PolyMarket’s calling it — 99% odds of a rate cut tomorrow, with a 98% chance it’s just 25 bps and a 1% shot at 50. Remember that whole government shutdown thing? Yeah, still very much a thing. The Senate’s slated to head out on a 10-day Veterans Day recess starting Friday, November 7, then they’ll have November 17–21 to hammer out a deal before the Thanksgiving break. Home prices are losing steam. The Case-Shiller National Index posted a 1.5% annual gain in August — down from 1.6% the month before and the weakest in over two years. AEI joined the chorus, reporting September as the slowest appreciation since 2013. And the theme of the day is “low.” Single-family rent growth just hit a 15-year low — up only 1.4% year-over-year in August 2025, down from an average 3% bump last August. On the rates front, Barry Habib — who’s helping FHFA review the GSEs’ LLPA (a.k.a. credit pricing) strategy — sees mortgage rates dropping to 5.5% by 2026. His forecast hinges on expected Fed cuts and tighter MBS spreads, whether from the GSEs buying their own paper or another big buyer stepping in. Apartments remain investors’ darling. Fifty-two percent now call multifamily their preferred sector — up six points from last year, per the latest SitusAMC survey. Investors also expect rents to accelerate and vacancies to dip below 4% by 2029.
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. Happy Birthday, Pop!
KEY TAKEAWAYS
- Federal Reserve poised for 25 basis point rate cut with 97% market probability as mortgage rates hit 6.19%, their lowest level in over a year 1
- Home price growth continues dramatic slowdown with Case-Shiller National Index rising just 1.5% year-over-year in August, the weakest annual gain since 2013 2
- Single-family rent growth hits 15-year low at just 1.4% year-over-year in August, down from 3% average increase one year ago as mortgage rates improve buyer affordability 3
- Commercial mortgage delinquencies decline in Q3 2025 after significant increases in Q2, with CMBS loans showing highest delinquency rates at 5.66% 4
- Bay Area housing market surges 17% in pending home sales driven by AI boom and return-to-office mandates, with homes selling at unprecedented speeds 5
- Government shutdown creates data blackout for Federal Reserve decision-making, forcing reliance on alternative economic indicators ahead of critical policy meeting 6
- Commercial delinquencies decline: MBA reports commercial property mortgage delinquencies decreased in Q3 2025 after significant Q2 increases, though CMBS loans remain elevated at 5.66% 1
- CRE investor optimism rises: SitusAMC reports commercial real estate emerged as top-performing asset class through first three quarters of 2025, outpacing equities, bonds, and cash as investors seek stability 2
- Major REIT M&A activity: Plymouth Industrial REIT agrees to $2.1B go-private deal with Ares Management and Makarora, signaling potential REIT transaction rebound 3
- Welltower announces massive expansion: Healthcare REIT unveils $23B in transactions, including $14B in seniors housing acquisitions across US, UK, and Canada 4
- Insurance crisis hits multifamily: Rising insurance costs at 12% annually are delaying deals nationwide, with smaller owners facing over $1M in upfront expenses 5
- Urban retail revival signs: Manhattan’s Midtown and Chicago’s Magnificent Mile show recovery momentum with new tenant activity and declining crime rates 6 7
RESIDENTIAL REAL ESTATE MARKETS
The residential market is experiencing its most significant price deceleration in over a decade, with national home price growth falling below inflation rates for the fourth consecutive month. While most markets struggle with declining activity, stark regional disparities are emerging, with technology hubs defying national trends.
