Daily Dose of Real Estate

Daily Dose of Real Estate for January 29

Forget the looming government shutdown (there appears to be an off-ramp), but pay attention to the stalling U.S. population growth—slowing to just 0.5%, with net migration potentially turning negative for the first time in 50+ years. AI better be genuinely productive if population growth flatlines, or we risk drifting toward an EU-style growth profile.

Mortgage applications declined 8.5% week over week, even as refinancing activity surged to 37% of all locks in December 2025. The Federal Reserve held rates steady at 3.5%–3.75% amid mixed economic signals, while the Trump administration implemented new restrictions on institutional investor home purchases and directed $50 billion toward mortgage-backed securities purchases to support housing markets grappling with record-high contract cancellation rates of 16.3%.

Commercial real estate transaction volume jumped 23% in 2025 to $545.3 billion, driven by a broad-based recovery across sectors—including a 34.1% increase in senior housing sales and a 92% surge in office lending. Still, office distress continued to spread, with major foreclosures in Oakland and Chicago, and several REITs—including Apollo Commercial and Camden Property Trust—executing significant portfolio repositioning amid increasingly selective markets that favor high-quality assets and experienced operators.

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

Fed Holds Steady: The Federal Reserve maintained its federal funds rate at 3.5%-3.75% in its first 2026 meeting, with two dissenting votes favoring a 25 basis point cut 1
Mortgage Applications Drop: Total mortgage applications fell 8.5% week-over-week as 30-year rates rose to 6.24%, the highest in three weeks 2
Population Growth Slows Dramatically: U.S. population growth slowed to just 0.5% in 2025, with net international migration plunging by over half to 1.26 million people, potentially turning negative for the first time in 50+ years 3
Refinance Activity Surges: Refinances accounted for 37% of all mortgage locks in December 2025, up from just 23% a year earlier, with rate-and-term refinance volume increasing more than 170% year-over-year 4
Record Home Sale Cancellations: Homebuyers canceled 16.3% of purchase agreements in December 2025, the highest rate since March 2020, with Atlanta leading at 22.5% 5
Housing Affordability Improves: U.S. house-buying power increased nearly 10% year-over-year in 2025 due to rising incomes, falling mortgage rates, and flat home prices 6
CRE transaction volume surged 23% in 2025 to $545.3B, marking the second consecutive year of growth as market momentum builds across sectors 1
Federal Reserve holds rates steady at 3.5%-3.75% range, with Fed Chair Powell citing solid economic expansion but elevated inflation concerns 2
Senior housing investment sales jumped 34.1% year-over-year to $17.9B in 2025, signaling a renaissance in the asset class as capital markets reopen 3
Office lending reached $45.8B in 2025, representing a 92% increase over 2024, with 70% of loans supporting Trophy and Class A properties 4
Deutsche Bank seizes three Oakland office towers from Starwood Capital after $365M default, highlighting continued Bay Area office distress 5
Manhattan investment sales hit $11B in 2025, up 26% from 2024, driven primarily by office sector recovery and major institutional deals

RESIDENTIAL REAL ESTATE MARKETS

The residential real estate market entered 2026 with concerning momentum as buyers pulled back sharply from signing new contracts and cancellation rates reached record highs. Meanwhile, dramatic population growth slowdowns threaten to fundamentally reshape housing demand patterns for years to come.

MARKET CONDITIONS SHOW MIXED SIGNALS

Pending home sales experienced a sharp 9.3% decline in December 2025 compared to the previous month, marking one of the steepest monthly drops of the year 7
Year-over-year pending sales were down 3%, erasing gains from recent months and raising concerns about momentum heading into 2026
Select metropolitan areas continued showing strength despite national slowdown, with Louisville, San Antonio, Virginia Beach, and Charlotte posting double-digit annual gains in pending sales
Boston, Phoenix, Miami, and Pittsburgh also registered notable year-over-year increases, highlighting pockets of localized demand amid broader market softness

RECORD-BREAKING CONTRACT CANCELLATIONS

Homebuyers canceled purchase agreements at the highest rate since the pandemic began, with 16.31% of deals under contract terminated in December 2025 5
This represents approximately 40,000 canceled home-purchase agreements nationwide, barely exceeding the cancellation rate seen in March 2020 during the initial pandemic shock
Atlanta led major metropolitan areas with the highest cancellation rate at 22.5%, up from 18.1% year-over-year, as the Georgia capital evolved into a solid buyer’s market where sellers outnumber buyers by more than 80%
Nassau County recorded the lowest cancellation share at 3.8%, benefiting from the strongest seller’s market among the top 50 metros where buyers outnumber sellers by more than 33%

