Daily Dose of Real Estate

Daily Dose of Real Estate for December 19

Just six more shopping days until Christmas, folks. Freddie Mac’s new CEO, Kenny Smith, is officially in the saddle, with Mike Hutchins remaining on as President (he’s expected to retire in early 2026). Forty-four of the 50 largest metros posted declining home sales—led by San Jose at -35.1%, Houston at -20.9%, and Oakland at -17.6%. Sellers are pulling listings or staying on the sidelines altogether as weaker demand continues to soften prices. Economists were left slack-jawed—and a bit suspicious—by today’s 2.7% CPI print. Meanwhile, new federal legislation permanently increases 9% LIHTC allocations and lowers the private-activity bond test for many 4% transactions starting in 2026, earning “game-changer” status from industry experts.

Mall investors aren’t buying the consumer doom-and-gloom narrative. Instead, they snapped up 38 mall properties in the first three quarters of 2025. Office markets managed their first price increase since 2022, though they’re still nursing a 33% hangover from their 2021 peak. Multifamily owners are quietly hoping no one notices that a record-high 7.2% vacancy rate hasn’t yet made their borrowing more expensive. And REITs are cautiously dipping their toes back into deal-making as the gap between what they think their properties are worth and what private buyers will actually pay continues to narrow.

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

Pending home sales plummeted 5.8% year-over-year in the biggest decline since early 2025, with only 6 of 50 major metros showing increases 1
Freddie Mac appointed Kenny M. Smith as new CEO effective December 17, bringing 40 years of financial services experience while Michael Hutchins remains president 2
AEI reports median purchase rate held steady at 6.125% in week 50, with purchase rate lock volume down 25% from 2019 levels but up 5% year-over-year 3
Federal Reserve published first bank supervision manual for largest institutions, marking significant transparency initiative under Vice Chair Michelle Bowman 4
Inflation cooled to 2.7% annually in November despite government shutdown data gaps, with shelter costs rising 3.0% year-over-year 5
MBA reports mortgage payment affordability improved for sixth consecutive month, with national median payment down $99 compared to November 2024 6
Mall investment surge: 38 US malls sold in Q1-Q3 2025, matching all of 2024, with occupancy at 91% and rent spreads at 7.5% – highest among retail property types 1
Office market recovery: US office prices rose 7.1% year-over-year to $190 PSF – first increase since 2022, though still 33% below 2021 peak 2
Multifamily vacancy hits record: National vacancy climbed to 7.2% with median rent down 1.0% month-over-month, yet spreads remain steady in low 140s 4
REIT transaction activity rising: Valuation gaps narrowing between public and private markets, with retail, healthcare, industrial, and self-storage REITs leading purchases 5
South Florida industrial dominated by Blackstone: Top 10 deals totaled $822 million with Blackstone selling over half, pricing generally in mid-$200s to high-$300s PSF 6

RESIDENTIAL REAL ESTATE MARKETS

The residential market experienced its most significant downturn in nearly a year, with pending sales falling sharply across most major metros. Market conditions shifted toward buyers as inventory dynamics changed and pricing pressures emerged nationwide.

MARKET CONDITIONS DETERIORATE AMID HOLIDAY SLOWDOWN

Pending home sales dropped 5.8% year-over-year during the four weeks ending December 14, representing the largest decline since early 2025 1
44 of 50 major metros showed declining sales, with San Jose leading at -35.1%, Houston at -20.9%, and Oakland at -17.6% 1
Only six metros posted increases, led by West Palm Beach (+10.7%), Virginia Beach (+6.5%), and Miami (+6.4%) 1
New listings declined 3.1% year-over-year, marking the biggest drop in more than two years and the largest decline of 2025 1

INVENTORY AND PRICING DYNAMICS SHIFT

Total homes for sale increased just 4.2%, the smallest increase since January 2024, despite reduced buyer demand 1
Median sale price reached $387,725, up 1.7% year-over-year, while median asking price rose 2.3% to $378,761 1
Homes taking longer to sell, with typical property requiring 52 days to go under contract—about a week longer than last year 1
Share of homes selling above list price dropped to 21.6% from 24%, with average sale-to-list price ratio declining to 98.1% from 98.4% 1
Months of supply reached 4.5 months, up 0.3 percentage points from previous year, approaching balanced market conditions 1

REGIONAL MARKET VARIATIONS

Detroit led price appreciation at 14.5% year-over-year, followed by Pittsburgh (8.4%), Nassau County NY (7.4%), San Francisco (7%), and New Brunswick NJ (6.5%) 1
Dallas experienced largest price decline at -6.8%, followed by Sacramento (-4.5%), Austin (-4.1%), Oakland (-3.9%), and Seattle (-3.1%) 1
Share of homes going off market within two weeks declined to 23.7% from 26%, indicating slower market pace 1

MORTGAGE MARKETS

Mortgage markets showed mixed signals with rates holding steady but purchase activity remaining muted compared to pre-pandemic levels. Affordability conditions improved for the sixth consecutive month, though application activity remained constrained by limited qualified buyer pools.

