Daily Dose of Real Estate

Daily Dose of Real Estate for July 25

The housing market hit record prices of $435,300 while buyers went on strike (2.7% sales drop), creating the world’s most expensive party nobody wants to attend. Foreclosure auctions surged 19% with VA foreclosures up 428%. The “One Big Beautiful Bill Act” gave permanent CRE tax breaks while urban offices sweat $40 billion in maturities. Investors like Peachtree Group picking up distressed hotels with $250 million funds. Despite rent collection hitting 83.6% and market chaos everywhere, mortgage companies posted strong Q2 earnings. Let’s get you caught up and out the door in 3 minutes. Tim

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Table of Contents

KEY TAKEAWAYS

Home prices reach record high of $435,300 in June despite 2.7% drop in sales, marking the 24th consecutive month of year-over-year increases 1 2
Foreclosure auction volume surges 19% to a two-year high while buyer demand plummets to multi-year lows, with VA-insured loans jumping 428% after moratorium expiration 3
Mortgage delinquencies rise to 3.35% in June, up 15 basis points monthly, with FHA delinquencies hitting their highest June level since 2013 and foreclosure activity up 10% year-over-year 4
Fannie Mae revises forecasts downward, now projecting mortgage rates at 6.4% by end of 2025 and home price growth of just 2.8% for the year 5
Taylor Morrison reports strong Q2 with $194 million net income and $2.0 billion in home closings revenue, up 2% year-over-year 6
Commercial real estate auctions surge with Crexi reporting 96% close rate and 10% year-over-year transaction volume increase in H1 2025 7
20% qualified business income deduction made permanent for pass-through entities (LLCs, limited partnerships) 1
Qualified Opportunity Zones program gains permanent status with tightened eligibility (median family income threshold lowered from 80% to 70%)
Serious delinquencies up 8% year-over-year (35,000 loans), while foreclosure activity continues rising with 10% annual increase 4

RESIDENTIAL REAL ESTATE MARKETS

Overview: June housing data revealed a tale of two markets – record-high prices amid declining sales activity, while distressed properties surge and inventory slowly improves.

Sales & Pricing Data

Record median home price of $435,300 in June, marking 24th consecutive month of annual increases despite weakening demand 1
Existing home sales dropped 2.7% month-over-month to 3.93 million units (seasonally adjusted annual rate), but unchanged from June 2024 1
Home price growth slowed to 2% year-over-year, down significantly from previous periods as inventory improves 2
Luxury market outperforms: Homes above $1 million jumped 14% annually while properties below $100,000 dropped 5% 1
ATTOM Q2 report: Homeowners averaged 50% profit on sales, up from Q1’s 48.9% but down from last year’s 55.6% 8• National median sale price reached record $369,000, reflecting 5.4% quarterly increase and 3.1% year-over-year growth 8

Inventory & Supply Trends

Total inventory reached 1.53 million units at end of June, up 15.9% year-over-year, representing 4.7-month supply at current sales pace 1
Inventory levels now “reasonable” after three years of record-low supply, no longer at “dangerously unhealthy levels” 2
Average homeownership tenure increased to 8.18 years, the longest in 25 years, contributing to ongoing inventory constraints 8

Distressed Property Markets

Foreclosure auction volume surged 19% to two-year high in Q2 2025, while buyer demand dropped to multi-year lows 3
VA loans led foreclosure surge with 428% annual increase following December 2024 moratorium expiration 3
REO auction volume jumped 20% year-over-year to more than two-year high, with vacant properties up 31% annually to five-year high 3
Foreclosure auction demand fell to 30-month low & REO auction demand dropped to almost six-year trough 3

Regional Performance

West region saw slight sales increase while Northeast experienced steepest decline 1
Manchester, New Hampshire emerged as top market for June 2025, offering $250,000 savings compared to nearby Boston 9

Market Outlook

Realtor.com forecasts home sales could fall to 30-year low in 2025 despite improved inventory 10
Distressed volume increases expected to put downward pressure on home price appreciation as auction buyers signal future retail market weakness 3

MORTGAGE MARKETS

Overview: Mortgage markets show mixed signals with improving rate forecasts offset by rising delinquencies, declining servicer satisfaction, and increased foreclosure activity.

