ALFRED Insights

Daily Dose of Real Estate for December 10

The housing market continues its slow-motion shuffle toward something resembling normalcy, with inventory up 26% year-over-year even as mortgage rates hop back above 6.3% (fun while it lasted) – a sign that bond markets remain unimpressed by the Fed’s rate-cutting enthusiasm. Homeowners insurance costs are projected to climb another 16% over the next two years, because apparently owning a home wasn’t already expensive enough, while four out of five mortgage holders remain locked into their sub-6% rates like financial prisoners of their own good luck. Realtor.com insists 2026 will bring a “more balanced” market where monthly payments finally drop below 30% of income, though this milestone owes more to wage growth outpacing home prices than any genuine affordability breakthrough.

Commercial real estate offered a similar mix of cheer and concern on December 9th, with transaction volumes hitting their first real speed bump in nearly two years while Netflix decided the best way to win the streaming wars is to buy $72 billion worth of actual buildings. Multifamily rents continued their four-month slide as foreclosure filings rose for the ninth straight month, though CMBS issuance is having its best year since people still thought subprime mortgages were a clever idea. Analysts now confidently predict that everything will get worse before it gets better, with peak distress expected in 2026—which apparently passes for optimism in commercial real estate these days. 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

Treasury yields surged to multi-month highs with 30-year yields hitting 4.81% (highest since September 4) and 10-year yields reaching 4.17% (highest since November 5), pushing mortgage rates up 9 basis points to 6.36% 1
Realtor.com predicts “more balanced” 2026 market with mortgage rates averaging 6.3%, home prices rising just 2.2%, and monthly payments dropping below 30% of income for first time since 2022 2
Housing inventory declined 2.3% week-over-week but remained 26.3% higher year-over-year, signaling continued improvement in market balance compared to the severe shortage of 2023 3
Homeowners insurance premiums expected to jump 16% over the next two years, with 8% increases projected for both 2026 and 2027, now representing 9% of typical homeowner payments 4
Mortgage lock-in effect persists with four out of five homeowners holding rates below 6%, limiting turnover to life necessities like job or family changes 2
Federal Reserve faces policy complications as bond market volatility undermines rate cut effectiveness, with long-term yields ignoring Fed’s short-term policy moves 1
Deal Volume Decline: October marked the first month of negative year-over-year CRE transaction volume growth in nearly two years, with $24.4 billion in sales representing 70% of October 2019 levels 1
Recovery Signals: First American identifies five key forces driving CRE recovery through 2026: pricing stabilization, increased transaction activity, refinancing rebound, rising distress levels, and lender re-engagement 2
Multifamily Rent Decline: U.S. multifamily advertised rents dropped $8 in November to $1,740, marking the fourth consecutive monthly decline with yearly growth at just 0.2% – the lowest since Q1 2021 3
CMBS Resurgence: Over $92 billion of CMBS debt was issued in the first nine months of 2025, putting the market on track for its most active year since 2007 4
Foreclosure Activity Rising: November marked the ninth straight month of year-over-year increases in foreclosure activity, with 35,651 properties receiving foreclosure filings – up 21% from last year 5

RESIDENTIAL REAL ESTATE MARKETS

Housing inventory continues to show seasonal patterns while maintaining year-over-year improvements. Regional markets display varying performance levels, with early reporting areas showing stronger sales momentum. Industry forecasts point to a “more balanced” market emerging in 2026 as affordability gradually improves.

INVENTORY DYNAMICS SHOW SEASONAL PATTERNS

Weekly inventory decline: Active single-family inventory dropped 2.3% week-over-week as of December 9th, following typical seasonal patterns heading into winter months 3
Year-over-year improvement: Inventory levels remained 26.3% higher than the same week in 2023, representing significant progress from the severe shortage conditions of recent years
Historical comparison: Current inventory still sits 16.8% below 2019 levels, but this gap has narrowed substantially from June 2023 when inventory was down almost 54% compared to 2019
2026 inventory projections: Realtor.com forecasts active listings will increase 8.9% in 2026, marking a third consecutive year of gains, though levels will remain roughly 12% below pre-2020 averages 2

REGIONAL MARKET VARIATIONS EMERGE

Early reporting markets strength: December sales in early reporting markets showed 18.1% year-over-year growth, slightly accelerating from November’s 17.6% increase 5
Calendar effect: December data benefited from one additional working day compared to December 2023, which inflated non-seasonally adjusted figures
Market performance gap: Early reporting markets have consistently outperformed the broader national market in recent months, suggesting regional variations in recovery patterns
2026 sales outlook: Existing-home sales expected to edge up only 1.7% in 2026 after a nearly flat 2025, with sales remaining well below normal levels 2

