Is 2025 the year that breaks the back of the housing market? Homebuyers are having their revenge with inventory hitting five-year highs and home price growth crawling to its slowest pace since 2012, while renters are also catching a break as landlords desperately try to fill apartments in an oversupplied market. Meanwhile, President Trump is playing his greatest hits by publicly roasting Fed Chair Powell over weak jobs data (only 37,000 private sector jobs added—yikes), but mortgage rates decided to throw borrowers a bone by dropping to 6.87% in the biggest daily decline in over a month. Federal regulators express confidence in overall CRE market stability, rising delinquencies and sector-specific transaction declines indicate continued stress. The historic shift from office to multifamily conversions reflects fundamental demand changes. Grab a coffee and let’s get you caught up and out the door in 3 minutes. Tim 

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June 5, 2025

Key Takeaways

• Housing market momentum shifts decisively toward buyers as inventory reaches five-year highs with nearly $700 billion in listings, while home price growth slows to just 2.0% annually—the weakest pace since 2012. 1 2
• Rental market experiences widespread cooling with asking rents falling 1% nationally to $1,633 and declining in 28 of 44 major metros—the most since September 2023—as apartment construction near 50-year highs creates oversupply conditions. 3
• Fannie Mae revises mortgage rate outlook downward forecasting 30-year rates to end 2025 at 6.1%, representing nearly an 80-basis-point decline from current levels and signaling growing optimism about economic conditions. 4
• Mortgage applications decline for third consecutive week despite 30-year rates dropping to 6.92%, with purchase applications down 4% weekly but still running 18% ahead of last year’s levels. 5
• Federal Reserve faces mounting political pressure as President Trump criticizes Chairman Powell following weak employment data showing only 37,000 private sector jobs added in May—the lowest total in over two years. 6 7
• Wells Fargo receives regulatory relief as the Federal Reserve lifts the $2 trillion asset cap imposed in 2018, potentially reshaping the mortgage lending landscape as the bank seeks to rebuild its home loan business. 8
• CMBS delinquencies jump 0.64 percentage points to 6.42% in Q1 2025—the most significant stress among all capital sources. This signals heightened pressure in parts of the market lacking refinancing options or facing structural challenges. 11
• Federal regulators signal CRE stabilization despite continued headwinds in office and multifamily sectors, as discussed in yesterday’s Financial Stability Oversight Council meeting 1
• Commercial mortgage delinquencies rise across all capital sources in Q1 2025, with CMBS seeing the largest increase at 6.42%, up 0.64 percentage points from Q4 2024 2
• April CRE sales activity plunges with hotel and industrial warehouse sales declining 52% and 34% respectively year-over-year, signaling potential end to the “Trump bump” 3
• Historic office supply decline underway as 2025 marks the first year since 2000 where more office space is being removed (23.3M SF) than added (12.7M SF) through conversions and demolitions 4
• Bank CRE lending shows cautious recovery with institutions holding 33% market share, down 17% from pre-pandemic levels, as standards remain tight for nonresidential properties 5

Residential Real Estate Markets

Market Overview: The spring homebuying season concludes with a dramatic shift favoring buyers over sellers, as inventory surges to five-year highs while home price growth slows to its weakest pace since 2012. Simultaneously, the rental market is experiencing historic cooling with widespread rent declines across major metros.

Home Sales & Pricing Data

• National home price growth slows to 2.0% annually in April 2025—the weakest appreciation rate since spring 2012, down from nearly 3% growth just two months earlier. Chief Economist Dr. Selma Hepp cites “widespread concern about personal finances, job prospects, and potential tariff impacts” as key factors weighing on prices. 1
• Total value of homes listed for sale hits nearly $700 billion in April—the highest level recorded by Redfin’s platform. The number of home sellers now exceeds homebuyers by nearly half a million, reversing previous trends where buyers consistently outnumbered sellers. 2
• 37 of the 100 largest markets have normalized inventory levels to pre-pandemic standards, with Denver leading with 90% more homes for sale compared to its 2017-2019 April average. New listings through the first four months of 2025 ran 15% below 2017-2019 averages, an improvement from the -22% deficit early last year. 9

Regional Market Performance

• Florida leads price declines with the state overall experiencing -0.8% price appreciation. Cape Coral posts the steepest decline at -8.0% annually, followed by Orlando (-5.7%) and Tampa (negative growth). Hawaii (-2%), Texas (-0.7%), and Washington D.C. (-0.6%) also experienced price declines. 1 10
• Northeast and Midwest markets maintain modest growth particularly in affordable areas surrounding expensive metropolitan centers. Wyoming notably entered the top five states with highest year-over-year home price growth, demonstrating ongoing migration toward more affordable regions. 1

