Daily Dose of Real Estate

Daily Dose of Real Estate for February 20

The housing market is showing a clear imbalance in early 2026. Builders are delivering 1.36 million new units — enough to house roughly 3.1 million people — while projected population growth is just 756,000. If sustained, that gap could ease affordability pressures through supply rather than demand destruction.

Mortgage rates near 6% have reopened eligibility for an estimated 5.5 million households. But strain is emerging elsewhere: mortgage quality control defects are up 18.5% as lenders chase volume, and property tax burdens range widely — from 2.11% in New Jersey to 0.27% in Hawaii — reinforcing uneven ownership costs and migration trends. Institutional investors are also adjusting to President Trump’s executive order affecting single-family rental strategies, potentially redirecting capital toward new construction.

In commercial real estate, CMBS issuance is accelerating. About $8 billion priced in January (up 40% year-over-year) and another $9 billion followed in early February, nearly doubling early-2025 levels. Trepp reports $76.6 billion in hard maturities due in 2026, with 39% concentrated in Q4. In Dallas–Fort Worth, multifamily construction is slowing after negative demand and rent declines in Q4 — a near-term drag that could set up better balance by late 2026.

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Today’s newsletter was prepared by our AI platform ALFReD. Know Better.

Table of Contents

KEY TAKEAWAYS

NAR Pending Home Sales Decline: Pending home sales fell 0.8% month-over-month and 0.4% year-over-year in January, with regional variations showing gains in Midwest and West but declines in Northeast and South 1
Trump Executive Order Targets Institutional SFR Investors: President Trump’s January 20 executive order instructs HUD and other agencies to combat speculation by large institutional investors in single-family housing markets, while carving out build-to-rent projects 2
Property Tax Gaps Widen Between States: New Jersey leads with highest effective property tax rate at 2.11% ($7,022 annually on $332,700 home), while Hawaii has lowest at 0.27% ($888 annually), creating stark affordability differences for homeowners 3
Mortgage Quality Control Defects Rise: ACES Q3 2025 report shows critical defect rate increased 18.5% to 1.79%, with income/employment defects rising 47.6% to become the largest category at 27.24% of all critical defects 4
Housing Construction Surges Despite Population Slowdown: 1.36 million housing units started in 2025 could house 3.1 million people, while US population grew only 1.78 million in 2025 and projected to grow just 756,000 in 2026 5
Vacancy Rates Remain Low Nationwide: ATTOM data shows residential vacancy rate held steady at 1.33% in Q1 2026, with zombie foreclosure rate at 3.27%, while institutional investors show higher vacancy rates at 3.5% 6
New Home Mortgage Applications Rise: MBA data shows January new home purchase mortgage applications increased 2% year-over-year and 19% from December, with estimated new single-family home sales at 663,000 units annually 7
Housing for 21st Century Act Passes House: The House of Representatives passed bipartisan legislation aimed at expanding housing supply and removing homeownership barriers, signaling continued focus on addressing the nation’s housing shortage 1
Lender enforcement intensifies — CRE lenders are shifting from “extend and pretend” to demanding fresh equity and faster paydowns as office CMBS delinquencies hit a record 12.34% in January 1
Insurance companies face $17B office maturity wall — US insurers confront 904 office loans maturing in 2026, with most originated at 3.8% rates now refinancing near 7% 2
Apartment market power shifts to renters — Only six of 50 major metros remain landlord-friendly as national median asking rents fell 1.5% year-over-year to $1,672 3
CMBS hard maturities total $76.6B in 2026 — Trepp analysis reveals debt yield thresholds that separate clean refinances from workouts, with 39% of maturities concentrated in Q4 4
Distressed retail sale highlights mall struggles — Palisades Center sold for $175M post-foreclosure, less than half its $418.5M mortgage value, reflecting ongoing regional mall distress 5
Commercial real estate enters 2026 with pricing clarity — Newmark survey shows improved capital market functionality and narrowing bid-ask spreads despite economic uncertainty 6

RESIDENTIAL REAL ESTATE MARKETS

The residential market shows mixed signals with pending sales declining nationally while regional performance varies significantly. Home price appreciation remains subdued with most major markets experiencing annual declines, though some regions continue to post strong gains. Meanwhile, housing construction continues at elevated levels despite slowing population growth.

