.8 parking spaces – reflects both consumer preferences and local zoning requirements mandating minimum parking provisions 11

MARKET CONDITIONS

Seven major metropolitan areas shift to buyer-friendly conditions – first time in years offering unprecedented opportunities for homebuyers 6
Median home prices held steady at $429,990 in August – compared with year earlier, according to Realtor.com data 6
Active listings growing for almost two years straight – though inventory levels remain below pre-pandemic levels 6
Typical listing spent 60 days on market in August – up seven days from previous year, while pending sales fell 1.3% marking eighth consecutive month of declines 6

MORTGAGE MARKETS

Overview: Mortgage markets experienced dramatic shifts with rates hitting 11-month lows, triggering the strongest borrower demand since 2022. Refinancing activity exploded while commercial mortgage delinquencies increased and foreclosure activity accelerated.

INTEREST RATES AND APPLICATIONS

30-year fixed mortgage rates plummeted to 6.35% – lowest level since October 2024 and biggest weekly drop of the year 3 4
Mortgage News Daily reports even lower daily rates at 6.27% – recorded on September 11, representing eighth consecutive week of steady or declining rates 3
Mortgage applications surged 9.2% for week ending September 5 – strongest week of borrower demand since 2022, according to Mortgage Bankers Association 12
Purchase applications increased 7% for the week – up impressive 23% year-over-year, demonstrating lower rates successfully enticing buyers back 12

REFINANCING ACTIVITY

Refinance applications jumped 12% for the week – registering 34% higher than same week one year ago as homeowners rush to lock in lower costs 4
Non-QM loans climb to 8.3% of total originations – nearly six times their share from five years ago, signaling significant shift in lending landscape 13
Market Composite Index increased 9.2% on seasonally adjusted basis – measure of mortgage loan application volume showing strong momentum 12

FORECLOSURE TRENDS

35,697 U.S. properties received foreclosure filings in August 2025 – representing 18% increase from year ago, sixth consecutive month of increases 8
Foreclosure starts increased 17% year-over-year to 24,254 properties – while completed foreclosures surged 41% to 4,077 properties 8
Nevada has worst foreclosure rate – one in every 2,069 housing units, followed by South Carolina (one in 2,152) and Florida (one in 2,512) 8
Texas, Florida, and California lead nation in foreclosure starts – reflecting both population size and economic stress in these markets 8

REGULATORY DEVELOPMENTS IN REAL ESTATE

Overview: Federal Reserve rate cut appears imminent with 90% market probability for September 17 meeting. Fed Chair search continues while GSEs maintain dividend policies and HUD lending surges in healthcare sector.

FEDERAL RESERVE POLICY

90% market probability of 25 basis point rate cut at September 17 FOMC meeting – current fed funds rate sits between 4.25% and 4.5% 15
Wells Fargo economists expect 125 basis points of cuts by end of 2026 – 50 basis points more than previously forecast, with cuts in September, October, December, March, and June 16
Some market participants pricing in slight chance of half-point cut – given labor market’s apparent softening and unemployment claims surge 15

FED LEADERSHIP TRANSITION

Treasury Secretary Scott Bessent met with potential Fed Chair candidates – including Kevin Warsh, Lawrence Lindsey, and James Bullard as search continues 17
Bessent seeks to reduce Fed’s economic footprint – advocating for significant reforms within the central bank structure 17

ECONOMIC NEWS

Overview: Labor market weakness is driving Federal Reserve policy shifts despite inflation ticking higher. Building material costs are surging while Treasury yields fall, creating mixed signals for the broader economy.

