Sellers outnumber buyers by a record 47%, giving active buyers meaningful negotiating power. Those in the market aren’t facing much competition. Mortgage rates have dropped to three-year lows, which should help. As demand increases, more inventory (currently just 3.7 months of supply) is likely to come to market. Still, getting prospective homebuyers to the closing table has been challenging due to sticker shock around home insurance, property taxes, HOA fees, and other costs. The recently passed housing legislation passed by Congress aims at making modular homes easier to build and buy.
Consistent with recent actions at the FHA and CFPB — including eliminating certain regulatory frameworks such as Disparate Impact — the Federal Housing Finance Agency (FHFA) is repealing its 2024 Fair Lending, Fair Housing, and Equitable Housing Finance Plans rule. Flip that coin over and you have state actions like in Massachusetts where voters are considering capping how much landlords can raise rents each year.
Separately, a massive $1.5 billion refinancing deal for industrial properties signals that commercial lenders are back in action, and two large real estate companies are expressing optimism about 2026 as property sales rebound toward pre-pandemic levels.
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.
KEY TAKEAWAYS
- Mortgage rates steady near three-year lows at 6.145% for 30-year fixed loans as of February 13, down 0.06 percentage points from the previous week as cooler inflation data pushed Treasury yields lower 1
- Home sales plunged 8.4% in January to 3.91 million units despite improving affordability conditions, marking the steepest monthly decline in nearly four years and pushing sales to lowest levels since late 2023 2 3
- All-cash home purchases hit five-year low at 29% in December 2025, down from 30.3% a year earlier, as buyers gained negotiating power in the strongest buyer’s market in recent history 4
- FHFA repealed Biden-era fair housing rules removing accountability requirements for Fannie Mae and Freddie Mac regarding equitable housing finance plans, effective March 9, 2026 5 6
- Mortgage applications declined 0.3% for the week ending February 6, while FHA and ARM loan shares increased as borrowers seek affordability solutions amid persistent rate sensitivity 7
- Escrow payment spikes catching borrowers off guard as rising property taxes and insurance costs create unexpected financial burdens, leading to increased home purchase cancellations even in buyer-friendly markets 8
- Auto loan delinquencies signal broader consumer stress with subprime auto loan delinquency rates hitting record 6.9% in January, while prime auto loans remain stable at 0.4%, indicating diverging financial conditions across income levels 9
- CRE Services Firms Report Strong Q4: Colliers and Marcus & Millichap raise 2026 outlooks as transaction volumes recover to 2019 levels 2
- CMBS Market Surges: $1.46B Plymouth Industrial REIT refinancing highlights record-pace CMBS lending activity in early 2026 3
- Massachusetts Rent Control Battle: Voters to decide on strict rent caps limiting increases to inflation or 5% maximum, sparking statewide debate 4
- AI Impact on CRE Markets: Technology stock volatility raises questions about office demand and lending spreads as markets reassess AI disruption timeline 5
- Retail REIT Portfolio Optimization: Kimco plans $300M-$500M in asset dispositions despite record 96.4% occupancy rates 6
RESIDENTIAL REAL ESTATE MARKETS
The residential market faced significant headwinds in January as severe winter weather and persistent affordability challenges weighed on buyer activity despite improving underlying conditions. Transaction volume declined sharply across all regions, while cash buyers retreated to multi-year lows as market dynamics shifted in favor of financed purchases.
