Daily Dose of Real Estate

Daily Dose of Real Estate for January 09

Fed Governor Stephen Miran wants to go big or send everyone home, calling for aggressive easing of more than 150 bps. Housing market activity continues to show caution, with pending home sales down 6.7% year over year and new listings falling 8.3%, reflecting hesitation from both buyers and sellers despite improved affordability. Home price growth has decelerated sharply, rising just 1.1% year over year versus roughly 5% at this time last year, signaling a cooling market. Inventory increased in 48 of the 50 largest metros—only Jacksonville and Chicago saw slight declines—with Washington, DC (+32.8%), Charlotte (+30.8%), and Las Vegas (+29.2%) leading the way. Multiple headwinds are expected to persist for mortgage applications, as MBA Chief Economist Mike Fratantoni points to a softening labor market, sticky inflation, elevated inventories, and steady rates as ongoing challenges into 2026.

Commercial real estate kicked off 2026 with a familiar mix of signals: property prices eked out a modest 2% gain, while apartment rents took a 0.8% nosedive in December. AT&T joined the ongoing corporate migration out of downtown Dallas and into the suburbs, apparently favoring strip malls over skyscrapers. Foreign investors have returned with checkbooks in hand, though they remain highly selective—focusing on data centers and, unsurprisingly, anything that doesn’t involve empty office buildings.

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

Mortgage rates remain stable near 2025 lows – The 30-year fixed-rate mortgage averaged 6.16% as of January 8, up slightly from 6.15% the previous week but down significantly from 6.93% a year ago, with purchase applications up over 20% year-over-year 1
Housing payments hit two-year low – The median U.S. monthly housing payment fell to $2,365 during the four weeks ending January 4, down 4.7% from a year earlier and the lowest level since the start of 2024 2
Federal Reserve officials divided on rate cuts – Fed Governor Stephen Miran intensified calls for aggressive easing, urging over 150 basis points of cuts in 2026, while other officials signal a more cautious approach with only one or two cuts expected 3
Trump proposes ban on institutional investors – The new administration announced plans to prevent large institutional investors from purchasing single-family homes, though details remain unclear and Congressional approval would be required 4
GSE guarantee fees turn unprofitable – Fannie Mae and Freddie Mac recorded negative profitability on guarantee fees in 2024, with expected returns falling below minimum capital thresholds for new acquisitions 6
Property prices posted modest 2% gains in 2025, with data centers and strip retail leading sector performance at 5% each, while office remains 35% below 2022 peaks 1
National apartment rents declined 0.8% in December to $1,356, marking a 1.3% year-over-year drop as vacancy rates hit record 7.3% amid oversupply 2
Foreign capital returns to US CRE with targeted approach, focusing on data centers, housing assets, and secondary markets rather than broad gateway city investments 3Freddie Mac issued $68 billion in multifamily securities in 2025, including record $28.1 billion in Multi PC issuances to support affordable rental housing 4

RESIDENTIAL REAL ESTATE MARKETS

The residential market began 2026 with improved affordability metrics as housing payments reached two-year lows, though buyer and seller activity remains cautious. Regional markets show stark contrasts, with smaller metros experiencing dramatic price appreciation while larger markets show more modest performance. December data reveals continued inventory growth but at a decelerating pace.

HOUSING PAYMENTS REACH TWO-YEAR LOW DESPITE MARKET CAUTION

Median monthly housing payment drops to $2,365 – Down 4.7% from last year during the four weeks ending January 4, marking the lowest level since early 2024 due to mortgage rates declining to 6.15% 2
Market activity shows continued caution – Pending home sales declined 6.7% year-over-year while new listings dropped 8.3%, indicating hesitation among buyers and sellers despite improved affordability 2
Home price growth decelerates significantly – Prices continue rising at 1.1% year-over-year, down from roughly 5% growth rate at this time last year, showing market cooling 2

