Daily Dose of Real Estate

Daily Dose of Real Estate for February 3

The talk of this being just a temporary government shutdown is quickly being replaced by a growing sense of “not so fast.” Home seller discounts hit 13-year highs in February 2026, averaging 7.9% off list prices and handing homebuyers near-unprecedented negotiating leverage. Mortgage rates crept up to 6.17% after stronger-than-expected manufacturing data, while state regulators escalated attacks on Trump administration proposals to preempt interest-on-escrow laws.

The broader economy is flashing early signs of stabilization. Manufacturing expanded for the first time in 12 months. Still, rising mortgage delinquencies and stubborn affordability pressures loom large as the spring buying season approaches.

Commercial real estate remains deeply bifurcated. Office distress worsened, with delinquencies hitting a record 12.34% and Texas leading $805 million in February foreclosure auctions. Yet pockets of strength persist: Manhattan logged $5.6 billion in mega-deal refinancing, led by Wells Fargo’s $3.15 billion Stuyvesant Town transaction. And yes—the data center boom is real. Construction is surging 18.4% year over year on AI infrastructure demand, cementing just how uneven performance has become across CRE asset classes.

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

Homebuyer discounts reach 13-year high – Buyers who secured discounts in 2025 averaged 7.9% off list prices, the largest since 2012, with nearly two-thirds of all buyers paying below asking price 1
Mortgage rates edge higher despite market optimism – 30-year fixed rates increased to 6.17% on February 2, up 0.01% from the previous day, as bond markets weakened following strong manufacturing data 2
State regulators slam OCC escrow proposals – Banking associations representing state regulators sharply criticized Trump administration proposals that would preempt state interest-on-escrow laws, calling them an effort to “pickpocket homeowners” and enrich national banks 3
Manufacturing PMI signals economic expansion – January Manufacturing PMI hit 52.6%, indicating the first expansion in 12 months after 26 straight months of contraction, suggesting broader economic growth 4
Housing supply imbalance persists – Months’ supply fell to 3.81 in December 2025 from 4.12 in November, reaching its lowest level since March 2025, while new home inventory surplus continues at 7.9 months 5
Mortgage delinquencies rise amid affordability concerns – Late-stage mortgage delinquencies (90+ days past due) jumped 18.6% year-over-year in December, though still remain low at 0.20% of all mortgages 6
Office delinquencies hit record high: CMBS office delinquency rate surged 103 basis points to an all-time high of 12.34% in January 2026, driving overall CMBS delinquencies up 17 basis points to 7.47% 1
Texas foreclosure crisis deepens: Commercial real estate loans totaling $805 million are headed to foreclosure auction in February, marking the third consecutive month above $800 million 2
Manhattan mega-deals dominate: Lenders deployed nearly $5.6 billion across Manhattan’s top five December deals, led by Wells Fargo’s $3.15 billion Stuyvesant Town refinancing 3
Data center construction surges: AI-driven demand pushed data center construction spending up 18.4% year-over-year in October, the highest growth among major non-residential asset classes 4
Brookfield’s $1.2B REIT acquisition: Global asset manager agreed to acquire Peakstone Realty Trust for $21 per share, a 34% premium, betting on industrial outdoor storage growth 5
Real estate M&A shifts local: 2026 brokerage consolidation trends toward selective local deals as national firms focus on integration over aggressive expansion 6

RESIDENTIAL REAL ESTATE MARKETS

The residential real estate market has undergone a dramatic transformation, with buyers gaining unprecedented negotiating power not seen since the Great Recession. Market dynamics have shifted decisively in favor of purchasers, creating the strongest buyer’s market in recent history as inventory levels surge and seller competition intensifies.

BUYER POWER REACHES NEW HEIGHTS

Record discounts secured: Buyers who negotiated below list price in 2025 averaged 7.9% off original asking prices—the largest discount since 2012, translating to approximately $31,600 off the median original list price of $399,900 1
Majority pay below asking: Nearly two-thirds (62.2%) of all homebuyers in 2025 paid less than the asking price, representing the highest share since 2019 and marking a dramatic reversal from pandemic-era bidding wars 1
Premium buyers shrink: Only 22.8% of buyers paid above list price in 2025—the lowest percentage since 2019, demonstrating the complete shift from seller-dominated markets 1
Supply-demand imbalance: Market researchers identified a record 47% more home sellers than buyers, creating intense competition among sellers and forcing significant price concessions 1

