Daily Dose of Real Estate

Daily Dose of Real Estate for February 2

Yes, the government is shut down again—hopefully not on track to break last year’s record-long shutdown. FHA issued a few Mortgagee Letters (MLs) that deserve attention. ML 2026-03 introduces meaningful changes to the CWCOT program—the same program that cut FHA loss severity rates by roughly half (even the OIG praised it). The timing is notable, given the growing backlog of SDQs at FHA.

Homebuyers are flexing their checkbooks as discounts appear in more than 60% of existing home sales in 2025 (and you don’t want to see how new home sales compare). Kevin Warsh has accepted Trump’s nomination to become the next Federal Reserve Chair following a long and very public deliberation process. Mr. Warsh appears to be a balanced and conservative choice.

Commercial real estate is sending mixed signals. Strong investor appetite has led 95% of buyers to maintain or increase activity, even as recovery timelines stretch to 2027. The CMBS market has staged a dramatic rebound, with $150B in issuance in 2025—a 140% increase from the prior year. Meanwhile, multifamily markets are approaching a critical supply inflection point as new deliveries fall below 100K units for the first time in nearly three years, potentially reversing the current 1.4% annual rent decline despite ongoing economic headwinds.

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

Mortgage rates demonstrated remarkable stability in late January 2026, with Mortgage News Daily reporting 30-year fixed rates averaging 6.17% on January 27, down just 4 basis points from the previous week, while HousingWire’s Mortgage Rates Center showed conforming loans at 6.25% 1
President Trump nominated Kevin Warsh as the next Federal Reserve Chair, introducing new uncertainty for housing markets as experts debate whether his appointment will deliver the lower mortgage rates Trump has repeatedly called for 2
Home prices reached new record highs in 2025, with the national median sale price climbing to $360,000 (up 2.6% from 2024), while cash buyers dominated 39.1% of transactions—the highest share since 2013 3
HUD issued Mortgagee Letter ML 2026-03 updating CWCOT program requirements, mandating that lenders must bid the Commissioner’s Adjusted Fair Market Value (CAFMV) at foreclosure sales to qualify for Claims Without Conveyance of Title benefits, while eliminating the small servicer exception 1
The National Flood Insurance Program (NFIP) faces a critical January 31 deadline for reauthorization, with potential lapses threatening to stall approximately 1,300 daily home sales in flood-prone areas that require federally-backed mortgages 4
Speaker Mike Johnson expressed confidence that the partial government shutdown will end by Tuesday, as the House prepares to vote on a Senate-approved spending package that includes two-week stopgap funding for the Department of Homeland Security 5
Real estate agent confidence surged to an 11-month high in December 2025, with Real Brokerage’s Agent Optimism Index reaching 70.8 as agents report the market moving toward a “healthier balance” despite ongoing affordability challenges 6
Investor confidence surges: 95% of CRE investors plan to maintain or increase buying activity in 2026, with 55% boosting capital allocations as markets stabilize 1
Multifamily supply finally cooling: New deliveries drop below 100K units for first time in nearly three years, setting stage for rent growth despite economic headwinds 2
CMBS market rebounds strongly: 2025 issuance surpassed $150B—a 140% jump from 2024—though delinquency rates rose to 7.3% with $900B in loan maturities approaching 3
CRE recovery timeline extends: Full sector recovery now pushed to 2027 as transaction volumes remain at just two-thirds to three-fourths of normal levels 4
Federal Reserve leadership change: Trump nominates Kevin Warsh as Fed Chair, potentially bringing significant monetary policy shifts that could impact real estate financing 5
Industrial REIT M&A accelerates: Six major REIT deals totaling $16.3B announced in late 2025, led by $2.1B Plymouth Industrial acquisition 6

RESIDENTIAL REAL ESTATE MARKETS

The residential real estate market closed 2025 with record-breaking price levels that continued to challenge affordability for traditional borrowers while favoring cash-rich investors and buyers. Regional variations showed surprising strength in Midwest markets while some Florida and California areas experienced price compression. Agent confidence reached an 11-month high as professionals expressed optimism about market balance heading into 2026.

