Daily Dose of Real Estate for July 22

Reconcile this one: cancellations by buyers are the highest on record, delistings outpace inventory gains, but naturally median home prices hit another record. Less than one-third (30.9%) of homes that sold in June went for over their list price, representing the lowest June share in five years. Unsurprisingly, recent analysis from First American Financial Corporation indicates that the pendulum has swung toward renting in most major U.S. markets as of mid-2025. Secretary Bessent gets in on the Powell action and calls for review of Fed’s “many mistakes” and questions institutional effectiveness. Commercial CLO issuance has spiked and defaults have retreated. Let’s get you caught up and out the door in 3 minutes. Tim

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KEY TAKEAWAYS

• Condo market collapse accelerates: 19 major cities now show condo price declines of 12-24% from peak, with Oakland and Austin leading at -24% each, signaling a broader “condo bust” 1
• California insurance crisis deepens: Homeowners insurance premiums rose 33% above inflation in Pacific Palisades and 26% in Altadena before the devastating fires, with the state’s FAIR Plan policies quadrupling since 2015 2
• Housing inventory hits 2-year low: New home listings fell 3.2% month-over-month to lowest levels since October 2023, as sellers withdraw properties rather than accept lower prices 3
• Buyer power emerges: Home sale cancellations surged to 14.9% in June—the highest June rate on record—while only 30.9% of homes sold above asking price, the lowest June share in five years 3
• Mortgage rate lock-in persists: 87% of borrowers hold rates below current market levels, with 66% having rates 2+ percentage points below today’s 6.75-6.90% rates 4
• Industry consolidation creates casualties: Rocket Companies laid off 2% of workforce weeks after completing $1.75B Redfin acquisition, affecting recruiting, product, and engineering roles 5

RESIDENTIAL REAL ESTATE MARKETS

Overview: The housing market faces severe inventory constraints while buyer leverage increases dramatically, creating unprecedented market dynamics with significant regional variations.

Inventory Crisis Deepens

• New listings plummet: Down 3.2% MoM and 3.4% year-over-year to lowest levels since October 2023 3
• Seller behavior shifts: Delistings jump 35% year-to-date and 47% year-over-year as sellers withdraw rather than cut prices 6
• Record equity positions: Sellers enjoy “record high levels of home equity” providing flexibility to wait for desired prices 6

Buyer Power Emerges

• Cancellation rates spike: 14.9% of pending sales canceled in June—highest June rate since records began in 2017 3
• Above-asking sales decline: Only 30.9% of homes sold above list price, lowest June share in five years 3
• Median prices hit records: Despite buyer leverage, median home price reached all-time high of $447,035 in June 3

Regional Market Divergence

• Rust Belt outperforms: Six of ten fastest-growing pending sales metros located in Rust Belt, led by Virginia Beach (+14.4%), Dallas (+8.2%), Warren, MI (+8.1%) 3
• Florida markets cool: Four of ten worst-performing metros in Florida, with Miami homes taking 88 days to go under contract (up 23 days year-over-year) 3
• Texas shows balance: Home listings up 27.8% year-over-year while median price of $340,000 down only 1.4%, with inventory reaching 5.7 months 7

Condo Market Collapse

• 19 cities see major declines: Oakland and Austin lead with -24% price drops from peak, followed by St. Petersburg (-21%) 1
• Florida dominates decline list: Seven Florida cities among the 19 worst performers, including Fort Myers (-17%), Sarasota (-17%), Jacksonville (-14%), Tampa (-13%), Naples (-13%) 1
• Accelerating monthly drops: Fort Myers (-2.0%), Oakland (-1.8%), St. Petersburg (-1.8%) lead month-over-month declines 1
• Multiple headwinds: Condos face high prices, special assessments, rising HOA fees, Fannie Mae blacklist threats, and foreign owner exits 1

MORTGAGE MARKETS

Overview: Mortgage rates remain elevated around 6.75-6.90% while the rate lock-in effect continues constraining market activity, with refinance activity showing modest improvement.

Rate Environment

• Current rates: 30-year fixed mortgages at 6.90% near three-week highs 8
• Refinance improvement: Rates dropped three consecutive days to 7.05% average 9
• Historical context: Rates significantly elevated from pandemic-era lows below 3% 8

Lock-In Effect Dominance

• Borrower rate distribution: 87% hold rates below current market, 66% have rates 2+ percentage points below market 4
• FHFA data: 71.3% of outstanding loans carry rates under 5%, approximately 2 points below current rates 4
• Sales impact: Goldman Sachs projects annual existing home sales of just 4.1 million units,  23% from 2019 levels 4

Rent vs. Buy Dynamics

• Renting advantage grows: First American analysis shows renting more affordable in most major markets despite potential equity gains 10
• Cost gap widens: Combined impact of high home prices, elevated mortgage rates, and stable rental costs favors renting 10

ECONOMIC & POLITICAL NEWS

Overview: Federal Reserve policy faces political scrutiny while economic indicators show mixed signals, with core inflation rising and unemployment steady at 4.1%.