HOUSING SUPPLY DYNAMICS CREATE MARKET DIVERGENCE

Existing home shortage persists: Months’ supply of existing homes fell to 3.81 in December 2025 from 4.12 in November, reaching its lowest level since March 2025, indicating continued shortage conditions 5
New home surplus continues: New home inventory remains elevated at 7.9 months’ supply, well above the balanced market threshold of 6 months, creating a tale of two markets 5
Builder sentiment weakens: The National Association of Home Builders’ Housing Market Index fell to 37, with the traffic of prospective buyers component dropping to just 23, indicating pessimism among surveyed builders 5
Price divergence emerges: Since Q4 2022, median new home prices have been largely declining while existing home prices continue rising, reflecting different market dynamics between new and resale properties 5

REGIONAL VARIATIONS PAINT COMPLEX PICTURE

Florida leads discounts: West Palm Beach topped the nation with buyers securing 10.9% average discounts, followed by Detroit (10.3%), Fort Lauderdale (10.3%), Pittsburgh (9.9%), and Miami (9.8%) 1
Bay Area maintains premiums: Only four metropolitan areas saw buyers pay above asking price, led by San Francisco (3.8% premium), Newark, NJ (3.1%), San Jose (2.3%), and Oakland (1.3%) 1
Florida market pressures: The state’s dominance in discount categories reflects abundant new construction, intensifying natural disasters, soaring insurance premiums, and rising condominium HOA fees forcing seller concessions 1
Tech sector resilience: Bay Area premiums stem from ongoing AI sector boom and return-to-office mandates, though even these premiums have shrunk compared to historical norms 1

PROPERTY TYPE DYNAMICS SHIFT

Condos face biggest discounts: Condominium buyers secured average discounts of 8.1% when purchasing below list price—exceeding single-family homes (7.9%) and townhouses (6.5%) for the first time since 2014 1
Condo buyer prevalence: 68.1% of condo buyers paid under asking price in 2025, significantly higher than single-family home buyers (61.7%) and townhouse buyers (60.4%) 1
Ownership cost pressures: Condo market weakness reflects mounting pressures from soaring HOA fees, escalating insurance costs, and substantial special assessments deterring potential buyers 1

MORTGAGE MARKETS

Mortgage markets experienced volatility in early February as strong economic data triggered bond market weakness, while industry participants continue monitoring credit quality trends and government-sponsored enterprise performance. The interplay between economic strength and interest rate movements remains a key focus for market participants.

INTEREST RATES RESPOND TO ECONOMIC DATA

Rates edge higher: 30-year fixed mortgage rates increased to 6.17% on February 2, up 0.01% from the previous day, as bond markets weakened following exceptionally strong ISM Manufacturing data 2
Bond market reaction: Mortgage-backed securities declined 6 ticks (0.19%) while 10-year Treasury yields rose 4.2 basis points to 3.831% as markets processed stronger-than-expected manufacturing data 2
Data-driven volatility: The worst of the bond market sell-off occurred in the first 10 minutes after the ISM Manufacturing release, with markets trading broadly sideways for the remainder of the session 2
Jobs report delayed: Friday’s employment report has been postponed due to the government shutdown, along with Tuesday’s JOLTS data, removing key economic indicators from the week’s schedule 2

REFINANCE ACTIVITY SHOWS MODEST IMPROVEMENT

Limited refinanceable pool: Only 9.1% of outstanding agency loans are refinanceable (contract rate at least 50 basis points above prevailing market rates) as of December 2025, limiting potential refinance volume 5
Rate distribution challenges: 81.7% of outstanding agency borrowers have rates of 6.0% or lower, meaning they would receive a sizeable rate increase from refinancing at current market levels 5
Refinance share uptick: The refinance share has jumped over the second half of 2025 as mortgage rates began to fall, though absent continued rate declines, the number of potential refinancings remains limited 5
Cash-out activity remains low: Cash-out refinances represent 37.0% of total refinance activity, with volume remaining low across all channels compared to 2022 cyclical highs 5

CREDIT QUALITY CONCERNS EMERGE

Delinquency rates rise: Late-stage mortgage delinquencies (90+ days past due) increased 18.6% year-over-year in December, though the absolute level remains low at approximately 0.20% of all mortgages 6
Relative performance: Mortgage delinquency growth exceeded that of other consumer credit categories including auto loans, credit cards, and personal loans, raising concerns about housing affordability pressures 6
Credit score decline: Average VantageScore credit scores declined to 700 in December, down one point from November and two points from the previous year, reflecting broader consumer financial stress 6
Historical context: Despite the concerning growth rate, current delinquency levels remain “considerably lower” than financial crisis levels, according to VantageScore’s chief economist 6

