Daily Dose of Real Estate

Daily Dose of Real Estate for December 16

The gap is widening between monetary policy intentions—lowering the federal funds rate—and what homebuyers actually pay each month, as mortgage rates continue to move in the opposite direction. Housing markets are performing an impressive balancing act with inventory back to pre-pandemic levels yet sales volumes are scraping lows not seen since 1995. Home prices remain stubbornly firm as homeowners cling to both sizable equity cushions and pandemic-era mortgage rates with little evidence they’ll surrender anytime soon. Foreclosures are quietly drifting back toward normal, regulators are dutifully indexing loan limits for inflation, and mortgage executives continue their round of musical chairs on a ship that appears neither in crisis nor fully under way.

Commercial real estate is ending 2025 with cautious optimism, as industry sentiment reached its strongest reading of the year – retail outperformed, and office finally emerged from contraction. Capital access has improved—marking the first time more investors report easier rather than harder financing—though most multifamily and office investors still expect additional distressed opportunities ahead. Trophy assets, meanwhile, remain in a world of their own, with Washington, D.C.’s largest private lease of the year commanding $100 per square foot, even as the broader market works through elevated vacancies and uneven transaction activity. 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 agencies announce critical regulatory updates: The Federal Reserve, OCC, and CFPB increased the 2026 threshold for higher-priced mortgage loan appraisal exemptions from $33,500 to $34,200, while HUD boosted FHA and HECM loan limits to reflect rising home prices 1 2
Foreclosure activity shows mixed signals: November 2025 foreclosure filings totaled 35,651 properties (down 3% monthly but up 21% annually), with Delaware, South Carolina, and Nevada leading distress rates amid nationwide affordability pressures 3
Treasury yield curve steepens dramatically: The 30-year Treasury yield rose 19 basis points to 4.84% since September despite 75 basis points in Fed cuts, creating a 120 basis point spread with the federal funds rate as bond markets price in inflation and supply concerns 4
Mortgage rates edge lower amid volatility concerns: The average 30-year fixed rate declined to 6.29% on December 15, down 0.03%, as markets position for Tuesday’s critical jobs report that could significantly impact rate direction 5
Market Sentiment Turning Positive: The Q4 2025 Fear & Greed Index hit 58, the strongest reading all year, with retail leading performance and office finally exiting contraction for the first time. 1
Capital Access Historic Shift: For the first time in survey history, more investors report capital is getting easier to access rather than harder, marking a significant turning point in lending conditions across all property sectors. 1
Trophy Assets Command Premium: Boston Properties secured DC’s largest private lease of 2025 at $100 per square foot for 240,000 square feet, demonstrating that high-quality properties still attract top dollar despite broader market challenges. 2
Distress Expected Despite Easier Money: 73% of multifamily and 54% of office investors anticipate more distressed deals over the next six months, revealing a bifurcated market where financing improves but asset-level stress persists. 1
Industrial Real Estate in Demand: Major acquisitions like Cold-Link Logistics’ 78 million cubic feet of cold storage and Anheuser-Busch’s 3.2 million square foot brewery conversion to logistics highlight continued investor appetite for industrial and distribution assets. 3 4

RESIDENTIAL REAL ESTATE MARKETS

The residential real estate market continues to exhibit complex dynamics as 2025 draws to a close, with inventory recovery contrasting sharply against persistent sales weakness and emerging foreclosure pressures. Housing markets face a fundamental shift characterized by substantially increased inventory levels approaching pre-pandemic norms, while sales volumes remain severely depressed and distress indicators show concerning annual increases.

MARKET DYNAMICS SHOW DIVERGENT TRENDS

Inventory surge continues: Active listings increased 12.6% year-over-year in November, marking the 25th consecutive month of inventory gains, though growth has moderated from 30% peak rates in May-June 7
New listings maintain momentum: New listings rose 1.7% year-over-year, with homes for sale exceeding one million for seven consecutive months, maintaining levels close to midsummer peaks 7
Sales remain depressed: Despite inventory improvements, sales volumes continue tracking 2024’s lowest levels since 1995, creating a buyer’s market in many regions 7
Pre-pandemic comparison: Nationwide inventory remains 11.7% below typical 2017-2019 levels, indicating continued normalization toward historical market conditions 7

FORECLOSURE ACTIVITY REFLECTS AFFORDABILITY PRESSURES

November distress levels: Total foreclosure filings reached 35,651 properties with default notices, scheduled auctions, or bank repossessions, representing one in every 3,992 housing units nationally 3
Mixed monthly trends: Filings declined 3% from October 2025 but surged 21% compared to November 2024, indicating continued normalization from historically low pandemic-era levels 3
Geographic concentration: Delaware (1 in 1,924 units), South Carolina (1 in 1,973 units), Nevada (1 in 2,373 units), New Jersey (1 in 2,511 units), and Florida (1 in 2,565 units) lead foreclosure rates 3
Foreclosure pipeline activity: Lenders initiated proceedings on 23,720 properties (down 6% monthly but up 17% annually), while completing 3,884 repossessions (flat monthly but up 26% annually) 3

