“Build the inventory and the buyers will come.” Maybe not. Inventory has been going up for almost 2 years and sales remain at multi-decade lows – largely due to affordability challenges. Non QM to the rescue? Embroiled Fed Governor Lisa Cook is one of 12 officials responsible for setting interest rates next month. Clock is ticking and Cook has filed suit to prevent her firing (90% of a rate cut). Moody’s analyst calls it “the feverish concern of these mass defaults and mass major losses geographically (in CRE assets) across the U.S., independent of region, is taken off the table.” The extend and pretend loss mitigation tactics of CRE special servicers appears to be paying off. Let’s get you caught up and out the door in 3 minutes. Tim
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🔑 KEY TAKEAWAYS
The housing market is experiencing unprecedented stagnation as buyers, sellers, and builders all retreat simultaneously, creating the most challenging environment since the 2008 financial crisis.
- Housing Market Hits Collective Pause: Despite 21 consecutive months of rising inventory reaching over 1 million homes, sales remain near multi-decade lows as buyers, sellers, and builders all pull back due to affordability challenges and elevated mortgage rates 1
- Buyers and Sellers Both Retreating: There are only 1.43 million homebuyers in the market—the lowest level since 2013 aside from the pandemic start—while sellers have declined by 14,000 since May, marking the first drop in two years 2
- Home Price Growth Hits Decade Low: National home prices rose just 1.9% year-over-year in June according to Case-Shiller, the slowest pace since summer 2023, while FHFA reported 2.9% annual growth with significant regional divergence 3 4
- Purchase Activity Defies Rate Increases: Mortgage purchase applications rose 2% week-over-week and are 25% higher than the same week last year, with average loan size hitting a two-month high of $433,400 despite 30-year rates climbing to 6.69% 5
- Political Turmoil Rocks Federal Reserve: President Trump’s firing of Fed Governor Lisa Cook sparked legal challenges and market volatility, with Treasury yield curves steepening as investors bet on short-term rate cuts but long-term increases 6
- Major Mortgage Merger Advances: FHFA approved Fannie Mae and Freddie Mac’s endorsement of Rocket Companies’ acquisition of Mr. Cooper Group, with conditions limiting Rocket’s servicing portfolio share to 20% to maintain market stability 7
- Extreme Regional Market Divergence: Miami leads buyer’s markets with 161% more sellers than buyers, while Newark represents the strongest seller’s market with 52% fewer sellers than buyers, highlighting unprecedented geographic disparities 2
🏠 RESIDENTIAL REAL ESTATE MARKETS
The residential market is experiencing what economists call a “collective slowdown” with buyers, sellers, and builders all retreating simultaneously. This creates an unusual dynamic where inventory is rising but sales remain stagnant, leading to the most buyer-friendly conditions since 2008—but only for those who can afford to buy.
MARKET STAGNATION DEFINES SUMMER 2025
- Sales at Multi-Decade Lows: Home sales remain near historic lows despite inventory growing 28% this summer, reaching over 1 million homes for three straight months—the highest levels since November 2019 1
- “Anna Karenina Housing Market”: Realtor.com economists describe current conditions where “everyone is unhappy in their own way”—buyers can’t afford homes, sellers can’t get their prices, and builders face a “three-headed monster” of low demand, high financing costs, and expensive materials 1
- Affordability Crisis Deepens: Only 28% of homes on the market are priced within reach of the typical household earning the U.S. median income of $78,770, with buyers paying over $1,200 more per month compared to 2019 due to higher prices and elevated mortgage rates 1
- Median List Price Stabilizes: National median list price has remained relatively unchanged near $440,000 since 2022, but elevated mortgage rates have pushed monthly payments significantly higher 1
UNPRECEDENTED BUYER-SELLER DYNAMICS
- Historic Imbalance: Sellers outnumber buyers by 36.3%—the largest gap in records dating back to 2013, with only 1.43 million homebuyers in the market (lowest level since 2013 aside from pandemic onset) 2
- Seller Retreat: Number of sellers has dipped by roughly 14,000 since May, falling for the first time in two years as frustrated sellers choose to delist rather than accept lower prices 2
- Most Buyer-Friendly Market Since 2008: Despite being labeled a “buyer’s market,” it only benefits those who can afford to buy, as many Americans have been priced out entirely 2
- Spooked Market Psychology: “Homebuyers are spooked by high home prices, high mortgage rates and economic uncertainty, and now sellers are spooked because buyers are spooked,” according to Redfin Senior Economist Asad Khan 2
EXTREME REGIONAL MARKET DIVERGENCE
- Strongest Buyer’s Markets: Miami leads with 160.9% more sellers than buyers, followed by Fort Lauderdale, FL (151.2%), Austin, TX (123.8%), West Palm Beach, FL (123.4%), and San Antonio (113.1%) 2