RECORD PRICES SQUEEZE BORROWERS AS CASH DOMINATES

National median sale price reached $360,000 in 2025, representing a 2.6% increase from 2024 and a staggering 39% jump above 2020 levels, with approximately 3.9 million homes changing hands during the year 3
Cash purchases dominated at 39.1% of all 2025 transactions—the highest share recorded since 2013, with luxury markets leading the trend: Naples, Florida (61.9%), Montgomery, Alabama (59.9%), and Hilo, Hawaii (58.8%) 3
Midwest markets posted surprising gains, with Birmingham, Alabama leading at 12.9% price increases, followed by Syracuse, New York (11.6%) and Toledo, Ohio (10.4%), while major metros like Detroit (8.5%), Tulsa (8.2%), and Kansas City (8.1%) also showed strong performance 3
Florida and California markets experienced compression, with North Port, Florida seeing median prices fall 9%, Deltona, Florida dropping 5.4%, and Stockton, California declining 4.7%, reflecting broader economic shifts and migration patterns 3

INSTITUTIONAL INVESTMENT MAINTAINS STRONG FOOTHOLD

Institutional investors purchased 6.6% of all U.S. homes for the second consecutive year, with activity concentrated in the South: Tennessee and Texas leading at 9.2%, followed by Missouri (9.1%) and Indiana (9%) 3
Memphis topped metropolitan areas with institutional buyers accounting for 14.8% of sales, followed by Huntsville, Alabama (11.9%) and Fayetteville, North Carolina (11.4%), demonstrating concentrated investment activity in specific markets 3
Average ownership tenure reached record 8.55 years for homes sold in Q4 2025, reflecting the “lock-in effect” from low mortgage rates obtained in previous years, with some Massachusetts and Connecticut markets exceeding 13 years 3

AGENT CONFIDENCE SIGNALS MARKET OPTIMISM

Real Brokerage’s Agent Optimism Index reached 70.8 in December 2025—the highest level in 11 months and approaching the record high of 76.4 set at the end of 2024, based on responses from 567 North American agents 6
Agents report market moving toward “healthier balance” despite ongoing affordability challenges, with Real Chairman and CEO Tamir Poleg noting that “the current enthusiasm feels different” from typical seasonal upticks 6
Affordability pressure showing signs of easing, which industry leaders believe is “exactly what needs to happen for a broader recovery to take shape in 2026,” according to survey feedback from real estate professionals 6

MORTGAGE MARKETS

Mortgage interest rates demonstrated remarkable stability throughout late January 2026, providing borrowers with consistent pricing as the Federal Reserve maintained its pause on rate cuts. The mortgage securitization market continued robust activity with major transactions closing, while industry leaders reported strong application volumes heading into the spring homebuying season.

MORTGAGE RATES MAINTAIN STEADY COURSE THROUGH LATE JANUARY

30-year fixed rates averaged 6.17% on January 27 according to Mortgage News Daily, representing a modest 4 basis point decline from the previous week, providing borrowers with sub-6.25% financing options 1
HousingWire’s Mortgage Rates Center showed 30-year conforming loans at 6.25%, adding 5 basis points during the week, while FHA loans maintained competitive pricing at 6.03% (down 1 basis point) and jumbo loans averaged 6.10% (down 5 basis points) 1
Rate stability occurred despite market attention on President Trump’s World Economic Forum speech outlining housing proposals, including restrictions on institutional investor homebuying and a $200 billion mortgage-backed securities purchase by Fannie Mae and Freddie Mac 1
Trump put brakes on 401(k) withdrawal proposal for down payments while maintaining focus on improving affordability through additional housing supply and lower mortgage rates, providing policy clarity for market participants 1

FEDERAL RESERVE PAUSE PROVIDES MARKET STABILITY

Fed maintained federal funds rate in the 3.5% to 3.75% range during January meeting, with interest rate traders nearly unanimous in expecting the pause according to CME Group’s FedWatch tool 1
MBA President Bob Broeksmit noted “strong start in 2026” for mortgage markets, with rates declining to levels not seen since September 2024 boosting both refinance and purchase application volumes on weekly and annual bases 1
First American’s Sam Williamson emphasized that while December’s Fed vote was relatively close, the central bank is unlikely to frame January’s decision as the end of the easing cycle, with officials maintaining flexibility for future moves 1

