Daily Dose of Real Estate

Daily Dose of Real estate for September 16

FOMC Alert! Lisa Cook will be suiting up for the FOMC meetings this week after all. At the buzzer, a US appeals court declined the Trump administration’s request to fire Cook. A rate cut seems to be a certainty regardless, but the FOMC meetings today and tomorrow ought to be interesting. The CFPB seems to be running out of runway and legal protections – layoffs imminent as the reduced funding cap goes into effect. Data shows that housing sales were nose diving in August but are recovering as mortgage rates improve and give buyers breathing room. Enterprise NPL/RPL sales data show the effectiveness of the disposition strategy for borrowers and the GSEs. Rising Distress Metrics in CRE as CLO distress metrics rose in August 2025 with delinquencies and special servicing needs increasing under mounting refinancing pressure across commercial mortgage market. CRE markets are dealing with a daunting maturity wall of over $1T in loans that need to refinance or payoff. Here’s a good example – the $1.4B refinancing of 11 Madison Avenue – rates jumped from the original 3.6% to 5.8% and the owner needs to come up with a $52.5 million down payment/capital call for the privilege. Let’s get you caught up and out the door in 3 minutes.

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Table of Contents

KEY TAKEAWAYS

Soon after Senate Republicans voted to confirm Lisa Cook’s replacement on the Federal Reserve’s Board of Governor’s, a US appeals court declined the Trump administration’s request to terminate Cook for cause. 11
Federal Reserve is widely expected to cut interest rates by 0.25% to approximately 4.1% this week, marking the first rate cut of 2025 amid concerns about a weakening labor market 1.
CFPB faces potential layoffs as the agency grapples with a significant funding cap reduction, while simultaneously proposing changes to its oversight of nonbank lenders 2.
August housing sales declined 5.0% year-over-year in early reporting markets, reversing from a 0.5% increase in July, with mortgage rates averaging 6.82% in June and 6.72% in July 3.
Enterprise NPL sales program shows strong borrower outcomes with 40.2% of non-performing loans achieving foreclosure avoidance, and borrower-occupied properties demonstrating 47.3% foreclosure avoidance rates compared to just 17.7% for vacant properties 4.
HUD terminated direct endorsement approval for an Atlanta-based mortgagee, impacting the lender’s ability to underwrite FHA loans and highlighting ongoing regulatory scrutiny 5.
Jobless claims surged to 263,000 last week, the highest level in nearly four years, providing additional justification for the Fed’s anticipated rate cut 1.
CRE – Major Industrial Transaction: Los Angeles County’s largest Q2 industrial sale closed at $140.3 million for a cold-storage complex in Santa Fe Springs, with W.P. Carey acquiring the 302,850-square-foot facility from Brookfield at $422.65 per square foot 1
CRE – Retail Investment Surge: Stockbridge Capital Group returned to South Florida retail with a $118.4 million acquisition of the Whole Foods-anchored Uptown Boca shopping center, signaling renewed confidence in quality retail assets 2
CRE – Financing Rate Shock: SL Green and PGIM are finalizing a $1.4 billion refinancing for 11 Madison Avenue with interest rates jumping from 3.6% to 5.8% and requiring a $52.5 million down payment 3
Federal Data Shows Recovery: Commercial real estate prices showed improvement with year-over-year declines narrowing to -1.74% in Q1 2025, compared to -11.57% in Q2 2024 4

RESIDENTIAL REAL ESTATE MARKETS

Sales data reveals cooling trends nationally, though certain markets continue to demonstrate exceptional strength due to supply constraints and local economic factors.

NATIONAL SALES TRENDS

August sales declined 5.0% year-over-year in early reporting markets, reversing from a 0.5% increase in July – this reflects contracts signed when mortgage rates averaged 6.82% in June and 6.72% in July 3.
Calendar effects amplify the decline as August 2025 had one fewer working day than August 2024, making the year-over-year comparison more pronounced 3.
Home prices are declining in a growing number of markets as inventories climb, according to Harvard Joint Center for Housing Studies, suggesting the market correction may be broadening beyond initial hotspots 6.

REGIONAL MARKET VARIATIONS

Chicago defies national trends with homes moving at 37 days in August compared to 60 days nationally, driven by severely constrained supply with less than 40% of 2019 listing levels 3.
South Windsor, Connecticut ranked #9 among hottest ZIP codes with homes receiving 5x more views than national average and selling in just 27 days, with median listing price of $449,000 7.
Price cuts becoming more common across various price segments as days on market extend in many areas, with sellers adjusting expectations to current market realities 6.