POPULATION GROWTH COLLAPSE THREATENS HOUSING DEMAND

U.S. population growth slowed dramatically to just 0.5% in the 12 months to July 1, 2025, with total population reaching 341.78 million people 3
Net international migration plunged by over half to 1.26 million people, reflecting six months each of Biden and Trump administration immigration policies
The Census Bureau projects population growth could slow to just 0.2% (756,600 people) in the 12 months to July 2026, with net migration potentially turning negative for the first time in over 50 years
The foreign-born population declined by 1.4 million over six months from January to June 2025, from 53.3 million to 51.9 million people, indicating accelerating emigration trends

AFFORDABILITY GAINS PROVIDE HOPE

Consumer house-buying power increased approximately 9.8% year-over-year in November, marking one of the most sustained improvements in recent years 6
The improvement reflected combined effects of higher incomes and falling mortgage rates, with median household incomes climbing 3.5% year-over-year while mortgage rates ended significantly lower than the previous year
The affordability boost translated to approximately $36,600 more house-buying power compared to November 2024, with income growth contributing roughly $13,100 and lower mortgage rates adding approximately $23,500
Forty-seven of 50 major metropolitan areas tracked by First American registered year-over-year affordability improvements, demonstrating broad-based gains rather than regionally confined benefits

MORTGAGE MARKETS

The mortgage market experienced significant volatility as applications declined sharply following the first rate increase in a month. However, refinancing activity reached multi-year highs as borrowers capitalized on rates that remained well below 2024 levels.

APPLICATIONS DECLINE AS RATES RISE

Total mortgage applications decreased 8.5% on a seasonally adjusted basis for the week ending January 23, 2026, primarily driven by refinancing activity 2
The 30-year fixed mortgage rate increased to 6.24% from 6.16% the previous week, marking the highest level in three weeks and the first rate increase in a month
Refinance applications dropped 16% week-over-week, though they remained 156% higher than the same week in 2025 when rates were nearly 80 basis points higher
The refinance share of total mortgage activity decreased to 56.2% from 61.9% the previous week, demonstrating the market’s sensitivity to weekly rate movements

REFINANCE BOOM CONTINUES DESPITE VOLATILITY

Refinances accounted for 37% of all mortgage locks in December 2025, up 224 basis points month-over-month and a massive 1,354 basis points year-over-year 4
Rate-and-term refinance volume increased 13% month-over-month and more than 170% year-over-year, while cash-out refinances rose 1% month-over-month and 35% year-over-year
Overall refinance pull-through improved 194 basis points from November to 69.2%, indicating borrowers are following through on applications at higher rates
Total lock volume rose 2% month-over-month in December and finished 30% higher year-over-year, driven primarily by rate-and-term refinances

PURCHASE MARKET SHOWS RESILIENCE

The seasonally adjusted Purchase Index decreased only 0.4% from the previous week and remained 18% higher than the same week in 2025
Purchase locks slipped just 1% month-over-month in December despite typical holiday-driven seasonality and finished December 7% higher than a year earlier
Pull-through for purchase loans increased 199 basis points month-over-month to 85.7%, showing strong borrower commitment
The average loan size increased to $394,502 in December from $391,323 in November, indicating that much of the current demand continues to come from higher-income buyers

PRODUCT MIX AND CREDIT TRENDS

Non-qualified mortgage production maintained its upward trajectory, finishing December above 9% of locks, up 50 basis points month-over-month and setting another record 4
Conforming loans accounted for 51% of locks in December, down 86 basis points month-over-month, while non-conforming share rose to 17%, up 17 basis points month-over-month and 141 basis points year-over-year
The average borrower credit score declined to 732 in December from 733 in November, extending a gradual pullback from 746 in September
FHA, VA and USDA loans each gained market share during December, with government and non-conforming products gaining at the expense of conforming loans

REGULATORY DEVELOPMENTS IN REAL ESTATE AND MORTGAGE

Federal agencies implemented significant policy changes affecting housing markets, with the Trump administration introducing new restrictions on institutional investors and the Federal Reserve maintaining its current monetary policy stance amid mixed economic signals.