GSE PERFORMANCE REMAINS STABLE

Fannie Mae growth: The GSE’s Guaranty Book of Business expanded at a 1.1% annualized pace in December, demonstrating continued participation in housing finance despite challenging market conditions 7
Single-family metrics: Fannie Mae’s single-family serious delinquency rate increased marginally by one basis point to 0.58%, reflecting modest deterioration in owner-occupied housing performance 7
Multifamily improvement: The multifamily serious delinquency rate actually improved, declining by one basis point to 0.74%, highlighting different stress dynamics between owner-occupied and rental housing segments 7

REGULATORY DEVELOPMENTS

Federal agencies continue refining oversight mechanisms while navigating leadership transitions and government shutdown impacts. Key regulatory developments focus on improving examination processes, enhancing coordination between agencies, and addressing controversial proposals that could significantly impact homeowner protections.

STATE REGULATORS CHALLENGE OCC ESCROW PROPOSALS

Sharp opposition emerges: The Conference of State Bank Supervisors (CSBS) and American Association of Residential Mortgage Regulators (AARMR) jointly urged the Trump administration to rescind OCC proposals that would preempt state interest-on-escrow laws 3
“Pickpocket homeowners” accusation: State regulators accused the OCC of trying to help national banks “pick the pocket of homeowners” while creating competitive disadvantages for nonbank and state-bank mortgage servicers 3
Significant market impact: Laws in almost one-quarter of U.S. states, accounting for 30% of annual mortgage volume, require entities holding escrow balances to pay homeowners interest, discouraging banks from inflating escrow accounts as interest-free funding sources 3
Consumer protection concerns: The National Consumer Law Center warned the proposals would create market distortions, allowing national banks to offer seemingly lower interest rates while retaining all interest earned on borrowers’ escrow accounts 3

FHFA OVERSIGHT RECOMMENDATIONS CONTINUE

Inspector General priorities: The FHFA Office of Inspector General’s February 2026 Compendium highlights ongoing recommendations for improving agency oversight capabilities, including enhanced coordination between Federal Home Loan Banks and regulators 8
High-risk program oversight: Key recommendations include establishing measurable objectives and risk tolerances for the Enterprises’ 97% loan-to-value mortgage programs, particularly regarding acquisition volume and delinquency rates 8
Internal controls enhancement: The OIG emphasized needs for better tools to identify, analyze, and respond to risks related to achieving program objectives, along with strengthening employee financial disclosure processes 8

FEDERAL RESERVE LEADERSHIP TRANSITION

Warsh nomination reception: The Trump administration’s nomination of former Fed Governor Kevin Warsh as the next Federal Reserve Chair has been generally well-received by market participants, though his specific policy approach remains to be clarified 9
Current policy stance: The Federal Reserve maintained its current interest rate stance at its most recent meeting, with officials citing elevated inflation risks despite slowing employment growth 9

GOVERNMENT SHUTDOWN IMPACT ON DATA

Employment data delayed: The Bureau of Labor Statistics has delayed the January jobs report and other critical employment metrics due to the partial government shutdown, affecting market participants’ ability to assess economic conditions 10
Retroactive collection issues: The shutdown has prevented retroactive data collection for certain reports, potentially creating gaps in economic analysis and policy decision-making 10
Resolution timeline: House Speaker Mike Johnson expressed hope that the shutdown could end by Tuesday, though uncertainty remains about the timeline for resuming normal government operations 10

ECONOMIC NEWS

Economic indicators present a mixed but generally improving picture, with manufacturing showing signs of recovery while inflation pressures persist. Labor market dynamics remain under scrutiny as federal officials assess the economy’s underlying strength amid policy uncertainty.

MANUFACTURING SECTOR SHOWS SIGNS OF RECOVERY

PMI expansion: The Institute for Supply Management’s January 2026 Manufacturing PMI reached 52.6%, marking the first expansion in 12 months following 26 consecutive months of contraction 4
GDP implications: The 52.6% reading corresponds to an estimated 1.7% increase in real gross domestic product on an annualized basis, suggesting broader economic momentum 4
Broad-based recovery: Four of the six largest manufacturing industries—Machinery, Transportation Equipment, Chemical Products, and Food, Beverage & Tobacco Products—reported increased new orders 4
Employment component: Manufacturing employment improved to 48.1 in January from 44.9 in December, though still indicating contraction in factory jobs 2

