Daily Dose of Real Estate for July 10

Housing inventory continues its 20 month hot streak with listings up 28.9% YoY bringing market balance and price pressure. First time homebuyers seem to be losing what little grip they had on the market as their market share continues to slip. More good news, mortgage rates are on four day rally in the wrong direction. Just for fun – the CRE market is about to get hit with a massive maturity wall with debt service coverage ratios around 1.2x. Let’s get you caught up and out the door in 3 minutes. Tim

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Key Takeaways

• Housing inventory continues its 20-month streak of year-over-year growth, with active listings up 28.9% compared to June 2024, exceeding 1 million homes for the second consecutive month 1 2
• America’s housing deficit has shrunk by 35% since its peak in 2020, dropping from 4.3 million to 2.8 million homes, though the nation still needs to build 1.2 million more homes annually to meet demand 3
• Fed minutes reveal growing concern about inflation persistence, with officials increasingly worried that progress toward their 2% target has stalled, potentially delaying expected rate cuts 4
• First-time homebuyers face increasing challenges with their market share dropping to 26.5% in June, down from 27.2% in May and well below the 32-33% range considered normal 5
• Only 11 states have HOA reserve requirements, leaving homeowners in 39 states vulnerable to special assessments when major repairs are needed 6
• Mortgage rates have risen for four consecutive days to 6.87% as of July 9, after declining to 6.77% in late June 7 8
• Compass continues aggressive acquisition strategy with purchase of Colorado-based PorchLight Real Estate Group, following earlier acquisitions of @properties Christie’s International Real Estate 9
• A $120 billion maturity wave is approaching over the next 18 months for CRE loans with debt service coverage ratios below 1.20x, creating potential buying opportunities 1
• Fed leadership: President Trump reportedly considering naming a “shadow chair” until current Fed Chair Jerome Powell leaves office next year 17
  Rate pressure: Trump pushing Fed to cut rates to lower financing costs for government debt, claiming it could save taxpayers $800 billion 17

Residential Real Estate Markets

Overview: Housing inventory continues to grow significantly while the nation’s housing deficit shrinks. HOA reserve requirements vary widely by state, creating potential risks for homeowners.

Housing Supply & Demand

• Inventory growth: Active listings up 28.9% year-over-year in June, exceeding 1 million homes for the second consecutive month 1
• Housing deficit improvement: America’s housing deficit has shrunk by 35% since 2020 peak, dropping from 4.3 million to 2.8 million homes 3
• Regional variations: Housing shortage remains most acute in West and Northeast, while some Southern markets have nearly eliminated their deficits 3
• Construction needs: Nation still requires approximately 1.2 million additional homes annually to meet demand and fully address the remaining deficit 3

Market Conditions

• Days on market: Homes now spending a median of 53 days on market, five more than a year ago 2
• Price reductions: Over 20% of listings experiencing price cuts as sellers adjust expectations in cooling market 2
• Sales volume: Home sales essentially flat compared to 2024, which was already the lowest since 1995 1
• Regional performance: South and West seeing more substantial inventory growth and price reductions compared to Northeast and Midwest 2

HOA Considerations

• Limited requirements: Only 11 states have laws requiring HOAs to maintain cash reserves for future repairs and replacements 6
• Strongest regulations: Hawaii, Nevada, and California mandate regular reserve studies and minimum funding levels 6
• Homeowner risk: Approximately 74 million Americans living in HOA communities potentially face special assessments when major repairs are needed 6

Mortgage Markets

Overview: Mortgage rates are rising again after a brief decline, while first-time homebuyers continue to struggle with affordability challenges. HUD has implemented emergency measures in disaster-affected areas.

Rate Trends

• Recent increase: 30-year fixed mortgage rate has climbed to 6.87% as of July 9, rising for four consecutive days 7
• Rate variations: FHA 30-Year Fixed at 7.44%, 15-Year Fixed at 5.83%, and Jumbo 30-Year Fixed at 6.89% 10
• Previous decline: Rates had reached a three-month low of 6.77% on June 26 before beginning to climb again 8

First-Time Homebuyers

• Market share decline: First-time homebuyer share dropped to 26.5% in June, down from 27.2% in May and well below the 32-33% normal range 5
• Contributing factors: Affordability constraints, increased competition from investors, tighter lending standards, and limited inventory in entry-level price ranges 5
• Long-term concerns: Continued decline risks creating a “permanent renter class” and exacerbating wealth inequality, according to AEI Housing Center director 5

Policy Updates

• HUD emergency response: 90-day foreclosure moratorium implemented on FHA-insured mortgages in Kerr County, Texas following severe flooding 11
• GSE credit scoring: Fannie Mae and Freddie Mac now allow lenders to use VantageScore 4.0, representing an evolution in mortgage underwriting practices 11
• Application volume: Mortgage applications increased 9.4% when rates temporarily dropped in late June, with VA refinance applications surging 32% 12

Economic & Political News

Overview: Inflation concerns are growing at the Federal Reserve, while political tensions over Fed leadership continue. The labor market remains resilient despite economic headwinds.