SECURITIZATION ACTIVITY CONTINUES ROBUST PACE

Chase Home Lending Mortgage Trust 2026-1 received final Fitch ratings, supported by 626 loans with a scheduled balance of $744.02 million as of the cutoff date, closing on January 30, 2026 7
J.P. Morgan Mortgage Trust 2026-1 completed rating process with “extremely strong” collateral quality, featuring 100% fixed-rate loans with all mortgages qualifying as safe harbor qualified mortgage (SHQM) average prime offer rate (APOR) loans 8
Verus Securitization Trust 2026-R1 finalized ratings with notes supported by 1,173 loans totaling $567.6 million as of January 1, 2026, featuring modified sequential-payment structure with 90-day advance protection for first-lien loans 9

REGULATORY DEVELOPMENTS IN REAL ESTATE AND MORTGAGE

Significant regulatory developments dominated the housing finance landscape in late January, with President Trump’s nomination of Kevin Warsh as Federal Reserve Chair creating uncertainty about future monetary policy direction. Meanwhile, two new Mortgagee Letters addressed technology programs and loan transfer requirements, while the National Flood Insurance Program faced critical reauthorization deadlines that could disrupt housing markets nationwide.

TRUMP NOMINATES KEVIN WARSH AS FEDERAL RESERVE CHAIR

Kevin Warsh nominated to succeed Jerome Powell as Fed Chair, introducing uncertainty into mortgage and housing markets as experts debate potential impact on interest rates and monetary policy direction 2
Warsh previously served as Fed governor 2006-2011 and currently works as partner at Duquesne Family Office, facing potentially challenging Senate confirmation amid Justice Department probe into current Fed leadership 2
Policy evolution shows softened stance from previous hawkish positions, with Warsh suggesting Fed balance sheet reduction could allow lower rates without reigniting inflation, calling for broader “regime change” in Fed communications 2
Industry groups welcome nomination cautiously, with MBA’s Bob Broeksmit citing Warsh’s “reputation as prudent, thoughtful voice on monetary policy” and CHLA’s Scott Olson expressing optimism for “steady, experienced hand” 2

HUD CLARIFYING GUIDANCE ON LOAN TRANSFERS & TECHNOLOGY PROGRAMS

Mortgagee Letter ML 2026-02 clarifies transfer requirements, specifying that FHA-approved lenders do not need HUD permission for routine loan transfers or mortgage servicing rights (MSR) transfers between approved lenders, addressing industry confusion about approval processes
Trust-based transfers require FHA approval, with ML 2026-02 applying specifically to instances where mortgage interests are transferred to separate legal entities such as trusts, requiring the trust entity to obtain FHA approval for loan holding and servicing activities
Guidance aims to streamline routine transactions while maintaining oversight of complex structural arrangements, providing clarity for lenders engaging in standard portfolio management and MSR trading activities without unnecessary regulatory burden

HUD MODIFIES BIDDING REQUIREMENTS FOR CWCOT

Mortgagee Letter ML 2026-03 updates CWCOT bidding requirements, mandating that lenders must bid the Commissioner’s Adjusted Fair Market Value (CAFMV) at foreclosure sales to qualify for Claims Without Conveyance of Title benefits, while eliminating the small servicer exception that previously allowed reduced bidding requirements 1
New flexibility allows lenders to bid below CAFMV and either convey the property to HUD or retain it without filing insurance claims, while HUD will reimburse 100% of amounts paid over credit bids necessary to acquire properties at CAFMV 1
Post-foreclosure sales efforts expanded with 60-day marketing periods and automatic extensions, allowing lenders additional opportunities to sell properties at CAFMV before conveying to HUD, with independent third-party providers eligible for reimbursement up to 5% of sales price 1