HOUSING AFFORDABILITY CHALLENGES PERSIST

Affordability metrics: With a 20% down payment, the share of median income needed for the median monthly mortgage payment was 30.0% in November 2025, while with 3.5% down, the housing cost burden reached 34.7% 5
Historical context: Current affordability levels approach the housing bubble peak of November 2005, when the burden reached 35.8% with 3.5% down, highlighting ongoing affordability constraints 5
Active listings dynamics: Active listings have broadly increased since 2022, though more recently the increase has partially reversed, with current levels sitting slightly lower than pre-COVID levels 5
Price tier performance: House price appreciation has begun to tick upwards in the lowest and middle price tiers in November 2025, with the lowest tier showing 1.24% year-over-year growth compared to 0.18% for the highest tier 5

INFLATION PRESSURES PERSIST

Price pressures: The ISM Manufacturing Prices Paid index reached 59.0 in January, down from 60.5 forecast but up from 58.5 in December, indicating continued inflationary pressures in manufacturing 2
Tariff impacts: Manufacturing companies continue grappling with tariff-driven cost increases, with many implementing multi-country sourcing strategies to manufacture and import products from more tariff-friendly countries outside China 4
Cost management: Companies have trimmed costs across operations, including labor and conference expenses, while reducing revenue forecasts to more achievable levels amid uncertainty about future trade policies 4

LABOR MARKET DYNAMICS UNDER SCRUTINY

December weakness: Federal Reserve officials are closely monitoring labor market conditions following December’s weaker-than-expected job growth of 50k positions, which fell short of economist projections 11
Unemployment trends: While the unemployment rate edged lower at year-end, the pace of hiring has slowed significantly, creating uncertainty about the economy’s underlying strength 11
Banking survey upcoming: The Senior Loan Officer Opinion Survey (SLOOS) will provide crucial insights into whether changes in bank commercial real estate lending standards and loan demand have reached equilibrium or are positioned for loosening 9

COMMERCIAL REAL ESTATE MARKETS (INCLUDING MULTIFAMILY)

The commercial real estate markets continue to face significant headwinds, with office properties experiencing unprecedented distress while multifamily and industrial sectors show mixed signals. Regional markets demonstrate varying levels of transaction activity, with major metropolitan areas still attracting substantial investment despite broader market challenges.

OFFICE SECTOR CRISIS DEEPENS

Record delinquencies: CMBS office delinquency rates reached an unprecedented 12.34% in January 2026, representing a massive 103 basis point increase from the previous month and the highest office delinquency rate on record 1
Dallas foreclosure spotlight: Starwood foreclosed on The National in Dallas, Todd Interests’ $460 million mixed-use conversion project, with the borrower still owing approximately $230 million on the original $245 million loan 2

MULTIFAMILY MARKET VOLATILITY

Delinquency fluctuations: Multifamily delinquency rates increased 30 basis points to 6.94% in January, following a similar magnitude decrease the prior month, reflecting ongoing rental housing market challenges 1
New construction activity: BridgeInvest provided a $57 million construction loan for the 313-unit Freemont Frisco Apartments in Dallas-Fort Worth, with completion targeted for mid-2028 and affordable housing components 7

REGIONAL MARKET HIGHLIGHTS

Los Angeles retail transaction: DJM Capital sold Gateway Center in Mission Viejo for $51 million to Asana Partners, with the 79,000 square foot retail center achieving 97% occupancy 8
Miami office investment surge: Office investment sales reached $2.2 billion in 2025, exceeding both 2024 ($2.1 billion) and 2023 ($1.3 billion) volumes, led by Amancio Ortega’s $274.4 million Sabadell Financial Center acquisition 9

COMMERCIAL FINANCING MARKETS

Commercial financing markets demonstrated robust activity in select segments, with mega-deal refinancing driving substantial lending volume. CMBS markets showed improved fundamentals in new issuances while Federal Reserve policy decisions continue to influence lending conditions and market expectations.

MEGA-DEAL REFINANCING ACTIVITY

Manhattan lending surge: Lenders deployed $5.6 billion across Manhattan’s top five December deals, with Wells Fargo providing the largest transaction – a $3.15 billion refinancing of Blackstone’s Stuyvesant Town-Peter Cooper Village 3
Blackstone portfolio investment: Since acquiring the 11,250-unit rent-stabilized complex for $5.5 billion in 2015, Blackstone has invested $460 million in improvements, including 9,600 solar panels 3
Additional major financings: Apollo and GIC secured $835 million for 25 Water Street’s office-to-residential conversion, while Carlyle Group obtained a $640 million condo inventory loan for 520 Fifth Avenue 3

CMBS MARKET CONDITIONS

Improved leverage metrics: The BANK5 2026-5YR20 pool achieved a Fitch loan-to-value ratio of 96.5%, below the 2025 average of 101.0%, though resulting net cash flow declined 15.0% from issuer projections 10

COMMERCIAL SERVICING MARKETS

The commercial servicing sector faces mounting pressure from accelerating special servicing transfers and a substantial foreclosure pipeline. Office and hotel properties continue to dominate distressed asset categories, while workout efforts show mixed success rates across different property types and geographic regions.

