Oprah comes to the housing market…in the form of concessions :). Home sellers and home renters are leaning hard into price drops and concessions – now over 35% of multifamily properties are offering concessions to renters. Yet multifamily is ironically the envy of most of the CRE market. Mortgage rates are unyielding (unintentional pun) sticking just below 7% and adding fuel to affordability challenges. Builders are feeling the pain and it’s reflected in weak sentiment numbers. The Fed continues to play wait and see as tariff policy and rates continues to evolve. 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

• Mortgage rates climbed back up on June 17 with 30-year fixed loans at 6.93% and 15-year loans at 6.10%, though experts expect downward pressure on rates in the short-term 1
• New home purchase applications declined 4.5% year-over-year in May, with MBA estimating sales running at 631,000 units annually—down 12.1% from April’s pace 2
• Industrial production fell 0.2% in May, marking the second decline in three months and signaling factory weakness despite tariffs, with capacity utilization dropping to 77.4% 3
• Major GSE reform proposal released by National Housing Conference calling for administrative recapitalization of Fannie Mae and Freddie Mac, with both enterprises holding $125 billion in combined equity capital 4
• Blue-collar wage growth hits nearly 60-year high with real wages for hourly workers increasing almost 2% in Trump’s first five months—the largest increase under any administration since Nixon 3
• Federal Reserve expected to hold rates steady at 4.25%-4.5% with 99.9% probability following today’s FOMC meeting
• Multifamily rent growth slowed to 3.2% year-over-year in May, down from stronger April performance 1
• Multifamily average rents reached $2,049 in May with only 0.4% monthly increase 1

🏠 Residential Real Estate Markets

Overview: Housing market faces headwinds with mortgage rates climbing back above 6.9% and home builder confidence hitting third-lowest point in 13 years, though new home demand continues battling economic uncertainty and increased existing home inventory competition.

Mortgage Rate Environment

• 30-year fixed mortgage rates averaged 6.93% as of June 17, 2025, up from the previous day 1
• 15-year fixed rates at 6.10%, also increasing from previous session 1
• FHA 30-year loans averaged 6.86% while VA loans reached 7.03% 1
• 5/1 ARM rates at 6.26% providing adjustable option for shorter-term borrowers 1

Builder Confidence Plummets

• Home builder confidence dropped to 32 in June from 34 in May—third-lowest point since 2012 1
• Confidence at the lowest level since December 2022 reflecting mounting industry concerns 1
• “Buyers increasingly moving to sidelines” due to elevated rates and economic uncertainty, says NAHB Chairman 1
• Growing number of builders cutting prices to address affordability concerns 1

New Home Sales Trends

• New home purchase applications down 4.5% compared to May 2024, with 9% decline from April 2025 2
• Sales pace estimated at 631,000 units annually in May, representing 12.1% decrease from April’s 718,000 unit pace 2
• 58,000 new home sales in May on unadjusted basis, down 10.8% from April’s 65,000 2

Market Dynamics

• For-sale inventory surged 33% over the past year, providing buyers with significantly more options 7
• Home prices flat or declining in 11 states year-over-year, led by Hawaii, Iowa, and Arizona 2
• Average loan size increased to $379,209 in May from $376,992 in April 2

Loan Composition

• Conventional loans: 47.3% of new home applications 2
• FHA loans: 37.8% of applications 2
• VA loans: 13.8% and RHS/USDA loans: 1.0% 2

Rental Market Cooling

• Rent growth slowed to 0.4% month-over-month in May 6
• Average rent reached $2,049nationally 6
• Over 35% of rentals offering concessions—a record high level 6

💰 Mortgage Markets

Overview: Mortgage industry adapts to elevated rate environment while regulatory uncertainty drives innovation in rate benchmarking and lending practices.