RATE ENVIRONMENT AND PURCHASE ACTIVITY

Median purchase rate held steady at 6.125% in week 50 2025, according to AEI Housing Finance Watch 3
Average 30-year rate reached 6.29% on December 15 according to Mortgage News Daily 3
Purchase rate lock volume down 25% from same week in 2019, sharply below 2020 and 2021 levels, but up 5% year-over-year 3
Subdued purchase activity reflects relatively high rates, inventory levels, and diminishing pool of well-qualified entry-level buyers 3

AFFORDABILITY CONDITIONS SHOW IMPROVEMENT

National median mortgage payment decreased to $2,034 in November 2025, down $5 from October and $99 compared to November 2024 6
Mortgage payment to rent ratio improved from 1.45 to 1.35, making homeownership more attractive compared to renting 6
Census Bureau’s national median asking rent increased to $1,534 in Q3, up from $1,494 in Q2 6
Strong household earnings growth combined with lower mortgage rates increased prospective buyers’ purchasing power 6

MARKET APPLICATION TRENDS

Mortgage purchase applications declined 3% from previous week as of December 12, though remained 13% higher year-over-year 1
Redfin Homebuyer Demand Index declined approximately 5% from previous month and was down 15% year-over-year as of December 14 1
Google searches for “homes for sale” decreased 9% from previous month, though remained 10% higher than previous year 1

HOME PRICE APPRECIATION TRENDS

Preliminary year-over-year HPA reached 1.5% in October 2025, with projections of 1.3%, 1.2%, and 0.9% for November 2025, December 2025, and first week of January 2026 respectively 3
Projected HPA has slowed to near zero, largely due to subdued purchase activity, relatively high rates and inventory levels 3

REGULATORY DEVELOPMENTS IN REAL ESTATE

Federal regulators advanced transparency initiatives while significant affordable housing policy changes prepare to reshape the market in 2026. New legislation and state actions are expected to unlock meaningful production capacity, while rating agencies continue evaluating non-prime mortgage securities.

FEDERAL RESERVE ENHANCES BANK SUPERVISION TRANSPARENCY

Fed published first staff manual for supervising largest banks, with Vice Chair Michelle Bowman announcing several additional manuals expected early 2026 4
Manual covers LISCC program though not yet updated to reflect recent name change to GSIB or November supervisory operating principles 4
Additional manuals planned for 2026 include large bank operating committee, capital and liquidity planning, recovery and resolution planning, rating program, enforcement actions, and risk identification system 4

AFFORDABLE HOUSING POLICY DEVELOPMENTS

New federal legislation permanently increases 9% LIHTC allocations and lowers private-activity bond test for many 4% transactions starting in 2026 7
25% bond test for 4% LIHTC transactions described as “game-changer” by industry experts, expected to strengthen deal feasibility 7
Return of 100% bonus depreciation will lower taxable income for equity investors and enhance after-tax yields 7
National shortage of 7.1 million affordable homes for 10.9 million extremely low-income renter households according to National Low-Income Housing Coalition 7

HUD BUDGET AND PROGRAM IMPLICATIONS

Unresolved HUD budget creates uncertainty for project-based vouchers essential to many affordable housing capital structures 7
Only fraction of income-eligible households receive rental assistance, with existing HUD programs already under strain 7
State and local actions increasingly important, with New York increasing capital commitments and California implementing CEQA reforms 7
Private-activity bond supply constraints limit ability to finance affordable housing projects as construction costs remain elevated 7

ECONOMIC NEWS

Economic data showed mixed signals with inflation cooling to 2.7% despite data collection challenges, while labor market conditions softened and consumer spending remained flat. Federal Reserve policy implications remain complex as officials navigate dual mandates.