INSURANCE COSTS IMPACT HOME VALUES

Value erosion: Rising insurance costs are reducing home values by over $40,000 in areas most exposed to natural disasters, according to National Bureau of Economic Research analysis of 74 million insurance premiums 6
Geographic disparities: Home price growth has dropped significantly in high-risk areas, with New Orleans seeing only 14% price growth since 2018 compared to 55% nationally
Buyer behavior changes: Over one-third of prospective homebuyers (33.7%) changed their geographic search area due to insurance challenges, while 30% now research natural disaster risk data 7
Uninsured homeowners rising: 14.1% of U.S. homeowners lacked insurance in 2024, up from 13.4% in 2023, with West Virginia, New Mexico, and Louisiana exceeding 20% uninsured rates

AFFORDABILITY IMPROVEMENTS PROJECTED FOR 2026

Payment-to-income ratio decline: Monthly mortgage payments expected to drop to 29.3% of median household income in 2026, falling below the 30% affordability threshold for the first time since 2022 2
Real price declines: While nominal home prices will rise 2.2% in 2026, inflation is expected to outpace these gains, meaning real house prices will “decline slightly” for a second consecutive year
Income growth advantage: Rising incomes will give buyers more purchasing power, helping to shrink the share of paychecks needed for mortgage payments
Monthly payment relief: The typical monthly payment to buy the median-priced home expected to slip 1.3% year-over-year, marking the first decline in monthly payments since 2020

MORTGAGE MARKETS

Mortgage markets experienced significant volatility with bond yields surging to multi-month highs despite expectations for Federal Reserve rate cuts. The disconnect between short-term policy rates and long-term bond yields highlighted market concerns about future inflation and fiscal policy, while industry forecasts suggest modest rate relief in 2026.

BOND MARKET VOLATILITY DRIVES MORTGAGE RATES HIGHER

30-year Treasury surge: Yields rose 17 basis points since Thanksgiving to 4.81%, the highest since September 4, with total increase of 87 basis points since first Fed rate cut in September 2024 1
10-year Treasury movement: Yields jumped to 4.17%, up 17 basis points from pre-Thanksgiving levels and the highest close since November 5, rising 54 basis points since September rate cuts began
Mortgage rate response: 30-year fixed mortgage rates jumped 9 basis points to 6.36% (daily avg from MND), the highest since November 20, demonstrating continued sensitivity to long-term Treasury movements
(More accurately for rates that you would see in the market) Current rate levels: Average contract interest rate for 30-year conforming loans decreased slightly to 6.67% from 6.69%, with points decreasing to 0.66 from 0.67 for 80% LTV loans 10
Policy disconnect: Fed’s short-term rate cuts have had limited impact on mortgage rates, which are driven by long-term bond market fears of future inflation and Treasury supply concerns

APPLICATION ACTIVITY SHOWS MIXED SIGNALS

Overall application increase: MBA reported mortgage applications increased 5.4% for the week ending December 6, 2024, following Thanksgiving holiday adjustments 8
Refinance surge: Refinance Index increased 27% week-over-week and registered 42% higher than the same week in 2023, driven by borrowers responding to slightly lower rates during the period
Purchase decline: Seasonally adjusted Purchase Index decreased 4% week-over-week, though unadjusted Purchase Index increased 30% due to calendar effects 9
Market composite performance: Market Composite Index rose 5.4% on seasonally adjusted basis, while unadjusted index surged 50% compared to previous week

INTEREST RATE ENVIRONMENT AND 2026 OUTLOOK

2026 rate projections: Realtor.com expects 30-year mortgage rates to average 6.3% in 2026, down modestly from 2025’s 6.6% average, as slowing growth and end of Fed quantitative tightening counterbalance rising government debt 2
Lock-in effect persistence: Four out of five homeowners with mortgages have rates below 6%, creating continued resistance to selling and limiting market turnover to life necessities
Treasury auction pressure: Market had to digest six Treasury bill auctions, two note auctions, and 30-year bond auction during the week, adding supply pressure to yields

REGULATORY DEVELOPMENTS

Key regulatory activity centered on MBA policy submissions and FHFA housing goals framework finalization. These developments could significantly impact mortgage qualification standards and GSE operations in the coming years.