MORTGAGE MARKETS

Mortgage markets are positioned for significant movement as the Federal Reserve prepares for rate cuts while current rates between 6.5%-6.8% continue to challenge affordability.

INTEREST RATE ENVIRONMENT

Fed rate cut of 0.25% to 4.1% widely expected this week, marking the first rate cut of 2025 with additional cuts anticipated in October and December 8.
Current mortgage rates hover between 6.25%-6.75% for 30-year fixed loans, creating affordability challenges that have kept many potential buyers on the sidelines 9.
Consumer sentiment around mortgages improving modestly in recent weeks with momentum building as rate cut expectations solidify, according to U.S. Bank’s John Hummel 9.

APPLICATION AND LENDING ACTIVITY

Mortgage applications typically surge 15-20% in the first two weeks following Fed rate cuts, making fresh pre-approvals essential for competitive positioning 9.
Rate cuts can substantially impact buying power – example shows couple’s budget increased $25,000 when pre-approval rate dropped from 6.8% to 6.4% 9.
Lender pricing varies significantly after Fed moves, making comparison shopping essential for borrowers according to loanDepot’s Debbie Calixto 9.

REGULATORY DEVELOPMENTS

The FHFA’s NPL sales program shows strong borrower outcomes (DEC 2024 – latest), while the CFPB confronts budget constraints and HUD maintains vigilant oversight of lender compliance.

ENTERPRISE NPL SALES PROGRAM SUCCESS

173,571 non-performing loans sold by Fannie Mae and Freddie Mac through December 2024 with $31.8 billion aggregate unpaid principal balance 4.
40.2% foreclosure avoidance rate achieved significantly exceeding historical Enterprise portfolio performance, with borrower-occupied properties reaching 47.3% vs. 17.7% for vacant properties 4.
Right party contact crucial for outcomes – NPLs with servicer contact achieved 47.7% foreclosure avoidance vs. 27.2% without contact 4.
Geographic concentration in distressed markets – New York, Florida, and New Jersey accounted for 39.3% of NPL sales, reflecting historical delinquency patterns 4.
Meaningful debt relief provided – 8% of permanent modifications included principal/arrearage forgiveness averaging $63,173, with potential total forgiveness averaging $75,820 4.

OPERATIONAL CHALLENGES & HUD ENFORCEMENT

Potential layoffs AT CFPB warned due to 6.5% funding cap reduction forcing agency to “right-size” operations for fiscal year 2026 2.
Direct endorsement approval terminated for Atlanta-based mortgagee, removing authorization to underwrite FHA loans and submit directly to FHA 5.

ECONOMIC NEWS

Consumer spending faces pressure from rising costs and employment uncertainty, while global economic challenges add complexity to domestic policy decisions.

LABOR MARKET DETERIORATION

Jobless claims surge to 263,000 for the week, marking highest level in nearly four years and final major data point before Fed meeting 1.
Worker mobility declining with Bureau of Labor Statistics showing reduced job switching and limited wage growth opportunities as workers feel stuck in current positions 15.
Labor market dynamism reduced typically preceding broader economic weakness and supporting Fed concerns about employment conditions 15.

INFLATION AND MONETARY POLICY

Consumer price index rose to 2.9% annually in August, representing biggest monthly jump since January, while core inflation increased to 3.1% 8.
Fed faces dual mandate challenge balancing persistent inflation concerns against clear signs of employment market weakness 1.

FEDERAL RESERVE MEETING THIS WEEK

FOMC meets September 16-17, 2025 with policy decision announcement scheduled for Wednesday, September 17 at 2:30 PM ET, followed by Chair Jerome Powell’s press conference 15.
92-96% probability of 0.25% rate cut according to CME FedWatch tool, bringing federal funds rate from current 4.25%-4.5% range to 4.0%-4.25% range 15.
8-12% chance of larger 0.50% cut has emerged following weak employment data, with some Fed officials potentially pushing for more aggressive action 15.
Updated economic projections (dot plot) to be released showing Fed officials’ forecasts for GDP, unemployment, and inflation through 2027, with potential revisions to rate path expectations 16.
Political pressure intensifies as Trump administration attempts to fire Governor Lisa Cook while rushing Stephen Miran’s confirmation before the meeting to influence voting composition 15.
Potential for dissenting votes with some governors possibly dissenting for larger cuts while regional Fed presidents may vote for no change, potentially creating first meeting with dissents on both sides since 2019 15.
Wells Fargo expects 125 basis points of cuts by end of 2026, with 25bp cuts at September, October, and December meetings followed by additional cuts in March and June 2026 17.
Market expectations for multiple cuts with fed funds futures pricing in three rate cuts in 2025, while economists split between two or three reductions before year-end 15.

