Daily Dose of Real Estate

Daily Dose of Real Estate for December 1

The lesser of two evils for Fed officials appears to be a softening labor market rather than elevated inflation. Growing concerns about employment have pushed the odds of a rate cut this month to 85%. FHFA just tore the roof off multifamily lending caps for the GSEs, raising limits by approximately 20%.

Consumers, meanwhile, are smoothing their weary confidence and sentiment numbers with a little retail therapy: Americans are now spending 17% more at restaurants than at grocery stores on a three-month average basis—roughly $15 billion more each month—despite the sour economic mood.

Case-Shiller Index data shows property values still positive for the year, but not by much. All 20 metros tracked posted month-over-month declines. In commercial real estate, U.S. property prices climbed 4.2% year-over-year in October, the strongest annual rate since 2022, with month-over-month gains of 0.8%. The office sector unexpectedly led the pack, posting 6.5% annual growth and 0.8% monthly gains, fueled by improved financing conditions and budding recovery optimism.

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.

Table of Contents

KEY TAKEAWAYS

Federal Reserve signals 85% probability of December rate cut as unemployment concerns mount, potentially driving mortgage rates to annual lows by year-end 1
FHFA announces massive $30 billion increase in GSE multifamily loan caps for 2026, setting combined limits at $176 billion to support affordable housing initiatives 2
Mortgage delinquency rates hit multi-year lows at 3.34% in October while prepayments surge to 3.5-year highs as borrowers capitalize on rate relief 3
Consumer confidence plummets to lowest level since April with the Conference Board index falling 6.8 points to 88.7, signaling potential recession concerns 4
Home price growth continues deceleration with national appreciation slowing to just 1.3% year-over-year in September, marking the weakest performance since mid-2023 5
Americans splurge on dining despite sour mood with restaurant sales hitting record $101 billion in September, outpacing grocery spending by 17% as consumers prioritize experiences 6
CRE Prices Surge 4.2% – Highest YoY growth in three years as office sector leads recovery with 6.5% gains 1
Multifamily Bidding Intensifies – Housing shortages drive fierce competition as JLL reports second-highest monthly bidding gains 2
Bank Lending Surges 85% – CRE loan issuance rebounds to pre-pandemic levels with $2T refinancing wave ahead 3
Data Centers Hit $3.68B – CMBS issuance reaches record levels as cap rates stabilize near 6.5% 4
REITs Show Mixed Q4 Outlook – Half of major multifamily REITs lower guidance amid supply headwinds 5

RESIDENTIAL REAL ESTATE MARKETS

The residential real estate market showed mixed signals as 2025 draws to a close, with home price growth continuing its dramatic deceleration while buyer activity demonstrates surprising resilience. Regional variations are stark, with more than half of major metropolitan areas experiencing outright price declines even as sales activity shows signs of improvement.

HOME PRICE TRENDS

National home price growth slows to 1.3% annually in September according to S&P CoreLogic Case-Shiller Index, down from 1.4% in August and marking the weakest performance since mid-2023 5
Home prices trail inflation by 1.7 percentage points with September CPI running ahead of housing appreciation, marking the widest gap since the two measures diverged in June 5
All 20 tracked metros posted month-over-month declines before seasonal adjustment, with Tampa (-1.0%), San Diego (-0.9%), and Seattle (-0.9%) leading the downturn 5
FHFA House Price Index shows 2.2% year-over-year growth in Q3 2025 with quarterly growth of just 0.2%, indicating continued moderation from pandemic-era highs 7
Illinois leads state appreciation at 6.9% followed by New York at 6.8%, while Florida experienced the most significant decline at -2.3% year-over-year 7

REGIONAL PERFORMANCE VARIATIONS

Chicago leads metro areas with 5.5% annual gain followed by New York at 5.2% and Boston at 4.1%, showing sustained momentum in Northeastern and Midwestern markets 5
Tampa posts 4.1% annual decline marking the sharpest drop among tracked metros and its 11th consecutive month of negative annual returns 5
Sun Belt markets show particular weakness with Phoenix (-2.0%), Dallas (-1.3%), and Miami (-1.3%) remaining in negative territory, highlighting challenges in markets that experienced dramatic pandemic-era price surges 5
Only seven of 20 metros posted positive appreciation over the trailing six-month period: Chicago, Cleveland, Minneapolis, Boston, New York, Charlotte, and Atlanta 5

SALES ACTIVITY AND INVENTORY

Pending home sales increased 1.9% month-over-month in October, with the Midwest leading regional performance with a 5.3% monthly gain 8
New listings remained flat with 0.3% year-over-year increase for the week ending November 22, while homes are staying on market two days longer than a year ago 9
Northeast and Midwest showing modest inventory gains while South and West experienced inventory slowdowns, reflecting varying economic conditions and affordability levels 9
Marketing times extending across most markets as conditions normalize from pandemic-era frenzied buying environment, with more price reductions compared to 2021-2022 9

MORTGAGE MARKETS

The mortgage market experienced significant volatility in late November, with rates declining just as Federal Reserve policy expectations shifted dramatically toward another rate cut. Refinancing activity surged to multi-year highs while credit quality remained robust, creating both opportunities and uncertainties for borrowers and lenders.

