Daily Dose of Real Estate

Daily Dose of Real Estate for December 17

FHA loans have captured a record 37% market share as buyers scramble for affordable financing options. Renters are finally catching a break with national median rents falling for the 28th consecutive month to $1,693, making five metro areas actually affordable for dual minimum wage earners— doesn’t sound that impressive but it also would have seemed impossible just two years ago. The Federal Reserve’s acknowledgment that housing activity remains “weak” while unemployment hits a four-year high suggests 2026 may bring some market normalization – although I can’t even remember a “normal” housing market in the past 20+ years.

The commercial real estate market continues its uneven recovery with San Francisco and NYC office spaces finally showing signs of life after years of pandemic-induced hibernation. Industrial storage has become the unexpected darling of institutional investors with rents up 123% since 2020. Meanwhile, artificial intelligence is apparently revolutionizing everything from deal sourcing to due diligence. Google is testing new home listing features that could disrupt Zillow and other real estate platforms – nice to finally see some disruption in real estate and mortgage :/ 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

Federal Reserve maintains cautious stance as unemployment hits 4-year high of 4.6% in November, with mortgage rates holding steady at 6.27% for 30-year loans 1 2
Rental affordability improves for minimum wage earners with national median rent falling to $1,693 (-1.0% annually) for 28th consecutive month, while five metros now affordable for dual minimum wage households 3
New home mortgage applications rise 3.1% annually despite 7% monthly decline, with FHA loans reaching historic 37% share as affordability pressures mount 4
Fed’s third rate cut reduces builder financing costs with federal funds rate now at 3.5%-3.75% range, though Chair Powell notes housing activity remains “weak” 5
Housing price appreciation slows dramatically to projected 0.9% by early 2026, down from 1.5% in October, signaling market cooling 6
Office Recovery Accelerates: San Francisco and NYC lead national office leasing boom with SF recording 158% growth over two years 1
Industrial Storage Surge: IOS rents soar 123% since 2020 as institutional capital floods the sector with $490M+ in recent deals 2
Multifamily Transaction Activity: Aimco sells $455M Chicago portfolio as commercial/multifamily borrowing rose 27% year-over-year in Q3 3
AI & REIT Consolidation: Technology and capital concentration reshape real estate investment strategies heading into 2026 4

RESIDENTIAL REAL ESTATE MARKETS

The residential market continues facing significant headwinds with increased inventory approaching pre-pandemic levels while sales remain at 1995 lows. Regional variations are emerging with Florida leading transaction growth while price appreciation slows nationally to projected 0.9% by early 2026.

MARKET FUNDAMENTALS SHOW CONTINUED PRESSURE

Housing inventory increases sharply approaching pre-pandemic levels while sales track 2024 levels, the lowest since 1995, creating sustained downward price pressure 7
Case-Shiller National Index growth slows to just 1.3% year-over-year in September, down from 4.2% in January 2025, reflecting ongoing market challenges 7
National median list price slips 0.4% year-over-year to $415,000 in November, marking a shift from previous growth trends 8

RENTAL MARKET SHOWS SUSTAINED AFFORDABILITY IMPROVEMENTS

National median rent falls for 28th consecutive month to $1,693 in November, down $17 (-1.0%) from last year, though still 17.2% higher than November 2019 3
Five metros now affordable for dual minimum wage earners including Buffalo ($1,176 rent), Rochester ($1,339), St. Louis ($1,305), Phoenix ($1,445), and Kansas City ($1,387) 3
Detroit and Jacksonville poised to join affordable metros in 2026 due to scheduled minimum wage increases, with Florida markets seeing most significant improvement 3

REGIONAL MARKET VARIATIONS EMERGE

Florida leads transaction growth with weekly pending sales already 10% to 15% higher than last year, contrasting with slower markets in New York tri-state area and Chicago 9
Midwest remains only region with price growth posting 1.7% increases in both median list price and price-per-square-foot measures in November 8
Luxury market concentrates in ski destinations with Aspen dominating November’s most expensive sales, including four of the ten priciest transactions nationwide 10

MORTGAGE MARKETS

Mortgage rates held steady despite Fed cuts, with 30-year rates at 6.27% while new home purchase applications showed mixed signals. FHA loans reached a historic 37% market share as affordability pressures intensify, reflecting a significant shift in mortgage product mix.