ALL-CASH PURCHASES RETREAT TO FIVE-YEAR LOWS
- Just under 29% of U.S. homebuyers paid in all cash in December 2025, down from 30.3% a year earlier and marking the lowest December share since 2020
- The share of cash buyers peaked at nearly 35% in late 2023 when mortgage rates reached the high-7% range, as buyers sought to avoid high monthly interest payments
- The decline reflects both lower mortgage rates making financing more attractive and the emergence of the strongest buyer’s market in recent history, where sellers outnumber buyers by a record 47%
- Amanda Peterson, a Redfin Premier agent in Dallas, noted that “the leverage buyers have when they pay in cash is unbelievable,” with cash offers commonly securing homes for 10-20% below appraised value in markets like Texas and Florida 4
REGIONAL PERFORMANCE SHOWS WIDESPREAD WEAKNESS
- Northeast region experienced sales decline of 5.9% month-over-month and 4.0% year-over-year, though median prices rose 5.8% to $505,400
- Midwest posted 7.1% monthly drop and 7.1% annual decline in sales activity, with median prices increasing 2.3% to $295,400
- South region suffered largest monthly decline at 9.0% with 1.6% annual decrease, while median prices edged up just 0.1% to $351,200
- West region experienced most severe weakness with 10.3% monthly drop and 7.9% annual decline, with median prices falling 1.4% to $600,400, making it the only region to post annual price decline 10
INVENTORY REMAINS CONSTRAINED DESPITE MODEST GAINS
- Housing inventory dipped 0.8% from December to 1.22 million units, representing a 3.7-month supply at the current sales pace
- Supply levels were 3.4% higher than a year earlier, providing some relief to prospective buyers, though inventory remained significantly below pre-pandemic norms
- Properties took longer to sell, with median days on market increasing to 46 days in January versus 41 days in January 2025
- First-time buyers represented 31% of sales, up from 28% a year ago, suggesting some improvement in entry-level market participation despite overall transaction weakness 3 11
MORTGAGE MARKETS
Mortgage rates continued their favorable trajectory while application activity showed mixed signals, with borrowers increasingly turning to alternative financing products to manage persistent affordability challenges. Rising escrow costs emerged as a new threat to transaction completion rates.
RATES APPROACH THREE-YEAR LOWS
- 30-year fixed rates averaged 6.145% as of February 17 according to Money.com’s daily survey, down 0.06 percentage points from the previous week as cooler inflation data pushed Treasury yields lower
- Freddie Mac’s weekly survey showed 30-year fixed rates at 6.09% for the week ending February 12, down 0.02 percentage points, while 15-year fixed rates decreased 0.06 percentage points to 5.44%
- The rate environment has provided significant relief compared to peak levels, with current rates approximately 80 basis points lower than the same time last year
- Realtor.com economist Jiayi Xu noted that rate stability in the low 6% range is likely to draw out buyers who opted to stay on the sidelines last year 1
APPLICATION VOLUME SHOWS MIXED SIGNALS
- Mortgage applications decreased 0.3% for the week ending February 6 according to the MBA’s Weekly Mortgage Applications Survey
- Purchase Index decreased 2% from the previous week on a seasonally adjusted basis, though the unadjusted Purchase Index increased 4% and was 4% higher than the same week one year ago
- Refinance Index increased 1% from the previous week and surged 101% higher than the same week one year ago
- Refinance share of mortgage activity decreased slightly to 56.4% of total applications from 57.1% the previous week 7
BORROWERS SHIFT TO ALTERNATIVE PRODUCTS
- FHA loan share increased to 18.4% from 17.8% the previous week, as FHA rates declined and remained 20 basis points lower than conforming 30-year fixed rate
- Adjustable-rate mortgage (ARM) share rose to 8.0% of total applications, reaching a seven-week high as ARM rates were almost a full percentage point lower than fixed rates
- MBA Deputy Chief Economist Joel Kan noted that borrowers are increasingly utilizing FHA loans as affordability challenges persist despite recent improvements
- The shift toward alternative products demonstrates borrowers’ strategic approach to managing the current interest rate and home price environment 12 13
ESCROW SPIKES THREATEN TRANSACTION COMPLETION
- Rising property taxes and insurance costs are creating unexpected escrow payment increases that catch borrowers off guard
- The escalating escrow costs represent a growing threat to transaction completion as borrowers discover at closing that their monthly housing payments will be significantly higher than initially calculated
- Industry professionals report that escrow-related surprises are becoming more common as property tax assessments rise and insurance premiums increase
- The trend highlights the importance of accurate escrow estimates early in the mortgage process, as last-minute payment shocks can derail transactions even when buyers have been pre-approved 8
REGULATORY & POLICY DEVELOPMENTS
Federal housing policy underwent significant changes as the Trump administration continued its deregulatory agenda while Congress advanced bipartisan housing legislation. The regulatory landscape reflects broader shifts in federal priorities regarding housing finance oversight and accountability.