FEDERAL RESERVE POLICY STANCE

The Federal Open Market Committee maintained the federal funds rate target range at 3.5% to 3.75% during its January 27-28, 2026 meeting, marking a pause in the rate-cutting cycle 1
The decision was not unanimous, with Fed Governors Christopher Waller and Stephen Miran dissenting in favor of an additional 25-basis-point cut
The Committee noted that “available indicators suggest that economic activity has been expanding at a solid pace” while acknowledging that “job gains have remained low, and the unemployment rate has shown some signs of stabilization”
The Fed emphasized that “inflation remains somewhat elevated” and that “uncertainty about the economic outlook remains elevated”

TRUMP ADMINISTRATION HOUSING INITIATIVES

President Trump signed an executive order targeting large institutional investors’ acquisition of single-family homes, requiring federal agencies to prevent the disposal of federal assets that would transfer single-family homes to large institutional investors within 60 days 8
The order mandates that the Attorney General and Federal Trade Commission Chair review “substantial acquisitions” of single-family homes by large institutional investors on antitrust grounds
HUD Secretary Scott Turner must require owners and managing agents of single-family homes participating in federal housing assistance programs to disclose direct or indirect owners, managers, or affiliates
The administration directed the purchase of $50 billion in mortgage-backed securities in an effort to lower mortgage rates, a move approved by the National Association of Realtors

HUD POLICY REVERSALS

HUD rescinded its investigation into the Texas General Land Office, marking the latest development in ongoing policy conflicts spanning multiple presidential administrations 9
HUD Secretary Scott Turner stated that “the Biden administration politicized enforcement of federal civil rights law and deprived rural communities of essential disaster mitigation funds”
Turner published an op-ed proposing a new rule to drop use of “disparate-impact theory” in fair housing cases, representing a significant shift in fair housing enforcement policies

ECONOMIC NEWS

Economic indicators presented a mixed picture as the Federal Reserve navigated between solid growth and persistent inflation concerns, while dramatic population changes threaten to reshape fundamental economic dynamics.

FEDERAL RESERVE ECONOMIC ASSESSMENT

Fed Chair Jerome Powell noted during his January 28 press conference that the labor market has shown signs of stabilization, with the last three jobs reports showing average declines of 22,000 jobs per month 11
The private sector added 29,000 jobs per month during that period, with Powell attributing slower growth in labor supply to lower levels of immigration and labor force participation
Inflation remains a key concern for policymakers, with the personal consumption expenditures (PCE) index reaching 2.9% over the past year through December
Powell explained that “elevated readings largely reflect inflation in the goods sector, which has been boosted by the effects of tariffs,” while the services sector has experienced disinflation

POPULATION DYNAMICS RESHAPE ECONOMIC OUTLOOK

The dramatic slowdown in population growth is expected to have major implications for employment, housing demand, and consumer spending patterns 3
The Bureau of Labor Statistics will incorporate new population data into employment-related statistics, potentially affecting total employment, labor force participation rates, and unemployment calculations
Housing construction has been averaging 1.45 million new units per year, but slower population growth could significantly reduce demand amid this surge in new supply
Consumer spending has been losing the engine of population growth, though it has continued to grow at a solid pace on rising incomes and capital gains

ECONOMIC GROWTH MOMENTUM

Economic growth has remained robust, with gross domestic product expanding at a 4.4% clip in the third quarter of 2025, and the final three months of the year tracking at a 5.4% rate according to the Atlanta Fed 12
Despite strong economic growth, hiring remains slow in the labor market amid the Trump administration’s crackdown on illegal immigration
Layoffs have been relatively tame, with the trend for initial jobless claims running at its lowest level in two years
Economists expect larger-than-usual tax refunds over the next few months to help fuel additional consumer spending

CONSUMER SPENDING AND WEALTH EFFECTS

Powell acknowledged the distinction between wealthier consumers driving the economy and less-affluent households struggling with inflation pressures 13
He noted that “higher-income households that tend to own real estate and tend to own stocks, securities, and those assets have been going up in value and increases in wealth do support spending over time”
This wealth effect has been a significant factor supporting consumer spending despite inflationary pressures affecting lower-income households
Faster economic growth could eventually boost hiring, which has been notably weak even as the economy continues expanding

COMMERCIAL REAL ESTATE MARKETS (INCLUDING MULTIFAMILY)

Commercial real estate transaction activity accelerated through 2025, with deal volumes climbing for the second consecutive year across most major property sectors. While data centers dominated headlines, broader market recovery extended to retail, office, hotels, senior housing, and land investments.