Interest Rates & Forecasts

Fannie Mae revised rates lower: Now projecting 6.4% by end 2025 and 6.0% by end 2026, down from previous forecasts of 6.5% and 6.1% 5
Current 30-year rates average 6.84% after two-day decline, while refinancing rates dropped five consecutive days to 6.99% 11

Mortgage Performance & Delinquencies

National delinquency rate rose to 3.35% in June, up 15 basis points monthly, driven by early-stage delinquencies 4
FHA delinquencies surged 41 basis points in June to highest level since 2013 (excluding pandemic era), now representing 51% of all serious delinquencies nationwide 4
Serious delinquencies up 8% year-over-year (35,000 loans), while foreclosure activity continues rising with 10% annual increase 4
Foreclosure starts and sales rose year-over-year in each of the past four months 4

Lending Activity

Mortgage applications increased 0.8% for week ending July 18, with purchase applications surging 3% and up 22% year-over-year 12
Refinance applications declined 3% weekly but remained 22% higher than same period last year 12
Prepayment activity slipped 6 basis points to 0.65% on higher rates, though up 22% from last year 4

Servicer Performance

Mortgage servicer satisfaction plummeted to 596 points, down 10 points from 2024 and 131 points below originator satisfaction scores of 727 13
Only 32% of customers gave high overall communication ratings, with escrow cost increases affecting 57% of servicer customers 13

Regulatory Developments

Fannie Mae faces discrimination lawsuit from 60+ former employees alleging nationality and age-based discrimination in mass termination 14
FHFA released FAQ on Fannie Mae and Freddie Mac credit score changes, providing implementation clarity 13

ECONOMIC & POLITICAL NEWS

Overview: Federal Reserve policy remains in focus as Treasury Secretary reassures markets about Powell’s position, while economic indicators show mixed signals ahead of the July 29-30 FOMC meeting.

Federal Reserve & Monetary Policy

Treasury Secretary Bessent reassures markets that Fed Chair Powell doesn’t need to resign but should conduct internal review, calming investor fears 15
Fed meeting July 29-30 widely expected to keep rates unchanged despite Trump’s calls for cuts 15
U.S. inflation rose to 2.7% annually in June, up from 2.4% in May, complicating Fed decision-making 15

Employment & Economic Growth

Nearly 1 in 2 workers plan job search in coming months, with 22% reporting improved employment situation in 2025 16
2025 U.S. real GDP growth consensus revised down to 1.4%, with labor market showing slower job growth and reduced quit rates 17

Trade & International Developments

U.S.-Japan trade agreement sets tariffs at 15%, boosting global stock markets and fueling hopes for similar EU deal 15

COMMERCIAL REAL ESTATE NEWS (INCLUDING MULTIFAMILY)

MAJOR TAX LEGISLATION IMPACTS CRE

The One Big Beautiful Bill Act (OBBBA), enacted July 4, 2025, delivers sweeping federal tax changes that fundamentally reshape commercial real estate investment incentives and preserve critical investment structures.

Key Provisions:

20% qualified business income deduction made permanent for pass-through entities (LLCs, limited partnerships) 1
Qualified Opportunity Zones program gains permanent status with tightened eligibility (median family income threshold lowered from 80% to 70%)
100% first-year bonus depreciation made permanent for qualifying non-residential real estate improvements (typically 20-year depreciation schedule)
Section 1031 like-kind exchanges preserved – rejected proposed elimination, maintaining ability to defer capital gains through property exchanges
Carried interest taxation unchanged – maintains favorable capital gains treatment rather than ordinary income rates
REIT flexibility expanded – increases permitted taxable REIT subsidiary assets from 20% to 25%
New Qualified Rural Opportunity Funds program established specifically targeting rural area investment

DISTRESSED HOTEL OPPORTUNITIES EMERGE

Hotel sector refinancing challenges are creating significant investment opportunities as properties struggle with debt originated during low-rate periods now facing higher refinancing costs.

Market Developments:

Peachtree Group launches $250M distressed hotel fund targeting high-quality assets with capital structure distress over next 18 months 2
Hotel CMBS special servicing hits 10% – up from 7.3% one year ago, indicating mounting sector distress
Focus markets: California, Texas, and Florida where demand fundamentals remain strong despite pricing softness
$1 trillion in troubled CRE debt nationwide with $582 billion maturing by 2027 according to Newmark
Peachtree’s track record: 18-year history developing $2B in hotels, currently managing $4B in assets
First acquisition expected within 90 days with 18-month deployment timeline

OFFICE MARKET SHOWS URBAN-SUBURBAN DIVIDE

Analysis of $165 billion in securitized office debt reveals the sector is bifurcating along geographic lines, with suburban properties demonstrating superior credit metrics despite lower transaction volumes.

