Daily Dose of Real Estate

Daily Dose of Real Estate for January 28

President Trump doing TV ads for Fannie Mae (okay – AI voiceover)?!?! And people think the Federal government is actually trying to get out of the GSEs? Okay, that settles it—I may have seen just about everything now.

Home prices rose 0.6% month over month while mortgage rates held steady near 6.2%. Consumer confidence, however, took it on the chin, falling to its lowest level since 2014, with weakening job growth in December adding to the pressure. The National Housing Conference outlined 10 actionable recommendations to improve affordability without congressional action.

Despite broader economic headwinds, mortgage market fundamentals remained solid: national delinquency rates fell to 3.34%, and refinance activity surged 37% as 4.1 million borrowers moved “in the money” at current rates.

Office markets hit a post-pandemic leasing high of 55.1 million square feet in Q4 2025, with 97% of Fortune 100 companies now enforcing hybrid or full-time office requirements. Multifamily fundamentals softened, with the Market Tightness Index dropping to 32 amid slowing rent growth and higher vacancies.

Meanwhile, co-working inventory surged to 158.3 million square feet, driven by corporate demand from firms like Pfizer and Amazon seeking flexible alternatives to long-term leases. Self-storage rents cooled to just 0.3% annual growth, reflecting winter seasonality and weak home sales.

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

Home prices continued their steady climb with the FHFA House Price Index showing a 0.6% monthly increase in November and 1.9% year-over-year growth, with the East North Central region leading gains at 5.1% annually 1
Mortgage rates held steady near 6.2% ahead of the Federal Reserve’s expected pause, with 30-year conforming loans averaging 6.25% and FHA loans at 6.03% as markets anticipate no rate cuts this week 2
Mortgage performance remained strong with the national delinquency rate falling 7 basis points to 3.34% in October, down 11 basis points year-over-year, while prepayment activity surged 37% as refinance applications hit 3.5-year highs 3
Consumer confidence collapsed to its lowest level since 2014, plummeting 9.7 points to 84.5 in January as Americans grow increasingly concerned about job prospects and inflation, with the expectations index falling well below recession warning levels 4
The National Housing Conference outlined 10 actionable recommendations for improving housing affordability without congressional action 5
Employment data showed weakness with only 50,000 jobs added in December and the economy gaining just 584,000 jobs in 2025, the weakest performance outside of a recession since 2003 4
Multifamily markets soften with Market Tightness Index dropping to 32, signaling higher vacancies and slowing rent growth 1
Office sector rebounds with Q4 2025 leasing hitting post-pandemic high of 55.1M SF as 97% of Fortune 100 companies enforce hybrid/in-office requirements 2
Co-working space surges to 158.3M SF across 8,800 locations, driven by major corporations like Pfizer and Amazon adopting flexible workspace strategies 3
Self-storage rents cool with 0.3% annual growth in December as winter seasonality and low home sales weigh on demand 4
FHFA reports home prices up 0.6% in November with 1.9% year-over-year growth, though Pacific region posts annual declines 5
Independent landlords see gradual gains with on-time payment rates improving in early 2026, continuing upward trend from late 2025 6

RESIDENTIAL REAL ESTATE MARKETS

Home prices continue showing resilience despite elevated mortgage rates and economic uncertainty. The latest federal data reveals steady price appreciation across most regions, though geographic variations highlight shifting demand patterns as buyers seek affordability outside traditional hot markets.

HOME PRICES SHOW CONTINUED STRENGTH DESPITE MARKET HEADWINDS

National home prices rose 0.6% in November according to the FHFA House Price Index, bringing annual growth to 1.9% – the fastest increase in 14 months 1
Regional winners and losers emerged clearly: East North Central division led with 5.1% annual growth, while the Pacific division declined 0.4%, showing the geographic shift away from Western markets 1
Northeast markets showed surprising strength: Middle Atlantic region posted 4.3% annual gains and New England achieved 3.7% growth, demonstrating renewed buyer interest in previously overlooked markets 1
ICE data shows price momentum building: Home prices rose 0.19% seasonally adjusted in November (+2.3% annualized), with only 11 of the 100 largest markets seeing price declines – the fewest in 18 months 3
Geographic rebalancing continues: About one-third of markets are seeing annual price declines while two-thirds post gains, with the Northeast and Midwest dominating growth while all 36 declining markets are in the South and West 3