NATIONAL PRICE TRENDS SHOW DRAMATIC DECELERATION
- Case-Shiller National Index posts 1.5% annual gain for August, down from 1.6% previous month and weakest gain in over two years 2
- Real wealth decline continues as 1.5% price growth falls below 3% inflation rate, marking fourth consecutive month of homeowner wealth erosion 2
- FHFA House Price Index shows 2.3% annual growth from August 2024 to August 2025, with monthly gain of 0.4% 7
- AEI reports September as lowest appreciation since 2013 with national year-over-year HPA at 1.5%, down from 1.8% in August and 3.9% a year ago 8
- Negative nominal HPA in 28 of top 57 metros representing 49% of major markets, with north-south divide continuing as California, Texas, and Florida metros experience negative growth 8
STARK REGIONAL DISPARITIES EMERGE
- Top performing markets: New York leads with 6.1% annual gain, followed by Chicago at 5.9% and Cleveland at 4.7% 9
- Declining markets: Tampa falls 3.3% year-over-year, Phoenix drops 1.7%, Miami declines 1.7% 9
- Western weakness: San Francisco down 1.5%, Denver declining 0.7%, San Diego falling 0.7%, Seattle slightly negative 9
- FHFA regional data: Monthly changes range from -0.8% in Pacific division to +1.2% in Middle Atlantic, with 12-month changes spanning -0.6% to +6.3% 7
- Inventory and sales trends: Housing inventory fell 0.3% month-over-month in September while existing home sales declined 3%, with higher inventory and lower sales pushing appreciation lower 8
BAY AREA DEFIES NATIONAL TRENDS WITH AI-FUELED BOOM
- Pending sales surge 17% compared to national average, with homes selling at unprecedented speeds 5
- AI industry drives demand with new class of affluent tech workers creating competitive bidding wars and rapid sales cycles 5
- Return-to-office mandates boost activity as tech companies require in-person work, increasing housing demand near major employment centers 5
MARKET DYNAMICS AND BUYER BEHAVIOR
- Mortgage rate decline provides relief with rates at lowest level in over a year, offering approximately $9,500 additional monthly purchasing power 10
- Buyer hesitation persists despite improved affordability due to economic uncertainties and elevated home prices relative to incomes 10
- Months’ supply projections show national months’ supply higher than recent years and projected to rise through early winter, contributing to price moderation 8
RENTAL MARKET EXPERIENCES HISTORIC SLOWDOWN
- Single-family rent growth hits 15-year low at 1.4% year-over-year in August 2025, down from 3% average increase in August 2024 3
- Mortgage rate impact on rentals as 30-year FRM approaches 6%, more potential homebuyers jump from rental to purchase market, reducing rental demand 3
- Price tier performance: High-end properties increased 1.6% year-over-year (down from 3.3%), low-end rentals rose 1.1% (down from 2.8%) 3
- Top metro rent growth: Chicago leads at 4.7%, followed by Los Angeles at 2.8%, Philadelphia at 2.7%, Washington D.C. at 2.6%, and Atlanta at 1.9% 3
- Dallas shows decline with 0.6% rent decline in August 2025, attributed to large number of multifamily units coming online giving renters bargaining power 3
MULTIFAMILY RENT TRENDS SHOW REGIONAL DIVERGENCE
- 69.4% of markets posted rent gains in September, holding steady from August’s 69.8% and well above March 2025 low of 61.4% 11
- National monthly growth at 0.14% equivalent to 1.7% annualized, but still trailing 3% CPI inflation meaning real rents declining slightly 11
- Annual growth stable at 2.0% for third consecutive month, continuing two-year trend of stable, low-single-digit increases 11
- Top annual performers: Syracuse, NY leads at 6.9%, Chicago and Akron, OH at 6.2%, Rochester, NY at 6.1%, San Francisco at 6.0% 11
- Sun Belt corrections continue: Cape Coral, FL down 4.8%, Austin, TX down 4.0%, North Port, FL down 3.5% reflecting normalization in overbuilt markets 11
MORTGAGE MARKETS
The mortgage market is experiencing significant shifts as the Federal Reserve prepares for a widely anticipated rate cut. Mortgage rates have already declined to their lowest levels in over a year, while commercial mortgage performance shows improvement after challenging quarters.
FEDERAL RESERVE RATE CUT DRIVES MORTGAGE RATE OPTIMISM
- 97% probability of 25 basis point cut at October 29-30 Fed meeting, bringing federal funds rate to 3.75%-4% range 1
- 30-year mortgage rates drop to 6.19% as of October 23, marking lowest level in over a year according to Freddie Mac 1
- Rate cuts already priced in with Realtor.com economist noting further declines depend on new developments beyond anticipated Fed actions 1
- Future rate predictions include Barry Habib’s forecast of 5.5% mortgage rates by 2026 based on expected Fed cuts and tighter spreads 12
MORTGAGE APPLICATION ACTIVITY SHOWS MIXED SIGNALS
- Applications react to rate improvements with borrowers seeking preapproval and rate locks while shopping 12
- Existing home closings increase 1.5% in September to seasonally adjusted annual rate of 4.06 million, highest level in seven months 12
- New home sales running at 800,000 annual rate representing fastest pace since early 2022 according to Census Bureau data 12
COMMERCIAL MORTGAGE PERFORMANCE IMPROVES
- Q3 delinquency rates decrease after significant Q2 increases, with balance of non-current commercial mortgages declining 4
- CMBS loans show highest delinquency at 5.66% of balances 30+ days delinquent, up from 5.14% previous quarter 4
- Other capital sources maintain moderate rates: Life company loans at 1.45%, GSE loans at 0.64%, FHA multifamily at 0.79% 4
- Property type variations with delinquencies increasing for multifamily and health properties while decreasing for office, retail, industrial, and lodging 4
REGULATORY DEVELOPMENTS IN REAL ESTATE
The GSE sector experienced major leadership upheaval as FHFA Director Bill Pulte continues his aggressive reform agenda. Meanwhile, Freddie Mac advances securitization strategies and Fannie Mae takes legal action against deceptive marketing practices.