- Strongest Seller’s Markets: Newark, NJ leads with 52% fewer sellers than buyers, followed by Nassau County, NY (40.5% fewer), Montgomery County, PA (36.1% fewer), New Brunswick, NJ (22.2% fewer), and Minneapolis (12.5% fewer) 2
- Market Distribution: 35 of the 50 most populous metros are buyer’s markets, 10 are balanced markets, and only 5 are seller’s markets 2
- Geographic Patterns: South and West regions experience slower sales and price declines due to oversupply, while Northeast and Midwest remain tight markets with resilient demand 1
SELLER DELISTING TRENDS EMERGE
- Delisting Acceleration: In markets like Miami, Phoenix, and Riverside, for every two or three fresh listings, one home is being pulled off the market as sellers reassert control 1
- Inventory Growth Deceleration: Overall inventory growth appears to be slowing as seller pullback blunts momentum, with new listings declining each month since April 1
- Price Protection Strategy: Frustrated sellers choose to delist rather than accept lower prices, tempering supply and keeping prices from falling more sharply 1
- Market Control Dynamics: Delisting trend represents sellers’ attempt to maintain leverage in a market where their negotiating power is fading 1
💰 MORTGAGE MARKETS
Mortgage markets are showing mixed signals with purchase activity gaining momentum despite rising rates, while the industry undergoes significant consolidation. Non-QM lending is emerging as a growth area as traditional agency pipelines face constraints.
PURCHASE ACTIVITY GAINS MOMENTUM DESPITE RATE INCREASES
- Weekly Application Growth: Mortgage purchase applications rose 2% week-over-week and registered 25% higher activity than the same week last year, representing the strongest week for purchase demand in over a month 5
- Rate Environment: 30-year fixed mortgage rate climbed to 6.69% from 6.68% the previous week, yet buyers appear less sensitive to rates at these elevated levels 5
- Average Loan Size: Purchase applications reached $433,400, hitting a two-month high and reflecting both higher home prices and buyers’ willingness to enter the market despite elevated costs 5
- Market Dynamics: MBA’s Joel Kan notes that “prospective buyers appear to be less sensitive to rates at these levels and are more active, bolstered by more inventory and cooling home-price growth in many parts of the country” 9
REFINANCE ACTIVITY COOLS AS RATES RISE
- Weekly Decline: Refinance applications declined 4% week-over-week as borrowers became more sensitive to the slight uptick in rates 5
- Year-over-Year Growth: Despite weekly decline, refinance activity remains 19% higher than the same week last year, indicating continued opportunities for homeowners to optimize mortgage terms 5
- Market Composite Index: Overall mortgage loan application volume decreased 0.5% on a seasonally adjusted basis 5
- Future Relief Potential: ICE projects 30-year fixed mortgage rate could drop to 6.3% by January 2026, potentially enabling 3 million homeowners to refinance, with 4 million eligible if rates reach 6.125% 10
MAJOR INDUSTRY CONSOLIDATION ADVANCES
- FHFA Approval: Federal Housing Finance Agency approved Fannie Mae and Freddie Mac’s endorsement of Rocket Companies’ acquisition of Mr. Cooper Group, marking significant step toward closing one of mortgage industry’s largest deals 7
- Market Concentration Limits: Approval comes with conditions limiting Rocket’s share of Fannie Mae and Freddie Mac’s servicing portfolio to 20% to prevent excessive market power concentration 7
- Regulatory Oversight: FHFA stated “no market participant should have greater than 20% of the combined Fannie Mae and Freddie Mac servicing portfolio to ensure the safety and soundness of the mortgage market” 7
- Industry Consolidation Trend: Deal reflects growing concerns about market concentration as mortgage industry continues consolidating around major players 7
NON-QM LENDING GAINS TRACTION
- Growth Opportunity: Non-Qualified Mortgage lending experiencing significant growth as traditional agency pipelines stagnate, providing brokers with new business expansion avenues 11
- Borrower Profiles: Homeowners sitting on significant equity can be tapped through Non-QM products, with borrowers showing stronger credit profiles than commonly perceived—average FICO scores around 735 and low debt-to-income ratios 11
- Operational Challenges: Sector faces challenges with low pull-through rates around 50%, prompting companies to invest in proprietary technology tools for pricing, prequalification, and compliance 11
- Technology Investment: Technological innovations making it easier to navigate Non-QM lending complexities and improve borrower experience, positioning sector for continued growth 11
📊 ECONOMIC & POLITICAL NEWS
Political turmoil at the Federal Reserve is creating market volatility as President Trump’s firing of Fed Governor Lisa Cook faces legal challenges. Meanwhile, markets anticipate rate cuts in September as economic data suggests shifting Fed priorities toward employment concerns.