SPECIAL SERVICING TRANSFERS ACCELERATE

New Jersey office distress: A four-building suburban office park in Florham Park totaling 360,265 square feet transferred to special servicing in December 2025 and reached foreclosure status by January 2026 12

TEXAS FORECLOSURE PIPELINE DOMINANCE

February auction volume: Texas leads with $805 million in troubled CRE loans scheduled for February auctions, marking the third consecutive month above $800 million 2
Major distressed properties: Include The National (Dallas) with a $245 million Starwood loan, Acadia on the Lake Apartments (San Antonio) with a $31.3 million CBRE loan, and The Sherry Apartments (Arlington) with a $24.4 million ReadyCap loan 2
Repeat foreclosure challenges: Nine properties are repeat foreclosure candidates, indicating ongoing workout difficulties and failed modification attempts 2

HOTEL PORTFOLIO DISTRESS

UBS 2018-C9 downgrades: The trust experienced significant downgrades due to a specially serviced Midwest Hotel Portfolio loan comprising eight limited-service properties totaling 658 keys across Missouri, Illinois, and Indiana 12
Property closures: Three hotels representing 40% of the allocated loan balance have been reported as closed, with a receiver appointed to all properties following March 2020 special servicing transfer 12

INDUSTRY NEWS

The real estate industry continues evolving through strategic consolidation, technology integration, and market adaptation. Key developments include major acquisitions, partnership expansions, and shifts in merger and acquisition strategies reflecting current market realities.

REAL ESTATE M&A LANDSCAPE EVOLVES

Strategic shift: The 2026 real estate M&A environment emphasizes local deals and selective national consolidation, with industry experts predicting one to two additional large-scale acquisitions involving national real estate organizations 12
Compass integration focus: Compass is expected to adopt a more measured acquisition approach given significant integration work from its Anywhere acquisition, while Berkshire Hathaway may re-enter the market if housing transaction volumes improve meaningfully 12
Keller Williams positioning: Supported by Stone Point’s capital investment, Keller Williams is positioned to become more aggressive in facilitating growth through mergers and acquisitions, particularly at the Market Center level 12
Private capital activity: Several private capital groups are actively pursuing roll-up strategies focused on teams and smaller brokerage firms, creating incremental liquidity opportunities for high-performing organizations 12

BROOKFIELD EXPANDS INDUSTRIAL REAL ESTATE PORTFOLIO

Major acquisition: Global alternative asset manager Brookfield Asset Management agreed to acquire Peakstone Realty Trust in a $1.2 billion all-cash transaction, betting on industrial outdoor storage and warehouse assets 13
Premium valuation: The deal offers Peakstone shareholders $21 per share in cash, representing a 34% premium to the January 30 closing price, reflecting confidence in industrial real estate fundamentals 13
Strategic rationale: Brookfield views industrial outdoor storage and warehouse assets as key beneficiaries of the next commercial real estate cycle and AI infrastructure build-out 13

MORTGAGE INDUSTRY FACES M&A REALITY CHECK

Succession challenges: The mortgage industry’s M&A landscape faces significant challenges as owners who delayed succession planning during boom years now confront exit decisions in a far less forgiving market environment 14
Valuation pressures: Industry experts at the National Mortgage Expo 2026 emphasized that many independent mortgage banks are “just trying to get out with something in hand” rather than optimizing valuations 14

TECHNOLOGY INTEGRATION ADVANCES

Rithm-Valon expansion: Rithm Capital Corporation announced an expansion of its partnership with Valon Technologies, further integrating Valon’s AI-native mortgage servicing platform into operations at Newrez 7
Customer impact: The collaboration aims to modernize mortgage operations and improve the experience for more than four million homeowners through advanced technology deployment 7

DATA CENTER CONSTRUCTION BOOM

AI infrastructure demand: Data center construction spending reached $42 million in October, ranking sixth-highest among analyzed sectors with year-over-year growth of 18.4% 4
2026 growth forecast: Commercial real estate brokers forecast a 23% surge in additional data center construction spending, actively seeking prime land from cornfields to abandoned factories 4