INVENTORY CONDITIONS REMAIN CHALLENGING

For-sale inventory deficit stalled: National inventory deficit remained at -13% compared to 2017-2019 averages after improving from -34% in May 2024, with 40% of markets seeing inventory decline over the past six months 3
Western markets see sharp inventory drops: San Francisco, San Jose, Seattle, Denver and Stockton experienced inventory declines over 20%, with more than a dozen other Western and Southern markets seeing drops exceeding 10% 3
Midwest and Northeast show inventory gains: These regions posted the largest inventory improvements recently, though many markets still face significant deficits compared to historical norms 3

GOVERNMENT AND OTHER REGULATORY UPDATES

FHFA House Price Index shows 0.6% monthly gain – November prices up 1.9% year-over-year nationally, with regional variations significant 5
Pacific region posts annual decline – -0.4% annual decline while East South Central division leads monthly gains at 1.1% 5
Rent control impacts investment strategies – 35% of multifamily respondents curbing activity in affected areas, with another 15% considering similar moves 1
Independent landlord performance improves – On-time payment rates showing gradual gains in early 2026, continuing upward trend from late 2025 6

MORTGAGE MARKETS

Mortgage rates remained stable in the low-6% range as markets positioned for the Federal Reserve’s expected pause in rate cuts. Application activity showed encouraging signs for the spring homebuying season, while mortgage performance data revealed strong fundamentals despite rising foreclosure activity in government-backed loans.

RATES HOLD STEADY AS FED PREPARES TO PAUSE EASING CYCLE

30-year fixed rates averaged 6.17% according to Mortgage News Daily on Monday, down 4 basis points from the previous week, while HousingWire’s Mortgage Rates Center showed conforming loans at 6.25%, up 5 basis points 2
Loan type differentiation emerged clearly: FHA loans averaged 6.03% (down 1 basis point) and jumbo loans hit 6.10% (down 5 basis points), reflecting varying risk premiums and investor demand across market segments 2
Mortgage spreads approach historical norms: The spread between 30-year mortgage rates and 10-year Treasury yields tightened to 217 basis points in November from 220 basis points in October, marking the narrowest spreads since early 2022 and approaching the 170 basis point historical average 3
Refinance market shows dramatic revival: At current 6.2% rates, 4.1 million mortgages are “in the money” for refinancing – a 3.5-year high – with that number jumping to 5.8 million if rates reach 6.0% 3

MORTGAGE PERFORMANCE REMAINS STRONG DESPITE FORECLOSURE UPTICK

National delinquency rate improved significantly: The rate fell 7 basis points to 3.34% in October, down 11 basis points year-over-year and 53 basis points below the October 2019 pre-pandemic benchmark 3
FHA loans remain concerning outlier: Non-current rates for FHA loans increased 26 basis points from last year, while GSE (-6 basis points), VA (-1 basis point), and portfolio-held mortgages (-19 basis points) all improved 3
Foreclosure activity trending upward: Between October and November, 79,000 mortgages entered foreclosure – 15% below 2019 levels but the highest two-month total in over five years, with FHA and VA loans driving 85% of the increase 3
Prepayment activity surges dramatically: Single-month mortality increased 37% from September to 1.01% as rates dipped, with rate-and-term refinance prepayments surging over 270% and making up nearly 60% of October prepayments 3

SERVICER RETENTION RATES HIT MULTI-YEAR HIGHS

Refinance retention reached 3.5-year high: Servicers retained 28% of refinancing borrowers in Q3, up from 24% in Q1 and Q2, with rate-and-term refinance retention at 37% approaching a 10-year high 3
Non-bank servicers significantly outperform: Non-bank retention jumped five points to 35% in Q3, with bank servicers seeing retention dip to just 13% – nearly three times less effective than non-banks 3
Recent loan vintages show highest retention: 51% of 2024 originations and 45% of early 2025 originations were retained, dropping sharply to 38% for 2023 loans and only 17% for 2021 originations 3

REGULATORY DEVELOPMENTS IN REAL ESTATE AND MORTGAGE

The Trump administration advanced its housing policy agenda with significant GSE proposals and institutional investor restrictions, while housing policy experts outlined comprehensive recommendations for improving affordability. Federal agencies continued regulatory streamlining efforts amid ongoing political uncertainty around Federal Reserve leadership.