INTEREST RATES HOLD STEADY DESPITE FED ACTIONS

30-year mortgage rates remain at 6.27% as of December 16, showing only slight improvement despite Fed’s third consecutive rate cut, with rates consolidating in narrow range since early September 1
Volatility risks remain elevated as markets await Thursday’s Consumer Price Index report, the heaviest hitting monthly inflation data that could drive more aggressive rate trading 1
Purchase rate lock volume remains muted down 25% from 2019 levels and sharply below 2020-2021 peaks, though up 5% year-over-year 6

FED RATE CUT BENEFITS BUILDER FINANCING

Federal funds rate reduced to 3.5%-3.75% range in Fed’s third and final 2025 cut, helping reduce financing costs for builder and developer loans 5
Fed Chair Powell acknowledges housing weakness noting activity remains “weak” with low supply and homeowners locked-in due to low-rate mortgages, while U.S. hasn’t built enough housing 5
Notable FOMC dissent emerges with largest level since September 2019, as two members preferred no change while one supported 50-basis-point reduction 5

NEW HOME PURCHASE APPLICATIONS SHOW MIXED SIGNALS

November applications increase 3.1% annually but decline 7% month-over-month on unadjusted basis, with estimated sales rate of 755,000 units down 2.1% from October 4
Average loan size decreases from $381,404 in October to $378,063 in November, reflecting both market conditions and changing buyer behavior 4

FHA LOANS REACH HISTORIC MARKET SHARE

FHA loans hit record 37.1% share of new home purchase applications in November, up from just over 30% earlier in 2025, representing highest share in MBA survey history 11
ARM usage increases to 24% of new home purchase applications as borrowers seek ways to extend purchasing power or lower monthly payments 4
Conventional loans comprise 49.5% of applications, with VA loans at 12.7% and RHS/USDA loans at 0.7% 4

REGULATORY DEVELOPMENTS

Federal regulators made significant moves with the Fed terminating enforcement actions against major institutions while the FDIC streamlined branch establishment rules. HUD’s latest report highlighted persistent affordable housing challenges despite record apartment construction.

FEDERAL RESERVE ENFORCEMENT ACTIONS TERMINATED

Goldman Sachs enforcement order terminated on December 4, 2025, ending cease and desist order originally dated October 22, 2020 12
Metropolitan Commercial Bank order also terminated on same date, ending cease and desist order from October 16, 2023, representing significant regulatory milestones 12

FDIC REGULATORY UPDATES

Branch establishment rules streamlined with most filings qualifying for expedited processing deemed approved three business days after submission, eliminating FDIC discretion to remove from expedited processing 13
Erebor Bank deposit insurance approved for Columbus, Ohio institution, subject to maintaining minimum 12% tier 1 leverage ratio during first three years of operation 14

HUD AFFORDABLE HOUSING REPORT HIGHLIGHTS PERSISTENT CHALLENGES

8.5 million very low-income renters continue facing severe rent burdens despite record apartment construction, highlighting disconnect between supply and affordability 15
Lock-in effect constrains inventory particularly impacting high-priced markets by suppressing mobility and limiting available housing stock 15

ECONOMIC NEWS

The labor market showed significant softening with unemployment reaching a 4-year high of 4.6% while consumer spending remained weak at 1.3% growth. The economic recovery continues showing K-shaped patterns with high-income consumers outperforming lower-income groups.