FEDERAL RESERVE FACES POLITICAL UPHEAVAL
- Unprecedented Firing: President Trump announced firing of Federal Reserve Governor Lisa Cook, creating significant political and market turmoil with Cook’s legal team asserting Trump lacks authority to remove her “for cause” 6
- Legal Challenge: Cook’s lawyer Abbe Lowell stated “President Trump has no authority to remove Federal Reserve Governor Lisa Cook,” and she has filed lawsuit challenging the removal 6
- Market Impact: Treasury yield curves steepened with short-term yields falling and long-term yields rising as investors anticipate lower rates near-term but higher rates long-term due to Fed independence concerns 6
- September Rate Cut Expectations: Markets widely anticipate Fed will cut benchmark interest rate from current 4.25%-4.5% range at September 16-17 policy meeting, with CME FedWatch showing 87.3% probability of 25 basis point cut 12
FED CHAIR SIGNALS RATE CUT POTENTIAL
- Policy Shift Signals: Federal Reserve Chair Jerome Powell signaled potential monetary policy easing in September, noting “the balance of risks appears to be shifting” with particular attention to rising downside risks for labor market 13
- Dual Mandate Focus: Powell’s comments suggest Fed’s dual mandate of maintaining both price stability and full employment is driving consideration of rate cuts despite ongoing inflation concerns 13
- Tariff Impact Assessment: Powell acknowledged while tariffs have contributed to elevated goods prices, their long-term impact on inflation may be limited, with recent trade developments potentially alleviating some inflationary pressures 13
- Housing Inflation Trends: Fed chair observed downward trend in housing-related inflation and softening housing data, which could signal future monetary policy adjustments 13
INFLATION DATA AWAITED
- Critical PCE Release: Friday’s personal consumption expenditures index release will be particularly significant as last major economic data Fed officials will see before September policy meeting 14
- Inflation Expectations: Economists expect report to show inflation remained at about 2.6% in July compared to year ago, with businesses warning about higher costs and prices due to tariffs 14
- Policy Meeting Influence: Upcoming inflation report could be especially influential because it precedes Fed’s critical September 16-17 meeting where potential interest rate cut is widely anticipated 14
- Market Pricing: Financial markets pricing in two 25 basis point cuts over rest of 2025, with second likely in December, and three additional rate cuts in 2026 12
STATE BUDGET IMPACTS FROM FEDERAL POLICY
- Colorado Budget Crisis: Colorado became first state to grapple with significant budget shortfalls triggered by federal tax and spending bill HR1, which extended Trump’s 2017 tax cuts and made major cuts to social safety net programs 15
- $1 Billion Gap: State facing approximately $1 billion in budget gaps, prompting special legislative session to address crisis through tax increases and fund reallocations 15
- Governor’s Response: Governor Jared Polis stated federal legislation “not only increased the federal deficit by trillions of dollars, but also increased the state deficit by hundreds of millions of dollars” 15
- National Preview: Colorado’s response will likely serve as preview of how other states will address similar financial ramifications in coming months, as bill’s passage came after most states had set their budgets 15
🏢 COMMERCIAL REAL ESTATE MARKETS
The commercial real estate sector is showing clear signs of recovery with transaction volumes increasing, major portfolio deals signaling institutional confidence, and regulatory clarity emerging on key issues.