MBA SUBMITS CRITICAL POLICY LETTERS

HUD rental income policy: MBA submitted comment letter on December 10th addressing how rental boarder income should be calculated and verified for mortgage qualification purposes 11
Road to Housing Act support: Joint letter to Congress supporting bipartisan measure aimed at increasing housing supply and affordability through regulatory reform
Timing significance: Submissions came during critical period with incoming Trump administration expected to implement significant changes to federal housing programs
Broader advocacy effort: Letters represent part of MBA’s comprehensive strategy to influence housing policy during transition period

FHFA HOUSING GOALS FRAMEWORK FINALIZED

2025-2027 Enterprise Goals: FHFA moved closer to finalizing benchmark levels for Fannie Mae and Freddie Mac’s single-family and multifamily housing goals 12
Technical changes included: Final rule incorporates technical modifications and clarifies factors FHFA will consider for housing plan requirements
Failure threshold: Enterprises required to submit housing plan if they fail to meet three of the single-family housing goals
Mission balance: Framework reflects ongoing efforts to balance GSE affordable housing mission with safety and soundness considerations

ECONOMIC NEWS

Federal Reserve officials maintained cautious outlook on inflation progress while economic data showed consumer resilience. Housing market economic indicators suggested continued support for demand despite affordability challenges, though bond market volatility raised questions about monetary policy effectiveness.

FEDERAL RESERVE FACES POLICY COMPLICATIONS

Inflation timeline concerns: Fed officials noted process of reaching 2% target “could take longer than previously anticipated” due to recent higher-than-expected readings 13
Bond market challenges: Market expects “hawkish cut” with several dissents and hawkish tone in “dot plot” projections, as long-term yields ignore Fed’s short-term rate policy 1
Policy effectiveness questioned: Disconnect between Fed rate cuts and mortgage rates highlights limitations of monetary policy when bond markets fear future inflation
Data complications: Fed must make December decision without current data still affected by government shutdown aftermath, including inflation and labor market statistics

CONSUMER SPENDING PATTERNS SIGNAL ECONOMIC RESILIENCE

Q3 consumption growth: Personal consumption expenditures increased 3.7% in Q3 2024, fastest pace since Q1 2023, contributing 2.5% to 3.1% Real GDP growth 14
December job gains: Payroll gains of 256,000 in December compared to 212,000 in November, driven by healthcare, leisure/hospitality, and retail rebound
Unemployment stability: Unemployment rate remained low at 4.1% in December, ticking down from 4.2% in November
Sector strength: Strong job growth primarily concentrated in service sectors supporting consumer spending patterns

HOUSING MARKET ECONOMIC INDICATORS

Mortgage rate projections: Moody’s forecasts 30-year fixed rate declining only 0.3 percentage points from 6.4% in 2025 to 6.1% in 2026, then 6.0% in 2027 15
Employment outlook: Unemployment projected to stay around 4% through 2027, supporting housing demand fundamentals
Income growth expectations: Per capita disposable nominal income growth projected to increase from $64,800 in 2025 to $70,100 in 2027
Economic support factors: Low unemployment and income growth expected to partially offset affordability challenges from elevated rates and rising insurance costs

COMMERCIAL REAL ESTATE MARKETS (INCLUDING MULTIFAMILY)

Commercial real estate transaction activity hit a speed bump in October with the first negative year-over-year growth in nearly two years, while multifamily markets continue showing rental softness with four consecutive months of declining advertised rents.

TRANSACTION VOLUME HITS SPEED BUMP

October Decline: First month of negative year-over-year CRE transaction volume growth since early 2024 recovery began, reflecting “stalemate between buyers and sellers” rather than imminent downturn 1
Volume Metrics: $24.4 billion in October sales representing roughly 70% of October 2019 levels, with persistently high interest rates and policy uncertainty extending U-shaped recovery 1
Sector Performance: Industrial and multifamily properties led top 50 deals; hotels only sector showing improvement with 6% growth after negative Q3 1
Notable Transaction: The New York Edition hotel at 5 Madison Avenue sold for $231.2 million by Abu Dhabi Investment Authority to Kam Sang Company 1

MULTIFAMILY MARKET SHOWS CONTINUED SOFTNESS

Rent Decline: Advertised rents dropped $8 to $1,740 in November – fourth consecutive monthly decline with yearly growth at just 0.2%, lowest since Q1 2021 3
Build-to-Rent Struggles: BTR properties down $10 to $2,185 in November, representing 0.5% year-over-year decline 3
Regional Winners: New York leading at 5.7% growth, followed by Chicago (3.8%), Twin Cities (3.2%), San Francisco (2.6%), and Kansas City (2.2%) 3
Supply-Burdened Markets: Austin (-5%), Phoenix and Denver (-4.1% each), Las Vegas (-2.1%), and Dallas (-2.0%) experiencing rental decline 3