Economic Indicators

• Inflation forecast: June CPI expected to rise 0.25%, nudging year-ago rate up to 2.6%, with core CPI anticipated to increase 0.24% 14
• Labor market: Unemployment rate held steady at 4.1% in June 2025, indicating resilience despite economic headwinds 15
• Jobs report: June employment data came in stronger than expected, though with some weakness in private sector 16

Political Tensions

• Fed leadership: President Trump reportedly considering naming a “shadow chair” until current Fed Chair Jerome Powell leaves office next year 17
• Rate pressure: Trump pushing Fed to cut rates to lower financing costs for government debt, claiming it could save taxpayers $800 billion 17
• Regulatory conflict: FHFA Chief has called for investigation of Federal Reserve Chairman, adding tension to relationship between regulatory bodies 11

Commercial Real Estate Markets (including Multifamily) – July 10, 2025

Multifamily Refinancing & Investment Opportunities

• A $120 billion maturity wave is approaching over the next 18 months for CRE loans with debt service coverage ratios below 1.20x, creating potential buying opportunities 1
• Multifamily properties represent the largest portion of these at-risk loans, with many carrying legacy sub-6% interest rates that will be difficult to refinance without equity infusion 1
• The South Atlantic region leads with $9.4 billion in maturing securitized multifamily debt, with nearly 70% carrying a current debt yield under 7% 1
• The West South Central region (TX, OK, AR, LA) has $6.7 billion in maturing loans, with approximately $1.2 billion having in-place coupons below 6% 1
• BlackRock has entered into a definitive agreement to acquire ElmTree Funds, a net-lease real estate investment firm with $7.3 billion in AUM, expanding its private credit strategy 2

Net Lease Market Conditions

• Cap rates in the single-tenant net lease market have stabilized at 6.79% in Q2 2025, indicating market normalization after interest rate turbulence 3
• Sector-specific cap rates: retail at 6.57%, office at 7.85%, and industrial at 7.23%, reflecting varying investor confidence across property types 3
• High-credit tenants like 7-Eleven and Chase Bank command lower cap rates, while brands under pressure such as Walgreens trade at higher rates 3
• Quick service restaurant (QSR) ground leases for brands like McDonald’s and Chick-fil-A continue to fetch some of the lowest cap rates in the market 3
• Bid-ask spreads have narrowed, indicating improved alignment between buyer and seller expectations in the current interest rate environment 3

Texas Floods: Insurance & Financing Implications

• HUD has implemented a 90-day foreclosure moratorium on more than 900 FHA-insured mortgages in Kerr County, Texas following devastating floods that have claimed over 100 lives 4
• Significant flood insurance coverage gaps exist: In Kerr County, FEMA designates 2,650 properties in flood hazard areas, but First Street’s climate models identify 4,592 at-risk properties—nearly double the FEMA count 5
• Only about 50% of potentially affected homeowners actually purchase flood insurance, creating substantial financial exposure 5
• Standard property insurance policies do not cover flood damage, highlighting the importance of comprehensive risk assessment for commercial properties 5

Multifamily Market Performance

• The US apartment market absorbed over 227,000 units in Q2 2025, setting a new record and pushing national occupancy rates to 95.6% 6
• Despite strong absorption, rent growth remains modest at just 0.19% in June, as property operators prioritize occupancy over rental income 6
• Market performance varies regionally: tech hubs are experiencing gains while tourism-heavy areas see softening demand 6
• Hines, partnering with Japanese companies, has acquired land in Dumfries, Virginia to develop 365 market-rate apartments within the Potomac Shores master-planned community 7
• The development will feature eco-friendly wood-frame construction and amenities including a coworking lounge and resort-style pool, strategically located near a future commuter station 7

Regulatory & Servicing Updates

• HUD and USDA have published a notice seeking comments on energy efficiency standards for newly constructed federally-financed housing, including multifamily buildings 8
• The proposed standards would incorporate the 2021 International Energy Conservation Code (IECC) for buildings up to 3 stories and ASHRAE 90.1-2019 for buildings with 4+ stories 8
• Fannie Mae updated its Servicing Guide on July 9, 2025, with revisions to default-related legal services, bankruptcy, and foreclosure proceedings 9
• The Mortgage Bankers Association announced a July 21 webinar on “Navigating Coverage and Risk for Commercial Catastrophic Insurance,” focusing on insurance concepts for major perils affecting commercial properties 10

Industry News

Overview: Compass continues its acquisition spree while significant property transactions and development projects reshape the real estate landscape. Technology innovations are enhancing customer experiences.

Corporate Moves

• Compass expansion: Acquired Colorado-based PorchLight Real Estate Group on July 9, 2025, which closed 1,257 transaction sides for $922.3 million in 2024 9
• Strategic growth: Part of CEO Robert Reffkin’s plan to reach 30% market share in top 30 regions by 2030, following $400+ million acquisition of @properties and Christie’s International Real Estate 18

Property Transactions

• Florida apartment sale: Vida Lakewood Ranch, a 304-unit apartment community in Bradenton, sold for $92.1 million 19
• Texas acquisition: Lakes at Madera, a 392-unit property in Baytown, acquired by 3 Points Realty Partners with $19 million loan from BridgeInvest 20
• Luxury property purchase: 1100 Apex, a 134-unit luxury property in Clearwater, Florida, purchased by Frontier Group of Companies for $32.6 million 21

Development Projects

• Virginia apartments: Hines developing 365 market-rate apartments in Dumfries, Virginia in collaboration with Japanese companies Sumitomo Forestry and Chuo-Nittochi Co. 22
• Texas expansion: StreetLights Residential broke ground on third phase of Arlington, Texas development with $78 million investment 23

Technology & Demographics

• Payment innovations: J.P. Morgan Payments implemented biometric payment experiences at Formula 1 Miami Grand Prix, along with online shopping with direct suite delivery 24
• Senior housing trends: 30% rise in senior renters aged 65+ from 2013 to 2023, with 25% increase in seniors renting houses during same period