Daily Dose of Real Estate

Daily Dose of Real Estate for October 27

More shake-up at Fannie Mae as Malloy Evans, Head of Single-Family, and General Counsel Danielle McCoy have departed. FHFA is sharpening its pencil on LLPAs—aka “pricing”—in an effort to positively affect housing affordability. The GSEs are roughly four times more profitable now than before conservatorship, largely due to increases in charged fees.

Turn that cap backwards because we’ve got a sweet dip in mortgage rates—the lowest in a year. Lower rates are helping buoy U.S. commercial real estate, with investment volume jumping 16% year-over-year in Q3 to nearly $124 billion, including $42 billion in September alone. Home sales are still chugging along, having crested the important 4 million units sold mark, with median prices up 2.1% for the year. Still, sales remain 23% below 2019 levels.

Let’s get you caught up and out the door in three minutes.

Tim

Today’s newsletter was prepared by our AI platform ALFReD. Know Better.

Table of Contents

KEY TAKEAWAYS

Home Sales Momentum Building: Existing-home sales reached 4.06 million in September (seasonally adjusted annual rate), up 1.5% month-over-month and 4.1% year-over-year, with median prices rising 2.1% to $415,200 1
Sales Still Below Pre-Pandemic Levels: Despite recent gains, single-family home sales remain 23% below September 2019 levels, with condo sales down 37% from pre-pandemic levels, indicating the market has not fully recovered 2
Mortgage Rates Hit Year Low: The 30-year fixed mortgage rate dropped to 6.19%, the lowest level in more than a year, spurring increased refinance activity and purchase applications 3
LLPA Fee Relief Coming: FHFA Director Bill Pulte announced a review of loan-level price adjustments (LLPAs) with Barry Habib leading the effort to provide relief to homeowners and buyers, potentially saving borrowers thousands in upfront fees 4
Fannie Mae Leadership Shakeup: Fannie Mae announced the departure of Single-Family head Malloy Evans and General Counsel Danielle McCoy on October 24th, promoting Jake Williamson and Tom Klein to acting roles respectively, marking significant leadership changes at the GSE 5
Historic Industry Consolidation: Rocket Companies completed its $14.2 billion acquisition of Mr. Cooper on October 1st, creating the nation’s largest mortgage originator and servicer, handling one in every six mortgages nationwide 5
Investment surge continues: U.S. commercial real estate investment volume jumped 16% year-over-year in Q3 to nearly $124 billion, with September alone seeing $42 billion in transactions 1
Multifamily momentum builds: Apartment transactions rose 13% year-over-year to $43.8 billion in Q3, driven by single-property sales and a 20% spike in distressed trades 2
Interest rates stabilizing: Based on data from FRED, 10-year Treasury yields closed at 4.01% on October 23 (below 4% as of this print), down from 4.18% in late September, supporting improved borrowing conditions 3
Lending recovery underway: CRE lending rebounded in H1 2025 with market-wide average loan-to-value ratios rising to 64.4%, up 170 basis points year-over-year 4
Blackstone earnings soar: The private equity giant’s Q3 distributable earnings jumped 48%to $1.9 billion, driven by $7.3 billion in real estate sales and strong private credit inflows 5

RESIDENTIAL REAL ESTATE MARKETS

The residential real estate market demonstrated resilience in September 2025, with existing-home sales climbing and inventory expanding year-over-year. However, deeper analysis reveals sales remain significantly below pre-pandemic levels, with regional variations showing the South leading in sales volume while supply conditions vary dramatically between single-family homes and condos.

SEPTEMBER SALES SHOW CONTINUED RECOVERY BUT REMAIN LOW

Sales Volume: Existing-home sales reached 4.06 million units (seasonally adjusted annual rate), up 1.5% from August and 4.1% year-over-year – the strongest annual growth in several months 1
Historical Context: Single-family home sales reached 3.69 million units annually, up 1.7% monthly and 4.5% year-over-year, but still down 23% from September 2019 and 2% from September 2009 during the Housing Bust 2
Median Price Growth: Home prices hit $415,200 in September, representing a 2.1% year-over-year increase and marking the 27th consecutive month of price appreciation 1
Single-Family Pricing: The median price of single-family homes reached $420,700, up 2.3% year-over-year, following the typical seasonal pattern with prices having exploded 47% from June 2020 through June 2025 2