FEDERAL HOME LOAN BANK SYSTEM REPORTS STRONG PERFORMANCE
- FHLBank Indianapolis declares dividends at 9.50% annualized rate for Class B-2 activity-based stock and 4.50% for Class B-1 non-activity-based stock 19
- Q3 net income of $87 million down $4 million from prior year but maintaining strong financial position 19
- Cash dividends paid October 29 demonstrating continued ability to provide returns to member institutions 19
FREDDIE MAC ADVANCES SECURITIZATION STRATEGY
- $343.2 million SLST Series 2025-2 priced representing securitization of seasoned residential mortgage loans with guaranteed senior and non-guaranteed subordinate securities 13
- Risk management focus allows GSE to manage less-liquid assets while maintaining market stability and liquidity 13
- Borrower outcome requirements guide servicing transactions to improve borrower outcomes and stabilize communities 13
LEGAL ACTION AGAINST HOME WARRANTY FIRMS
- Fannie Mae lawsuit targets misleading marketing accusing multiple home warranty companies of coordinated campaign misusing Fannie Mae name since July 2023 14
- Deceptive mailer practices featured urgent language like “IMMEDIATE RESPONSE NEEDED” and “Official Business” with obscured company identities 14
- Consumer confusion documented with borrowers contacting Fannie Mae directly due to misleading solicitations 14
- Brand protection effort represents broader initiative to prevent consumer confusion and protect GSE trademark 14
ECONOMIC NEWS
The Federal Reserve faces unprecedented challenges making monetary policy decisions during a government shutdown that has created a data blackout. Despite limited official data, inflation trends and alternative indicators support the anticipated rate cut.
FEDERAL RESERVE FACES CRITICAL DECISION AMID DATA BLACKOUT
- Government shutdown creates data drought forcing Fed to rely on private-sector sources and market indicators for October 29-30 meeting 6
- September jobs report delayed with most Bureau of Labor Statistics data collection halted 6
- Fed Chair Powell acknowledges limitations but notes access to “wide variety of public- and private-sector data” showing outlook unchanged since September 1
- December meeting impact could be significant if shutdown continues and delayed reports aren’t published 12
INFLATION TRENDS SUPPORT DOVISH POLICY STANCE
- September CPI shows 3% inflation cooler than expected and released before shutdown, providing justification for rate cuts 1
- Tariff impact limited so far with concerns about Trump’s tariff policies driving prices higher not yet materializing significantly 1
- Bank of America economists emphasize CPI report “should keep Fed focused on labor market” with October cut appearing “done deal” 1
- Global X strategist notes “nothing in inflation print should stop Fed from cutting rates” 1
LABOR MARKET SIGNALS CREATE POLICY COMPLEXITY
- Alternative indicators suggest softening with ADP data providing limited insights compared to comprehensive BLS reports 15
- Potential Fed disagreement with some officials possibly arguing for holding steady while others push for aggressive cuts 15
- First American economist warns Fed “operating with limited visibility” could lead to cautious approach 15
TREASURY YIELD MOVEMENTS SIGNAL MARKET EXPECTATIONS
- Treasury markets closely watched for signals about economic expectations and Fed policy with yield movements indicating investor sentiment 16
- Focus on forward guidance with December meeting communications potentially more important than widely expected 25bp cut 16
- Stock markets hit records as investors position for continued monetary accommodation 17
COMMERCIAL REAL ESTATE MARKETS (INCLUDING MULTIFAMILY)
Urban markets are showing early signs of recovery with Manhattan Midtown and Chicago’s Magnificent Mile gaining momentum, while apartment preferences strengthen among investors as the sector transitions from oversupply toward the next cycle.