LABOR MARKET SHOWS CONTINUED SOFTENING

Unemployment rises to 4.6% in November, highest level since September 2021, up from 4.2% in November 2024 with total unemployment reaching 7.1 million people 2
Payroll growth slows dramatically with only 64,000 jobs added in November, complicated by federal government shutdown from October 1 through November 12, 2025 2
Federal employment continues declining losing 6,000 jobs in November following sharp 162,000 decline in October as deferred resignation offers took effect 2

CONSUMER SPENDING PATTERNS REFLECT ECONOMIC UNCERTAINTY

Real consumer spending growth weak at 1.3% annualized in 2025, well below typical 2% rate and significantly lower than 2.95% growth in 2024 16
K-shaped recovery evident with high-income shoppers increasing spending 2.6% in November while lower-income groups lagged at just 0.6% growth according to Bank of America data 17
Wage growth moderates with average hourly earnings rising just 0.1% monthly and 3.5% annually in November, representing smallest annual gain since 2021 2

INFLATION OUTLOOK AND POLICY IMPLICATIONS

Treasury Secretary predicts substantial inflation drop in first six months of 2026, citing falling rents, lower energy prices, and increased capital investment as early relief signs 18
Federal Reserve officials welcome wage moderation as it reduces inflationary pressures while supporting case for continued monetary easing 2
Concerns remain about tariff impacts and trade policy effects on pricing in 2026 despite optimistic inflation projections 18

COMMERCIAL REAL ESTATE MARKETS (INCLUDING MULTIFAMILY)

Major metropolitan office markets are showing strong recovery signals while multifamily transactions remain active despite financing headwinds. Industrial real estate faces supply constraints that could impact manufacturing growth initiatives.

OFFICE MARKET RECOVERY

San Francisco Surge: Office leasing activity posted 158% growth over two years with Q3 2025 showing 112% year-over-year increase 1
Vacancy Improvements: SF vacancy dropped 100 basis points for first time since pandemic with rents stabilizing at $62 PSF and Class A reaching $74.50 1
Premium Space Demand: View spaces now command $100 PSF with just 5% vacancy as office attendance reaches 42.5% in SF and 53% in NYC 1
NYC Momentum: Five straight quarters of positive absorption with Q3 2025 leasing up 34% year-over-year and deal sizes rebounding 40% from 2023 lows 1
Top-Tier Pricing: NYC top-tier office space exceeds $200 PSF while availability dropped 390 basis points over two years 1

MULTIFAMILY TRANSACTIONS

Aimco Portfolio Sale: $455 million Chicagoland portfolio sale to LaTerra Development and Respark Residential includes 2,524 units across 19 properties 3
Deal Structure: Transaction includes $20 million non-refundable deposit by January 15, 2026, with closing expected Q1 2026 and net proceeds of $160 million after debt 3
Brooklyn Development: 65 multifamily construction projects underway comprising 20,445 units with ten developments breaking ground this year 5
Borrowing Activity: Commercial and multifamily borrowing increased 27% year-over-year in Q3 2025 though quarter-over-quarter growth was modest at 12% 3

INDUSTRIAL REAL ESTATE CHALLENGES

Manufacturing Delays: Industrial real estate shortages delay reindustrialization efforts despite federal funding as companies struggle to find properly zoned sites 6
Infrastructure Constraints: Essential infrastructure including transportation access, broadband, power capacity, and water systems remain inadequate for manufacturing needs 6
Power Grid Issues: US electric grid maxing out with data centers consuming megawatts and locking power-ready sites, leaving manufacturers facing years-long grid delays 6

RETAIL LEASING GROWTH

QSR Dominance: Quick-service restaurants drove 20% of all new US retail leases over the past year with top 50 QSR brands adding 2,700+ net new locations in 2024 7
Consumer Spending: Restaurant spending hit $100B+ in July 2025, nearly 50% above pre-pandemic levels, led by Starbucks, Chipotle, and Wingstop 7

COMMERCIAL FINANCING MARKETS

Interest rates remain elevated while capital markets show signs of institutional reallocation from traditional real estate to alternative investments. REIT consolidation accelerates amid balance sheet pressures.