CONDO MARKET STRUGGLES WITH NEAR-RECORD LOW SALES

Flat Performance: Condo and co-op sales remained unchanged for the third consecutive month at 370,000 units (seasonally adjusted annual rate), barely above record lows in NAR data going back to 2011 2
Severe Decline: Condo sales are down 37% from September 2019 levels, indicating much deeper distress in the condo market compared to single-family homes 2
Price Declines: The national median condo price dropped 1.6% monthly to $360,300 and fell 0.6% year-over-year, marking the first annual price decline after explosive 43% growth from mid-2020 through mid-2025 2

REGIONAL MARKET VARIATIONS

South Leads Volume: The South recorded 1.86 million units (annual rate) with 1.6% monthly growth and impressive 6.9% year-over-year gains, maintaining its position as the strongest regional market 1
West Shows Strength: The West experienced the strongest monthly growth at 5.5%, though sales remained flat compared to the previous year, indicating market stabilization after previous declines 1
Market-Specific Variations: Price movements differ massively by market, with 15 major cities seeing single-family home price drops of 10-24% from peaks, including Oakland (-24%), Austin (-24%), and San Francisco (-16%), while other markets like Chicago continue rising 2

INVENTORY DYNAMICS SHIFTING DRAMATICALLY

Single-Family Supply: Housing inventory reached 1.55 million units representing a 4.6-month supply, the highest since August 2016 (excluding the pandemic-distorted May 2020) 1 2
Condo Supply Crisis: Condo supply jumped to 6.5 months in September, reaching Housing Bust levels and representing a 48% increase compared to September 2019 2
Marketing Time: Properties spent a median of 33 days on market compared to 28 days a year earlier, reflecting increased buyer selectivity and expanded inventory choices 1

MORTGAGE MARKETS

The mortgage market experienced significant rate relief in recent weeks, with the 30-year fixed-rate mortgage reaching its lowest level in over a year. This rate environment has reinvigorated both purchase and refinance activity, while credit conditions show some tightening with elevated rejection rates for mortgage applications.

INTEREST RATES REACH YEARLY LOWS

Rate Decline: The 30-year fixed-rate mortgage dropped to 6.19%, marking the lowest level in more than a year and providing significant relief from earlier 2025 peaks 3 6
Refinance Surge: The improved rate environment sparked a surge in refinance applications as homeowners with higher-rate mortgages sought to reduce monthly payments, reaching levels not seen since late 2024 6
ARM Interest: Adjustable-rate mortgages (ARMs) accounted for 10.8% of all mortgage applications, reflecting growing borrower interest in these products as they seek lower initial rates 6

APPLICATION VOLUME TRENDS

Mixed Patterns: Mortgage application volumes showed purchase applications maintaining steady levels while refinance activity surged due to the improved rate environment 6
Borrower Response: The rate decline has particularly benefited borrowers looking to escape higher-rate mortgages originated during 2024’s peak rate period 6

CREDIT MARKET CONDITIONS

Application Rates: Mortgage loan application rates increased to 6.0% in October 2024 from 4.3% in October 2023, indicating more consumers are seeking mortgage financing despite challenging conditions 7
Refinance Decline: Application rates for mortgage refinancing declined to 2.4% in 2024 from 4.5% in 2023, reaching a new series low before the recent rate-driven surge 7
Credit Tightening: Consumer credit conditions show some tightening with elevated rejection rates for mortgage applications, reflecting lenders’ cautious approach in the current environment 7

FANNIE MAE LEADERSHIP TRANSITION

Executive Departures: Fannie Mae announced on October 24th that Single-Family head Malloy Evans and General Counsel Danielle McCoy are leaving their positions, marking significant leadership changes at the government-sponsored enterprise 5 8
New Leadership: Jake Williamson was promoted to Acting Head of Single-Family, bringing nearly two decades of experience across servicing, risk management, operations, and analytics, while Tom Klein was named Acting General Counsel after 20 years in legal leadership roles at Fannie Mae 5
Strategic Vision: Evans expressed pride in the foundation laid for the company and America’s homeowners, stating his confidence in the experienced team moving forward, while McCoy emphasized the privilege of helping American homeowners and renters find housing 5

REGULATORY DEVELOPMENTS IN REAL ESTATE

Federal regulatory activity focused on monetary policy guidance, housing agency goal-setting, and a significant review of controversial loan-level price adjustments. The FHFA under new leadership is signaling major changes to mortgage pricing policies that could provide substantial relief to borrowers.