MANHATTAN MIDTOWN COMEBACK
- Major development activity: Developer Gary Barnett breaks ground on 600-foot skyscraper at 570 Fifth Avenue featuring 80,000 sq ft IKEA flagship store, betting on return-to-office momentum 6
- Luxury tower pipeline: Barnett expects 5-10 new developments in Billionaires’ Row area over next decade, defending ultraluxury condos as essential revenue engines generating hundreds of millions in property and employment taxes 6
- Mixed-use strategy: New projects blend workspaces with experiential retail designed for browsing and brand engagement rather than traditional purchases 6
CHICAGO MAGNIFICENT MILE RECOVERY
- Traffic and safety improvements: Foot traffic nearing pre-pandemic levels while crime rate declined 4% year-over-year, creating more favorable environment for retailers 7
- New tenant activity: Canadian fashion brand Aritzia takes 46,000 sq ft space, Uniqlo returns with new flagship at nearly half former size, signaling renewed confidence 7
- Rent adjustments: Michigan Avenue rents declined approximately 24% since 2019, helping attract tenants back to corridor 7
- Ongoing challenges: Retail vacancy remains at 25% (down from 26% in 2023 but well above 7% rate from fifteen years ago), with two major malls handed back to lenders 7
APARTMENT SECTOR PREFERENCES STRENGTHEN
- Investor favorability: Apartments remain most favored asset class with 52% of investors citing it as preferred sector, up six percentage points from year-ago quarter according to SitusAMC investor survey 2
- Cycle transition: SitusAMC projects apartment vacancy to fall to 3.9% by 2029 with rent growth accelerating to 4.5% over same period as sector transitions from oversupply to next cycle 2
- Affordability advantage: Apartment affordability improved modestly in Q2 while single-family housing remains out of reach for many households, with renting still more affordable than buying 2
COMMERCIAL FINANCING MARKETS
Commercial real estate has emerged as the top-performing asset class through Q3 2025 as investors seek stability, while rising insurance costs continue disrupting multifamily transactions and cap rates show early signs of stabilization.
CRE OUTPERFORMS OTHER ASSET CLASSES
- Top performer: Through first three quarters of 2025, CRE was top-performing preferred asset class, outpacing equities, bonds, and cash as investors seek stability in volatile world 2
- Capital availability improves: Both equity and debt underwriting becoming more flexible, though transaction volumes remain subdued 2
- Economic uncertainty easing: U.S. Economic Uncertainty Index moved significantly back toward normal levels from April peak, helping restore capital markets activity 2
CAP RATES SHOW EARLY STABILIZATION
- Q3 tightening: Third-quarter cap rate data showed modest tightening across most sectors, signaling early signs of stabilization 2
- Multifamily leads: Multifamily and office cap rates each declined 10 basis points, while industrial held steady and retail edged up same margin; multifamily cap rates at lowest in two years 2
- Pricing momentum: Industrial led with 0.8% monthly growth in August, followed by office at +0.6% and retail at +0.4%; apartment prices unchanged but year-to-date gains suggest modest recovery 2
INSURANCE CRISIS IMPACTS DEALS
- Premium surge: Multifamily insurance premiums increasing at nearly 12% annually, significantly outpacing inflation and overall expense growth 5
- Deal disruption: Mid-sized and smaller owners facing upfront insurance-related expenses sometimes exceeding $1 million per deal 5
- Lender tightening: Fannie Mae and Freddie Mac tightening insurance rules as insurers reduce coverage for high-risk exposures, creating mismatch between lender requirements and available coverage 5
SIGNIFICANT REIT TRANSACTION ACTIVITY
- Plymouth Industrial REIT $2.1 billion acquisition by Makarora Management and Ares Management at 50% premium signals investor interest in logistics assets 20
- Go-shop period included allowing Plymouth to solicit alternative proposals despite substantial premium 20
- REIT M&A resurgence potential with investors showing particular interest in resilient logistics-focused assets 20
COMMERCIAL SERVICING MARKETS
Commercial mortgage delinquencies showed improvement in Q3 2025 after Q2 increases, though distress levels remain elevated particularly in office and multifamily properties, while major players like Brookfield face mounting office sector challenges.
