As I discussed recently on a podcast with Greg Sher, consolidation in the IMB space is certainly worth watching and could become concerning if it continues. But we can’t forget the group that surrendered its dominant market share in mortgage and real estate under duress: the banks. You shouldn’t forget either — because the Fed’s Vice Chair for Supervision, Michelle Bowman, certainly hasn’t and wants them back in a big way. She has significant bank capital reform teed up for Q1 – MSR limits, warehouse financing, UST purchases, etc.
In other news, a growing share of homes is being sold outside traditional MLS channels through semi-private networks and niche marketplaces. FHA’s market share took another hit — down to 14% of the purchase market — with anecdotal evidence suggesting the decline reflects softness at the lower end, where FHA borrowers most often transact. FHA’s delinquency rate reached 11.5% at year-end 2025, compared with 4% for the overall market … a tough pill to swallow.
Commercial real estate financing conditions improved meaningfully in February 2026, with spreads tightening across all property types. Multifamily led at 152 basis points over Treasuries, while retail saw the largest compression at 15 basis points. Meanwhile, Los Angeles multifamily investment volume surged 26% in 2025 to $3.4 billion, signaling renewed institutional interest.
Let’s get you caught up and out the door in 3 minutes. Tim
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KEY TAKEAWAYS
- Fed announces mortgage lending reforms – Vice Chair Bowman signals forthcoming proposals to encourage more bank participation in home loans, addressing current capital framework issues 1
- New construction price cuts surge – Nearly 1 in 5 new homes now carries a price reduction, marking the first time new builds are more likely to be discounted than existing homes 2
- Treasury sells $701 billion in securities – Massive weekly auction highlights brutal bond math as government replaces low-rate debt with higher-yield obligations 3
- Cash home purchases hit 5-year low – Only 29% of buyers paid cash in December, down from 30.3% a year earlier as improving mortgage rates reduce competitive advantage 4
- FHA loan usage drops to 4-year low – Just 14.4% of mortgaged buyers used FHA loans as high housing costs price out traditional first-time buyers 4
- Consumer confidence continues declining – Sentiment index falls to 57.3 despite positive economic data, reflecting disconnect between statistics and public perception 5
- Job market anxiety rises sharply – 57% of workers now “job hugging” out of fear rather than loyalty, up 12 points since August 2025 6
- CRE financing spreads continue tightening across all property types, with multifamily leading at 152 bps over Treasuries (down 14 bps), while retail saw the biggest compression at 15 bps to 173 bps as lender demand rebounds 1
- Los Angeles multifamily investment volume surged 26% in 2025 to $3.4 billion, with cap rates stabilizing and institutional investors showing renewed interest heading into 2026 2
- Student housing rent growth turned sharply negative in major markets, with University of Arkansas shifting from 10.3% growth in January 2025 to -9.2% in January 2026 3
- Brooklyn multifamily refinancing activity accelerates as developers secure stabilization funding, with One Nine Rockwell landing $90M to replace construction debt 4
- FTSE NAREIT index gains 1.36% while office spreads remain elevated at 223 bps over Treasuries despite 14 bps of compression, reflecting persistent lender caution 1
- Capital returns to CRE markets selectively, with CRED iQ projecting further modest compression through 2026 and top-tier loans potentially pricing in the low- to mid-5% range 1
RESIDENTIAL REAL ESTATE MARKETS
Home buying patterns are shifting significantly as market conditions evolve. New construction price cuts are outpacing existing home discounts while cash purchases decline and inventory shortages continue driving affordability challenges.
New Construction Market Dynamics
- Price cuts reach historic levels – 19.3% of new construction listings carried price reductions in Q4 2025, compared to just 18% of existing homes – marking the first time new builds were more likely to be discounted 2 7
- Builders respond faster than homeowners – The shift suggests homebuilders are adapting more rapidly to buyer-friendly market conditions, while individual sellers are more inclined to delist properties rather than offer discounts 2
- Regional concentration in South and West – Nevada, Indiana, South Carolina, Minnesota, North Carolina, New Jersey and Texas all posted above-average shares of reduced-price new builds, ranging from roughly 19% to nearly 25% 7
- Median prices remain stable despite cuts – New construction median listing price was $451,128 in Q4, up just 0.3% year-over-year, while existing home prices were essentially flat 2
Market Activity & Buyer Trends
- Cash purchases drop to 29% in December 2025, down from 30.3% a year earlier – represents the lowest level in 5 years as improving mortgage rates reduce the competitive advantage of cash offers 4
- Market dynamics favor buyers more – Sellers now outnumber buyers by a record 47%, significantly reducing the competitive pressure that previously made cash offers essential for winning homes 4
- Cash purchases peaked at 35% in late 2023 when mortgage rates hit the high-7% range, but have steadily declined as rates moderated throughout 2024 and 2025 4
- Regional variations remain stark – West Palm Beach leads cash purchases at 47.2%, followed by Jacksonville (39.3%) and Miami (39.3%), while West Coast markets show lowest rates with Seattle at 17.3% 4
Inventory & Supply Challenges
- New listings declined 1.7% year-over-year during the four weeks ending December 7, 2025 – marking the biggest decline in more than two years and highlighting persistent supply constraints 8
- Inventory shortages drive affordability crisis – Industry analysis identifies insufficient supply, rather than interest rates, as the fundamental force keeping home prices elevated and creating affordability challenges 9
- Rate paradox emerges – When mortgage rates fall and buyers surge back into the market, insufficient inventory naturally drives prices higher, creating situations where lower rates can actually make homes less affordable 9
Alternative Transaction Channels
- Off-market sales gaining momentum – A growing share of homes is being sold outside traditional MLS channels through semi-private networks and niche marketplaces, particularly in the $100,000-$300,000 price range 8
- Small investors dominate activity – Small investors now account for more than 62.5% of investor purchases, with many assembling rental portfolios of 10, 20, or 100 homes through specialized platforms 8
MORTGAGE MARKETS
Federal regulators are preparing significant reforms to boost bank participation in mortgage lending while loan usage patterns shift dramatically. The competitive landscape is being reshaped as large servicers gain advantages over smaller lenders.