CAPITAL MARKET TRENDS

AI Integration: Artificial intelligence and capital concentration reshaping real estate investment strategies heading into 2026 with focus on operational performance 4
Institutional Shift: Domestic institutions stepping in as global investors pull back due to geopolitical uncertainty and tighter monetary policy 4
Capital Reallocation: Investment moving from traditional core real estate assets to private credit and infrastructure opportunities 4
Retirement Plan Access: Regulatory changes may open doors for defined-contribution retirement plans to include private real assets, potentially unlocking trillions in new investment 4

REIT CONSOLIDATION ACCELERATES

Market Pressure: Publicly traded REITs face growing pressure leading to increased take-private deals, mergers, and activist interventions 4
Concentration Levels: Top 10 REITs account for 44% of sector enterprise value highlighting intense market concentration 4
Acquisition Targets: Smaller REITs face balance sheet challenges and higher SG&A burdens making them prime acquisition candidates 4
Structured Capital: Expect more structured capital deals including preferred equity and mezzanine debt as liquidity remains uneven across markets 4

INDUSTRIAL STORAGE INVESTMENT SURGE

Rent Growth: Industrial Outdoor Storage rents soared 123% since 2020 with vacancy averaging just 4.9% compared to 10.5% for bulk warehouses 2
JP Morgan: $95 million acquisition of 16-property IOS portfolio demonstrates institutional appetite for the sector 2
Morgan Stanley: $92 million purchase of single Southern California facility shows premium pricing for quality assets 2
Catalyst Investment: $163.5 million recapitalization with state pension fund highlights institutional backing 2
Alterra/JP Morgan: $490 million sale of 51-property portfolio to Peakstone Realty Trust marks largest recent transaction 2

INDUSTRY NEWS

The real estate industry is positioning for significant technology-driven changes while facing ongoing legal challenges in mortgage servicing. New fintech ventures are emerging to tokenize real estate assets as the sector adapts to post-pandemic realities.

FINTECH AND INNOVATION DEVELOPMENTS

World Property Exchange launches as Miami-based fintech creating SEC-regulated, AI-driven digital exchange for tokenized real estate assets, targeting $654 trillion global real estate market 19
Blockchain technology integration aims to make global real estate more liquid, transparent, and democratized through RWA-backed stablecoins and digital asset trading 19

LEGAL AND SERVICING DEVELOPMENTS

FHA COVID foreclosure lawsuit filed against Servbank and Mr. Cooper over alleged violations of HUD’s COVID-19 loss mitigation requirements, highlighting ongoing servicing challenges 20
Pandemic relief program implementation continues facing legal scrutiny as borrowers challenge servicer compliance with federal requirements 20

MULTIFAMILY AND REGIONAL DEVELOPMENTS

Prestige Companies completes Miami joint venture community, adding to region’s growing multifamily inventory as Florida markets show continued strength 21
Tampa multifamily market maintains momentum in November, reflecting broader Florida market dynamics and regional transaction growth patterns 21

CRE TECHNOLOGY & AI INTEGRATION

AI Transformation: Artificial intelligence transforming real estate dealmaking from sourcing and underwriting to valuation and post-deal integration 4
Data Mining: AI tools mining massive datasets including tenant behavior, energy use, and zoning data to identify undervalued properties and accelerate due diligence 4
Asset Class Convergence: Technology driving convergence as properties evaluated by operational performance and digital infrastructure needs rather than just asset type 4

MAJOR OFFICE TRANSACTIONS

TRT Holdings: Omni Hotels owner acquired St. Paul Place office tower in Dallas Arts District marking continued investment in urban office properties 9
Crescent Real Estate: Largest office sale of 2025 was acquisition of Texas Capital Center at 2000 McKinney Avenue backed by Fort Worth billionaire John Goff 9

HOUSING POLICY DEVELOPMENTS

HUD Report: Affordable housing gap persists despite surging apartment supply with severe rent burdens continuing to affect low-income renters 10
Supply Disconnect: Report highlights disconnect between increased apartment construction and ongoing affordability challenges for target demographics 10

PROPTECH DEVELOPMENTS

Google Testing: New home listing features in search results potentially impacting companies like Zillow, CoStar, and Rocket Companies 11
Market Impact: New real estate ad format for buy-side agents could reshape how consumers discover properties online 11
Valuation Pressure: Zillow and other real estate platforms lost over 60% of their value in 2025 amid increased competition 11