MAJOR MULTIFAMILY TRANSACTIONS SIGNAL ACTIVITY

Houston Deal: MetroNational sold The Lodge at Spring Shadows (432 units) to TPG Angelo Gordon as part of Houston’s $2.4 billion multifamily transaction volume in first 11 months – up 14.4% year-over-year 6
Mill Creek Sale: Recently completed Houston property sale despite market showing -0.8% year-over-year rent decline compared to national increase 7

COMMERCIAL FINANCING MARKETS

Commercial real estate financing markets are experiencing a dramatic turnaround with refinancing activity surging and CMBS issuance on track for its most active year since 2007, while pricing stabilization signals growing market confidence.

REFINANCING ACTIVITY SURGES AS RECOVERY TAKES SHAPE

Refinancing Rebound: Activity surged from $55 billion in Q1 2024 to $114 billion by Q3 2025, returning to levels last seen from late 2019 through early 2022 2
Maturity Wall Pressure: More loans from 2021-2022 boom period beginning to mature, creating pressure on property owners with fewer refinancing options 2
Distress Timeline: Overall distress continues building and expected to peak in 2026, combined with pricing stabilization and lender re-engagement suggesting new recovery phase 2

CMBS MARKET EXPERIENCES HISTORIC RESURGENCE

Issuance Volume: Over $92 billion of CMBS debt issued in first nine months of 2025, putting market on track for most active year since 2007 4
Major Deal: Clipper Equity’s $450 million refinancing of Tower 77 in Brooklyn’s Greenpoint – $405 million five-year fixed-rate mortgage plus $45 million mezzanine debt 4
Deal Structure: Co-originated by JPMorgan Chase and Citi Real Estate Funding, securitized as YC Commercial Mortgage Trust 2025-77C, replacing previous $430 million JPMorgan loan from May 2024 4

PRICING STABILIZATION SIGNALS MARKET CONFIDENCE

Price Recovery: CRE pricing stopped falling and showing modest gains over 2024 levels, indicating buyers becoming more willing to transact at current valuations 2
Transaction Growth: Volume growth approaching five-year pre-pandemic averages, suggesting improving market conditions despite ongoing distressed asset challenges 2
Capital Unlock: Combination of pricing clarity, reduced uncertainty, and stabilizing rates may help unlock sidelined capital for players who “stay in the mix until ’26” 2

COMMERCIAL SERVICING MARKETS

Foreclosure activity continues its nine-month upward trend while CMBS delinquency rates signal hidden distress in the commercial real estate market, with peak distress expected in 2026 as boom-era loans mature.

FORECLOSURE ACTIVITY CONTINUES NINE-MONTH UPWARD TREND

November Data: 35,651 U.S. properties received foreclosure filings – up 21% from previous year, marking ninth consecutive month of year-over-year increases 5
Filing Breakdown: Foreclosure starts increased 17% compared to last year; completed foreclosures rose 26% versus year-ago period 5
State Rankings: Delaware worst foreclosure rate (1 filing per 1,924 housing units), followed by South Carolina and Nevada 5
Metro Areas: Philadelphia recorded worst rate among major metros (1 filing per 1,511 housing units), attributed to resumption of data collection adding backlogged records 5

CMBS DELINQUENCY RATES SIGNAL HIDDEN DISTRESS

Coverage Limitation: CMBS delinquency rates only cover 15-20% of commercial real estate loans but provide useful signal for broader private lending trends 2
Hidden Distress: Many properties still meeting debt obligations but facing falling net operating income, suggesting real distress level higher than headline numbers 2
Maturity Pressure: Hidden distress expected to become more apparent as loans made during 2021-2022 boom continue to mature 2

DISTRESS EXPECTED TO PEAK IN 2026

Peak Timeline: Industry analysts expect distress levels to peak in 2026 as more boom-period loans mature and property owners face limited refinancing options 2
Turning Point: 2026 peak also expected to mark turning point as opportunistic deals and stabilized rates bring more capital back into market 2
Recovery Catalyst: Anticipated clearing of distressed assets combined with lender re-engagement should drive higher origination volumes heading into 2026 2

INDUSTRY NEWS

Industry developments focused on continued technological advancement, market consolidation trends, and regulatory compliance priorities. Rising insurance costs emerged as a major factor affecting both industry operations and consumer behavior, while forecasts suggest a gradual market rebalancing in 2026.