Regulatory & Policy Developments
- Fed signals major mortgage lending reforms – Vice Chair for Supervision Michelle Bowman announced forthcoming proposals specifically aimed at revitalizing bank participation in mortgage lending markets 1
- MBA welcomes regulatory changes – President Bob Broeksmit stated that current capital framework aspects have discouraged banks from competing in mortgage origination and servicing, calling for more appropriately calibrated approaches 1
- Focus on mortgage servicing rights – Proposed reforms will particularly address capital treatment of mortgage servicing rights and mortgage loans to strengthen banks’ ability to serve creditworthy borrowers 1
Loan Usage Pattern Shifts
- FHA loans hit 4-year December low – Usage dropped to 14.4% of mortgaged purchases, down from 15.1% a year earlier, representing the lowest December share since 2021 4
- Traditional FHA buyers priced out – The decline appears counterintuitive given high housing costs and low buyer competition, but experts attribute it to many low-to-moderate-income Americans being completely priced out of homeownership 4
- Conventional loans surge to 78.6% – Conventional loan usage among mortgaged purchases reached the highest December share since 2021, while VA loan usage increased modestly to 7% 4
Industry Competition & Technology
- Competitive divide widens – Large mortgage servicers and independent mortgage banks maintained aggressive borrower outreach during the downturn while smaller lenders focused on cost-cutting and waiting for rate improvements 10
- Execution quality becomes critical – Industry experts warn that execution quality, not just training or technology investments, will determine which lenders successfully capture business as rates ease and volume returns 10
- Major technology advancement – Click n’ Close announced integration of Sagent’s Dara platform, the first end-to-end, cloud-native servicing platform designed to revolutionize the $14 trillion mortgage industry 11
REGULATORY & POLICY DEVELOPMENTS
Housing policy uncertainty continues under the Trump administration while Treasury debt issuance reaches massive levels, creating potential implications for mortgage rates and housing finance.
Housing Policy & Institutional Ownership
- Institutional ownership restrictions under consideration – Trump administration floated ideas to address affordability concerns through potential restrictions on institutional single-family home ownership, though details remain scarce 8
- Speculation includes various approaches – Potential measures could include unfavorable accounting treatments, volume limits, or giving individual buyers right of first offer on properties, creating uncertainty for significant investment capital 8
- Industry adapts to NAR changes – Ongoing DOJ scrutiny and evolving National Association of Realtors rules have created regulatory uncertainty, though the industry has largely adapted to new commission transparency requirements 8
Treasury Market & Bond Implications
- Massive Treasury auction activity – U.S. government sold $701 billion of Treasury securities in one week, including $160 billion in notes and bonds and $541 billion in Treasury bills 3
- Bond math becomes “relentlessly brutal” – $54 billion of 10-year notes sold at 4.177% replaced $25 billion of maturing 1.73% notes, increasing outstanding debt by $29 billion and demonstrating the compounding effect of higher rates 3
- Yield curve implications – 10-year Treasury yield closed at 4.05% on Friday, down 13 basis points since the auction, while 30-year yields fell to 4.70%, potentially affecting mortgage rate trends 3
ECONOMIC NEWS
Consumer sentiment remains persistently weak despite objectively positive economic indicators, while growing job market anxiety among workers could impact housing demand and mobility patterns.