INFLATION COOLS DESPITE DATA COLLECTION CHALLENGES

November CPI cooled to 2.7% annually despite federal government shutdown preventing October data collection 5
CPI-U increased 0.2% over two-month period from September to November, with core index also rising 0.2% 5
Shelter index increased 0.2% over two months and rose 3.0% year-over-year, remaining significant inflation driver 5
Energy costs rose 1.1% over two months and increased 4.2% annually, with electricity up 6.9% and natural gas up 9.1% year-over-year 5

LABOR MARKET CONDITIONS SOFTEN

U.S. added only 64,000 jobs in November, significant decline from 119,000 jobs added in September 8
Unemployment rate ticked up to 4.6% from 4.4% in September, reaching highest level since September 2021 8
Real average hourly earnings increased 0.8% from November 2024 to November 2025, with 3.5% wage growth outpacing 2.7% inflation 9
Real average weekly earnings also increased 0.8% over the year, indicating workers maintaining purchasing power 9

CONSUMER SPENDING AND RETAIL CONDITIONS

Retail sales remained unchanged from September to October despite traditional holiday season ramp-up 8
Flat retail performance concerning as retail sales account for approximately two-thirds of U.S. economic activity 8
Consumer caution persists despite lower inflation and improved real wage growth, indicating other constraining factors 8

FEDERAL RESERVE POLICY IMPLICATIONS

Fed Chair Powell acknowledges “no risk-free path” for policy navigating tension between employment and inflation goals 10
Market expectations for additional rate cuts in early 2026 have increased following inflation and employment data 10
Fed’s continued MBS holdings reduction means real estate financing costs may remain elevated even with short-term rate cuts 11

COMMERCIAL REAL ESTATE MARKETS (INCLUDING MULTIFAMILY)

Mall investments are surging despite consumer sentiment concerns, while office markets show first price gains since 2022. Industrial markets remain active with major portfolio transactions, particularly in South Florida where Blackstone led selling activity.

MALL INVESTMENT SURGE DEFIES CONSUMER SENTIMENT

Mall transactions matching 2024 totals: 1, on pace for 50+ sales by year-end – busiest in two decades
Strong fundamentals driving interest: Occupancy returned to 91% (matching late-2019 levels) with rent spreads at 7.5% – highest among retail property types
Limited supply supports pricing: Of 1,382 malls nationwide, only 1,000+ remain operational with nearly 70% built before 1990 and fewer than 3% developed since 2010

OFFICE RECOVERY SHOWS FIRST PRICE GAINS SINCE 2022

Price momentum returns: 2 – first increase since 2022, signaling potential market bottom
Still below peak levels: Prices remain 33% below 2021 peak despite improvement, with vacancy declining slightly to 18.5%
Construction activity slowing: New construction fell 44% year-over-year, with national pipeline at just 1.7% of total stock (down from 3.0% last year)
Coworking expansion continues: Flexible space surged 16% in 2025, now capturing 2.2% of total office inventory as hybrid work drives demand

SOUTH FLORIDA INDUSTRIAL SALES DOMINATED BY BLACKSTONE SELL-OFF

Market activity down but concentrated: 6, down from $1.1 billion last year, with Blackstone selling more than half of top 10 assets
Premium pricing for infill assets: Terreno Realty paid $130.7 million for Royal Palm Doral portfolio at ~$378 PSF, with most deals pricing in mid-$200s to high-$300s PSF
Strategic buyer focus: Terreno, Ares, and TA Realty targeted last-mile warehouses in Doral, Miramar, Opa-locka, and Hialeah markets

INDUSTRIAL MARKETS FAVOR RICHMOND AND OKLAHOMA CITY

Market segmentation continues: 7 based on local ownership patterns and inventory control, suggesting continued segmentation into 2026

COMMERCIAL FINANCING MARKETS

Mixed signals emerge as Fed Treasury purchases may ease short-term stress while long-term rates remain elevated. Mortgage rates dropped slightly to 6.21%, while multifamily spreads hold steady despite record vacancy rates reaching 7.2%.

FED’S TREASURY PIVOT CREATES MIXED SIGNALS FOR LONG-TERM BORROWING

Short-term relief, long-term uncertainty: 8 but long-term rates remain elevated with MBS runoff still in place
CRE financing costs to remain elevated: Unless Fed rethinks MBS strategy, real estate financing will stay costly with slow relief on borrowing costs

MULTIFAMILY SPREADS STEADY DESPITE RECORD VACANCY

Spreads holding in challenging environment: 4 during Q4 2025
Supply-demand imbalance evident: National multifamily vacancy rate climbed to record high 7.2% with median rent dipping 1.0% month-over-month in November
Spread widening not yet materializing: Despite metrics showing supply outpacing demand, too preliminary to predict CRE multifamily spread widening

MULTIFAMILY CONCESSIONS DRIVE 2026 LEASING TRENDS

Operators preparing for challenging year: 9 with slower rent growth expected
Economic headwinds building: Heightened renter price sensitivity as labor markets soften and monetary policy remains on hold

COMMERCIAL SERVICING MARKETS

CMBS deals show recovery from interest shortfalls while regional mall loans continue working through maturity defaults with extension agreements providing breathing room.