PENDING HOME SALES SHOW MIXED REGIONAL PERFORMANCE

National pending home sales decreased 0.8% month-over-month and 0.4% year-over-year in January 2026, reflecting continued market uncertainty as buyers remain cautious about making purchase decisions
The Midwest posted the strongest monthly gain at 5.0%, indicating renewed buyer confidence in markets like Chicago, Detroit, and Minneapolis where affordability conditions have improved significantly
The West region followed with a 4.3% monthly increase, driven primarily by California markets where inventory improvements have created more opportunities for buyers
The Northeast experienced the steepest decline at 5.7% monthly, with markets like New York and Boston continuing to struggle with high prices and limited inventory
The South fell 4.5% monthly despite historically being the most active region, suggesting that even traditionally strong markets are feeling pressure from economic uncertainty
Year-over-year performance showed the South leading with 4.0% growth and the West posting modest 0.3% gains, while the Northeast declined 8.3% and the Midwest fell 3.3% 1

HOUSING CONSTRUCTION OUTPACES POPULATION GROWTH

Construction was started on 1.36 million privately owned housing units in 2025, including 943,000 single-family units and 416,000 multifamily units, which could provide homes for 3.1 million additional people when completed
US population increased by only 1.78 million people in the 12 months through mid-2025, with projections showing growth slowing to just 756,000 people in the 12 months through mid-2026
This represents a dramatic shift from pre-2009 years when US population grew by 2.5-2.8 million people annually, with current growth rates at one-third to one-quarter of historical levels
Single-family construction starts at 943,000 units were down 6.9% from 2024 but roughly on pace with 2023, as homebuilders pulled back amid high inventories and falling prices
Multifamily construction starts rose 17.4% to 416,000 units in 2025, reaching the highest pace since 1986 outside of the 2021-2023 period
The continued flood of new housing supply amid dramatically slowing population growth is precisely what the overpriced and frozen housing market needs to restore balance 5

HOME PRICE APPRECIATION REMAINS SUBDUED

January home prices declined 0.2% month-over-month with annual appreciation of just 0.4%, representing a dramatic shift from the double-digit gains seen in recent year
This marks the sixth consecutive month of sub-1% growth nationally, indicating that the rapid price appreciation cycle may be definitively ending
West Virginia leads all states with 11.8% year-over-year gains, benefiting from its relatively affordable housing stock and growing remote work population
Maine posted strong 10.1% annual gains, continuing to attract buyers from expensive Northeast markets seeking more affordable coastal living options
California experienced a 3.0% annual decline, marking a significant reversal for the nation’s most expensive housing market as buyers increasingly price out
Florida posted a 3.3% annual decline, reflecting the end of the pandemic-driven migration boom and concerns about insurance costs and climate risks
Twenty-three of the top 30 markets showed annual price declines, up from 20 markets in the previous month, indicating the breadth of the price correction is expanding 8

VACANCY RATES REMAIN LOW DESPITE CONSTRUCTION SURGE

ATTOM data shows 1.33% of residential properties nationwide were vacant at the beginning of 2026, essentially unchanged from 1.32% in the previous quarter and first quarter of 2025
Out of nearly 104.8 million residential properties, approximately 1.4 million homes were vacant, indicating continued tight inventory conditions despite increased construction activity
The states with highest vacancy rates were Oklahoma (2.4%), Kansas (2.4%), Alabama (2.2%), Missouri (2.1%), and West Virginia (2.1%)
Lowest vacancy rates were found in New Hampshire (0.3%), Vermont (0.4%), New Jersey (0.5%), Connecticut (0.5%), and Idaho (0.6%)
Properties held by institutional investors showed higher vacancy rates at 3.5% compared to the overall market, with Indiana (7.2%), Illinois (6.2%), and Alabama (6.0%) leading investor-owned vacancy rates
Zombie foreclosure rates remained at 3.27% nationally, with properties in various stages of the foreclosure process but still occupied by distressed homeowners 6