FHFA ANNOUNCES LLPA REVIEW FOR BORROWER RELIEF

Leadership Change: FHFA Director Bill Pulte announced a comprehensive review of the loan-level price adjustment (LLPA) matrix, with Barry Habib (founder of MBS Highway and Fannie Mae board member) leading the effort to provide relief to homeowners and buyers 4
Political Motivation: Pulte framed the review as correcting Biden-era policies, stating “Barry Habib is working hard to present me options to fix LLPAs and bring some relief to HOME OWNERS AND HOME BUYERS in President Trump’s America!” 4
Industry Support: The Community Home Lenders of America and Mortgage Bankers Association voiced support, with MBA recommending changes should “lower the cost of credit for middle-income homebuyers and for homeowners wanting to do rate and term refinances” 4
Potential Savings: A rollback could save borrowers $1,500 to $4,000 depending on loan amount and credit profile, with fees currently ranging from 0.25% to over 2% of total loan amount 8

BACKGROUND ON CONTROVERSIAL 2023 LLPA CHANGES

Original Changes: The Biden administration’s 2023 LLPA revisions aimed to reduce disparities by narrowing the pricing gap between high and mid-tier credit profiles, though borrowers with higher credit scores still received better overall pricing 8
Industry Backlash: The changes sparked swift criticism for allegedly penalizing qualified borrowers, particularly those with credit scores in the 680-740 range and down payments below 20% who saw increased fees 8
Previous Rollback: Following pushback from state governments and industry groups, some controversial elements including a debt-to-income ratio LLPA above 40% were previously rolled back 4

FEDERAL RESERVE POLICY UPDATES

FOMC Minutes Released: The Federal Reserve published minutes from its September 16-17, 2025 meeting on October 8th, revealing the Committee’s economic assessment and monetary policy deliberations 9
Housing Focus: Committee discussions highlighted ongoing concerns about housing affordability and the role of monetary policy in supporting sustainable homeownership 9
Rate Projections: FOMC projections suggest 30-year fixed mortgage rates will decline modestly from 6.4% in 2025 to 6.1% in 2026, then to 6.0% in 2027, reflecting continued restrictive monetary policy 10

HOUSING AGENCY DEVELOPMENTS

Enterprise Housing Goals: The FHFA continues implementing its 2025-2027 Enterprise Housing Goals Final Rule, establishing benchmark levels for Fannie Mae and Freddie Mac’s affordable housing support 10
GSE Privatization: Pulte also announced the Trump administration is “opportunistically evaluating” a stock offering for Fannie Mae and Freddie Mac, potentially as soon as the end of 2025 4

ECONOMIC NEWS

Consumer spending patterns reflect cautious optimism with households prioritizing essential expenditures while reducing discretionary spending. Economic forecasts show continued growth in construction spending, while labor shortages in the construction industry continue to impact housing production and costs.

CONSUMER SPENDING PATTERNS

Selective Spending: Consumers are prioritizing essential expenditures while reducing discretionary spending, particularly in dining out and vacation travel, influencing housing demand as buyers weigh homeownership costs 11
Home Focus: The Conference Board’s Consumer Confidence Index showed consumers planning to increase spending on non-discretionary categories like financial services and home maintenance 11
Vacation Decline: Vacation spending plans declined for the second consecutive month, suggesting homeowners are focusing on maintaining existing properties rather than pursuing new purchases 11

ECONOMIC OUTLOOK AND FORECASTS

Fannie Mae Outlook: Fannie Mae published its October 2025 Economic and Housing Outlook with updated forecasts for mortgage rates, single-family and multifamily originations, and real GDP growth 12
Construction Growth: Construction spending increased 0.4% in October to a seasonally adjusted annual rate of $2.174 trillion, representing a 5.0% increase compared to October 2023 13
Private Sector Strength: Private construction spending led gains with a 0.7% monthly increase, while public construction spending declined 0.5% 13

LABOR MARKET IMPACTS

Skilled Labor Shortage: The National Association of Home Builders reported skilled labor shortages resulted in an estimated $10.8 billion loss in production, particularly affecting smaller builders 14
Construction Delays: Labor shortages have led to longer construction times and increased costs of approximately $2,639 per single-family house 14

COMMERCIAL REAL ESTATE MARKETS (INCLUDING MULTIFAMILY)

Commercial real estate investment activity surged in Q3 2025, with transaction volumes reaching post-pandemic highs across most sectors. Multifamily markets showed particular strength despite ongoing supply pressures, while office properties began showing signs of stabilization after years of decline.