CAPSTONE FORECASTS REGULATORY FRAGMENTATION

Significant regulatory fragmentation predicted for 2026, with Trump administration pursuing CFPB dismantling while Democratic-led states intensify oversight, creating complex patchwork of consumer finance regulations 10
Housing policy emerging as major priority with lawmakers likely reshaping Fannie Mae and Freddie Mac roles while pursuing supply-side reforms to address affordability challenges across federal and state levels 10
Continued scrutiny of algorithmic pricing tools expected in rental and real estate markets, reflecting ongoing concerns about market manipulation and consumer protection in automated pricing systems 10

NFIP REAUTHORIZATION CRISIS LOOMS

Critical January 31 deadline for National Flood Insurance Program reauthorization threatens to disrupt housing markets, with approximately 1,300 daily sales relying on NFIP for federally-backed mortgages in flood-prone areas 4
Past 43-day lapse in late 2025 demonstrated program’s critical importance, stalling flood insurance issuance and renewals that slowed home sales because federally-backed lenders require coverage for closings 4
Broader market impacts beyond transactions include potential effects on real estate valuations and homeowner confidence, as properties without NFIP coverage perceived as higher risk, reducing demand and impacting local tax bases 4

OCC ESCROW PROPOSALS FACE STATE OPPOSITION

OCC faces significant pushback from state regulators regarding proposed rules formalizing banks’ authority to manage real estate escrow accounts, potentially establishing federal preemption of state interest payment requirements 11
Twelve states currently require interest payments on escrow accounts (California, Connecticut, Maine, Maryland, Massachusetts, and others), with proposed federal preemption potentially eliminating these consumer protections 11
Opponents argue changes reduce transparency and create unlevel playing field for competition while making homeownership more expensive for consumers through elimination of state-mandated interest payments 11

ECONOMIC NEWS

Economic data releases revealed building inflationary pressures through the Producer Price Index, while labor market conditions remained mixed heading into the crucial January jobs report. A partial government shutdown that began Saturday morning threatens to disrupt economic data collection and federal operations, with Speaker Johnson expressing confidence about resolution by Tuesday. European economic improvements and dollar weakness added global complexity to domestic housing market considerations.

GOVERNMENT SHUTDOWN THREATENS ECONOMIC DATA & OPERATIONS

Partial government shutdown began Saturday morning after Congress failed to approve spending package by January 30 deadline, with House Speaker Mike Johnson expressing confidence the shutdown will end by Tuesday as House prepares to vote on Senate-approved package 5
Senate Democrats demanded changes to original House package after two U.S. citizens were shot and killed by federal immigration agents in Minnesota, ultimately stripping Department of Homeland Security funding and replacing it with two-week stopgap funding 5
House Rules Committee scheduled to meet Monday as first step in legislative process, with Johnson noting he’s “not counting on Democratic support” to fast-track the measure under suspension of rules requiring 2/3 majority 5
Democratic resistance complicates passage with Rep. Ro Khanna stating he’s “a firm no” on the package and will advocate against it, while Johnson faces razor-thin 218-213 majority set to dwindle further after recent special election results 5

PRODUCER PRICE INDEX REVEALS INFLATIONARY PRESSURES

PPI for final demand increased 0.5% in December 2025 (seasonally adjusted), accelerating from 0.2% advance in November and 0.1% increase in October, suggesting building pipeline pressures that could affect consumer prices and housing costs 12
December data significantly impacted by federal government shutdown in October and November, delaying price-update requests to survey respondents until January 5, 2026, for December 9, 2025 pricing date 12
January 2026 PPI release rescheduled for February 27, 2026, at 8:30 a.m. ET due to continued shutdown delays, coinciding with release of recalculated relative importance figures and seasonal adjustment factors 12

LABOR MARKET OUTLOOK REMAINS MIXED

January jobs report scheduled Friday, February 6 will provide crucial insights into labor market strength as Federal Reserve weighs future monetary policy decisions affecting mortgage rates and housing demand 13
December labor market showed weakness with employers adding only 50,000 jobs—lower than economists anticipated—despite unemployment rate edging lower at year-end, creating mixed signals for Fed policy 13
Fed officials closely monitoring employment after January decision to keep rates unchanged, with some indicating rates should decline to support employment while others remain concerned about persistent inflation 13

