Daily Dose of Real Estate

Daily Dose of Real Estate for July 28

“From waaay downtown! Trump shoots and he scores!” Trump scores with the EU and lands one of the biggest trade deals in history. Rocket Mortgage has a modestly smaller celebration for winning JD Powers’ servicer rankings for customer service. Housing market continues to be stuck in its tracks with new home sales inching upward and their prices falling. Multifamily construction a crescendo. 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. Work Smarter. Be More Successful.

KEY TAKEAWAYS

Single-family housing starts hit lowest level since July 2024, declining 4.6% in June to 883,000 units as elevated interest rates and affordability challenges continue to pressure builders, with the South experiencing the steepest declines at 12.4% year-to-date 1
New home sales edge up slightly but remain tepid, rising 0.6% to 627,000 units in June while staying 6.6% below year-ago levels as mortgage rates averaged above 6.8%, keeping many potential buyers on the sidelines 2
Mortgage servicer satisfaction plummets to all-time lows with J.D. Power study showing average scores dropping to 596 on a 1,000-point scale, creating a stark 131-point gap with mortgage originators who scored 727 in the most recent study 3 4
Rocket Mortgage dominates servicer rankings for the 11th consecutive time with a score of 685, followed by Guild Mortgage at 677 and Regions at 656, while Select Portfolio Servicing ranked last at 469, highlighting the wide performance gap across the industry 3
Federal Reserve expected to hold rates steady this week despite intense pressure from President Trump and his allies to reduce borrowing costs, with potential dissents from officials advocating for cuts to support a slowing labor market 5
Trump announces breakthrough 15% EU tariff deal, down from previously threatened 30% rates, as markets brace for the August 1 deadline affecting more than 200 trading partners worldwide 6
Multifamily construction reaches 38-year high with 608,000 units completed in 2024, driven primarily by high-density buildings of 50+ units as developers respond to rental demand 7

Table of Contents

RESIDENTIAL REAL ESTATE MARKETS

Overview: Housing markets continue to show mixed signals with modest new home sales gains offset by declining construction starts and persistent affordability challenges across all price segments. Regional disparities are becoming more pronounced, with the Midwest showing resilience while the South faces significant headwinds.

New Home Sales & Construction Data

New home sales edged up 0.6% to 627,000 units in June, representing a slight improvement from May’s unrevised figures, but the broader picture remains challenging as sales remain 6.6% below June 2024 levels and down 4.3% on a year-to-date basis 2
Single-family housing starts declined 4.6% to 883,000 seasonally adjusted annual rate – the lowest level since July 2024, reflecting ongoing challenges from elevated interest rates, rising inventories, and supply-side issues that continue to create headwinds for builders 1
Multifamily construction provided a bright spot with starts surging 30% to an annualized 438,000 pace, helping push overall housing starts up 4.6% to 1.32 million units in June as developers respond to rental market demand 1
New home inventory continued its upward trajectory with 511,000 residences marketed for sale as of June, representing a 1.2% increase from the previous month and an 8.5% jump compared to a year ago, resulting in 9.8 months’ supply compared to 8.4 months a year ago – well above the six-month supply considered balanced 2

Regional Performance Variations

The South leads construction decline with single-family home building down 12.4% on a year-to-date basis, far outpacing declines in the Northeast and West as the region grapples with oversupply concerns and affordability challenges 1
Midwest bucks the national trend with single-family construction up 10% year-to-date, where housing affordability conditions remain generally better than much of the nation and builders continue to find viable opportunities 1
All four regions show sales weakness on a year-to-date basis, with the Northeast experiencing the steepest drop at 25.6%, followed by the Midwest at 8.5%, the West at 4.0%, and the South at 1.6%, underscoring the national scope of housing market challenges 2