INVESTMENT VOLUME REACHES POST-PANDEMIC HIGHS

Q3 2025 investment volume: $124 billion, up 16% year-over-year, with September accounting for $42 billion in transactions (+19% vs. September 2024) 1
Office sector leads gains: Transaction volume up 69% year-over-year in September, coinciding with first national vacancy rate decline since 2019 to 22.5% (down 5 basis points in Q3) 1
Other sector performance: Retail (+28% YoY), industrial (+25% YoY), hotels (+15% YoY), while multifamily declined 5% year-over-year 1
JPMorgan projection: Q3 totals could reach $140 billion after historical revisions, representing 31% annual increase and new post-pandemic benchmark 1

MULTIFAMILY TRANSACTIONS ACCELERATE DESPITE CHALLENGES

Apartment sales volume: $43.8 billion in Q3, up 13% year-over-year, with single-property sales driving 85% of total deals at $37 billion (+21% YoY) 2
Distressed activity surges: Distressed property sales up 20% year-over-year in Q3, signaling both opportunity and stress in the sector 2
Property type breakdown: Mid/high-rise sales increased 16% to $19.5 billion; garden property sales rose 10% to $24.3 billion 2
Cap rates remain flat: 5.7% for seven consecutive quarters, though RCA commercial property price indexes for multifamily fell 0.8% year-over-year 2

CONSTRUCTION PIPELINE SIGNALS SUPPLY SURGE

Units under construction: Nearly 970,000 units currently in pipeline, with Yardi Matrix revising multifamily supply forecasts upward through 2027 6
Development outlook: Steady mix of market-rate and affordable housing expected to meet demand, with favorable lending conditions and policy support encouraging continued construction starts 6

COMMERCIAL FINANCING MARKETS

Commercial real estate debt markets showed significant recovery in 2025, with banks returning to lending and loan-to-value ratios rising substantially. Interest rate stabilization has improved borrowing conditions, though a massive refinancing wave looms with $300 billion in loans maturing in H2 2025.

DEBT MARKETS SHOW SIGNS OF RECOVERY

Loan-to-value ratios rise: Market-wide average LTV reached 64.4%, up 170 basis points from a year ago, with national banks nearly doubling lending volume without raising LTVs 4
Banks reclaim market share: 33% of overall market share, up from 27% in 2024, as national and regional banks re-entered the space 4
Foreign lender activity: Increased share of CRE financing, accounting for 18% of conventional loans with average loan sizes of $25 million—nearly double the domestic average 4
Investor-driven leverage: Highest in market at 68.6% LTV, while government agencies and CMBS lenders lost market share amid increased private capital activity 4

INTEREST RATE ENVIRONMENT IMPROVES CONDITIONS

10-year Treasury yields: Closed at 4.01% on October 23, 2025, down from highs of 4.20% in late September, supporting improved borrowing conditions 3
Cap rate trends: Average cap rate across all transactions rose to 6.38% in September (+4 basis points from August), with multifamily seeing biggest jump at +14 basis points to 5.63% 1
Positive leverage potential: Cap rates now exceeding mortgage rates in many cases could signal return of positive leverage, though interest rate direction remains critical 1

REFINANCING PRESSURES MOUNT

Upcoming maturities: $300 billion in CRE loans due in H2 2025, with additional $600 billion appearing to have been extended past original maturity dates 4
Multifamily exposure: 35% of upcoming maturities, with 60% tied to low-interest 2021-22 originations, raising likelihood of refinancing challenges 4
Office sector stress: Disproportionately represented in pool of extended debt, with banks (especially regional/local) holding largest share of both upcoming maturities and likely extensions 4

COMMERCIAL SERVICING MARKETS

The “extend and pretend” strategy has returned in full force, with CRE loan modifications reaching $11.2 billion in Q3 2025. Hotels and office properties dominate distressed activity, while larger loans drive most modification volume as lenders delay defaults rather than foreclose.

LOAN MODIFICATIONS SURGE AS “EXTEND AND PRETEND” RETURNS

Q3 modification volume: $11.2 billion total, with extensions accounting for 67% of volume as lenders delay defaults rather than foreclose 7
Modification breakdown: Maturity extensions (67%), combination strategies (14.1%), forbearance (5.8%), and miscellaneous adjustments (12.5%) 7
Strategic rationale: “Extend and pretend” allows lenders to manage balance sheet risks without triggering defaults, echoing post-2012 downturn tactics 7

HOTELS AND OFFICES BEAR THE BRUNT OF DISTRESS

Hotel sector dominance: $5.5 billion across 53 loans (49% of total modified balance), highlighting hospitality sector’s ongoing challenges 7
Office property stress: $1.4 billion across 36 loans, while multifamily had most loans by count (55) but only $1.4 billion in balance 7
Stable sectors: Industrial properties saw just $55.8 million across 5 loans; self-storage had $150 million across 3 loans, reflecting more stable fundamentals 7
Mixed-use activity: $891.9 million across 20 loans, showing broad-based stress across property types 7