TRANSACTION VOLUME ACCELERATES ACROSS SECTORS

Q4 2025 deal volume reached $185.8 billion, marking a substantial 30% increase from Q4 2024, with December alone posting $71.4 billion in transactions 1
Full-year 2025 volume hit $545.3 billion, representing 23% growth over 2024, driven by renewed investor confidence and improved financing conditions 1
Excluding data centers, Q4 volume still rose 14% and full-year activity climbed 19%, demonstrating broad-based market recovery beyond the headline-grabbing tech sector 1
Retail, office, hotels, senior housing, and land all posted strong double-digit growth in late 2025, while apartments and industrial showed more modest gains 1

MANHATTAN OFFICE MARKET SHOWS RESILIENCE

Manhattan investment sales reached $11 billion in 2025, representing a 26% jump from 2024, with the office sector leading the recovery 6
Major institutional deal: $1.08 billion purchase of 590 Madison Avenue by RXR and Elliott Investment Management signals renewed confidence among large investors 6
75 office-to-residential conversion projects representing 34 million square feet are either underway or being evaluated, accounting for approximately 7% of Manhattan’s office inventory 6
Union Square occupancy grew to 91% by Q4 2025, demonstrating selective recovery in well-positioned submarkets with strong transportation access 6

CHICAGO MULTIFAMILY CONSTRUCTION HITS 13-YEAR LOW

Chicago multifamily construction activity reached lowest levels since 2012, reflecting demographic challenges and reduced demand from young professionals 7
Shrinking 20-to-34-year-old renter population across the metro area is reducing demand for new apartment units, as this demographic typically drives professional hiring and rental demand 7
Suburban multifamily building sales up 40% year-over-year in Q3, with developers increasingly favoring outer suburbs like Lake County-Kenosha for new development 7
Investment activity expected to pick up along North Lakefront-Rogers Park corridor in 2026, as investors target transit-accessible areas with development potential 7

COMMERCIAL FINANCING MARKETS

The Federal Reserve maintained steady interest rates while commercial lending markets showed selective strength, particularly in office and senior housing sectors. Capital availability improved significantly for high-quality assets, though lenders remain cautious about property type and sponsorship quality.

OFFICE LENDING SURGES ON TECH OPTIMISM

Office loan originations reached $45.8 billion in 2025, representing a remarkable 92% increase over 2024’s total as lenders regained confidence in select office assets 4
70% of office loans supported Trophy and Class A properties, as lenders favored high-end, stable buildings positioned to attract tech tenants and other quality occupiers 4
Renewed venture capital funding boosting tech office demand, with early 2026 leasing indicators suggesting continued strengthening in premium office markets 4
Positive momentum expected through first half of 2026, according to Avison Young analysts tracking lending patterns and leasing activity 4

SENIOR HOUSING CAPITAL MARKETS REOPEN

Senior housing investment sales jumped 34.1% year-over-year to $17.9 billion in 2025, as the liquidity crunch that paralyzed transactions in 2024 largely eased 3
Banks and alternative lenders actively seeking sector exposure, with money available throughout the capital stack from construction loans to permanent financing 3
Sponsorship and operational expertise now key differentiators, as both equity providers and lenders favor investors with proven track records in senior housing operations 3
Bridge-to-permanent financing structures gaining popularity, allowing buyers to stabilize assets and improve operations before locking in long-term debt at favorable rates 3

COMMERCIAL SERVICING MARKETS

Office distress continued spreading across major markets, with high-profile foreclosures and deed-in-lieu transactions highlighting ongoing challenges. CMBS servicing disputes intensified as borrowers and servicers clash over loan modifications and fee structures.

BAY AREA OFFICE DISTRESS CONTINUES

Deutsche Bank seized three Oakland office towers from Starwood Capital through deed-in-lieu of foreclosure, representing $442.1 million in unpaid debt on original $364.5 million loan 5
Buildings purchased by Starwood for $494 million in 2019 when downtown Oakland office vacancy was 7.5%, now facing 28.5% vacancy rate as of Q4 2025 5
Three buildings total 975,000 square feet at 2101 Webster Street, 1901 Harrison Street, and 2100 Franklin Street, and could be sold individually given separate parcel locations 5
Office distress spreading beyond San Francisco to Oakland and other Bay Area markets, reflecting pandemic’s lasting impact on regional office demand 5