Pricing & Affordability Crisis

Median new home price fell 4.9% in June to $401,800, marking a 2.9% decline compared to a year ago, though affordability challenges persist as elevated mortgage rates continue to price out many potential buyers 2
Only 14% of homes were priced in the entry-level range below $300,000, while 28% were priced above $500,000, with most homes falling in the $300,000-$500,000 range, highlighting the continued squeeze on first-time and middle-income buyers 2
Lower-priced home sales experienced a devastating collapse with homes under $300,000 seeing a 65% decline between 2020 and 2024, reflecting the broader shift away from affordable housing options as construction costs and land prices have risen dramatically 8
Luxury segment more than doubled in volume with homes priced between $800,000 and $999,999 seeing massive growth, while the median sales price of new homes rose from $330,900 in 2020 to $420,300 in 2024 8

Local Market Highlights

San Francisco housing market showed mixed signals with home sales increasing 12.2% year-over-year in June 2025 according to the California Association of Realtors, but the market experienced volatility with home prices rising 3.3% year-over-year while falling 5.3% from May to June 9
San Francisco homes continue selling well above asking with a 111.2% sales price-to-list price ratio, while the luxury lakefront market has seen significant activity with the median listing home price in South Lake Tahoe reaching $745,000 in June 2025 10

MORTGAGE MARKETS

Overview: The mortgage industry faces a perfect storm of challenges with servicer satisfaction hitting record lows while rates remain elevated above 6.7%. The Federal Reserve is expected to hold steady this week despite political pressure, as rising escrow costs and communication failures drive customer frustration to new heights.

Servicer Satisfaction Crisis Deepens

Industry average satisfaction drops to historic low of 596 on a 1,000-point scale, down 10 points from 2024, representing an all-time low for the mortgage servicing industry and highlighting growing customer frustration with service quality 3 4
Massive 131-point satisfaction gap emerges between mortgage servicers (596) and originators (727) in the most recent study, suggesting fundamental differences in customer experience between loan origination and ongoing servicing 3
Study methodology based on comprehensive feedback from 15,912 mortgage customers who have maintained the same servicer for at least one year, evaluating six key dimensions including trust, ease of doing business, communication, personnel, problem resolution, and digital experience 11

Servicer Performance Rankings

Rocket Mortgage maintains dominance for 11th consecutive time with a score of 685, significantly outperforming the industry average and demonstrating consistent excellence in customer service delivery 11
Guild Mortgage secures second place with a score of 677, followed by Regions Mortgage at 656, showing that mid-sized servicers can compete effectively with larger players when focused on customer experience 11
Select Portfolio Servicing ranks last with a concerning score of 469, highlighting the wide performance gap across the industry and the significant room for improvement among lower-performing servicers 11

Key Satisfaction Drivers & Pain Points

Communication remains a critical weakness with only 31% of customers rating their servicer’s communication as excellent or perfect, while personalized outreach proves critical for satisfaction, though only 32% gave high overall communication scores – down five percentage points since 2022 11
Rising escrow costs emerge as major satisfaction killer with 57% of customers reporting higher escrow costs in 2025, causing satisfaction to drop an average of 67 points compared to those who saw no change, highlighting how property tax and insurance increases directly impact customer perceptions 11 4
Account alerts prove most effective among personalized outreach efforts, with 46% of customers recalling this type of communication, suggesting servicers should focus on proactive, relevant messaging to improve customer relationships 11

Current Rate Environment & Market Conditions

30-year fixed refinance rates remain elevated at 6.79% with 15-year fixed refinance rates at 6.06% and 10-year fixed refinance rates at 6.08%, significantly dampening refinancing activity as many homeowners secured rates in the 3-4% range during the pandemic era 12
Refinancing activity has fallen out of favor as homeowners instead turn to home equity lines of credit and home equity loans to access their property’s value, with experts noting refinancing might only make sense for homeowners with substantial equity gains 12
Mortgage rates averaged above 6.8% in June contributing to the tepid sales pace and keeping many potential buyers on the sidelines, as challenging affordability conditions continue to act as headwinds on the housing sector 2