Fed Under Political Pressure

• Treasury criticism: Secretary Bessent calls for review of Fed’s “many mistakes” and questions institutional effectiveness 11
• Powell dismissal risk: Trump reportedly considering Fed Chair removal, though analysts warn this could raise long-term rates 12
• Independence concerns: Markets might interpret Powell firing as undermining Fed independence 12

Economic Indicators

• Unemployment steady: 4.1% rate unchanged from 12 months ago, up 10 basis points since January 12
• Job creation slows: 111,000 net new jobs monthly in Q1 2025, improving to 150,000 in Q2 12
• Inflation uptick: Core CPI reached 2.9% in June, up from 2.8% in May—highest since February 12

Growth Projections

• GDP forecast: Consensus 2025 real GDP growth at 1.4%, reflecting narrowing growth drivers 13
• Labor market balance: Lower dynamism with slower job growth and declining quit rates, though layoffs remain scarce 13
• Immigration impact: Policy changes expected to reduce labor supply flows, potentially tightening labor market 13

California Recovery

• GDP growth: State GDP returning to pre-pandemic trend after interest rate-driven slowdown 14
• Employment improvement: Unemployment rate declining after sharp two-year rise, population inflows boosting labor force 14
• Sector performance: Healthcare and government driving job growth, while manufacturing and information struggle 14

Insurance Market Crisis

Overview: California’s homeowners insurance market serves as a national bellwether, with the recent LA fires exposing deep structural problems that threaten housing affordability and availability nationwide.

Pre-Fire Warning Signs

• Premium spikes: Pacific Palisades premiums rose 33% above inflation ($5,025 to $6,689), Altadena up 26% ($1,485 to $1,873) from 2018-2022 2
• Nonrenewal surge: Both fire-affected ZIP codes saw nonrenewal rates rise above California and national averages in years before fires 2
• National trends: Average homeowners premiums nationwide rose 8.7% above inflation 2018-2022, with higher rates in climate-risk areas 2

FAIR Plan Explosion

• Historic growth: California FAIR Plan policies nearly quadrupled since 2015, reaching 500,000+ in March 2025 2
• Fire-area concentration: FAIR Plan policies in Pacific Palisades and Altadena more than doubled from 1,184 to 2,388 (2021-2024) 2
• Financial stress: Plan received 5,000 fire claims, will assess $1B emergency fees on member insurers—first assessment in 30+ years 2

Post-Fire Market Response

• Rate increases approved: State Farm received 17% rate increase approval from insurance commissioner 2
• Statewide crisis declared: Insurance commissioner reaffirmed California is in “statewide insurance crisis” 2
• Cost spreading: Half of FAIR Plan emergency fees can be passed to policyholders statewide 2

COMMERCIAL REAL ESTATE MARKETS (INCLUDING MULTIFAMILY)

Market Developments

• CRE CLO Market Surges Back: Commercial real estate CLO issuance has reached $17 billion in 2025, marking a dramatic recovery from the 2023 contraction and signaling renewed investor confidence in CRE debt markets 1
• Distress Levels Retreat: CRE CLO distress dropped 230 basis points in June to 10.9%, providing temporary relief though market volatility persists 2
• Multifamily Metrics Improve: Q2 2025 saw modest improvement in multifamily underwriting with slight cap rate compression and stronger value-add buyer sentiment across key markets 2

💰 Major Transactions

• $241M Industrial Portfolio Sale: Mapletree Investments sold 2.4 million square feet of Sun Belt warehouse space to EQT Real Estate for $241.2 million, spanning 10 assets across Georgia, Florida, and Texas – marking continued institutional demand for logistics properties 3
• San Francisco’s Tallest Tower Proposed: Hines unveiled plans for a 76-story, 1,225-foot office tower that would become the West Coast’s tallest building, despite SF’s 23% office vacancy rate – betting on AI company demand and premium office recovery 4

🏦 Financing & Capital Markets

• Alternative Investment Surge: Delaware Statutory Trust (DST) offerings hit a 2025 high in June with $630 million raised, pushing year-to-date equity up nearly 50% over 2024 levels despite broader capital access challenges 2
• Credit Conditions Tighten: Rising borrowing costs and cautious lending practices continue to slow CRE dealmaking across property sectors, creating selective capital deployment environment 2

📋 Policy & Regulatory

• HUD Rental Aid Cap Debate: Department of Housing and Urban Development considering two-year limit on Section 8 vouchers and public housing subsidies affecting 1.4 million low-income households – sparking debate over program sustainability versus displacement risks 2

INDUSTRY NEWS

Overview: Major consolidation creates workforce disruption while technology companies raise capital and regulatory changes open doors for cryptocurrency adoption in commercial real estate.

Consolidation Fallout

• Rocket layoffs: 2% workforce reduction (~285 employees) weeks after $1.75B Redfin acquisition completion 5
• Affected roles: Recruiting, product management, software engineering positions eliminated, some employees with 10+ years service 5
• Severance package: 12 weeks pay plus one week per year of service, health benefits up to 12 months, career coaching 5