REGIONAL MARKET VARIATIONS EMERGE

Florida metros lead declines: Florida markets dominate the list of areas experiencing home value declines, reflecting challenges in previously high-growth markets 8
Northeast and Midwest opportunities: Smaller markets in these regions show strong 2026 projections, with Grand Rapids, Michigan (10.6%), Milwaukee, Wisconsin (10.5%), New Haven, Connecticut (10%), and Pittsburgh, Pennsylvania (9.7%) expected to outperform expensive coastal neighbors 8
Affordability drives demand: These markets benefit from balanced job access and housing costs, positioning them to capitalize on anticipated lower mortgage rates in 2026 8
Geographic dispersion: Market opportunities reflect normalization away from pandemic-era concentration in high-cost coastal markets toward more diverse regional performance 8

PRICE PRESSURES AND MARKET STABILITY

Price stability expected: Existing home prices likely to remain mostly unchanged year-over-year nationally by end of 2025, despite increased inventory and reduced sales activity 7
Equity cushion provides floor: Most homeowners maintain substantial equity positions and benefit from low pandemic-era mortgage rates, preventing widespread distressed sales 7
Balanced market transition: Market dynamics shifting toward more balanced environment between buyers and sellers, moving away from extreme seller’s market conditions 7

MORTGAGE MARKETS

Mortgage markets demonstrate complex dynamics as Federal Reserve rate cuts fail to translate into lower long-term borrowing costs, with Treasury yield curve steepening creating challenging conditions for mortgage pricing. Bond market concerns about inflation and government debt supply continue to pressure longer-term rates despite monetary policy accommodation.

TREASURY YIELD CURVE STEEPENS AMID FED CUTS

Dramatic yield curve movement: The 30-year Treasury yield rose 19 basis points to 4.84% since September 16 despite 75 basis points in Fed rate cuts, creating a 120 basis point spread with the federal funds rate 4
Long-term rate resistance: Every yield from 2 years and longer has risen since the Fed’s first rate cut, defying expectations that long-term rates including mortgage rates would decline with policy accommodation 4
Yield curve normalization: The curve has almost uninverted with only a shallow sag remaining in the 3-month through 3-year range, indicating bond market expectations of fewer future rate cuts 4
Inflation and supply concerns: Bond markets face dual pressures from inflation expectations and fears of increased Treasury supply to fund government deficits, overwhelming Fed policy accommodation 4

MORTGAGE RATE ENVIRONMENT SHOWS MODEST IMPROVEMENT

Rates edge lower amid volatility: The average 30-year fixed rate declined to 6.29% on December 15, down 0.03% from previous levels, as markets position for critical economic data releases 5
Jobs report focus: Tuesday’s employment report carries significant weight for rate direction, with potential for substantial market movement based on labor market data 5
Fed policy disconnect: Three consecutive 25 basis point cuts in final four months of 2025 have provided cumulative 75 basis point reduction, though long-term rates moved opposite to policy intentions 5
Market positioning: Lenders and investors carefully positioning for potential volatility around key economic data releases that could influence Federal Reserve policy trajectory 5

MARKET OUTLOOK AND POLICY IMPLICATIONS

Data dependency heightened: Mortgage markets face critical period as investors and lenders await key economic indicators that will shape Federal Reserve policy direction in 2026 10
Employment revisions potential: Chair Powell’s recent comments suggesting possible downward revisions to employment estimates have heightened market attention to upcoming data releases 10
Inflation monitoring: Consumer Price Index data will provide crucial insights into inflation trends and potential impact of tariff policies on price pressures 10

REGULATORY DEVELOPMENTS

Federal agencies coordinate on multiple regulatory adjustments affecting residential real estate and mortgage markets, with threshold increases and loan limit adjustments reflecting current economic conditions and inflation impacts.