DECEMBER INVENTORY DATA SHOWS CONTINUED GROWTH BUT DECELERATION

26th consecutive month of inventory gains – Active listings rose 12.1% year-over-year in December, but growth continues to decelerate from peak levels of ~30% in May and June 2025 7
Seasonal decline in active inventory – Active listings fell 8.9% month-over-month in December, dropping below 1 million homes for the first time since April, following typical seasonal patterns 7
National inventory remains below pre-pandemic levels – December inventory sits 12.5% below typical 2017-2019 levels, similar to recent months, with stark regional differences in recovery 7

REGIONAL MARKET DYNAMICS SHOW STARK CONTRASTS

Small metros surge dramatically – Johnstown, Pennsylvania led with 54.9% price increase, rising from $75,000 to $116,000 throughout 2025, reflecting affordability advantage drawing buyers from expensive coastal markets 8
West and South lead inventory growth – West posted 14.4% inventory growth while South recorded 12.3%, compared to Midwest at 11.1% and Northeast at 7.5% 7
48 of 50 largest metros show inventory gains – Only Jacksonville and Chicago recorded slight declines, with Washington DC (+32.8%), Charlotte (+30.8%), and Las Vegas (+29.2%) leading growth 7

PRICE DYNAMICS AND MARKET TIMING

National median list price declines – December median list price of $399,950 was down 0.6% year-over-year and 3.6% month-over-month, with price per square foot down 1.3% annually 7
Regional price patterns diverge – Northeast price per square foot up 4.1% year-over-year, Midwest up 1.7%, while South fell 2.3% and West declined 1.4% 7
January offers maximum savings potential – Buyers can potentially save up to $23,000 compared to May purchases according to LendingTree analysis, with winter conditions providing opportunities for motivated buyers 9

MORTGAGE MARKETS

Mortgage rates remained stable near multi-year lows in early 2026, with the 30-year fixed rate averaging 6.16%. Despite rate improvements, application volume declined while credit availability tightened, reflecting ongoing market caution and lender conservatism. GSE guarantee fee profitability turned negative in 2024.

MORTGAGE RATES STABILIZE NEAR MULTI-YEAR LOWS

30-year fixed rate holds steady at 6.16% – Up slightly from 6.15% previous week but down significantly from 6.93% one year ago, with 15-year rate at 5.46% 1
Purchase applications surge year-over-year – Applications increased over 20% from a year ago, showing improved demand momentum despite rates hovering near 6% mark 1
Economic conditions support rate stability – Combination of solid economic growth and lower rates creating improving conditions for home shoppers according to Freddie Mac Chief Economist Sam Khater 1

APPLICATION VOLUME DECLINES DESPITE RATE IMPROVEMENTS

Total applications fall 9.7% over two weeks – MBA’s Weekly Mortgage Applications Survey showed decline for period ending January 2, highlighting how affordability challenges and lock-in effect continue restraining activity 10
Multiple headwinds expected to persist – MBA Chief Economist Mike Fratantoni cites softening job market, sticky inflation, elevated inventories, and steady rates as ongoing challenges for 2026 10
Modest sales growth projected – Economists expect only modest growth in home sales reflecting complex interplay of economic factors affecting mortgage market demand 10

CREDIT AVAILABILITY TIGHTENS

MCAI hits three-month low in December – MBA’s Mortgage Credit Availability Index decreased to lowest level in three months, reversing gains from prior two months 11
Multiple loan programs see reductions – Declines included ARM loans, cash-out refinances, and tightening documentation requirements across both conforming and jumbo indexes 11
Conforming index reaches historic low – The conforming index hit its lowest level since survey inception in 2011, indicating significant tightening in conventional loan offerings 11

GSE GUARANTEE FEE PROFITABILITY TURNS NEGATIVE

Average G-fee profitability gap turns negative – Fannie Mae and Freddie Mac recorded negative 0.6% profitability in 2024, down from positive 2.1 basis points in 2023, indicating expected returns below minimum capital thresholds 6
Average guarantee fees remain relatively stable – GSEs charged average of 65.2 basis points on $650 billion in single-family acquisitions in 2024, slightly down from 65.5 basis points in 2023 6
Purchase loan profitability deteriorates – Profitability gap for purchase loans worsened from negative 0.4 to negative 3.2 basis points, while 30-year fixed-rate loans turned negative by one basis point 6

REGULATORY DEVELOPMENTS IN RESIDENTIAL REAL ESTATE AND MORTGAGE

The Trump administration announced plans to ban institutional investor purchases of single-family homes while GSE multifamily lending capacity increased 20%. State-level housing reforms advanced in Maryland with comprehensive development streamlining legislation. Industry experts debate the effectiveness of investor bans versus housing supply solutions.