Rate Trends and Lending Activity

• Total mortgage lock volume fell 5.87% from April to May 2025 8
• Refinance activity particularly hard hit, with shares dropping from 21% to 16% 8
• 10-year Treasury yield rose 26 basis points to 4.41%, narrowing the treasury spread with mortgage rates to 2.44% 8

Market Indicators Point to Rate Pressures

• Oil prices jumped to $73.59 from $70.63 per barrel, creating inflationary pressure 1
• CNN Fear & Greed index decreased to 59 from 62, potentially supporting rates 1
• Major stock indexes fell, which typically supports bond prices and mortgage rates 1

Regulatory and Technology Developments

• ICE Mortgage Technology launched independent APOR index providing alternative to CFPB’s weekly average prime offer rate 9
• Same Encompass LOS data will power both CFPB and ICE APOR calculations 9
• Uncertainty about CFPB’s future operations may have influenced ICE’s decision to create alternative benchmark 9

Alternative Lending Growth

• Non-QM lending continued upward trend representing 7.36% of May volume 8
• Expanded guidelines gaining traction as lenders and borrowers explore alternative qualification paths 8

Industry Modernization Efforts

• Mortgage bankers examining move to single credit reports rather than traditional tri-merge approach 10
• Potential to streamline lending process and reduce costs for borrowers 10

📊 Economic & Political News

Overview: Federal Reserve maintains cautious stance amid mixed economic signals, while industrial weakness raises questions about tariff effectiveness and GSE reform proposals gain momentum.

Wage Growth

• Real wages for hourly workers increased almost 2% in Trump’s first five months—largest increase under any administration in nearly 60 years 3
• Trump only president since Nixon in 1969 to record positive blue-collar wage growth in first five months of presidency 3 • Stark contrast to Biden’s first five months which saw negative wage growth as inflation outpaced earnings 3
• Treasury Secretary Scott Bessent noted “The only other time it has been this high was during President Trump’s first term” 3
• Recovery from 1.7% decline recorded in Biden’s first five months suggests shift in economic conditions for financially stressed workforce segment 3

Federal Reserve Policy

• 99.9% probability Fed holds rates steady at 4.25%-4.5% range at today’s FOMC meeting 5
• Fourth consecutive meeting without rate adjustment expected 5
• President Trump continues urging rate cuts particularly following May employment report 5
• Chairman Powell press conference at 2:30 PM EST could provide crucial insights for remainder of 2025 5

Retail Sales Show Weakness

• U.S. retail sales dropped 0.9% in May, worse than April’s 0.1% decrease and median forecast of -0.6% 1
• Import price index flattened in May compared to April’s 0.1% gain 1
• Business inventories held flat in April versus 0.1% gain in March 1

Industrial Production Weakness

• Industrial production fell 0.2% in May, second decline in three months 3 1
• Manufacturing rose just 0.1% after 0.5% fall in April, with gain due to automotive production jump 3
• Motor vehicles and parts output jumped 4.9% after 2.3% April decline 3
• Excluding autos, manufacturing fell 0.3% revealing underlying sector weakness 3
• Capacity utilization dropped to 77.4%—lowest rate since January 3 1

Major GSE Reform Proposal

• National Housing Conference released comprehensive white paper calling for administrative recapitalization of Fannie Mae and Freddie Mac 4
• 16 years after financial crisis, GSEs remain in conservatorship creating market uncertainty 4
• Combined $125 billion in equity capital held by both enterprises as of early 2025 4
• Building capital at $26 billion annually but still below full regulatory requirements 4
• Fannie Mae needs up to $190 billionand Freddie Mac up to $146 billion in total capital including buffers 4

Commercial Real Estate Markets (Including Multifamily)

🏢 Multifamily Market Update

Overview: The rental market is showing clear signs of cooling as increased inventory gives tenants more negotiating power and landlords offer more concessions to attract renters.

• Rent growth slowed to 3.2% year-over-year in May, down from stronger April performance 1
• Average rents reached $2,049 in May with only 0.4% monthly increase 1
• Over 35% of rentals now offer concessions – a record high indicating landlords are working harder to attract tenants 1
• Renting remains cheaper than buying: Typical rental at $2,296/month vs. mortgage payment of $2,388/month despite 6.84% mortgage rates 1
• Regional variations persist: San Jose shows $6,200 gap favoring rentals, while Miami rentals cost $413 more than mortgages 1

💰 CRE Financing Trends

Overview: Commercial real estate financing faces headwinds from multiple directions, with new home mortgage applications declining and industrial deals navigating tariff uncertainty.

• New home mortgage applications dropped 4.5% year-over-year in May, also falling 9% from April 2
• Estimated new home sales fell 12.1% from April’s pace to 631,000 units annually 2
• Industrial financing remains active despite uncertainty: $35 million income bridge deal and 265,000 sq. ft. speculative development approved in Greater Toronto Area 3
• Lenders conducting enhanced due diligence on industrial deals due to tariff volatility, but capital continues flowing 3