MORTGAGE RATES AND APPLICATION ACTIVITY

30-year fixed-rate mortgage averages 6.23% as of November 26, down from 6.26% the previous week and significantly below 6.81% from a year earlier 10
15-year fixed-rate mortgage averages 5.51%, down from 5.54% prior week and well below 6.10% rate from November 2024 10
Mortgage applications increased 0.2% for week ending November 21, with seasonally adjusted purchase index rising 8% week-over-week 11
Government-backed loans posted strongest week since 2023 with 9% increase, including FHA, VA, and USDA programs showing robust demand 11

REFINANCING AND PREPAYMENT TRENDS

Single month mortality or “SMM” – which tracks prepayments – rate surged 27 basis points in October to 1.01%, marking the highest prepayment level in 3.5 years as borrowers capitalize on rate improvements 3
Refinancing wave driven by homeowners who purchased at elevated rates in recent years seizing opportunities to reduce monthly payments 3
CME FedWatch shows 85% probability of quarter-point rate cut at December 10 Federal Reserve meeting, up sharply from split odds just a week earlier 1

CREDIT QUALITY AND DELINQUENCIES

National delinquency rate improved 7 basis points to 3.34% in October, representing 11 basis point improvement from same period last year 3
Delinquency rate sits 53 basis points below pre-pandemic October 2019 levels, with both early-stage and late-stage delinquencies declining during the month 3
Foreclosure starts slowed 9.8% month-over-month in October, though foreclosure inventory remains up 37,000 units (+19%) year-over-year 3
FHA foreclosures up 50% year-over-year with VA foreclosures resuming after last year’s moratorium, driving overall foreclosure inventory increases 3

REGULATORY DEVELOPMENTS IN REAL ESTATE

Federal housing agencies made landmark announcements that will reshape the multifamily lending landscape for 2026, while monetary policy signals suggested continued support for housing market recovery. The most significant development was FHFA’s massive increase in GSE lending capacity, representing a 20% boost from current levels.

FHFA MULTIFAMILY LENDING EXPANSION

Fannie Mae and Freddie Mac each receive $88 billion in multifamily loan purchase caps for 2026, representing a $30 billion increase from combined $146 billion limit in 2025 2
New $176 billion combined total reflects growing expectations for stronger lending activity and lower interest rates in the coming year 2
At least 50% of GSE multifamily business must be mission-driven affordable housing, maintaining same requirement from 2025 2
Workforce housing loans excluded from 2026 limits, providing additional capacity for this critical housing segment beyond the $176 billion cap 2

BANKING REGULATORY CAPITAL STANDARDS

Federal banking agencies issued final rule modifying certain regulatory capital standards to reduce disincentives for banking organizations to engage in lower-risk activities like U.S. Treasury market intermediation 12
Enhanced supplementary leverage ratio standard capped at 1% for depository institution subsidiaries, making overall requirement no more than 4% to ensure leverage standard operates as backstop during stress 12
Rule reduces tier 1 capital requirements for affected bank holding companies by less than 2% in aggregate, with final rule taking effect April 1, 2026 12
Banking organizations may elect early adoption beginning January 1, 2026, providing flexibility for implementation timing 12

MARKET STABILITY PROVISIONS

FHFA will monitor multifamily mortgage market and increase caps if necessary, but crucially will not reduce caps even if actual market proves smaller than projected 2
Asymmetric approach provides lenders confidence when planning deals and prevents market disruption from regulatory uncertainty 2
Industry response overwhelmingly positive with MBA leadership praising higher limits as recognition of growing market demand and improved conditions 13

FEDERAL RESERVE AND GSE OPERATIONS

Federal Reserve released discount rate meeting minutes from October 6, 20, and 29, providing insight into Board’s thinking on monetary policy tools 14
Fannie Mae and Freddie Mac released October 2025 monthly summaries, detailing mortgage portfolio activities, securities issuance, and delinquency trends 15 16
Fed Governor Christopher Waller publicly advocates for December rate cut, prioritizing labor market weakness over persistent inflation concerns 17

ECONOMIC NEWS

The economic landscape presented conflicting signals as consumer confidence plummeted to its lowest level since April while holiday spending showed resilience. Labor market concerns dominated sentiment even as Federal Reserve officials increasingly signal support for additional monetary accommodation, creating a complex backdrop for real estate markets.