LARGE LOANS DRIVE MODIFICATION ACTIVITY

Size concentration: Loans over $50 million made up 74% of total modified balances, with $100M+ category accounting for 50 loans totaling $5.9 billion 7
Mid-tier activity: $50-100 million range included 38 loans for $2.5 billion, while smaller loans under $10 million represented just 30 loans totaling $145.9 million 7
Institutional focus: Concentration in larger loans reflects distress in big-ticket debt and suggests major institutional borrowers face most significant refinancing challenges 7

INDUSTRY NEWS

The mortgage industry witnessed historic consolidation with major acquisitions, product innovations in Non-QM lending, and significant leadership changes across organizations. Earnings reports showed mixed performance as companies navigate challenging market conditions while expanding service offerings. Major earnings releases dominated industry news, with Blackstone delivering exceptional Q3 results and significant M&A activity including Federated Hermes’ entry into U.S. real estate.

MAJOR ACQUISITIONS AND CONSOLIDATION

Historic Deal: Rocket Companies completed its $14.2 billion acquisition of Mr. Cooper on October 1st, creating the nation’s largest mortgage originator and servicer handling one in every six mortgages 5
Market Dominance: The combined entity services nearly 10 million homeowners and represents unprecedented scale in mortgage origination and servicing 5
Leadership Integration: Jay Bray, longtime Mr. Cooper CEO, assumed the role of president and CEO of Rocket Mortgage, bringing 25 years of industry experience to the leadership team 5

PRODUCT INNOVATION AND EXPANSION

Non-QM Growth: Union Home Mortgage expanded its Non-QM lending options through its new Platinum Product Suite, introducing bank statement loans and debt-service-coverage-ratio (DSCR) loans 15
Alternative Lending: The Non-QM market continues evolving as lenders serve borrowers who don’t fit conventional criteria, including self-employed individuals and real estate investors 15
Market Demand: These products gain traction as housing affordability challenges persist and borrowers seek alternative financing solutions 15

LEADERSHIP CHANGES AND APPOINTMENTS

Industry Appointments: Key leadership changes at Ocwen, MBA, and CHLA, reflecting ongoing evolution in mortgage and housing finance sectors 16
Talent Competition: Rate Companies hired top loan originator Torrey Jacoby as Vice President of Mortgage, highlighting the competitive landscape for talent in the mortgage industry 17

EARNINGS AND FINANCIAL PERFORMANCE

Rithm Capital Results: Rithm Capital Corporation reported net income of $36.5 million for Q1 2025, with subsidiary Newrez LLC achieving $11.8 billion in total funded originations, up 9% year-over-year 18
Home Equity Trends: Approximately 48% of mortgaged residential properties fell into the equity-rich category in Q3, slightly down from the previous quarter’s peak of 49.2% 19

FEDERAL AGENCY UPDATES

Fannie Mae earnings: Will report Q3 2025 results on October 29, 2025 before market open, with CFO webcast and October Economic and Housing Outlook publication 8 9
FHLB Des Moines dividend: Approved Q3 2025 dividend at 9.75% annualized rate on average activity-based stock and 6.00% on membership stock, with $159 million in payments due November 12 10

MAJOR EARNINGS AND CORPORATE DEVELOPMENTS

Blackstone Q3 results: Distributable earnings jumped 48% to $1.9 billion ($1.52 per share), well above forecasted $1.23, driven by $7.3 billion in real estate sales 5
Record AUM: Assets under management hit $1.24 trillion, supported by $54.2 billion in new investor inflows and strength in private credit 5
Leadership outlook: CEO Schwarzman called declining cost of capital a “secular tailwind,” while President Gray noted firm is “getting closer to that inflection point” for real estate 5

MERGERS AND ACQUISITIONS

Federated Hermes acquisition: Definitive agreement to acquire 80% stake in FCP Fund Manager for up to $331 million, marking formal entry into U.S. real estate sector 11
Deal structure: $215.8 million cash plus $23.2 million in Class B stock upon closing, with up to $92 million in additional contingent payments based on performance milestones 11
FCP portfolio: Has invested in over $14.6 billion in assets with 75,000+ apartment units across six offices nationwide 11

NOTABLE PROPERTY TRANSACTIONS

Blackstone Queens sale: Completed sale of 183,000-sq-ft warehouse near LaGuardia Airport for $87 million to Morgan Stanley fund, up from $55.5 million 2019 purchase 12
Palm Beach Gardens deal: Sold 476-unit apartment complex to TA Realty for $193 million, highlighting multifamily investment growth in South Florida 13
Brandywine buyout: Acquired full ownership of 28-story University City mixed-use tower for $71 million, buying out partner to gain complete control and refinancing opportunities 14