LABOR MARKET CONDITIONS

Unemployment claims surge to 263,000 – highest level in nearly four years, providing Fed with compelling evidence for rate cuts 2
Morgan Stanley’s Ellen Zentner: “Labor market is still the main story” – translates into rate cut next week and likely more to come despite inflation concerns 2

BUILDING MATERIAL COST PRESSURES

Year-over-year building material price growth advances significantly – led by concrete and steel products experiencing double-digit increases 7
Dual affordability challenge emerges – combination of higher material costs and elevated mortgage rates constraining new housing supply 7
Multiple factors driving price increases – supply chain disruptions, increased infrastructure demand, and energy costs affecting manufacturing processes 7
Lumber prices show particular strength – while concrete and steel products experience sustained upward pressure expected to persist through 2025 7

INFLATION AND MONETARY POLICY

Consumer Price Index rises to 2.9% in August – up from 2.7% in June and July, highest level since January driven partly by tariff impacts 4
Market participants remain convinced Fed will cut rates – despite inflation uptick, citing labor market weakness outweighing inflation concerns 20

TREASURY MARKET MOVEMENTS

10-year Treasury yield falls from 4.31% to 4.01% – key driver of mortgage rate movements, briefly sliding below four-percent mark 20
Wells Fargo lowers Treasury yield forecast – to 4.00% at year-end 2025 and 4.15% at year-end 2026 16

MARKET EXPECTATIONS

Financial markets price in 75% odds of three consecutive 25-point cuts – with some economists speculating about possibility of 50-point cut similar to aggressive action taken year ago 4

COMMERCIAL REAL ESTATE NEWS (INCLUDING MULTIFAMILY)

Overview: Commercial real estate markets showed mixed signals in the past 24 hours, with transaction volumes hitting 2025 peaks while rental concessions rise in oversupplied markets. Chicago’s multifamily sector leads national activity with exceptional rent growth driving major property listings.

COMMERCIAL REAL ESTATE MARKETS

July Transaction Volume Peaks: CRE transactions reached 2025’s highest level in July, climbing 10% over June with mid-cap deals ($50-$100M) surging to 72 transactions from 58 in June, reflecting investor preference for more manageable assets 1
Multifamily Dominates Activity: Multifamily properties led July’s transaction activity with 38 mid-cap deals and 15 nine-figure trades, benefiting from high rental demand and homeownership affordability challenges 1
Year-to-Date Volume: More than $160 billion in CRE transactions have closed through July 2025, with top buyers including Blackstone Infrastructure, Starwood Property Trust, and LG Energy Solution 1
Chicago Multifamily Boom: 4,200 apartment units across 13 properties hit the Chicago market since April, driven by 6.4% year-over-year rent growth in Class A downtown properties averaging $3.99 per square foot 4
Chicago Rent Levels: One-bedroom apartments in Chicago now average nearly $2,800 per month, making it the second-highest rent growth market nationally 4
Austin Leads Concessions: 30.5% of Austin apartments offered rental concessions in August, averaging 12.9% discounts as new supply drives competition among landlords 6
Texas Markets Struggle: San Antonio, Fort Worth, and Dallas also posted elevated concession rates as heavy new supply fuels competition in Texas markets 6
National Rent Concession Trends: 14% of apartments nationwide offered discounts in August with an average concession rate of 9.7%, highlighting intense competition in oversupplied Sun Belt markets 6

COMMERCIAL FINANCING MARKETS

Application Surge: Mortgage applications jumped 9.2% to the highest level in more than three years, driven by improved affordability from lower rates 3
CMBS Delinquencies Spike: CMBS loan delinquencies reached 6.36% in Q2 2025, up 0.45 percentage points from Q1, driven by rising defaults in multifamily and office properties 2
Bank Delinquencies Rise: Banks and thrifts reached 1.29% delinquency rate (up 0.01 percentage points), while life company portfolios hit 0.51% (up 0.04 percentage points) 2
GSE Performance Mixed: Freddie Mac delinquencies increased to 0.47% (up 0.01 percentage points), while Fannie Mae improved to 0.61% (down 0.02 percentage points) 2
Refinancing Wall Looms: Nearly 63% of US banks’ CRE loans are set to mature by end of 2025, equal to their tangible common equity, creating massive refinancing pressure 1