TRUMP ADMINISTRATION TARGETS INSTITUTIONAL INVESTORS

Single-family purchase ban proposed – Administration announced plans to prevent large institutional investors from buying single-family homes, though investors represent only 2-3% of overall market 4
Regional impact varies significantly – During pandemic, investors comprised over 20% of home sales in Houston, Miami, Phoenix, and Las Vegas, though national impact remains limited 4
Congressional approval required – Proposed ban would not require institutions to sell current holdings but would block new purchases, with administration calling on Congress to codify the move 4
Market reaction immediate – Investor and homebuilder stocks fell following announcement, reflecting concerns over future demand and revenue streams from institutional buyers 4

INDUSTRY EXPERTS DEBATE INVESTOR BAN EFFECTIVENESS

Focus should be on housing supply – Redfin Chief Economist Daryl Fairweather argues that banning corporate landlords won’t fix affordability crisis, emphasizing need to build more homes of all types 12
Potential unintended consequences – Ban might hurt development of new affordable housing units, particularly in states like CA where single-family homes are zoned for up to two accessory dwelling units 12
Corporate vs. individual landlord debate – Experts note corporations may be better able to manage repairs and are easier for law enforcement to monitor for fair housing compliance compared to mom-and-pop landlords 12
Root cause remains housing shortage – Fewer single-family homes were built in 2010s than any decade since 1960s, with scarcity driving up values and giving speculators profit opportunities 12

STATE-LEVEL HOUSING REFORM INITIATIVES

Maryland Housing Certainty Act advances – Legislation sponsored by Senator Malcolm Augustine and Delegate Dylan Behler focuses on streamlining development process through early vesting rights 15
Early vesting protections proposed – Would lock in residential developers’ rights at permit application point, insulating approved projects from later zoning changes and new local rules 15
Regulatory delay targets – Bill addresses impact-fee processes and regulatory delays that can add costs or derail projects following initial approval, aiming to reduce risk and timing uncertainty 15

ECONOMIC NEWS

Federal Reserve officials remain divided on the appropriate pace of monetary policy easing in 2026, with some advocating aggressive cuts while others signal caution. Economic growth forecasts have been revised upward, though labor market signals remain mixed and geopolitical factors could impact mortgage rates.

FEDERAL RESERVE OFFICIALS DEBATE RATE CUT TRAJECTORY

Miran intensifies easing calls – Fed Governor Stephen Miran advocates for over 150 basis points of cuts in 2026, arguing current policy is “clearly restrictive and holding the economy back” 3
Labor market focus drives policy debate – Miran frames debate in employment terms, noting “about a million Americans who don’t have jobs, who could have jobs without causing unwanted inflation” 3
Cautious approach from other officials – Neel Kashkari and Anna Paulson signal more measured approach, with median projection pointing to only one quarter-point reduction in 2026 3
Data-driven policy expected – First American’s Sam Williamson expects Fed to proceed cautiously with one or two rate cuts, maintaining data-driven approach balancing inflation and employment 16

LABOR MARKET SHOWS MIXED SIGNALS

Initial jobless claims increase modestly – Claims for week ended January 3 totaled 208,000, up 8,000 from previous period but below 210,000 economist estimates, suggesting low layoffs but sluggish demand 17
December jobs report highly anticipated – Economists expect 73,000 new jobs added in December, up from 64,000 in November, with unemployment rate projected to decline to 4.5% from 4.6% 18
Government shutdown impact lingers – November unemployment rate partially distorted by 43-day federal shutdown, which also prevented household data collection for October 18

