Key Takeaways

• Purchase loan activity declined 3.2% in May despite falling mortgage rates, with AEI’s Housing Finance Watch reporting first-time buyers down 5.1% and repeat buyers down 1.4% year-over-year, suggesting affordability challenges persist. 1
• Mortgage rates declined across all loan types with the 30-year fixed rate dropping to 6.90%, down 7 basis points from last week, as slowing job growth raises expectations for potential Fed rate cuts later this year. 2
• Democrats urge Trump administration to slow GSE privatization plans, expressing concerns about potential market disruption and housing affordability impacts if Fannie Mae and Freddie Mac exit conservatorship too quickly. 3
• Bipartisan bill aims to help veterans avoid foreclosure by extending VA home loan protections and creating new loss mitigation options for struggling veteran homeowners. 4
• Federal Home Loan Banks face scrutiny over their expanding role and potential systemic risks, with critics arguing the system has strayed from its original housing mission. 5

Residential Real Estate Markets

Overview: The housing market shows signs of cooling despite lower mortgage rates, with purchase loan activity declining and first-time buyers particularly affected. Home price appreciation is moderating while mortgage risk indicators suggest lenders are adjusting strategies to maintain volume in a challenging environment.

• Purchase loan activity drops: AEI’s Housing Finance Watch reports a 3.2% year-over-year decline in purchase loan activity for May 2025, with first-time buyers down 5.1% and repeat buyers down 1.4%, suggesting persistent affordability challenges. 1
• FHA/VA market share increases: Government-backed loans now account for 37.2% of the purchase market, up from 35.8% a year ago, as more buyers turn to lower down payment options amid affordability constraints. 1
• Home price appreciation moderates: The latest AEI data shows annual home price appreciation at 5.8% in May, down from 6.3% in April, suggesting the market may be responding to higher inventory levels and reduced buyer activity. 1
• Mortgage risk index rises: The Mortgage Risk Index increased to 13.2% in May from 12.8% a year earlier, indicating lenders are taking on slightly more risk to maintain volume in a challenging market. 1

Mortgage Markets

Overview: Mortgage rates have declined across all loan types as slowing job growth raises expectations for potential Fed rate cuts. Meanwhile, significant policy developments are unfolding with a new bipartisan bill to protect veteran homeowners, ongoing debates about GSE privatization, and growing scrutiny of the Federal Home Loan Bank system.

• 30-year fixed rates drop: The benchmark rate fell to 6.90%, down 7 basis points from 6.97% a week ago, reducing monthly payments by $4.69 per $100,000 borrowed compared to last week. 2
• 15-year and ARM rates also decline: The 15-year fixed mortgage rate decreased to 6.11% (down 5 basis points), while the 5/1 ARM dropped slightly to 6.16% (down 1 basis point). 2
• Refinance activity remains subdued: Despite lower rates, AEI reports refinance volume is 68% below pre-pandemic levels, with cash-out refinances accounting for 62% of all refinance activity as homeowners tap equity rather than seeking rate reductions. 1
• Job market signals potential Fed action: May employment data showed slowing job growth with 139,000 jobs added (down 10,000 year-over-year) and a 0.2% decrease in labor participation rate, potentially setting the stage for Fed rate cuts later this year. 2
• Veterans Housing Stability Act introduced: Senators Richard Blumenthal (D-CT) and Jerry Moran (R-KS) introduced bipartisan legislation to extend VA home loan protections and create new loss mitigation options for struggling veteran homeowners, including enhanced forbearance periods and streamlined loan modifications. 4
• Democrats caution against rushed GSE exit: House Financial Services Committee Democrats have sent a letter to Treasury Secretary urging a more measured approach to releasing Fannie Mae and Freddie Mac from conservatorship, citing concerns about potential market disruption and housing affordability impacts. 3
• Federal Home Loan Banks under scrutiny: A new analysis from R Street Institute argues the Federal Home Loan Bank System has strayed from its original housing mission, with only 40% of advances now supporting housing finance compared to 80% in the 1990s. 5
• FHLB system size raises concerns: The combined assets of the Federal Home Loan Banks have grown to over $1 trillion, raising questions about systemic risk and appropriate regulatory oversight as the system increasingly serves as a liquidity provider to large financial institutions. 5
• Wells Fargo leads mortgage servicing: The latest MBA Commercial/Multifamily Mortgage Servicer Rankings show Wells Fargo Bank leading with $646 billion in total loans serviced, followed by PNC Real Estate/Midland Loan Services with $584 billion. 6

Economic & Political News

Overview: Economic uncertainty continues with concerns about tariff impacts and potential stagflation. Gold prices surge as investors seek safe havens amid market volatility. Policy debates around GSEs and Federal Home Loan Banks highlight ongoing tensions between housing affordability goals and financial system stability.

• Tariff concerns grow: Recent Federal Reserve minutes highlight increasing worries about economic effects of tariffs, particularly risks of stagflation and rising unemployment. 2
• Tax bill could impact mortgage rates: According to Bankrate’s senior economic analyst Mark Hamrick, the current tax bill could exacerbate debt and deficit issues with “potential implications for mortgage rates in the intermediate and long terms.” 2
• Gold prices reach new heights: Prices have climbed as much as 30% year-to-date, peaking at $3,500/oz in April, with J.P. Morgan now projecting prices to reach $3,675/oz by Q4 2025 and approach $4,000/oz by Q2 2026. 7
• GSE reform debate intensifies: The Trump administration’s plans to release Fannie Mae and Freddie Mac from conservatorship have sparked debate, with Democrats warning about potential impacts on mortgage availability and housing affordability. 3
• FHLB mission drift questioned: R Street Institute analysis argues the Federal Home Loan Bank System has evolved from its original housing-focused mission to become a major liquidity provider for large financial institutions, raising questions about appropriate oversight and reform. 5
• Housing affordability remains challenging: AEI’s Housing Finance Watch notes that despite moderating price growth, the combination of elevated home prices and mortgage rates continues to strain affordability, particularly for first-time buyers whose activity has declined 5.1% year-over-year. 1

Industry News

Overview: The real estate industry continues to embrace technological innovation, with blockchain applications expanding beyond cryptocurrency and digital twin technology gaining traction in commercial real estate. Investment in property technology is showing signs of recovery after a challenging 2024.

• Proptech investment rebounds: Venture capital funding for real estate technology startups has increased approximately 18% quarter-over-quarter in Q2 2025, with particular interest in solutions addressing energy efficiency and climate resilience. 9
• Investor focus shifts to practical solutions: “We’re seeing renewed investor confidence in proptech solutions that address concrete problems like energy efficiency, climate adaptation, and operational efficiency,” notes Alex Robinson, emerging technology analyst at PitchBook. 9
• Lenders embrace automated valuation: AEI reports that the use of automated valuation models (AVMs) for mortgage origination has increased 28% year-over-year, with 42% of conventional loans now using some form of appraisal alternative, reflecting the industry’s push for greater efficiency and reduced closing times. 1