FITCH AFFIRMS BACM 2015-UBS7 WITH STABLE OUTLOOK REVISIONS

CMBS trust structure context: BACM 2015-UBS7 is a Bank of America Merrill Lynch Commercial Mortgage Trust – a type of commercial mortgage-backed security (CMBS) that pools commercial real estate loans and issues multiple classes of certificates with different risk levels and credit ratings ranging from AAA (safest) to C (riskiest)
Interest shortfall recovery: 10 after interest shortfalls on classes A-S, B, and C through September 2025
Full recovery achieved: Class A-S recovered full interest by October 2025, class B by November 2025, and class C by December 2025
Future shortfalls unlikely: Servicer hasn’t confirmed shortfall causes, but future class A-S shortfalls not considered likely

REGIONAL MALL LOAN TRANSFERS TO SPECIAL SERVICING

Maturity default workout: Regional mall loan transferred to special servicing in July 2025 due to maturity default, receiving two-year extension through July 2027
Performance-based extension option: Additional nine-month extension available if NOI reaches $11 million threshold
Current performance metrics: Property 88% occupied as of year-end 2024 with NOI DSCR of 1.79x

INDUSTRY NEWS

Industry activity accelerated with major leadership changes at Freddie Mac and increased REIT transactions across multiple sectors. Artificial intelligence continues transforming investment strategies while the luxury market showed continued strength despite broader challenges. REITs increase property transactions as valuation gaps narrow between public and private markets.

FREDDIE MAC LEADERSHIP TRANSITION

Kenny M. Smith appointed as new CEO effective December 17, bringing nearly 40 years of financial services experience 2
Michael Hutchins remains as president after serving as interim CEO, providing continuity during leadership transition 2
Smith spent 27 years at Deloitte Consulting, including five years as vice chairman and US financial services industry leader 2
Served as global lead client service partner for Wells Fargo from 2008 to 2019, advising on strategic and risk issues 2
Freddie Mac increased retained portfolio over 25% in five months through October, holding more mortgage-backed securities and home loans 2

REIT MARKET ACTIVITY ACCELERATES

REITs increased net acquisitions across most property types over the past year as market conditions improve and valuations align 12
Retail, healthcare, industrial, and self-storage REITs led buying activity in Q3 2025, with shopping centers and free-standing stores dominating retail purchases 12
Residential, office, and diversified REITs sold more than acquired, with apartments comprising most residential purchases while manufactured homes represented half of sales 12

ARTIFICIAL INTELLIGENCE TRANSFORMS REAL ESTATE INVESTMENT

PwC study reveals AI fundamentally reshaping how global property dealmakers approach investment strategies and portfolio management 13
Institutional investors reassessing strategy and structure as technology, geopolitics, and market fragmentation reshape real-asset markets 13
Consolidation and take-private transactions expected to accelerate among roughly 180 publicly traded equity REITs as investors favor scale and governance credibility 13

NEW YORK LUXURY MARKET ACTIVITY

140 luxury transactions totaling $202 million recorded in 24 hours before 4 p.m. on December 17 14
Top transaction: $12.3 million co-op at 888 Park Avenue sold by Daniel and Joyce Straus to Grant S. Johnson, spanning 3,800 square feet 14
Property originally purchased in 2009 for $5.4 million, listed in July for just under $13 million, indicating successful pricing strategy 14
New York leads nation in price reductions with 3.6% of home listings marked down in November—highest among 25 most populous markets 14

RENTAL MARKET EVOLUTION CONTINUES

Over 506,000 new apartments opened in 2025, second-highest total in over a decade, with more than half located in the South 15
Adaptive reuse reached record levels with over 70,000 apartments created from former office buildings and 181,000 units in conversion pipeline 15
National average unit size reached 908 square feet, responding to changing renter preferences and demographic shifts 15
Washington D.C. emerged as top metro for renters, leading in livability, renter engagement, and new downtown development 15

INVESCO REAL ESTATE INCOME TRUST FULLY SUBSCRIBES $87 MILLION DST OFFERING

Industrial portfolio fully subscribed: 11 in gross proceeds since May 2025 launch
Portfolio specifications: Three industrial properties across Ohio and Illinois totaling 795,825 net rentable square feet, 100% occupied
INREIT scale: Sourcing entity had total asset value of $1 billion as of October 31, 2025