EUROPEAN ECONOMIC DEVELOPMENTS IMPACT DOLLAR STRENGTH

Dollar reached weakest level against euro in 4.5 years, making European exports less competitive in U.S. market while potentially affecting global capital flows and investment patterns in U.S. real estate 14
European inflation declined to 1.9% in December following painful 2022-2023 spike, combined with rising wages leaving consumers with more purchasing power and willingness to spend, improving economic conditions 14
Global trade dynamics shifting as European economic improvement could influence international capital flows and investment decisions affecting U.S. housing markets through foreign investment patterns 14

COMMERCIAL REAL ESTATE MARKETS (INCLUDING MULTIFAMILY)

The commercial real estate markets are showing mixed signals as we enter 2026, with strong investor appetite contrasting against extended recovery timelines. Multifamily markets are experiencing a critical supply inflection point while rent growth remains challenged by economic headwinds.

INVESTOR CONFIDENCE REACHES NEW HIGHS

95% of investors plan to buy the same or more CRE assets than in 2025, with 55% increasing capital allocations—up from 48% last year 1
Dallas-Fort Worth remains the top U.S. market for the fifth consecutive year, followed by Atlanta and a surging San Francisco
Stabilizing interest rates, better pricing, and improved fundamentals are driving the bullish investor shift
Commercial real estate recovery is likely delayed until at least 2027 as property sales transactions run at just two-thirds to three-fourths of normal levels 4
Lending activity has rebounded for most sectors, but office sector loan activity has yet to reach prior periods
Market fundamentals continue improving despite slower transaction velocity

MULTIFAMILY SUPPLY INFLECTION POINT

Multifamily supply falls below 100K units for first time in nearly three years after 10 quarters of sky-high deliveries 2
Industry experts expect declining supply will allow rents to increase this year despite economic challenges
Markets are beginning to differentiate between those leading recovery and those pulling back

RENT GROWTH REMAINS CHALLENGED

Annual US rent growth fell to -1.4% in early 2026, reflecting ongoing supply surpluses and weakening rental demand 7
Average list-to-lease time hit 41 days in January—a new high that’s four days slower than last year
Leasing velocity is more than twice as slow as summer 2021 levels

COMMERCIAL PROPERTY PRICES SHOW MODEST GAINS

U.S. commercial property prices closed 2025 with a 0.2% year-over-year increase in December 8
Office sector led gains with prices up 2.8% year-over-year, driven primarily by suburban office properties
Modest price appreciation signals market stabilization after significant declines

COMMERCIAL FINANCING MARKETS

Capital markets are showing signs of stabilization with steady lending activity, though transaction volumes remain below historical norms. The CMBS market has experienced a remarkable rebound while mortgage rates hold relatively steady.

FEDERAL RESERVE MAINTAINS STEADY COURSE

Fed’s decision to keep rates unchanged offers needed predictability but unlikely to prompt significant deal activity increases without additional cuts 9
Multifamily and industrial remain the most rate-sensitive sectors by transaction volume
Data centers and medical offices have proven more resilient to rate fluctuations

CMBS MARKET EXPERIENCES DRAMATIC REBOUND

CMBS issuance in 2025 surpassed $150B—a 140% jump from 2024—fueled by pent-up demand and yield-seeking investors 3
Delinquency rates rose to 7.3% by December 2025, though still below post-GFC highs
$900B in loan maturities approaching in 2026 expected to drive another robust year as CMBS provides vital refinancing liquidity

MAJOR MULTIFAMILY FINANCING TRANSACTIONS

Newmark arranged $690 million loan for West Shore’s 13-property Sun Belt multifamily portfolio—the largest multifamily closing in the U.S. year-to-date 10
Multifamily debt originations increased 37% year-over-year in 2025 according to Newmark Research
Properties span Florida, Kentucky, South Carolina, Tennessee and Texas markets

COMMERCIAL SERVICING MARKETS

The servicing sector is navigating mixed conditions with some lenders returning to profitability while distressed situations continue to emerge, particularly in multifamily and South Florida markets.