COMMERCIAL SERVICING MARKETS

$1B Distressed Fund Closes: Cottonwood Group closed a $1 billion distressed CRE fund, doubling its original $500 million target launched in 2023, positioning for “once-in-a-decade opportunity” 5
Capital Already Deployed: The Los Angeles-based firm has deployed approximately $300 million of the fund, primarily through structured loans with built-in rights to assume property control in case of borrower default 5
High-Profile Investments: Fund investments include 262 Fifth Avenue in Manhattan, a West Hollywood redevelopment site featuring the historic Viper Room nightclub, and a mixed-use Austin project 5
International Backing: Fund backed by diverse capital including Fubon Financial Holding Co. (Taiwan), Korea Investment Holdings, and North Atlantic States Carpenters Benefit Funds 5
Market Opportunity: High interest rates and mounting refinancing pressure creating conditions where many property owners struggle to recapitalize, driving distressed opportunities 5
$2T Refinancing Challenge: Approximately $2 trillion in commercial loans mature through 2027, with $591 billion already flagged as troubled according to industry analysis 1

INDUSTRY NEWS

Overview: Industry consolidation accelerates with major M&A hires while technology integration advances. Real estate investment banking innovation emerges alongside strategic corporate transactions.

HUD LENDING ACTIVITY

HUD lending against healthcare properties skyrocketed in 2025 – increasing just over 11% during third fiscal quarter to $3.59 billion 19
Nine-month lending volume reaches $10.42 billion – representing nearly 50% increase from same time last year under various multifamily and healthcare programs 19

MERGERS AND ACQUISITIONS

Christie’s International Real Estate hires G. Scott Hurlock as Senior VP of Strategic Growth– to lead partnerships, mergers, and acquisitions for luxury brand 9
Hurlock joins from Engel & Völkers – where he served as Senior VP of Expansion and led 2023 acquisition of California’s Dilbeck Real Estate 9
Christie’s operates under Compass following $444 million acquisition – of @properties and Christie’s International Real Estate last year 9
Chicago brokerage consolidation continues – Baird & Warner also acquired Dream Town in June reflecting ongoing market trend 9

TECHNOLOGY PARTNERSHIPS

PNMAC partners with Vesta Innovations – implement cutting-edge cloud-native loan origination system 21
AI-driven technology streamlines mortgage process – from application to closing, positioning PennyMac as industry leader in technological innovation 21

INVESTMENT BANKING INNOVATION

World Property Bank launches as tokenization-focused investment bank – aimed at tapping $3 trillion market for tokenized real estate by 2030 22
Miami-based firm seeks to democratize global property market access – through innovative platforms for trading and predicting real estate outcomes 22

CORPORATE TRANSACTIONS

Ashford Hospitality Trust sells Residence Inn San Diego Sorrento Mesa – 150-room property for $42.0 million or $280,000 per key 23
Sale represents 5.7% capitalization rate on net operating income – reflects company’s ongoing portfolio optimization strategy 23
DataBank $1B Securitization: Dallas-based DataBank raising $1.067 billion through securitization of three stabilized data centers in Northern Virginia, Atlanta, and New York totaling 491,000 square feet and 100 MW capacity 7
Fifth ABS Transaction: This marks DataBank’s fifth asset-backed securities transaction since 2021, adding to the company’s existing $2.2 billion in debt from previous securitizations 7
Data Center ABS Surge: JLL reports 14 data center ABS deals totaling $7.7 billion in H1 2025, up from 11 deals worth $5.5 billion in the same period last year 7
Securitized Asset Details: Assets include 40 MW Atlanta facility (built 2024, leased through 2035), 40 MW Ashburn, VA site (leased through 2037), and 20 MW New York Hudson Valley colocation center 7
$1B Affordable Housing JV: Manulife Investment Management and TruAmerica Multifamily launched Anchor Point Residential, acquiring 51 properties totaling 6,000 income-restricted units across California, Texas, and Washington 8