DELINQUENCY TRENDS IMPROVE
- Q3 decline: MBA reports commercial property mortgage delinquencies decreased in Q3 2025 compared to prior quarter, providing relief after significant Q2 increases 1
- Property type variations: Delinquencies increased for multifamily and health properties while decreasing for office, retail, industrial, and lodging properties 1
- Capital source breakdown: CMBS loan delinquencies remain elevated at 5.66% (up from 5.14% prior quarter), while other sources show lower rates: life company loans 1.45%, GSE loans 0.64%, FHA multifamily/healthcare 0.79% 1
DISTRESS CONCENTRATED IN OFFICE AND MULTIFAMILY
- Total distress volume: U.S. commercial property distress reached $122 billion, up $25 billion year-over-year, with office distress nearing Global Financial Crisis levels 2
- Apartment distress peaks: Multifamily distress at highest level in over a decade, while retail, industrial and hotel assets remain well below crisis levels 2
- Geographic concentration: Manhattan, San Francisco and Washington D.C. lead in distress volume, while Southeast remains relatively healthy averaging just 2% of total CRE volume in distress 2
BROOKFIELD OFFICE DISTRESS ESCALATES
- Foreclosure wave: Six suburban Maryland office buildings set for auction as part of 12-asset portfolio backed by $223 million loan that matured August 2023 and remains unpaid 8
- Debt maturity pressure: Brookfield managing over $8 billion in office debt maturities through 2026, with $2.8 billion due next year alone 8
- Major losses: Houston Center handed back to lenders in 2024, 175 W. Jackson Blvd in Chicago currently in foreclosure and reportedly near sale 8 9
- Strategic pivot: Firm preparing to sell around $10 billion of office assets by end of decade as part of broader $45 billion real estate sell-off strategy, pivoting from direct ownership to fund management 8
INDUSTRY NEWS
The mortgage and real estate finance sector saw significant corporate governance changes, strong FHLB performance, major REIT transactions, and continued technological innovation. Regional market recovery stories highlight urban adaptation to post-pandemic realities.
TECHNOLOGY AND INNOVATION DEVELOPMENTS
- FICO launches “What If” tool helping borrowers understand how financial decisions impact credit scores and mortgage qualification 23
- FHFA encourages GSE innovation in credit assessment tools and technologies to expand homeownership access while maintaining risk standards 23
- Industry evolution toward sophistication with more borrower-friendly processes and advanced technological solutions 23
MULTIFAMILY MARKET DYNAMICS
- National vacancy rates stabilize at 6.5% while revealing stark Sun Belt vs Snow Belt differences 24
- Sun Belt oversupply challenges with cooling demand following pandemic boom while Snow Belt benefits from affordability and job stability 24
- Construction pipeline slowdown in overheated markets while demand shifts toward more affordable regions 24
- 2026 balance expectations with regional realignment setting stage for more balanced supply-demand dynamics 24
MAJOR REIT M&A ACTIVITY
- Plymouth Industrial deal: $2.1 billion all-cash go-private transaction with Makarora Management and Ares Management at $22 per share, representing 50% premium over pre-offer stock price 3
- Portfolio details: Plymouth’s industrial portfolio spans approximately 32.1 million square feet across Midwest and East Coast, highlighting investor appetite for stable logistics and distribution assets 3
- Go-shop period: 30-day period ending November 23 allows REIT to seek potentially higher offers, with deal expected to close early 2026 pending approvals 3
WELLTOWER MASSIVE EXPANSION
- $23 billion program: Healthcare REIT unveils transactions totaling $23 billion to amplify focus on seniors housing, including $14 billion of acquisitions primarily in US and UK 4
- UK partnership: Largest component is £5.2 billion acquisition of Barchester-operated portfolio in UK, forming exclusive long-term partnership with operator 4
- Portfolio rebalancing: Following completion, seniors housing expected to represent mid-80% range of in-place NOI, with $7.2 billion outpatient medical portfolio divestiture including $2 billion first tranche completed October 2025 4
DOUGLAS ELLIMAN STRATEGIC EXIT
- Property management sale: Luxury brokerage sells property management business to PMG Holdings (Associa subsidiary) for $85 million, using proceeds to pay off $50 million convertible debt 10
- Business scope: Sold unit generated $20 million of $525 million total H1 2025 revenue, managing nearly 400 NYC buildings 10
- Licensing agreement: Five-year licensing and noncompete deal allows PMG to use Douglas Elliman brand while brokerage agreed not to pursue new property management deals in New York, Texas, and other Associa markets 10
OFFICE CONVERSION TRENDS ACCELERATE
- Urban transformation: Growing trend in office-to-residential conversions could reshape urban landscape and ease oversupply as more cities offer zoning changes and tax incentives 2
- Vacancy impact: SitusAMC research shows conversion trend could positively impact office vacancy, with Cleveland and New York potentially seeing office vacancy improve by 265 and 100 basis points respectively by