FEDERAL AGENCY COORDINATION ON APPRAISAL REQUIREMENTS

Threshold increase announced: Consumer Financial Protection Bureau, Federal Reserve Board, and Office of the Comptroller of the Currency increased 2026 threshold for higher-priced mortgage loans exempt from special appraisal requirements from $33,500 to $34,200 1
Inflation adjustment basis: 2.1% annual percentage increase based on Consumer Price Index for Urban Wage Earners and Clerical Workers as of June 1, 2025, effective January 1, 2026 1
Consumer protection maintained: Dodd-Frank Act’s special appraisal requirements continue requiring written appraisals based on physical property visits for higher-priced mortgage loans above threshold 1
Regulatory calibration: Annual threshold adjustment ensures exemption remains appropriately calibrated to current economic conditions while preserving consumer protections 1

HUD ANNOUNCES COMPREHENSIVE LOAN LIMIT INCREASES

FHA and HECM limits raised: U.S. Department of Housing and Urban Development announced substantial increases to FHA and Home Equity Conversion Mortgage loan limits for 2026, reflecting continued home price appreciation 2
Forward mortgage parameters: New limits establish $541,287 floor and $1,249,125 ceiling for one-unit properties, with proportional increases for multi-unit properties up to $1,041,125 floor and $2,402,625 ceiling for four-unit properties 2
HECM maximum increase: Home Equity Conversion Mortgage maximum claim amount increases from $1,209,750 in 2025 to $1,249,125 for 2026, applying uniformly across all areas including special exception jurisdictions 2
Statutory framework alignment: Adjustments align with national conforming loan limits established by Federal Housing Finance Agency for Fannie Mae and Freddie Mac-backed loans 2

INFLATION EXPECTATIONS AND POLICY FRAMEWORK

New dashboard launched: Philadelphia Federal Reserve introduced interactive dashboard for Price and Inflation Expectations Survey (PIES), providing enhanced access to firm-level expectations data from past decade 11
Q4 expectations decline: Fourth quarter 2025 results showed firms expecting lower U.S. inflation relative to previous quarter, with median expectations at 3%, representing second consecutive decrease and lowest reading in a year 11
Business sentiment insights: Data provides valuable insights into business sentiment regarding future price pressures and economic conditions, informing policy considerations 11

ECONOMIC NEWS

Federal Reserve policy adjustments and upcoming economic data releases create critical decision points for markets, with employment and inflation data carrying particular significance for 2026 policy direction and real estate market conditions.

FEDERAL RESERVE POLICY AND MARKET EXPECTATIONS

Final 2025 rate cut completed: Federal Reserve concluded year with third consecutive 25 basis point rate cut, bringing cumulative reduction to 75 basis points over final four months 5
Labor market concerns: Chair Powell’s comments about potential employment estimate revisions reflect evolving economic conditions and labor market softening concerns 5
Oil supply sensitivity: San Francisco Federal Reserve research highlights increased interest rate sensitivity to oil supply disruptions since 2022, coinciding with Fed’s “liftoff” period from zero rates 12
Market perception shifts: Heightened sensitivity reflects market perceptions of Fed’s evolving approach to inflation management and economic stability 12

EMPLOYMENT AND INFLATION DATA FOCUS

Critical jobs report Tuesday: November employment report carries particular weight following Chair Powell’s suggestion that prior employment estimates may require downward revisions 13
CPI data Thursday: Consumer Price Index report for November will provide crucial insights into inflation trends, with FactSet consensus anticipating headline inflation at 3.1% yearly basis 14
Core inflation expectations: Core inflation also expected at 3.1%, with particular attention to tariff policy impacts on price pressures 14
Policy implications: These readings will be closely scrutinized for evidence of persistent inflationary pressures that could influence Federal Reserve policy deliberations 14

CORPORATE EARNINGS AND ECONOMIC INDICATORS

Lennar earnings Tuesday: Homebuilder’s fourth quarter results will provide insights into construction activity, buyer demand, and regional market variations complementing broader housing data 13
Retail and inventory data: October retail sales and September business inventories will offer insights into consumer demand patterns and supply chain dynamics 13
Regional economic indicators: Empire State Manufacturing Survey for December and S&P flash Purchasing Managers Index data will provide early indicators of economic activity trends 13

COMMERCIAL REAL ESTATE MARKETS (INCLUDING MULTIFAMILY)

The commercial real estate markets showed mixed signals in December 2025, with modest expansion indicated by key indices while specific sectors like office began recovering from prolonged contraction. Major lease transactions and development deals highlighted continued activity in trophy assets despite broader market challenges.

Market Confidence Rising: Industry sentiment index hit 58 in Q4 2025, the strongest reading all year. Retail leads performance while office markets finally stopped declining. However, investors are less optimistic about 2026 due to interest rate and regulatory concerns. 1
Massive DC Office Deal: Law firm Sidley Austin signed a 240,000 square foot lease in Washington DC for $100 per square foot – the city’s largest private lease of 2025. Shows premium properties still command high rents despite overall DC vacancy at 22.4%. 2
Retail Stays Strong: Despite store closures, retail demand remains solid into 2026. Retailers using more flexible formats and competing for good locations. Sales expected to grow 2.9% next year. 6\
Housing Market Stalled: Home inventory nearly back to pre-pandemic levels but sales remain at 1995 lows. Prices under pressure despite most homeowners having low mortgage rates and substantial equity. 7

COMMERCIAL FINANCING MARKETS

Commercial financing conditions showed improvement in Q4 2025, with the Federal Reserve’s rate cuts beginning to filter through to lending markets. Capital access improved across all sectors for the first time in recent survey history, though expectations for further monetary easing appear more limited.