TOP METRO MARKETS FOR PENDING SALES GROWTH

Phoenix-Mesa-Chandler leads all major metros with 11.8% annual growth in pending home sales, benefiting from improved affordability as prices have stabilized
Boston-Cambridge-Newton and Charlotte-Concord-Gastonia both posted 10.7% growth, representing strong performance in both high-cost and mid-tier markets
San Francisco-Oakland-Fremont achieved 8.9% growth despite being one of the nation’s most expensive markets, suggesting pent-up demand is being released as conditions improve
Other top performers include Oklahoma City, St. Louis, Virginia Beach-Chesapeake-Norfolk, San Diego, San Antonio, and Miami-Fort Lauderdale, representing a diverse mix of market types and price points 1

MORTGAGE MARKETS

Mortgage markets show encouraging signs with new home purchase applications gaining momentum and refinancing activity surging. However, quality control data reveals concerning trends in loan defects, particularly around income verification and compliance issues.

NEW HOME PURCHASE APPLICATIONS GAIN MOMENTUM

The MBA’s Builder Application Survey shows mortgage applications for new home purchases increased 2% year-over-year and 19% from December, indicating builders are successfully attracting buyers despite challenging market conditions
New single-family home sales are estimated at a seasonally adjusted annual rate of 663,000 units, representing a meaningful recovery from the lows experienced in 2024
This represents a 3.6% gain from December’s 640,000 pace, suggesting momentum is building as we move through the first quarter of 2026
The increase indicates that builders are seeing increased buyer interest, likely driven by improved mortgage rate conditions and better inventory availability
New home sales remain well below historical norms but the upward trajectory suggests the market may be finding a sustainable baseline for activity,7

REFINANCING ACTIVITY SURGES

The MBA’s weekly survey for the week ending February 13 showed the Refinance Index increased 7% from the previous week, indicating borrowers are responding quickly to rate improvements
Refinance activity is running 132% higher than the same week in 2025, representing a dramatic surge as homeowners seek to take advantage of declining rates
The Market Composite Index rose 2.8% on a seasonally adjusted basis, reflecting overall increased mortgage activity across both purchase and refinance segments
The seasonally adjusted Purchase Index decreased 3%, suggesting that while refinancing is surging, purchase activity remains more cautious
This surge is being driven by borrowers who have been waiting for rates to decline and are now moving quickly to lock in lower payments 9

MORTGAGE QUALITY CONTROL DEFECTS RISE SIGNIFICANTLY

ACES Quality Management’s Q3 2025 report shows the overall critical defect rate increased 18.5%, rising from 1.51% in Q2 2025 to 1.79% in Q3 2025
Income/Employment defects increased 47.6%, rising from 18.45% to 27.24% of all critical defects and remaining the largest defect category
Legal/Regulatory/Compliance defects increased 16.8%, rising from 16.24% to 18.97% of all critical defects, indicating growing challenges with regulatory adherence
Borrower/Mortgage Eligibility defects decreased 56.5%, declining from 15.87% to 6.90%, showing improvement in basic qualification verification
Conventional loans accounted for 57.18% of all critical defects, FHA for 31.10%, and VA for 11.00%, reflecting relative stability across product types
Purchase defect share decreased to 62.65% while refinance defect share increased to 37.35% as refinance review share expanded with increased activity
The increase was driven primarily by concentrated deterioration in income- and compliance-related findings, reinforcing the importance of documentation integrity as refinance activity expands 4

MORTGAGE RATE PROJECTIONS

Fannie Mae projects the 30-year fixed mortgage rate will average approximately 6.2% in early 2026, representing a modest improvement from current levels
Rates are expected to decline below 6% by year-end, which would mark the first time since early 2023 that rates have been in the 5% range
Current rates align closely with Freddie Mac’s national average of 6.09% for the week ending February 12, showing stability around the 6% level
This represents a significant improvement from 6.87% a year earlier, providing meaningful relief for borrowers and expanding the pool of qualified buyers
The projected decline suggests that Federal Reserve policy changes and improved economic conditions are expected to continue supporting lower mortgage rates 8