MARKET RECOVERY SIGNALS STRENGTHEN
The feared CRE “doomsday” scenario appears to have been averted as market fundamentals stabilize and transaction activity rebounds.
- Analyst Confidence: Stephen Lynch of Moody’s Ratings stated that “the feverish concern of these mass defaults and mass major losses geographically across the U.S., independent of region, is taken off the table” 1
- Transaction Volume Growth: Commercial real estate transaction volumes increased 13% in H1 2025 compared to the same period last year, according to MSCI Real Assets data 1
- Extend-and-Pretend Success: The strategy of loan modifications to avoid immediate losses has largely succeeded in providing breathing room for market stabilization 1
- Valuation Stabilization: Property valuations have shown signs of stabilization rather than continued decline across most markets 1
INVESTMENT ACTIVITY REBOUNDS ACROSS SECTORS
National CRE investment activity is showing broad-based improvement with multifamily leading the recovery and office assets demonstrating unexpected resilience.
- Q2 2025 Investment Volume: National CRE investment reached $115 billion, representing a 3.8% year-over-year increase 2
- Multifamily Leadership: Multifamily investments surged 39.5% year-over-year, leading all property sectors in growth 2
- Office Resilience: Office investments showed an 11.8% increase, defying expectations of continued decline 2
- Pricing Surge: Median price per square foot climbed 13.9% annually across most property types 2
- 2025 Projections: CBRE projects national CRE sales to rise 10% in 2025, with office assets expected to lead at 19% growth despite trimming US GDP forecast to 1.5% 6
🏠 MULTIFAMILY MARKET SHOWS RESILIENCE
The multifamily sector demonstrated remarkable strength with significant financing growth and stabilizing sales activity, supported by strong GSE participation.
- Loan Origination Surge: Multifamily loan originations spiked 66% year-over-year in Q2 2025, according to Mortgage Bankers Association research 3
- GSE Support: Fannie Mae and Freddie Mac financing increased 59%, with the GSEs closing 2024 with more than $55 billion and $66 billion in volume, respectively 3
- July Sales Activity: Apartment sales reached $10.6 billion in July, marking a 1% YoY increase 5
- Property Value Stabilization: Property values rose 0.4% after experiencing a 6.6% annual decline in the previous year 5
- Cap Rate Stability: Capitalization rates held steady at 5.7%, reflecting market adjustment to higher borrowing costs 5
- Portfolio Deal Growth: Portfolio and entity-level deals rose 11% to $1.6 billion, reflecting renewed appetite for larger trades 5
REGIONAL CRE MARKET PERFORMANCE
The New York Tri-State region led national performance with strong growth across multiple property sectors and significant international investment activity.
- Tri-State Growth: New York Tri-State CRE sales climbed to $8.8 billion in Q2, an 11% year-over-year increase 6
- Retail Sector Leadership: Retail investment surged 50.9% to $1.59 billion, making it the fastest-growing asset class in the quarter 6
- Industrial Performance: Industrial posted $1.73 billion (up 21.3%) in investment activity 6
- Office Recovery: Office recorded $2.19 billion (up 18.3%) in transactions 6
- International Investment: Cross-border investment into the Tri-State region spiked 500% year-over-year in Q2, led by Japan with $1.1 billion in investments 6
- Borough Performance: The Bronx posted the sharpest growth with investment activity surging 178.9% in the trailing four quarters through June 6
MAJOR CRE TRANSACTION ACTIVITY
July’s largest real estate financing deals were dominated by New York properties, with significant retail and residential transactions leading the market.