FHFA REPEALS BIDEN-ERA FAIR HOUSING RULES
- Federal Housing Finance Agency finalized the repeal of its 2024 Fair Lending, Fair Housing, and Equitable Housing Finance Plans rule, with changes taking effect March 9, 2026
- The repeal removes accountability requirements for Fannie Mae, Freddie Mac, and other government-sponsored enterprises regarding their equitable housing finance plans
- FHFA Director Bill Pulte led the repeal effort, arguing the rules conflicted with recent executive orders barring federal agencies from running programs focused on specific demographic groups
- The agency stated there had been “a change in federal policy with respect to activities that promote equity,” referencing the Trump administration’s broader effort to dismantle diversity, equity, and inclusion initiatives 5 6
INDUSTRY AND ADVOCACY GROUP REACTIONS
- National Fair Housing Alliance and NAACP Legal Defense Fund condemned the repeal, warning it weakens oversight at a moment when affordability and access to homeownership are already under strain
- Democratic Senator Catherine Cortez Masto of Nevada joined the chorus of objections during the public comment period, alongside the National Community Reinvestment Coalition
- Industry groups representing mortgage insurers and large financial institutions backed the repeal, arguing that fair housing enforcement already exists elsewhere in federal law
- Conservative Political Action Coalition’s Center for Regulatory Freedom praised the FHFA for aligning itself with the administration’s deregulatory agenda 6
ECONOMIC NEWS
Economic data provided encouraging signals for the housing market as inflation continued cooling while broader consumer financial stress emerged in auto lending markets. The diverging performance between prime and subprime borrowers highlighted growing economic inequality.
CONSUMER FINANCIAL STRESS EMERGES IN AUTO MARKETS
- Subprime auto loan delinquency rates hit a record 6.9% in January for loans packaged into asset-backed securities, up 34 basis points from January 2024
- Prime auto loans remained in pristine condition with 60-plus-day delinquency rates holding steady at 0.4% in January, unchanged from December 2025
- The divergence illustrates the “K-shaped” economic recovery where higher-income borrowers with good credit continue to perform well while subprime borrowers face increasing financial pressure
- Total auto loan balances reached $1.67 trillion in Q4 2025, though the auto-loan-to-disposable income ratio remained at 7.2%, the lowest since 2014 except for Q1 2021 when stimulus payments distorted income data 9
INFLATION CONTINUES COOLING TREND
- Consumer Price Index rose 2.4% year-over-year in January, down from 2.7% in December, marking the lowest reading since May 2025
- Core inflation, excluding food and energy, fell to 2.5% annually from 2.6% in December, reaching the lowest level since March 2021
- Shelter index, which represents more than one-third of the CPI, rose just 0.2% for the month, bringing the annual increase down to 3.0% from 3.2%
- The moderation in housing costs served as a key driver of the improved inflation outlook 15
FEDERAL RESERVE POLICY IMPLICATIONS
- Cooler inflation reading strengthened expectations for potential Federal Reserve rate cuts later in 2026, though market participants reduced expectations for a March cut to just 10%
- Market expectations show 25% probability of a 25-basis-point cut in late April and 50% expecting one by mid-June
- Sam Williamson, senior economist for First American, noted the inflation report provides “another incremental tailwind heading into the spring” for housing markets
- Fed officials remain cautious about tariff-related cost pressures potentially feeding through more broadly into prices 15
COMMERCIAL REAL ESTATE MARKETS (INCLUDING MULTIFAMILY)