TRUMP ADMINISTRATION ADVANCES HOUSING POLICY AGENDA

$200 billion GSE intervention confirmed: President Trump’s Davos speech focused on two key initiatives – the $200 billion purchase of mortgage-backed securities by Fannie Mae and Freddie Mac and restrictions on institutional investor homebuying, with other previously discussed proposals remaining under consideration 6
Institutional investor restrictions move forward: Administration advanced restrictions on U.S. homebuying activities by large institutional investors, designed to reduce competition from institutional buyers in single-family rental markets and create more opportunities for individual homebuyers 2
401(k) withdrawal proposal faces presidential skepticism: Despite economic adviser Kevin Hassett’s support for allowing penalty-free 401(k) withdrawals for first-time homebuyers, President Trump expressed reservations, stating “I’m not a huge fan of it” due to strong 401(k) performance 5

NATIONAL HOUSING CONFERENCE OUTLINES 10 ACTIONABLE RECOMMENDATIONS

Comprehensive affordability strategy proposed: The National Housing Conference released detailed recommendations that the Trump Administration can implement immediately under existing authority, emphasizing that “housing affordability is not a zero-sum game” 5
Construction lending reforms prioritized: Recommendations include fixing capital rules for construction lending by creating new risk-weight categories for well-underwritten, modest-price, owner-occupied construction projects with strong presales and low loan-to-value ratios 5
Loan-Level Price Adjustments elimination proposed: The Administration should direct FHFA to eliminate LLPAs on purchase-money mortgages for owner-occupied homes, as these “act like a regressive tax on first-time and lower-wealth homebuyers” 5
Federal land utilization strategy outlined: Recommendations include directing GSA, DOD, VA, and USPS to prioritize affordable housing when disposing of surplus federal land that already has infrastructure access 5
Private Activity Bond capacity expansion: The Administration should order IRS to amend Form 8328 to allow carryforward authority for a general housing category supporting multifamily housing bonds, mortgage revenue bonds, and mortgage credit certificates 5

NCUA ANNOUNCES FOURTH ROUND OF DEREGULATION PROPOSALS

Regulatory burden reduction continues: National Credit Union Administration requested comments on four proposals that would clarify agency guidance or eliminate unduly burdensome requirements in the Code of Federal Regulations 7
Public Unit and Non-Member deposit changes: Proposals include changes for specific deposit categories as part of ongoing review to ensure regulations focus on credit unions’ safety, soundness, and resilience 7

FEDERAL RESERVE LEADERSHIP UNCERTAINTY CONTINUES

Supreme Court considers Fed Governor dismissal: Court reviewing President Trump’s effort to dismiss Fed Governor Lisa Cook, with justices appearing “unwilling to side with the White House” according to oral argument analysis 6
Fed chair nomination expected imminently: Markets expect President Trump to announce his Fed chair nominee “any minute,” with BlackRock chair Rick Rieder emerging as a favorite candidate 6

ECONOMIC NEWS

Consumer confidence collapsed to its lowest level in over a decade while labor market weakness intensified, creating a paradoxical situation where macroeconomic growth continues despite deteriorating microeconomic conditions. Housing affordability showed modest improvement as mortgage rates stabilized, though broader economic uncertainty persists.

CONSUMER CONFIDENCE COLLAPSES TO DECADE LOW

Dramatic confidence decline recorded: U.S. consumer confidence fell 9.7 points to 84.5 in January, marking the lowest level since May 2014 and surpassing depths reached during COVID-19 pandemic 4
Expectations component signals recession risk: Short-term outlook index tumbled 9.5 points to 65.1, falling well below the 80 threshold economists consider a potential recession signal for the 12th consecutive month 4
Inflation concerns remain elevated: Conference Board’s Dana Peterson noted that “respondents’ references to inflation, including gas and grocery prices, remained elevated,” while mentions of tariffs, trade, politics, and labor market also rose significantly 4

HOUSING AFFORDABILITY SHOWS MODEST IMPROVEMENT

Payment-to-income ratio drops below 30%: The monthly principal and interest payment for a median-priced home fell to $2,126 with mortgage rates around 6.25%, representing 29.7% of median household income – the first time below 30% since early 2023 3
All major markets see affordability improvement: 100% of major U.S. markets experienced year-over-year affordability improvements, with about 1 in 10 now back to or near long-term affordability averages 3
Purchase applications trend higher: MBA purchase applications, adjusted to 2018/2019 same-week averages, are trending higher and hitting their best marks in over three years as improved affordability brings potential buyers back 3
Affordability challenges persist historically: Despite improvements, affordability still requires approximately 5% more of median household income than long-term norms, with larger gaps in challenged markets like Southern California 3