Fed Cuts Helping: Three consecutive 25 basis point Fed rate cuts are starting to improve commercial real estate lending terms. Further cuts appear less likely, but current policy clarity helps with loan pricing. 5
Money Getting Easier: For the first time ever in surveys, more investors say capital is getting easier to access rather than harder. Major shift in lending conditions across all property types. 1
Bond Ratings Stable: Fitch maintained stable ratings on major commercial mortgage bonds backed by 33 million square feet of industrial properties across multiple states. Shows confidence in warehouse and distribution sectors. 8

COMMERCIAL SERVICING MARKETS

The commercial servicing sector faces a bifurcated outlook, with improving capital access contrasting against expectations of rising distressed deals. Industrial CMBS performance metrics show mixed results, while transaction volume monitoring continues as the easing cycle progresses.

Trouble Ahead Despite Easier Money: 73% of apartment investors and 54% of office investors expect more distressed property deals in next six months. Shows market split between easier financing and struggling properties. 1
Industrial Properties Mixed: Major warehouse portfolio occupancy dropped from 96% to 90% but still covering debt payments at 1.14x coverage ratio. Shows some softening but properties remain viable. 8
Sales Volume Key Metric: Industry watching property sales closely as Fed cuts continue. Early 2026 transaction data will show if lower rates are boosting deal activity. 5

INDUSTRY NEWS

The mortgage and real estate finance sector experiences significant leadership changes and strategic positioning as companies prepare for growth opportunities and market evolution in specialized lending segments.

EXECUTIVE LEADERSHIP TRANSITIONS SHAPE INDUSTRY DIRECTION

Kind Lending CFO appointment: Brett Stubbs appointed chief financial officer, succeeding retiring co-founder Gary Fabian, bringing 25+ years of financial and operational leadership experience 6
Succession planning emphasis: Stubbs and Fabian collaborating through December 31, 2025, ensuring operational continuity during leadership transition at Irvine, California-based wholesale lender 6
Strong momentum period: Leadership change occurs during period of expanded national presence, year-over-year production gains, and multiple industry recognitions including repeated Top Workplace honors 6
Experience background: Stubbs’ previous roles include CFO at Kinecta Federal Credit Union and audit leadership positions, providing relevant financial services expertise 6

SPECIALIZED MARKET EXPANSION AND STRATEGIC APPOINTMENTS

ARDRI wholesale expansion: Technology-forward mortgage lender appointed Wesley Olison as vice president of wholesale production, supporting growth strategy in Non-QM and business purpose financing 15
Non-QM market focus: Olison’s 20+ years of mortgage sales, underwriting, and team leadership experience strengthens broker relationships in expanding alternative lending segment 15
Technology-forward positioning: ARDRI’s emphasis on technology solutions and business purpose financing positions company to capitalize on growing demand for flexible lending products 15
Alternative lending growth: Non-QM market continues attracting industry attention as lenders seek to serve borrowers outside traditional qualifying criteria 15

MARKET ANALYSIS AND REGIONAL OPPORTUNITIES

Land price disparities revealed: Comprehensive study by Cinch Home Services highlights dramatic regional variations in land costs, creating both challenges and opportunities for development 16
Development economics impact: Regional land cost variations provide important context for understanding development economics and strategic investment decisions 16
Housing supply implications: Understanding land cost variations becomes increasingly important for developers, investors, and policymakers addressing housing supply challenges 16
Strategic positioning importance: Analysis underscores need for regional market knowledge in real estate investment and development decisions amid affordability concerns 16

Developments in CRE

Cold Storage Deal: Investment firms bought Cold-Link Logistics with 78 million cubic feet of refrigerated warehouse space across nine facilities. Shows growing investor interest in food storage infrastructure. 3
Beer Giant Closes Breweries: Anheuser-Busch shutting three breweries affecting 475 workers. The 3.2 million square foot Newark facility will be sold and converted to logistics hub, reflecting shift from manufacturing to distribution. 4
Government Raises Loan Limits: HUD increased FHA and reverse mortgage loan limits for 2026 to help borrowers in expensive markets access government-backed financing. 9
Lender Names New CFO: Kind Lending appointed Brett Stubbs as Chief Financial Officer as company continues expanding operations. 10
Tech Stock Crashes: Fermi Inc. shares fell 33% after losing a tenant deal worth $150 million for its Texas university campus project. Shows risks in development-stage real estate ventures. 11