CONSUMER CONFIDENCE AND SENTIMENT

Conference Board Consumer Confidence Index fell 6.8 points to 88.7 in November, marking the lowest level since April and broad-based decline 4
Present Situation Index dropped 4.3 points to 126.9 while Expectations Index plunged 8.6 points to 63.2, with expectations below 80 for ten consecutive months 4
Labor market differential declined again in November after brief October respite, with mid-2026 expectations for labor conditions remaining decidedly negative 4
12-month inflation expectations increased to median of 4.8% in November, well above Federal Reserve’s 2% target and reflecting persistent price concerns 4

CONSUMER SPENDING PARADOX

Restaurant sales hit record $101 billion in September, jumping 0.74% month-over-month and 6.7% year-over-year, bringing 12-month total to $1.16 trillion 6
Americans spend 17% more at restaurants than grocery stores on three-month average basis, representing $15 billion more monthly despite sour economic mood 6
Restaurant spending outpaces inflation by wide margin with 6.7% growth versus 3.7% CPI for “food away from home,” showing consumers prioritize dining experiences 6
Record $6.4 billion in Thanksgiving Day online spending demonstrated continued consumer engagement, with spending increasing 5.3% compared to a year ago 18

HOLIDAY SPENDING AND CONSUMER BEHAVIOR

Growth driven primarily by steep discounts, suggesting price sensitivity among consumers despite overall spending resilience 18
Confidence improved among consumers under 35 but fell for those 35 and older, with respondents 55 and over remaining most downbeat 4
Consumers earning less than $15,000 were only income group showing improvement while remaining least optimistic overall 4
Restaurant spending represents 14% of total retail sales, behind only motor-vehicle dealers and ecommerce, showing dining as major economic driver 6

GOVERNMENT AND POLICY IMPACTS

Consumer write-in responses showed increased mentions of federal government shutdown as factor affecting economic conditions 4
References to tariffs and trade appeared in consumer responses, suggesting ongoing concern about trade policy impacts on prices 4
Treasury Secretary Scott Bessent promised relief for American wallets in 2026, describing it as potential “blockbuster” year for economic performance 18
Data availability complicated by shutdown has affected Federal Reserve decision-making, with policymakers heading into December meeting without updated labor market information 4

COMMERCIAL REAL ESTATE MARKETS (INCLUDING MULTIFAMILY)

Commercial property prices posted their strongest performance in three years, with office properties leading the recovery and multifamily markets experiencing intense bidding competition driven by housing shortages across major metropolitan areas.

PRICING MOMENTUM ACCELERATES

National Price Growth: U.S. commercial property prices climbed 4.2% year-over-year in October – the highest annual rate since 2022, with month-over-month gains reaching 0.8% 1
Office Sector Leadership: Office properties led all sectors with 6.5% annual growth and 0.8% monthly gains, driven by improved financing conditions and rising recovery optimism 1
CBD vs Suburban Performance: Both central business districts and suburban areas showed similar strength, posting 4.6% and 4.2% annual growth respectively 1

MULTIFAMILY MARKET DYNAMICS

Bidding Competition Peak: Multifamily housing led all commercial sectors in bidding competition during October, showing the second-highest monthly gain over the past year according to JLL’s Global Bid Intensity Index 2
Regional Performance Variance: Northern California emerged as standout market with AI-sector demand, while Seattle struggled with “temporary supply pockets” and Washington D.C. faced government employment volatility 5
Sun Belt Absorption Strength: Camden Property Trust called 2025 “one of the best years for apartment absorption in the last 25 years” with Equity Residential posting record-high Q3 retention rates 5

MAJOR TRANSACTIONS

Houston Activity: Camden Property Trust sold Marquis Enclave (312 units) as Houston’s multifamily transaction volume reached $2.2 billion from 139 assets in first 10 months of 2025 6
Dallas Market Strength: JPI sold 360-unit Dallas asset as DFW market traded approximately 45,800 units for estimated $3.3 billion in transaction volume through October, with units averaging $164,908 (up 2.3% year-over-year) 7
Richmond Investment Surge: Multifamily investment volume reached $620 million through August 2025, nearly double the $334 million from same period in 2024, with 23 deals closing 8

COMMERCIAL FINANCING MARKETS

Commercial real estate lending experienced a dramatic resurgence with bank competition intensifying and CMBS markets showing robust activity, while cap rate spreads indicate attractive REIT valuations compared to private market pricing.