CHICAGO LOOP FACES CONTINUED PRESSURE

Kohan seized Loop office building through deed-in-lieu arrangements, adding to AmTrust’s challenging stretch in Chicago commercial real estate 9
AmTrust previously lost 30 North LaSalle Street to foreclosure and is currently battling foreclosure lawsuit tied to $260 million Illinois Center mortgage 9
Nuveen took control of 321 North Clark Street last month to resolve troubled loan, highlighting broader trend of lenders stepping in to resolve distressed office assets 9
High interest rates, sagging values, and loan maturities creating perfect storm for Loop office owners facing difficult refinancing decisions 9

CMBS SERVICING DISPUTE INTENSIFIES

Rialto and 400 Capital dispute over $130 million loan connected to Herald Square hotel and retail location centers on whether agreement constitutes forbearance or modification 10
400 Capital argues special servicing fees make refinancing difficult despite property being fully leased with net operating income more than double debt service payments 10
25 basis point fee and default interest being charged while loan remains in special servicing, highlighting ongoing tensions in CMBS servicing practices 10
Case highlights broader CMBS servicing tensions over fee structures and loan modification procedures affecting borrowers with performing assets 10

INDUSTRY NEWS

Real estate companies demonstrated operational discipline while strategic developments and market recovery signals emerged across various sectors, from technology solutions to senior housing investments.

REAL ESTATE OPERATIONAL EFFICIENCY

October 2025 data from industry expense indices revealed a clear shift toward operational discipline across real estate firms, with both non-wage expenses and labor costs continuing to trend downward year-over-year 14
Companies are not only cutting costs but doing so strategically—improving efficiency without sacrificing productivity
Non-wage expenses remained significantly improved compared to 2024 levels, with firms maintaining tighter control over controllable and operational expenses

COSTAR GROUP STRATEGIC DEVELOPMENTS

CoStar Group stood firm against investor pressure regarding its Homes.com investment strategy, rejecting demands from activist investors Third Point and D.E. Shaw 15
The company expects revenue of approximately $3.8 billion in 2026, representing an 18% annual increase, with an adjusted EBITDA margin of 20% compared to the 13% margin recorded in the previous year
CoStar announced plans to accelerate completion of its $500 million share repurchase program in 2025 and launch a new $1.5 billion repurchase program in July 2026
The company is deploying AI initiatives across the organization and investing to enhance commercial product offerings, including its loan origination module and real estate lease benchmarking capabilities

SECONDARY MARKET EXECUTION TRENDS

Lenders adjusted hedged execution strategies in December as bulk aggregators regained market share at the expense of agency securitization and cash window channels 4
Hedged loan sales to bulk aggregators increased 200 basis points month-over-month to 29%, reversing a multi-month decline
Agency mortgage-backed securities (MBS) executions and cash window sales each declined 100 basis points during the month
The number of active investors rose to 12 in December after holding steady at 11 for four consecutive months, modestly expanding execution options for lenders

SENIOR HOUSING MARKET RECOVERY

The senior housing sector experienced significant improvement in 2025, with sales activity recording a 34.1% year-over-year gain and $17.9 billion in investment sales reported during the year 16
The liquidity crunch that paralyzed transactions in 2024 has eased, with banks and alternative lenders returning to actively seek exposure to the sector
Money throughout the capital stack is now available, with both equity and lenders favoring investors with proven track records and assets in markets with strong barriers to entry

TECHNOLOGY AND OFFICE LEASING

Venture capital activity has boosted technology office leasing, with office lending rising significantly in 2025 17
Loan originations reached $45.8 billion, representing a 92% increase over 2024’s total
Approximately 70% of those loans supported Trophy and Class A properties, as lenders favored high-end, stable office buildings likely to attract technology tenants
Early indicators suggest this positive momentum will continue into the first half of 2026

MAJOR REIT PORTFOLIO TRANSACTIONS

Apollo Commercial Real Estate Finance selling entire $9 billion loan book to Athene Holding at 99.7% of total loan commitments, amid persistent pressure from public markets 11
Sale leaves Apollo REIT with $1.4 billion in net cash and potential for strategy pivot or dissolution if no new business plan is adopted by year-end 11
Camden Property Trust marketing 11 California properties totaling 3,600 units in Los Angeles, Orange County, San Diego, and Inland Empire for sale 12
Camden’s California exit reflects broader REIT strategy shifts in high-regulation markets as companies focus on more business-friendly jurisdictions 12