HOMEOWNERS INSURANCE CRISIS INTENSIFIES

Premium surge projections: Insurance premiums expected to rise 8% in both 2026 and 2027, following 14% annual increases in 2023 and 2024 4
Record expense burden: Insurance now accounts for 9% of typical homeowner’s payment, representing the highest average on record for principal, interest, property tax, and insurance premiums
Geographic disparities: Miami premiums average $4,607 annually (up 72% in five years), while costs jumped 79% in New Orleans, 59% in Sacramento, and 58% in Atlanta 16
Market withdrawal: Major insurers like Allstate and State Farm stopped issuing new policies in high-risk states, with Farmers Insurance recently removing monthly policy caps in California 17

MARKET REBALANCING TRENDS EMERGE

Seller market shift: Realtor.com forecasts sellers will face another year of rising home inventory and sluggish sales as the market continues moving toward better balance 2
Buyer advantages growing: More buyers expected to successfully navigate market challenges in 2026, with improved affordability and more negotiating power
Inventory growth patterns: Active listings projected to grow 8.9% in 2026, outpacing sales growth and providing buyers with more options
Price moderation effects: Nominal price growth of just 2.2% expected to help buyers’ incomes catch up through “slow normalization process”

MORTGAGE TECHNOLOGY AND INNOVATION

Digital transformation momentum: Mortgage industry continued investing in artificial intelligence and automation technologies to streamline origination and servicing processes
Efficiency focus: Companies prioritized technology solutions to reduce processing times and improve customer experience amid competitive market conditions
Innovation investment: Despite market challenges, technology spending remained priority for maintaining competitive advantage
Process automation: Emphasis on automated underwriting and document processing to reduce operational costs

REGULATORY COMPLIANCE FOCUS

Compliance prioritization: Mortgage lenders continued treating compliance and fraud prevention as critical business functions rather than cost centers 18
Risk management emphasis: Companies failing to prioritize compliance faced significant risks including regulatory penalties and reputational damage
Operational integration: Compliance functions increasingly integrated into core business operations rather than treated as separate departments
Technology solutions: Investment in compliance technology to automate monitoring and reporting requirements

NETFLIX’S $72 BILLION WARNER BROS ACQUISITION RESHAPES HOLLYWOOD REAL ESTATE

Deal Size: $72 billion acquisition includes Warner Bros. studios, HBO, and HBO Max, combining over 100 million square feet of global real estate 8
Real Estate Portfolio: Warner Bros.’ 97 million square feet includes iconic Burbank Studios with 30 soundstages and UK’s Leavesden Studios 8
Strategic Shift: Netflix currently leases 5.2 million square feet while owning few properties; acquisition would make it one of largest physical media landlords in entertainment 8
Timeline: Deal faces regulatory review and shareholder approval, with completion expected by late 2026 pending Warner Bros. Discovery’s planned spinoff 8

INDUSTRY CONSOLIDATION EXPECTED TO DRIVE COST SAVINGS

Consolidation Plans: Overlapping headquarters in Hollywood and Burbank likely to be streamlined as part of integration 8
Savings Target: Netflix projects $2-3 billion in annual savings within three years of closing, partly from cutting redundant leases and consolidating operations 8
Market Context: Deal comes as studio space demand declined, with LA soundstage occupancy dropping to 63% from over 90% pre-pandemic 8

COMMERCIAL REAL ESTATE COMPENSATION TRENDS SHOW MARKET CAUTION

2025 Growth: Industry experienced uneven compensation growth with companies taking cautious approach in slower market environment 9
2026 Outlook: Wage growth expected to cool with companies focusing on retention, modest raises, and internal promotions rather than aggressive hiring 9
Incentive Changes: Many firms rethinking incentive structures as market recalibrates, reflecting broader uncertainty in CRE fundamentals 9

LOOKING AHEAD: SIX FORCES RESHAPING CRE IN 2026

Key Forces: Rising costs, supply shortages, enhanced user experience demands, AI implementation requirements, energy efficiency mandates, and improved market access 10
Success Strategy: Companies that adapt with focus and flexibility expected to lead next era of global property market 10
Integration Approach: Success coming from integrated strategies linking cost control, energy use, digital tools, and tenant experience 10