- CRE Services Firms Signal Market Recovery Colliers reported 15% revenue growth to $5.56B while Marcus & Millichap posted second consecutive quarterly profit. Both firms raised 2026 forecasts as transaction activity matches 2019 levels. 2
- Industrial Portfolio Transactions Continue Fort Lauderdale industrial property sold for $16M ($220/SF), while Los Angeles saw $52.7M sale of 190,464 SF distribution center ($276/SF). 7 8
- Multifamily Rental Market Shifts National vacancy rates reached 7.6% in 2025, up from 7.2%, with median rents falling 1.5% to $1,672. Milwaukee vacancy jumped from 4.9% to 10.8% as new supply hit market. 9
COMMERCIAL FINANCING MARKETS
- CMBS Market Reaches Record Pace Ares and Makarora secured $1.46B CMBS refinancing for Plymouth Industrial REIT portfolio. CMBS market raised $17B in first six weeks of 2026, nearly double 2023 pace. 3
- AI Volatility Impacts CRE Credit Pricing Technology stock decline lowered Treasury yields, improving rates for fixed-rate CRE borrowers. Unusual widening in balance sheet lending spreads for office loans warrants monitoring. 5
- Debt Maturity Pressures Persist Kimco faces $800M in debt maturing in 2026 at 2.65%, expecting higher refinancing costs. Broader market faces $875B in property debt maturities this year. 6
INDUSTRY NEWS
Mortgage industry professionals reported strengthening business conditions entering the spring season, with technology investments and creative financing solutions driving optimism despite ongoing market challenges. The shift away from cash purchases created new opportunities for lenders.
FINANCING PRODUCT MIX SHIFTS DRAMATICALLY
- FHA loan usage fell to 14.4% of mortgaged homebuyers in December, down from 15.1% a year earlier and reaching the lowest December share since 2021
- John Tomlinson, a Redfin Premier agent in Fort Lauderdale, noted that “a lot of homebuyers—especially FHA buyers—are getting cold feet when they see the actual monthly payment and the amount of money they need to bring to the table at closing”
- Conventional loan usage rose to 78.6% of mortgaged homebuyers in December, up from 78.2% a year earlier and reaching the highest December share since 2021
- VA loan usage increased slightly to 7% of mortgaged purchases from 6.8% a year earlier, with Virginia Beach leading at 36.8% of mortgaged buyers using VA loans 4
LENDERS REPORT STRONG SPRING PIPELINE MOMENTUM
- United Wholesale Mortgage’s Alex Elezaj reported that mortgage rates are approximately 80 basis points lower this year versus the same time last year
- “We’re off to a great start,” Elezaj said, noting that “spring is traditionally a strong season for homebuying. We expect this year to be no different”
- Falling mortgage rates in early 2026 have sparked significant increases in refinancing activity while purchase demand has remained resilient
- Bob Johnson, head of originations at Newrez, confirmed early-cycle momentum following years of suppressed origination volume 17
CREATIVE FINANCING SOLUTIONS GAIN TRACTION
- Industry professionals report growing interest in seller concessions and alternative financing structures as borrowers seek ways to achieve rates “with a five handle”
- Nicole Rueth of CrossCountry Mortgage emphasized the importance of using all available tools to help buyers reach the 5% rate range
- David Battany, EVP of capital markets for Guild Mortgage, noted that current activity levels are now on the low end of typical ranges, which he calls “encouraging”
- Despite challenges facing first-time homebuyers, Battany reported that half of Guild’s purchase loan pipeline consists of first-time buyers 17
COMMERCIAL REAL ESTATE
- Massachusetts Rent Control Ballot Initiative Coalition pushes ballot measure capping rent increases at inflation with 5% maximum. Boston Mayor Wu supports with 63% voter approval, while Governor Healey opposes. 4
- Retail REIT Strategic Repositioning Kimco plans $300M-$500M in asset sales targeting lower-growth centers, despite achieving record 96.4% occupancy and completing 1.2M SF of Q4 leases. 6