Consumer Confidence & Economic Perception
- Consumer sentiment continues decline – University of Michigan’s preliminary February reading of 57.3 reflects a 20% decline since Trump took office again, despite stronger economic fundamentals 5
- Disconnect between data and perception – Nearly three-quarters of Americans describe economic conditions as only fair or poor, even as recent reports showed stronger job growth and lower inflation 5
- Wealth gap in sentiment – The sentiment decline is most pronounced among consumers without stock portfolios, while more affluent Americans with market investments showed modest improvement 5
- Economic approval hits record low – Disapproval of Trump’s economic handling reached 59% in NPR/PBS polling, with most Americans saying tariffs have hurt rather than helped 5
Employment Market Anxiety
- “Job hugging” phenomenon accelerates – 57% of U.S. workers now identify as “job huggers,” staying in current positions out of fear rather than loyalty, representing a significant 12-point increase from 45% in August 2025 6
- AI concerns drive job insecurity – Among job huggers, 70% worry that artificial intelligence will impact their job security within the next six months, while 63% express concerns about potential layoffs 6
- Housing implications of job anxiety – Growing workforce anxiety could significantly impact housing demand as workers prioritize job security over geographic mobility, potentially affecting regional real estate markets 6
Market Conditions & Policy Response
- Markets stabilize after AI disruptions – Stock markets showed stability following earlier artificial intelligence-related disruptions, with inflation data helping to steady overall market conditions 12
- Administration acknowledges challenges – Trump acknowledged voter skepticism despite claiming “the greatest economy actually ever in history,” noting the need to better “sell” the economic message to voters 5
- Housing affordability divide widens – 64% of unmarried respondents report difficulty meeting monthly housing obligations compared to 39% of married households, highlighting growing affordability pressures 13
COMMERCIAL REAL ESTATE MARKETS (INCLUDING MULTIFAMILY)
Financing spreads compressed across all property types, with multifamily and industrial leading performance while office properties maintained elevated premiums. Transaction volumes increased in gateway markets.
- Los Angeles Multifamily Volume Surges 26% → Greater LA traded $3.4 billion in 2025 vs $2.7 billion in 2024, with cap rates stabilizing and institutional investors returning 2
- Student Housing Rent Growth Reverses → University of Arkansas shifted from 10.3% growth to -9.2% decline, while North Texas moved from 7.0% to -9.9% year-over-year 3
- Brooklyn Maintains 5.5% Annual Rent Growth → Strong fundamentals with 25,623 units under construction as of March 2025 4
COMMERCIAL FINANCING MARKETS
Spreads tightened across all property types with multifamily leading at 152 bps over Treasuries. Capital returned selectively with lenders favoring stabilized assets in preferred sectors.
- Multifamily Leads Spread Compression → 152 bps over Treasuries (down 14 bps), followed by industrial at 163 bps and retail at 173 bps (down 15 bps) 1
- Office Spreads Remain Elevated → Tightened from 237 bps to 223 bps but still 71 bps above multifamily due to vacancy concerns 1
- Brooklyn Developer Secures $90M Refinancing → One Nine Rockwell replaced $78M construction loan from S3 Capital with Affinius Capital funding 4
- FTSE NAREIT Gains 1.36% → REITs outperformed S&P 500’s 0.050% gain, reflecting renewed investor confidence 1
INDUSTRY NEWS
Major consolidation continues to reshape the residential real estate industry while new artificial intelligence technologies emerge for land development and property search, creating both opportunities and competitive pressures.
Mergers & Acquisitions Activity
- Compass completes major acquisition – The brokerage giant completed its acquisition of Anywhere Real Estate for approximately $1.6 billion in early January, significantly expanding its market presence 8
- Rocket-Redfin merger progresses – Rocket Companies’ agreement to acquire Redfin Corp. in March aims to fundamentally reshape how Americans buy, sell, and refinance homes by combining mortgage and brokerage capabilities 8
- Keller Williams secures expansion capital – The franchise network raised money from Stone Point Capital for expansion efforts amid challenging market conditions characterized by weak sales and regulatory uncertainty 8
- TruAmerica Acquires Two LA Assets → Purchased Luxe Villas (60 units) and Haven Apartments (97 units) in Brentwood and Culver City 2
Technology Innovation & Competition
- Real estate portal wars intensify – Competition among Zillow, Realtor.com, and Homes.com has escalated as each platform employs different strategies for marketing, agent relationships, and technology to capture market share 8
- Homes.com challenges incumbents – Backed by CoStar, the platform is positioning itself as a more transparent and affordable option for real estate agents, directly challenging Zillow’s long-standing market dominance 8
- AI revolutionizes land development – Acres.com announced AI-powered capabilities for land and lot search and zoning feasibility analysis, representing what the company calls the first major rollout in digitizing the traditionally manual land acquisition process 14
Homebuilder Innovation
- Sustainability becomes competitive advantage – Beazer Homes achieved its goal of becoming the first national homebuilder to deliver 100% of new homes meeting DOE Zero Energy Ready Home standards, with solar communities showing higher margins 15
- Operational efficiency gains – Beazer reduced build-cycle direct costs by about half through improved building processes, tighter construction standards, and renegotiated trade partner pricing 15