LABOR MARKET SHOWS CONTINUED WEAKNESS

Job availability perceptions deteriorate: Only 23.9% of consumers said jobs were “plentiful”(down from 27.5% in December), while 20.8% said jobs were “hard to get” (up from 19.1%), reflecting weakening employment conditions 4
December job growth disappoints: Economy added just 50,000 jobs in December, nearly unchanged from 56,000 in November, with unemployment rate holding at 4.4% 4
2025 marks weakest job growth since 2003: Economy gained just 584,000 jobs in 2025, sharply lower than more than 2 million added in 2024, representing weakest performance outside of recession since 2003 4

EQUITY WITHDRAWAL ACTIVITY REACHES THREE-YEAR HIGH

Record quarterly equity withdrawals: Mortgage holders withdrew $55.9 billion of equity in Q3, split between cash-out refinances ($22.9B) and second liens ($33B) – the highest quarterly total in three years 3
Second lien activity dominates: Second liens made up 59% of Q3 equity withdrawals, the highest share in over 20 years, as falling second lien rates improved borrowing costs significantly 3
HELOC rates drive increased activity: A 2.5-point drop in HELOC rates over 18 months reduced initial payments by 25%, with expected Fed cuts potentially lowering payments another 15-20% in coming quarters 3

COMMERCIAL REAL ESTATE MARKETS (INCLUDING MULTIFAMILY)

The commercial real estate landscape shows mixed signals across asset classes, with multifamily markets softening while office and co-working sectors experience renewed momentum. Supply constraints and corporate return-to-office mandates are reshaping demand patterns across major property types.

MULTIFAMILY MARKET CONDITIONS SOFTEN

Market Tightness Index drops to 32 – Well below neutral territory, indicating looser market conditions with higher vacancies and slower rent growth expected 1
Sales Volume Index at 47 – Slightly more decreases than increases in deal activity, with 63% of executives reporting sales activity as largely unchanged 1
New supply slowing dramatically – Only 270,000 new units expected for completion in 2026, marking the slowest supply growth in over a decade 7
Investment outlook improves – Marcus & Millichap reports renewed momentum for rental housing investors driven by improving capital markets and construction slowdown 7

OFFICE SECTOR HITS POST-PANDEMIC HIGH

Q4 2025 leasing reaches 55.1M SF – Highest quarterly volume since the pandemic, with annual leasing up 5.2% year-over-year to 207M SF 2
97% of Fortune 100 enforce office requirements – Companies now requiring hybrid or full-time in-office work, resulting in average 4-day per week attendance 2
Supply constraints drive premium pricing – Inventory under construction down 20% below historic lows, with Class A asking rents growing 68 basis points 2
Gateway markets outperform – 15% year-over-year growth compared to 3.5% for secondary markets, with total vacancies at 22.2% 2

CO-WORKING SPACE EXPERIENCES MAJOR RESURGENCE

Total inventory jumps to 158.3M SF – Up from 115.6M SF three years ago across nearly 8,800 locations, now representing 2.2% of US office stock 3
Corporate demand drives expansion – Major corporations including Pfizer, Amazon, JPMorgan Chase using flexible offices to avoid long-term leases 3
Independent operators lead growth – Single-site co-working locations up 66% in three years, twice the growth rate of top 20 operators 3
CBRE acquires Industrious for $800M – Major consolidation move in flexible workspace sector as market matures 3

SELF-STORAGE MARKET FACES HEADWINDS

National rents rise just 0.3% annually – December rents at $16.32 PSF with development pipeline stable at 2.7% of national inventory 4
Regional performance varies widely – NYC, Boston, DC lead gains due to healthy rental housing, while Denver, Portland, San Diego post flat/declining rents 4
Winter seasonality weighs on demand – Low home sales and seasonal factors continue impacting storage demand and investor sentiment 4

COMMERCIAL FINANCING MARKETS

Commercial real estate financing shows mixed signals as markets adjust to Federal Reserve rate cuts, with debt financing outpacing equity in multifamily while credit pricing continues evolving. Agency lending capacity expands while banks remain cautious on balance sheet growth.