COMMERCIAL REAL ESTATE (INCLUDING MULTIFAMILY)

Commercial real estate transaction activity remains selective but robust for quality assets, with industrial and retail sectors leading deal flow. Federal data shows price stabilization while financing costs create refinancing challenges.

COMMERCIAL FINANCING MARKETS

Rate Environment Reality Check: SL Green/PGIM’s $1.4 billion refinancing of 11 Madison Avenue shows financing challenges – rates jumped from 3.6% to 5.8% with $52.5 milliondown payment required for five-year term 3
Maturity Wall Pressure: The refinancing exemplifies broader challenges as $1.5 trillion in commercial real estate debt matures through 2027, with borrowers facing significantly higher costs 3
Borrower Strategy Shift: CRE investors now favor shorter loan terms as steepening yield curve, looming maturities, and tighter underwriting push borrowers toward flexibility over long-duration debt 5

COMMERCIAL REAL ESTATE MARKET ACTIVITY

Los Angeles Industrial Leader: W.P. Carey acquired Santa Fe Springs cold-storage facility for $140.3 million ($422.65/sq ft) – the county’s largest Q2 industrial transaction. The 302,850-sq-ft warehouse is fully leased to United Natural Foods on long-term contract 1
Brookfield’s Strategic Exit: Seller Brookfield Properties originally acquired the property for $68 million in 2020 and successfully repositioned it into a stabilized, income-generating asset before the profitable exit 1
South Florida Retail Revival: Stockbridge Capital Group paid $118.4 million for Uptown Boca shopping center ($519/sq ft), featuring 150,591 sq ft anchored by Whole Foods with tenants including REI, Bonefish Grill, and Sephora 2
Pacific Northwest Activity: Northmarq arranged $31.76 million sale and $26.8 million bridge financing for Gresham Town Fair in Oregon – a 264,634-sq-ft retail center currently 74% leased with national and regional retailers 6
Price Recovery Signals: Based on the data displayed above, U.S. commercial real estate prices showed year-over-year decline of -1.74% in Q1 2025, significantly improved from -11.57% decline in Q2 2024 4

COMMERCIAL SERVICING MARKETS

Rising Distress Metrics: CRE CLO distress metrics rose in August 2025 with delinquencies and special servicing needs increasing under mounting refinancing pressure across commercial mortgage market 5
Workout Activity Surge: Special servicers report higher volumes of loan modifications, extensions, and restructuring requests as property owners seek alternatives to foreclosure amid refinancing challenges 5

INDUSTRY NEWS

Major investment activity and executive changes highlight ongoing transformation in the real estate sector, with significant capital deployment in affordable housing and leadership transitions at key technology companies.

SitusAMC Leadership Addition: Amrit Gill appointed Director of CRE Platform Management & Client Relations (effective September 2, 2025) – brings 20+ years experience from Trepp where she served as SVP and Practice Leader 9
Talent Platform Expansion: SitusAMC’s Talent Platforms now manage 300+ professionals across dedicated teams serving CRE lenders and investors in underwriting, securitization, investment advisory, and servicing 9
Brookfield Mega-Deal: Advanced negotiations for $10 billion acquisition of Yes! Communities (manufactured housing operator) with Singapore’s GIC – would rank among biggest real estate deals since 2022 5

MAJOR INVESTMENTS AND ACQUISITIONS

Brookfield eyes $10 billion investment in Yes! Communities manufactured housing operator, potentially representing one of largest investments in the manufactured housing space 11.
Continua Developments secured $28 million in construction financing for 110-unit Urbania Flagler 1st Ave development in Fort Lauderdale with 6.3% vacancy rates and strong absorption 18.
Blackstone acquired up to $869 million in single-tenant lease loans from First Internet Bancorp, demonstrating continued appetite for net lease portfolios 11.