Performance Metrics:

Suburban office outperforms on credit: 2.47x DSCR vs 2.01x urban; 53% LTV vs 56% urban in 2025 originations 3
Cap rate spread reversal: Suburban at 8.97% vs urban at 7.16% in 2025 (suburban previously traded at lower cap rates)
Urban dominance by volume: $137B urban exposure vs $28B suburban (nearly 5:1 ratio)
Maturity wall concentration: $40B+ urban office CMBS debt maturing by end-2026 vs $6.1B suburban
Refinancing vulnerability: 77% of securitized office universe faces refinancing challenges with coupons under 6%
Geographic concentration: Top 10 metros account for 50%+ of urban exposure, led by New York ($60.8B), San Francisco ($10B), Los Angeles ($9.8B)

TRANSACTION MOMENTUM BUILDS

Commercial real estate transaction activity is gaining steam as buyer-seller pricing gaps narrow and creative financing solutions emerge to address high interest rate environment.

Market Activity:

Q1 2025 volumes: $100.6B total, up 14% year-over-year with individual asset sales jumping 24% 4
Leading property types: Retail, industrial, multifamily, and suburban office (CBD office continues to struggle)
Strong secondary/tertiary marketsdriven by owner-users and 1031 exchange investors
Creative financing dominance: Seller financing, cash transactions, local bank/credit union funding replacing traditional lenders
Auction market success: Crexi reports 96% close rate, 10% YoY volume increase in H1 2025 5
Office auction activity: 13 office properties sold in May-June alone, signaling investor opportunity in challenged sector

MULTIFAMILY DEBT GROWS AMID COLLECTION PRESSURES

Despite lower origination volumes, multifamily mortgage debt outstanding continues expanding while independent landlords face mounting rental collection challenges.

Financing Trends:

Total multifamily debt: $2.16 trillion, up $19.9B (0.9%) in Q1 2025 despite reduced originations 6
Largest holders: Agency/GSE portfolios ($1.07B, 50%), banks/thrifts ($639B, 30%)
Biggest gains: Banks/thrifts added $10.0B (1.6%), REITs up 10.9% percentage-wise
Extended loan durations and continued institutional appetite driving debt growth

Collection Challenges:

Independent landlord payments: 83.6% on-time in July, down 20 bps from June 7
24 consecutive months of declining performance, weakest since December 2020
Year-over-year decline: 209 basis points, marking post-pandemic lows
Regional leaders: Idaho (93.5%), Hawaii (92.3%), Alaska (91.6%)
Worst performers: West Virginia (-1002 bps YoY), Vermont (-718 bps), Massachusetts (-675 bps)
Property size impact: Small multifamily (2-4 units) at 84.0% vs larger properties at 82.4%

INDUSTRY NEWS

Overview: Strong Q2 earnings across real estate sector demonstrate resilience, while technology platforms show exceptional growth and commercial real estate transactions gain momentum.

Homebuilder Earnings

Taylor Morrison Q2 results: $194 million net income ($1.92 per share), $2.0 billion home closings revenue up 2% year-over-year 6
3,340 closings at $589,000 average price, maintaining 22.3% gross margin while achieving 90 basis points SG&A leverage to 9.3% of revenue 6
CEO emphasizes “price over pace” strategy with diversified product portfolio in competitive environment 6

Technology Platform Growth

CoStar Group Q2 revenue hit $781 million, up 15% year-over-year, marking 57th consecutive quarter of double-digit growth 18
Homes.com averaged 111 million monthly visitors with unaided brand awareness growing from 4% to 36% since major marketing campaign launch 18
New home listing section launching with 200 builder agreements already secured, positioned as significant future revenue stream 18

Commercial Real Estate Activity

Crexi auction business: 96% close rate and 10% year-over-year transaction volume increase in H1 2025, with largest client achieving 100% close rate in May 7
CRE transactions up 14% year-over-year to $100.6 billion in Q1 2025, with sales activity now surpassing leasing for first time 19

Strategic Partnerships & M&A

Taylor Morrison-Kennedy Lewis form $3 billion build-to-rent partnership to expand Yardly BTR brand with enhanced land acquisition capabilities 20
Towne Bank Q2 earnings of $38.84 million highlight record revenue and successful Village Bank acquisition 21