CREDIT MARKETS SHOW MIXED SIGNALS

Rate cuts not fully incorporated – Key question remains how much of last quarter’s Fed rate cuts have been reflected in CRE credit pricing and terms 8
Debt Financing Index strong at 75 – Over half of multifamily respondents indicate now is better time to borrow, though lending terms aren’t loosening further 1
Lenders remain open for core product – Solid, core properties continue finding financing support, helping underpin overall market stability 1
Capital availability varies by lender type – Insurance companies and securitized lenders growing CRE exposure while banks show muted balance-sheet growth 8

CAP RATES AND LEVERAGE CONDITIONS

Cap rates stabilize to support positive leverage – Many buyers now able to achieve positive leverage for deals, improving investment fundamentals 7
Private real estate investment grows – Fundraising hit $222B in 2025, marking first annual gain since 2021 1
Heitman closes $2.6B fund – Record-breaking fund backed by investors from seven countries, positioned for real estate cycle’s next phase 1

COMMERCIAL SERVICING MARKETS

The commercial servicing sector shows distress remains minimal and localized, though a record wave of maturing CMBS loans approaches. Market participants are watching for shifts from extensions toward refinancing as rate uncertainty diminishes.

DISTRESS REMAINS MINIMAL AND LOCALIZED

Distress concentrated in specific areas – Marcus & Millichap reports commercial real estate distress remains minimal and localized across most asset classes 7
CMBS debt wall approaches – Record wave of maturing CMBS loans testing market’s refinancing ability amid high rates and tighter credit 1
Crisis not guaranteed – Despite debt maturity pressures, widespread crisis isn’t inevitable according to recent market analysis 1
Investors remain selective – Tighter lending standards and cautious capital markets keeping underwriting standards elevated 4

REFINANCING ACTIVITY SHIFTS

Extensions dominate current activity – Deal activity hampered by loan extensions and widespread bridge lending use, keeping transaction volumes below historical norms 4
Key signal to watch – Whether activity shifts from extensions/modifications toward refinancing as rate uncertainty thaws 8
Refinancing shift indicates rate impact – Move toward refinancing would suggest lower rates translating into capital deployment rather than delaying outcomes 8

INDUSTRY NEWS

Major industry developments included intensified activist pressure on CoStar over its residential strategy, while short-term rental investment opportunities shifted toward more affordable markets. The industry grappled with strategic questions about sustainable business models in real estate technology.

COSTAR FACES INTENSIFIED ACTIVIST PRESSURE OVER HOMES.COM STRATEGY

Third Point renews aggressive campaign: Activist investor demanded immediate changes to CoStar’s board and strategic alternatives for Homes.com after characterizing the residential venture as a $3 billion failure 8
Stock performance highlights struggles: CoStar’s stock dropped 27% over five yearscompared to 94% total return for S&P 500, with Third Point attributing underperformance “entirely to the misallocation of billions of dollars into Homes.com” 8
Residential venture shows minimal returns: Homes.com generated roughly $60 million revenue in 2024 and expects $80 million in 2025 after cumulative investment of approximately $3 billion over five years, with positive adjusted EBITDA not expected until 2030 8
Activist demands major changes: Third Point called for replacing majority of board with “more qualified directors,” refocusing on core commercial real estate business, and considering “strategic alternatives for Homes.com” 8
CoStar pushes back with strategic defense: Company emphasized board’s unanimous approval of updated strategic plans and projected 18% year-over-year revenue growth to between $3.78 and $3.82 billion, with net income expected between $175 million and $215 million 9

SHORT-TERM RENTAL INVESTMENT OPPORTUNITIES SHIFT

AirDNA identifies new investment patterns: The company’s annual Best Places to Invest in Short-Term Rentals report challenges conventional assumptions, with affordability playing a much bigger role in investment decisions than previously recognized 10
Revenue and affordability balance crucial: AirDNA Chief Economist Jamie Lane noted that “when revenue and growth aren’t viewed in isolation, affordability plays a much bigger role” in determining investment attractiveness 10
Proprietary scoring methodology deployed: The report evaluates properties using AirDNA’s Best Places to Invest Score, assessing demand, revenue potential, and how purchase prices compare with projected short-term rental income 10at

RETAIL MARKET DEVELOPMENTS

Retail openings edge up as closings slow – 2026 projections show 1.4% to 4% increase in new store launches compared to last year 12
Store closings expected to decelerate – 2025 outperformed liquidation expectations, with slower closure pace anticipated for 2026 12
Off-price and beauty retailers positioned to expand – Discount chains and specialty retailers poised to seize real estate from department store and apparel bankruptcies 12