RMBS MARKET ACTIVITY

Fitch Ratings issued expected ratings for residential mortgage-backed certificates from HOMES 2026-AFC1 Trust, indicating continued robust secondary market activity
Multiple tranches are receiving AAA(EXP)sf expected ratings, suggesting strong underlying mortgage quality and investor confidence in residential mortgage securities
The strong ratings indicate that lenders are maintaining disciplined underwriting standards while the secondary market remains receptive to new issuances
Continued RMBS activity is crucial for maintaining mortgage liquidity and ensuring lenders can continue originating loans at competitive rates 10

REGULATORY & POLICY DEVELOPMENTS

Policy makers are taking targeted action on housing affordability and supply challenges. The Trump administration focuses on institutional investment restrictions while Congress advances bipartisan housing legislation.

PROPERTY TAX GAPS WIDEN BETWEEN STATES

New Jersey leads the nation with the highest effective property tax rate at 2.11%, translating to $7,022 annually on a $332,700 home and $9,590 on the state’s median home value of $454,400
Hawaii has the lowest effective property tax rate at just 0.27%, resulting in $888 annually on a $332,700 home, though the state’s high median home value of $839,100 means typical bills reach $2,239
Illinois ranks second highest at 2.01% ($6,694 annually), followed by Connecticut at 1.81% ($6,024 annually) and New Hampshire at 1.66% ($5,511 annually)
Among low-tax states, Alabama follows Hawaii at 0.38% ($1,249 annually), Nevada at 0.47% ($1,549 annually), and Arizona, Colorado, and South Carolina all at 0.48%
Texas, despite having no state income tax, ranks high for property taxes at 1.49% ($4,232 annually), demonstrating how states compensate for revenue through different tax mechanisms
The wide variation in property tax burdens significantly impacts total homeownership costs and is driving new legislative proposals for tax relief, particularly for seniors 3

ECONOMIC NEWS

Economic conditions are gradually improving for housing markets with better affordability conditions and wage growth outpacing home price appreciation. However, labor market cooling presents some challenges for mortgage qualification.

AFFORDABILITY CONDITIONS SHOW IMPROVEMENT

NAR Chief Economist Dr. Lawrence Yun notes that with mortgage rates approaching 6%, an additional 5.5 million households that could not qualify for a mortgage one year ago would now meet qualification requirements
This dramatic expansion of the potential buyer pool is based on standard debt-to-income ratios and represents one of the most significant improvements in affordability conditions in recent years
Based on historical patterns showing that approximately 10% of newly qualifying households typically enter the market, this could potentially add 550,000 new homebuyers in 2026 compared to 2025
This represents a significant expansion of market demand that could help support home sales even as other economic factors create headwinds
The improvement demonstrates how sensitive housing demand is to mortgage rate changes and why Federal Reserve policy has such direct impacts on real estate markets 1

WAGE GROWTH OUTPACING HOME PRICE APPRECIATION

First American Chief Economist Mark Fleming highlights that wage growth continuing to outpace home price appreciation represents a fundamental shift in housing market dynamics
This trend, which economists expect to define 2026 market conditions, gradually improves affordability for workers across most income levels and geographic markets
The current pattern of flat national home prices combined with sharper local divergences is likely to persist as long as this wage-price dynamic continues
This represents a reversal from the 2020-2023 period when home price appreciation far exceeded wage growth, creating severe affordability challenges
The dynamic is particularly beneficial for first-time buyers and moderate-income households who were completely priced out during the peak appreciation years 8

LABOR MARKET COOLING IMPACTS HOUSING

MBA data indicates the labor market is cooling significantly from earlier peaks, with job creation slowing to levels that could impact housing demand
The economy added approximately 15,000 jobs per month in 2025, representing a dramatic decline from 120,000 per month in 2024
The unemployment rate currently stands at 4.3%, which while still relatively low by historical standards, represents an increase from recent lows
About 25% of unemployed workers have been out of work for more than six months, a concerning trend that could complicate mortgage payment capabilities for affected households
This labor market softening could offset some of the benefits from improved mortgage rates and better affordability conditions 11

COMMERCIAL REAL ESTATE MARKETS (INCLUDING MULTIFAMILY)

The commercial real estate sector faces a critical inflection point as lenders abandon extension strategies in favor of enforcement actions, creating significant pressure across office markets while multifamily and industrial sectors show signs of stabilization.