- Crown Building Refinancing: Brookfield Properties secured a $601 million refinancing from London-based Cale Street Partners for the luxury Fifth Avenue retail property housing Bulgari, Ermenegildo Zegna, and Chanel 4
- Penn 11 Financing: Vornado Realty Trust obtained a $450 million CMBS loan for Penn 11, contributing $50 million in equity to close a financing gap 4
- Long Island City Development: Baron Property Group and LargaVista secured a $389 million construction loan for a 46-story residential tower with 451 rental units and 110 condominiums 4
COMPANY ACTIVITY AND M&A
Major portfolio transactions and refinancing activity demonstrate renewed institutional confidence and capital deployment across the multifamily sector.
- HHHunt Portfolio Refinancing: HHHunt Corporation secured $619 million in refinancingfrom PGIM Real Estate for a 15-property Southeast portfolio spanning Virginia, North Carolina, Maryland, Tennessee, and Georgia, supporting ownership of over 8,600 units 3
- Blackstone Divestment: Blackstone’s LivCor sold Cyan Southcreek, a 380-unit multifamily community in Overland Park, Kansas, to Bonaventure Senior Living for $90 million 8
- Major Portfolio Deals: Elme Communities sold a 19-property portfolio to Cortland Partners for $1.6 billion, while Aimco disposed of 2,719 units across Massachusetts, New Hampshire, and Rhode Island to Harbor Group International for $740 million 5
- REIT Acquisition: Morgan Properties agreed to acquire Dream Residential REIT in a $354 million all-cash deal
🏢 INDUSTRY NEWS
The real estate industry is experiencing significant capital flows with multifamily lending surging dramatically while construction activity slows. Major portfolio transactions signal continued institutional confidence despite market challenges.
MULTIFAMILY LENDING EXPERIENCES DRAMATIC SURGE
- Exceptional Growth: Multifamily lending sector posted 66% year-over-year growth in second quarter 2025 loan originations according to Mortgage Bankers Association research 16
- GSE Performance: Fannie Mae and Freddie Mac financing specifically increased 59%, with the two government-sponsored enterprises closing 2024 with more than $55 billion and $66 billion in volume, respectively 16
- Strong Fundamentals: Multifamily sector absorbed record 794,160 units annually, leading to vacancy rates dropping to 4.3%—lowest in nearly three years 16
- Rent Growth Dynamics: Despite strong demand and low vacancy rates, rent growth remained modest at 0.8%, significantly below long-term average of 2.8%, creating unusual market dynamic suggesting potential for accelerated rent growth as supply slows 16
BUILDER ACTIVITY SLOWS AMID RISING COSTS
- Construction Headwinds: Construction activity continues facing headwinds as builders navigate high financing costs, weak buyer demand, and new tariffs on building materials 1
- Permit and Starts Data: Single-family home construction permits rose just 0.2% month-over-month in June but remained 4.4% lower than previous year, while housing starts increased 4.6% from May but were still down 0.5% compared to June 2024 1
- Three-Headed Monster: Builders face what Realtor.com describes as a “three-headed monster” of low demand, high financing costs, and expensive materials 1
- Housing Shortage Context: Pullback comes at critical time when country is still short an estimated 4 million homes, with builders responding by constructing smaller homes (median size decreased from 2,197 to 2,125 square feet) 1
- Construction Backlog: Number of new single family homes sold but not yet started reached all-time high in June, up 19% year-over-year and 22% since 2022, suggesting growing backlog for hesitant builders 1
MAJOR PORTFOLIO TRANSACTIONS SIGNAL MARKET CONFIDENCE
- HHHunt Refinancing: HHHunt Corporation secured $619 million in refinancing through PGIM Real Estate for 15-property Southeast portfolio, utilizing both Freddie Mac and Fannie Mae loans spanning Virginia, North Carolina, Maryland, Tennessee, and Georgia 16
- Large-Scale Apartment Deals: Major transactions included Elme Communities selling 19-property portfolio to Cortland Partners for $1.6 billion and Aimco unloading 2,719 units across Massachusetts, New Hampshire, and Rhode Island to Harbor Group International for $740 million 16
- Institutional Confidence: Large-scale transactions reflect growing acceptance of sustained higher interest rates and renewed appetite for portfolio deals among institutional investors 16
- Geographic Diversification: Portfolio transactions span multiple states and property types, indicating broad-based institutional confidence in real estate fundamentals despite market challenges 16