Federal Reserve Policy Outlook

Fed widely expected to hold benchmark rate unchanged at the conclusion of its two-day meeting on July 30, despite intense pressure from President Trump and his allies to reduce borrowing costs to stimulate economic activity 5
September rate cuts widely anticipated by markets potentially providing good news for Americans hoping to borrow money, especially first-time homebuyers who have been effectively locked out of the market with mortgage rates close to 7% 5
Multiple dissents possible from Fed officials who want to provide support to a slowing labor market, creating potential drama at this week’s meeting as Chair Jerome Powell navigates political pressure and economic data 5

ECONOMIC & POLITICAL NEWS

Overview: This week represents one of the most consequential periods for the economy in years, with critical Fed decisions, major economic data releases, and Trump’s August 1 tariff deadline creating a perfect storm of market-moving events. Inflation trends are moving away from the Fed’s target while labor market conditions show signs of weakening.

Critical Economic Week Ahead

Federal Reserve’s two-day meeting concludes July 30 with a rate decision and Chair Jerome Powell’s press conference, as the central bank weighs political pressure against economic data showing mixed signals for the economy 5
July jobs report expected to show significant weakness with average monthly employment gains dropping to levels not seen since 2010 (excluding pandemic-era losses), as the labor market shows signs of cooling amid economic uncertainty 5
Manufacturing sector continues losing jobs for the second straight month amid economic headwinds, reflecting broader challenges in the industrial economy as trade policies and higher costs impact production 5
Labor force shrinking in recent months potentially indicating how anti-immigrant rhetoric and mass deportations are weighing on employment, creating additional challenges for employers seeking workers 5

Trade Policy Breakthrough & Deadline

Trump announces significant 15% EU tariff deal down from previously threatened 30% rates, representing a major diplomatic breakthrough that could ease trade tensions with one of America’s largest trading partners 6
EU commits to massive $750 billion energy purchases plus an additional $600 billion in U.S. investment above current levels, potentially reshaping transatlantic economic relationships and energy markets 6
Friday marks critical deadline for 200+ trading partners as the administration prepares to set tariff rates ranging from 10% to 15% or potentially less, with global markets watching closely for final determinations 5
Letters going out this week to roughly 200 countries unilaterally setting tariff rates, as Trump follows through on campaign promises to reshape America’s trade relationships through aggressive negotiation tactics 5

Inflation Trends & Consumer Behavior

Fed’s favorite inflation gauge creeping higher with the Personal Consumption Expenditures index moving further away from the central bank’s 2% target in recent months, complicating the Fed’s decision-making process on interest rates 5
Consumers adapting by pulling forward purchases including back-to-school items and other goods to mitigate expected higher prices from tariff policies, potentially creating temporary demand spikes followed by weakness 5
July inflation data will likely reflect trade policy impact as pre-tariff inventory is depleted and higher-cost goods enter the supply chain, potentially showing the first clear effects of the new administration’s policies 5

Commercial Real Estate Markets (Including Multifamily)

Key Takeaways

Industrial markets defy expectations with Miami-Dade, Minneapolis, and Houston leading performance despite broader sector challenges, with Miami-Dade achieving sub-3% vacancy for small-bay spaces and rents surpassing $18 PSF 1
Suburban offices outperform urban counterparts in lending metrics, posting superior debt service coverage ratios of 2.47x versus 2.01x for urban properties, while offering higher cap rates at 8.97% compared to 7.16% 2
CRE sales momentum accelerates with Q2 2025 transaction volume climbing nearly 18% year-over-year to $110 billion, driven by a 37.4% surge in retail, 15% gain in industrial, and 11.5% rise in office transactions 3
Immigration enforcement disrupts construction labor markets as ICE raids create uncertainty across major metros, with 41% of California’s construction workforce being foreign-born facing heightened scrutiny 4
Apollo Commercial Real Estate Finance earnings anticipated with Q2 2025 results expected tomorrow (July 29), as investors watch for insights into commercial mortgage REIT performance amid challenging market conditions 5

Industrial Markets

Overview: Several industrial markets are significantly outperforming forecasts in 2025, with unexpected leaders emerging based on strong fundamentals and strategic advantages.