CRE lenders abandon extensions for enforcement — After years of “extend and pretend,” lenders are triggering defaults on troubled loans with about $25B in office loans past maturity and office CMBS delinquencies hitting a record 12.34% in January 1
Insurance companies confront $17B office maturity crisis — US insurers face 904 office loan maturities totaling $17B in 2026, with most originated at 3.8% rates now refinancing near 7%, forcing capital redeployment toward multifamily and industrial sectors 2
Apartment markets shift power to renters nationwide — Only six of 50 largest metros remain landlord-friendly as national median asking rents fell 1.5% year-over-year to $1,672 with average vacancy reaching 7.6% 3
CMBS hard maturity playbook reveals $76.6B challenge — Analysis shows $76.6B in CMBS hard maturities due in 2026 with no extension options, debt yield thresholds separating clean refinances from workouts, and 39% concentrated in Q4 4
Palisades Center sells at 58% discount post-foreclosure — Black Diamond Capital acquired the 2.3M SF New York retail mall for $175M after foreclosure, less than half its $418.5M mortgage, reflecting continued regional mall distress 5
Newmark survey shows improved CRE market functionality — Commercial real estate entered 2026 with greater pricing clarity and improved capital market functionality, with transaction activity and debt capital availability strengthening through late 2025 6
CMBS market shows strong momentum — Industrial refinancing reflects broader CMBS momentum with $8B in deals closing in January 2026, up 40% year-over-year, and another $9B in early February, nearly doubling 2025’s early volume 7

INDUSTRY NEWS

Industry performance shows mixed results with some brokerages achieving strong profitability while market conditions continue to challenge traditional business models. Capital markets services show particular strength.

SOTHEBY’S INTERNATIONAL REALTY LEADS PROFITABILITY

AccountTECH’s comprehensive 2025 median performance analysis across 11 national real estate brokerage brands found Sotheby’s International Realty achieved the highest median EBITDA margin at 5.77%
The study revealed that the highest EBITDA outcomes were driven primarily by tighter operating overhead management rather than higher gross profit margins, indicating the importance of cost control in challenging market conditions
This finding suggests that successful brokerages in the current environment are those that can maintain service quality while operating more efficiently
Other national brands showed varying performance levels, with those focused on operational efficiency generally outperforming those relying solely on volume-based strategies
The results highlight how market conditions are forcing brokerages to fundamentally rethink their business models and cost structures 12

JLL REPORTS STRONG CAPITAL MARKETS GROWTH

Jones Lang LaSalle reported that capital markets services revenue increased 21% year-over-year to $854 million, demonstrating strong performance in investment sales and debt advisory services
The growth was attributed to increases across nearly all sectors, indicating broad-based improvement in commercial real estate transaction activity
CEO Christian Ulbrich noted rising investor confidence and increasingly robust real estate debt markets as key drivers of the strong performance
The company expects further growth in 2026 as market conditions continue to improve and investor appetite for real estate transactions increases
This performance suggests that while residential markets face challenges, commercial real estate capital markets are showing significant strength 13

FLORIDA MARKET SHOWS STABILIZATION

Florida Realtors reported that 2025 brought a stronger and more sustainable housing market characterized by increased inventory, steadier sales, and cooling prices
The state’s months of supply reached 8.8 months as of December 2025, indicating significantly improved market balance compared to the severe inventory shortages of previous years
This represents a dramatic shift from the pandemic-era boom when Florida markets were characterized by bidding wars and rapidly escalating prices
The stabilization suggests that Florida’s housing market is transitioning from crisis-driven volatility to more sustainable long-term growth patterns
Industry professionals in the state report more balanced negotiations and realistic pricing expectations from both buyers and sellers 14