ECONOMIC GROWTH FORECASTS REVISED UPWARD

Fitch raises U.S. growth outlook – Estimates GDP expanded 2.1% in 2025 and forecasts 2.0% growth in 2026 after incorporating delayed economic data from government shutdown 19
Unemployment projections stable – Fitch expects unemployment to average 4.6% in 2026, close to recent levels, as slower job growth impact dampened by labor force slowdown 19
Two rate cuts anticipated – Fitch anticipates Federal Reserve will cut rates twice in first half of 2026, taking Fed Funds Rate upper band to 3.25% 19

INFLATION TRENDS AND CONSUMPTION PATTERNS

Inflation expected to rise – Fitch estimates inflation rose to 3.0% in December 2025 from 2.7% in November, expecting further increases to 3.2% by end of 2026 reflecting tariff pass-through effects 19
Consumer spending resilient – Consumption held up despite slower real household income growth, with saving ratio falling from 5.1% in January 2025 to 4.0% in September 19
Geopolitical factors could impact rates – Global tensions, particularly in Venezuela, could affect oil prices and broader economic conditions, potentially influencing Fed policy decisions 16

COMMERCIAL REAL ESTATE MARKETS (INCLUDING MULTIFAMILY)

The commercial property sector showed signs of stabilization in 2025 with modest price gains, though significant challenges remain in multifamily markets facing oversupply and office properties still recovering from pandemic lows. Regional variations highlight the importance of local market dynamics.

PROPERTY PRICES SHOW MODEST RECOVERY

Commercial property prices gained 2% in 2025 according to Green Street Commercial Property Price Index, though values remain 18% below 2022 peaks
Data centers and strip retail led gains at 5% each, while healthcare, manufactured home parks, and self-storage posted 2-5% increases
Office properties remain 35% below 2022 levels and self-storage is down 21% from peak values, showing continued sector weakness
December saw 0.1% monthly decline but maintained 2.3% annual gain, reflecting market stabilization 1

MULTIFAMILY FACES OVERSUPPLY HEADWINDS

National median rents fell 0.8% in December to $1,356, representing 1.3% year-over-year decline and sitting 5.9% below 2022 peaks
Vacancy rates hit record 7.3% as developers added over 600,000 multifamily units in 2024 – the largest annual total since 1986
List-to-lease times reached 39 days, the highest since tracking began, reflecting reduced renter urgency in oversupplied markets
Austin leads rent declines at 6.6% year-over-year, with similar pressures in Phoenix, San Antonio, Denver, and Orlando
Providence, RI topped growth at 5.6% as supply-constrained markets maintain pricing power 2

OFFICE CONVERSIONS ACCELERATE IN D.C.

Washington D.C. leads office-to-housing conversions with more than 6,500 residential units planned from obsolete office buildings
Post Brothers launched $750M conversion project for 530 rental apartments near Dupont Circle using $110M first mortgage and $465M C-PACE loan
City’s 22.8% office vacancy rate and anticipated federal job losses drive conversion incentives through tax abatements and zoning modifications
Nationwide, over 70,000 conversion units underway – three times 2022 levels, with D.C. serving as blueprint for other urban markets 6

COMMERCIAL SERVICING MARKETS

The servicing sector showed mixed performance with slight increases in CMBS delinquencies offset by unexpected office sector improvements. Underwriting standards tightened significantly while alternative financing gained prominence for complex projects.