FLAGSTAR BANK RETURNS TO PROFITABILITY

Flagstar reported net income of $21 million or $0.05 per diluted share in Q4 2025, returning to profitability after previous losses 11
Increase in non-accrual loans driven by higher multi-family non-accruals, majority related to one previously disclosed borrower relationship
Bankruptcy auction process recently finalized with sale expected to close before end of Q1 2026

RATING AGENCY UPDATES CMBS CRITERIA

Fitch Ratings updated U.S. and Canadian Multiborrower CMBS Rating Criteria with no rating implications for existing transactions 12
Key changes include adjustments to pool level concentration add-ons
Standard cap rates increased for Retail-Mall Tier 2 and Tier 3 to 11% and 12%, and 15% and 16% respectively

SOUTH FLORIDA DISTRESS CONTINUES

Cirrus won downtown Miami site auction redo for $95 million amid ongoing challenges from skyrocketing insurance premiums 13
Some multifamily development site owners who planned to capitalize on rental boom instead put properties on market or lost them in foreclosure
Insurance costs and increased development expenses continue pressuring South Florida property owners

INDUSTRY NEWS

The real estate industry continued its consolidation and technology integration trends in late January, with major brokerage expansions, strategic partnerships, and renewed commercial real estate investment activity. Banking sector earnings highlighted mixed mortgage market conditions while technology platforms expanded their service offerings to meet evolving market demands.

MAJOR REAL ESTATE BROKERAGE EXPANSIONS AND ACQUISITIONS

Real Brokerage added Houston Properties Team in Texas, marking significant milestone with 17-agent group that has closed more than $2 billion in lifetime sales and served over 2,000 clients over 15-year history 15
M&A activity accelerated across major brands including Coldwell Banker, ERA, and Century 21, reflecting industry evolution as companies seek greater scale and operational efficiency in increasingly competitive market environment 15
Consolidation trend continues as brokerages pursue strategic acquisitions to achieve market dominance and operational synergies, particularly in high-growth markets across Texas and other Sun Belt states 15

TECHNOLOGY PARTNERSHIPS DRIVE INNOVATION

Final Offer expanded North Texas presence through strategic partnership with Briggs Freeman Sotheby’s International Realty, extending real-time offer platform tools to one of region’s largest luxury real estate firms 16
OneKey MLS integrated SkySlope Forms providing members with streamlined transaction management capabilities, while NAR-backed .RealEstate platform launched unified marketing and branding platform for industry professionals 16
HomeMatch integrated buyer discovery workflow into Follow Up Boss, demonstrating continued industry focus on technological advancement and operational efficiency through strategic platform integrations 16

COMMERCIAL REAL ESTATE INVESTMENT REVIVAL

CBRE reported renewed investor confidence for 2026, with 95% of investors planning to buy same or more assets than 2025, while 55% are increasing capital allocations (up from 48% last year) 17
Blackstone executives reported dealmaking revival after prolonged market slowdown, with easing financing conditions and gradually recovering asset values driving increased transaction volumes across commercial real estate 18
Renewed confidence stems from stabilizing rates and better pricing with improved market fundamentals, while Blackstone cited data centers and real estate credit exposure as ongoing strengths for 2026 acquisitions 17

BANKING SECTOR EARNINGS HIGHLIGHT MORTGAGE MARKET TRENDS

Flagstar Bank returned to profitability in Q4 2025, reporting net income attributable to common stockholders of $0.05 per diluted share, showing recovery in mortgage banking operations 19
Asset quality showed mixed results with total non-accrual loans representing 4.90% of total loans, driven by higher multi-family non-accruals partially offset by declines in commercial and industrial and commercial real estate categories 19
Newmark arranged $690 million refinancing for Sun Belt multifamily portfolio on behalf of West Shore, demonstrating continued capital market activity and investor interest in Sun Belt markets with available refinancing capital 20

REIT M&A ACTIVITY ACCELERATES

REIT M&A activity rocketed in latter half of 2025 with six major deals totaling $16.3B announced, compared to only $1.7B in first half 6
Industrial investment played prominent role, highlighted by Ares and Makarora’s completion of $2.1B deal for Plymouth Industrial REIT
Transaction momentum expected to continue into 2026 as market conditions improve