LENDING RENAISSANCE

Bank Competition Surge: Commercial real estate lending jumped 85% year-over-year as banks reentered the market after balance sheet cleanup, with origination activity rising 48% through first three quarters of 2025 3
Market Share Dynamics: Banks remain top source of CRE financing at 38% of all lending, though debt funds and securitized lenders are gaining share in competitive environment 3
Refinancing Wave Ahead: Approximately $2 trillion in CRE debt will mature through 2027, with roughly $573 billion considered at risk of distress according to Newmark data 3

CAPITAL MARKETS ACTIVITY

CMBS Market Strength: Manhattan office market secured $1.25 billion CMBS loan for Brookfield Properties’ 5 Manhattan West with fixed 6% interest rate and five-year maturity 9
Data Center Securitization: Data center CMBS issuance reached $3.68 billion year-to-date with cap rates stabilizing near 6.5%, marking sector’s transition from niche to mainstream CRE investment 4

CAP RATE TRENDS

REIT Pricing Advantages: Public-private cap rate spreads in Q3 2025 showed REITs trading at significant discounts with spreads of 191 basis points for apartments, 121 basis points for office, 94 basis points for industrial, and 79 basis points for retail 10
Industrial Confidence: Industrial spreads signal strong CRE lender confidence heading into 2026, serving as key indicator of capital market sentiment and potential investment momentum 11

COMMERCIAL SERVICING MARKETS

The servicing landscape shows strategic loan extensions delaying anticipated distress while new CMBS issuance continues with strong rating agency activity, indicating market stability despite underlying challenges.

WORKOUT ACTIVITY

Loan Extensions Strategy: Many lenders are opting to extend existing loans, temporarily postponing the wave of distress many had anticipated, helping maintain market stability while borrowers work through challenges 3
Special Servicing Cases: Blossom Gardens Apartments loan (0.8% of BANK 2021-BNK32) transferred to special servicing in October 2023 due to fire damage affecting 36 of 184 units 12
Office Monitoring: 605 Third Avenue office loan being monitored due to anticipated occupancy decline from major tenant departure 12

RATING ACTIONS

New CMBS Issuance: Fitch assigned final ratings to A10 2025-FL6 Issuer, LLC with notes collateralized by 21 loans secured by 27 commercial properties with aggregate principal balance of $293.3 million 13
BRCK Trust 2025-830B: Fitch issued expected ratings for $630 million, five-year, fixed-rate commercial mortgage pass-through certificate, with Class A receiving ‘AAA(EXP)sf’ rating 14

INDUSTRY NEWS

The real estate and mortgage industries witnessed significant technological developments and strategic positioning as companies prepare for changing market conditions in 2026. Artificial intelligence and data analytics took center stage while legal challenges emerged around algorithmic pricing tools.

TECHNOLOGY AND INNOVATION

RealtyAds released comprehensive industry report titled “Filling the Gaps: Transforming Leasing Efficiency in CRE with Digital Marketing and AI,” exploring how AI is reshaping commercial leasing 19
Report emphasizes “digital-first, AI-enabled, and data-driven” strategy as optimal approach for commercial real estate amid shifting vacancy rates and lengthening deal cycles 19
Zillow Group CFO Jeremy Hofmann will participate in fireside chat at UBS Global Technology and AI Conference 2025 in Scottsdale on December 2 20
Freddie Mac announced Quality Control Advisor Plus platform designed to streamline quality control review process, saving lenders time and reducing risk 21

LEGAL AND REGULATORY CHALLENGES

RealPage filed lawsuit against New York over state’s ban on rent pricing tools, seeking court injunction to block enforcement before statute takes effect 22
Legal challenge could become high-profile test of how far states can regulate technology in housing market, with national implications for PropTech firms and landlords 22
MISMO published new standardized servicing dataset developed with VA, aimed at modernizing how federal housing agencies and servicers share data 23

REIT AND INVESTMENT MARKET DEVELOPMENTS

REIT performance diverged sharply by sector in 2025, with US healthcare and global REITs outperforming while residential and data center REITs lagged 24
Senior housing emerged as compelling opportunity backed by demographic tailwinds, limited new supply, and rising demand, with REITs trading at historic discounts 24
Orion Properties rejected board challenge amid takeover tensions, reflecting broader pattern of REITs trading below asset value being targeted for take-private deals 25
Panorama Mortgage unveiled new down payment assistance solution, reflecting industry efforts to help borrowers overcome primary barrier to homeownership 26

MAJOR CORPORATE DEVELOPMENTS

Blackstone’s Mixed Results: Facing $1.8 billion loss from senior housing selloffs while simultaneously nearing $4 billion acquisition of MacLean Power Systems from Centerbridge Partners, beating out competitors including ABB Ltd 15
Brookfield’s AI Infrastructure: Launched $10 billion fund to build out AI infrastructure, targeting growing demand for digital services and expanding AI workloads with backing from Nvidia and Kuwait 16

TECHNOLOGY & INNOVATION

Data Center Mainstream Adoption: Data centers shifted from niche to mainstream commercial real estate with securitized markets seeing strongest momentum, driven by rising demand for digital services and AI workloads 16
Office-to-Data Center Conversions: Trend of converting office buildings to data centers gaining momentum, representing potential new frontier of value creation as digital infrastructure demand soars 17