Miami-Dade leads performance rankings – Vacancy for spaces under 10,000 SF remains below 3% despite new inventory; rents exceed $18 PSF, leading all US markets outside NY/CA 1
Houston defies national trends – Vacancy actually fell despite being second only to Atlanta in new deliveries; Southern Corridor absorbed significant supply while fundamentals strengthened 1
Minneapolis-St. Paul ranks #2 nationally – Northern submarkets recorded sub-2% vacancy in June; drawing significant investor interest despite traditionally slower growth profile 1
Small spaces outperform big-box – Assets under 50,000 SF showing superior performance across multiple markets; Cleveland’s centrally located smaller assets thriving with sub-3% vacancy 1

Office Markets

Overview: A clear geographic divide is emerging in office lending, with suburban properties demonstrating superior credit metrics and attracting more conservative underwriting than urban counterparts.

Suburban offices show stronger credit profiles – Average debt service coverage ratio of 2.47x vs. 2.01x for urban properties; indicates more cautious lender approach 2
Conservative LTV ratios favor suburbs – Suburban office LTV averages 53.01% in 2025, down from 54.29% in 2023; urban LTVs rose to 55.99% from 48.09% in 2023 2
Higher cap rates compensate suburban risk – Suburban offices average 8.97% cap rates vs. 7.16% for urban locations; reflects yield premium for perceived risk 2
Urban maturity wall creates pressure – $40 billion in urban CMBS debt matures by end-2026 vs. only $6.2 billion suburban; legacy loans may struggle in tighter capital environment 2

Transaction Volume

Overview: Commercial real estate sales showed significant momentum in Q2 2025, with broad-based gains across property types and encouraging signs of market recovery.

Q2 sales surge 18% year-over-year – Total transaction volume reached $110 billion, exceeding JPMorgan analysts’ expectations for the quarter 3
Retail leads sector gains – 37.4% surge in retail transactions; industrial up 15%, office up 11.5% year-over-year 3
Cap rates compress broadly – Overall cap rates declined 25 basis points to 6.5%; office saw largest drop of 32 basis points to 7.3%, apartments down 18 basis points to 5.4% 3
CBD offices attract renewed interest – Central business district office sales jumped 28% year-over-year in Q1; values cut in half now drawing significant investor attention 3
June activity remains strong – $38 billion in CRE sales for the month; excluding entity-level deals, property transactions rose 6% year-over-year 3

Construction & Labor

Overview: Trump administration immigration enforcement is creating significant disruption across construction markets, with particular impact on specialized trades and project timelines.

South Florida labor shortage intensifies – Day laborers no longer gathering at Home Depot locations; subcontractors avoiding crews that might invite federal scrutiny 4
California workforce faces acute pressure – 41% of state’s construction workforce is foreign-born; specialized trades like Disney World industrial painters experiencing costly mid-project delays 4
ICE raids disrupt major projects – Over 100 people detained at Tallahassee construction sites this spring (only 6 actually undocumented); 700 active-duty Marines withdrawn this week 4
Legal complications multiply – Landlords receiving subpoenas for tenant files creating Fair Housing violations; Chicago landlord paid $80,000 for immigration threats under Illinois protections 4

CRE Finance & Earnings

Overview: The commercial real estate finance sector faces mixed signals, with some markets showing resilience while legal battles and earnings reports provide insight into sector health.

Apollo CRE Finance reports tomorrow – Q2 2025 results expected July 29; investors watching for portfolio performance and dividend sustainability insights amid challenging REIT environment 5
Chicago multifamily shows strength – Approximately $250 million in recent refinancing deals succeeding despite high rates; limited new supply driving rent growth 4
Five Star wins major legal battle – Successfully fended off Madison Realty Capital foreclosure on $585 million debt; accused lender of manufacturing default and racketeering violations 6
REIT sector faces headwinds – Commercial mortgage REITs dealing with elevated rates and selective lending; Apollo results will provide sector insights 5