CMBS DELINQUENCIES SHOW MIXED SIGNALS

CMBS delinquencies rose slightly in December but office properties posted second consecutive month of improvement
Office sector resilience unexpected given its status as most distressed commercial real estate asset class
Mixed performance reflects ongoing servicing challenges while highlighting pockets of stabilization in previously troubled sectors
Servicers adapting strategies to address varying asset class performance and borrower needs 9

UNDERWRITING STANDARDS TIGHTEN

2026 ushers in ruthless underwriting reset as lenders become increasingly selective about refinancing opportunities
“Refinancing is back, but only for the strong” with focus on financially robust borrowers and high-quality assets
Stricter lending practices reflect lessons learned from recent market volatility and emphasize sustainable cash flows
Speculative investments face limited financing options as lenders prioritize proven performance over potential 9

ALTERNATIVE FINANCING GAINS TRACTION

C-PACE loans becoming crucial for complex projects like office conversions when traditional banks hesitate
Post Brothers’ D.C. conversion utilized $465M in C-PACE financing alongside conventional mortgage for $750M project
Alternative capital sources filling gaps left by conventional lenders amid economic uncertainty
Structure mirrors other multifamily conversions that turned to non-traditional financing to overcome lending hurdles 6

INDUSTRY NEWS

The real estate and mortgage industry saw significant consolidation activity with the Compass-Anywhere merger receiving shareholder approval, while new investment platforms launched to address affordable housing needs. Technology companies continue to benefit from AI-driven demand for data center real estate.

$250 MILLION AFFORDABLE HOUSING INVESTMENT PLATFORM LAUNCHED

Walker & Dunlop-Pretium partnership – Joint venture creates Walker & Dunlop Affordable Bridge Capital platform providing flexible first-mortgage bridge loans ranging from $10 million to $75 million 20
6 to 36-month loan terms – Platform targets asset acquisitions and refinancings, plus properties prepared for long-term government-backed programs including LIHTC, Section 8, and tax-exempt bonds 21
Critical financing gap addressed – Initiative provides flexible, short-term capital while permanent financing programs take time to structure and close, leveraging Pretium’s $60 billion platform 20

MULTIFAMILY INVESTMENT ACTIVITY CONTINUES

LaSalle-Cortland co-investment – LaSalle Investment Management completed $250 million co-investment alongside Cortland Enhanced Value Fund VI into 19-property portfolio acquired for $1.6 billion 22
Nearly 6,000 apartment units – Portfolio spans metro Atlanta, Washington D.C., and Northern Virginia, with LaSalle’s commitment representing approximately 34% of equity 22
Value-add strategy focus – Investment aligns with LaSalle’s selective approach to multifamily opportunities in key growth markets across target metropolitan areas 22

TECHNOLOGY AND INNOVATION DEVELOPMENTS

Applied Digital exceeds revenue estimates – Data center operator reported strong Q2 performance driven by AI data center demand, with shares gaining over 6% in premarket trading 23
AI hyperscaler lease agreements – Company signed two data center leases with AI hyperscalers for North Dakota facilities and is in discussions with third potential client 23
Technology-real estate intersection grows – Shares tripled in value over past 12 months, reflecting growing intersection between technology infrastructure and real estate investment opportunities 23

MAJOR CORPORATE RELOCATIONS

AT&T announced relocation from downtown Dallas to Plano, delivering major blow to urban core driven by safety concerns and hybrid work trends
Move represents latest corporate flight from downtown areas as companies prioritize suburban locations and employee preferences
DFW tops list of US markets to watch in 2026 due to rapid population growth and strong Class A office demand
Corporate relocations reshaping urban real estate dynamics as downtown areas face continued occupancy challenges 10

TECHNOLOGY AND AI INVESTMENTS

Broadridge Financial Solutions invested in DeepSee, expanding partnership with agentic AI technology leader for post-trade operations
Investment includes minority ownership stake and marks significant progress in leveraging AI for capital markets efficiency
Applied Digital reported dramatic revenue growth with shares up more than 6% after signing two data center leases with AI hyperscalers
Company’s stock tripled in value over 12 months, reflecting strong AI infrastructure demand and investor confidence 11 12

AFFORDABLE HOUSING INITIATIVES

Walker & Dunlop and Pretium launched $250M affordable housing investment fund providing flexible first-mortgage bridge loans
Platform offers $10-75 million loans with 6-36 month terms targeting asset acquisitions, refinancings, and government program preparation
Focus on LIHTC, Section 8, and tax-exempt bond properties addresses critical affordable housing financing gap
Initiative reflects growing institutional commitment to addressing housing affordability crisis 14