Rental Market Trends

• National asking rents fall 1% year-over-year to $1,633 in May, representing a $72 drop from the August 2022 record high. This marks the 15th consecutive month of minimal rent changes, with year-over-year fluctuations remaining within roughly 1%. 3
• 28 of 44 major metros experience rent declines—the highest number since September 2023. Austin leads with an 8.8% decline to $1,385 (lowest since February 2021), followed by Minneapolis (-6.3%), Columbus (-3.5%), Nashville (-3.4%), and Portland (-3.4%). 3
• Apartment construction near 50-year highs drives oversupply with Austin granting permits for 64.5 multifamily units per 10,000 people—the highest rate among analyzed metros. Rental vacancy rates for buildings with 5+ units reached 8.2% in Q1, tied for the highest since early 2021. 3
• Four metros achieve record-high rents: Cincinnati (+7.4% to $1,460), Chicago ($1,781), Memphis ($1,274), and Washington D.C. ($2,104). These markets generally permit less multifamily construction than the national average. 3

Mortgage Markets

Market Overview: Mortgage applications continue declining despite rate relief, while Fannie Mae revises its rate outlook downward. Commercial mortgage stress signals emerge across all major capital sources, and Wells Fargo receives significant regulatory relief that could reshape the lending landscape.

Application & Rate Trends

• Mortgage applications decline 3.9% for third consecutive week ending May 30, despite 30-year fixed rates declining to 6.92%. Purchase applications fell 4% weekly while refinance applications dropped 4%. However, annual comparisons remain strong with purchase apps up 18% and refinance activity up 42% versus last year. 5
• Fannie Mae forecasts 30-year rates to end 2025 at 6.1%—nearly 80 basis points below current levels. This downward revision from previous forecasts signals growing optimism about economic conditions and potential Fed rate cuts later in the year. 4
• 30-year rates drop to 6.87% in biggest daily decline in over a month according to Mortgage News Daily, down from 6.96% the previous day and representing the best single-day drop since mid-April. Rates have fallen from 7.08% exactly two weeks ago, with the average lender now about an eighth of a percent lower in just over a week. 10

Government Loan Activity

• FHA share increases to 18.7% from 17.9% the prior week, with average contract rates rising to 6.68% from 6.66%. VA share rose to 12.6% from 12.3%, while USDA remained at 0.5%. Jumbo loan rates decreased slightly to 6.92% from 6.93%. 5
• Refinance share increases to 35.2% from 34.6% the previous week, though activity fell across both conventional and government segments. Average refinance loan size was the smallest since July 2024, suggesting borrowers are waiting for larger rate drops. 5

Commercial Real Estate Markets 

CRE Markets

Federal regulators are signaling increased confidence in commercial real estate market stability, while fundamental shifts continue reshaping property sectors, particularly office space.

• FSOC Meeting Signals Stability: Treasury Secretary Scott Bessent led yesterday’s Financial Stability Oversight Council meeting where federal regulators (FDIC, OCC, FHFA) presented findings showing CRE market stabilization despite ongoing office and multifamily headwinds 1
• Historic Office Supply Decline: 2025 marks first year since 2000 where more office space is being removed (23.3M SF) than added (12.7M SF) through conversions and demolitions 4
• Office-to-Multifamily Conversions Surge: Over 70% of conversion projects target apartment housing, driven by strong rental demand with rising rents and low vacancy rates across major markets 4
• Leading Conversion Markets: Manhattan, Washington D.C., and Cleveland are driving conversion volumes, benefiting from local government initiatives and elevated office vacancy rates 4

CRE Financing Developments

Commercial real estate lending markets are showing mixed recovery signals, with banks maintaining cautious approaches while specialized sectors see continued activity.

• Bank Market Share Decline: Banks now hold approximately 33% of CRE lending market, representing a 17% decline from pre-pandemic levels as institutions remain selective 5
• Volatile Lending Volumes: CRE lending peaked at $75.5B in December 2022, swung to negative $4.1B by March 2025, then rebounded to $3.2B in April 2025 5
• Tight Lending Standards Continue: Federal Reserve’s April loan officer survey shows standards for nonresidential property loans remain tight, while multifamily standards have held relatively steady 5
• Self-Storage Financing Activity: Gantry secured $31.76M in permanent loans for three California self-storage facilities since early 2025, including $9.76M for 829-unit Lompoc facility in May 6

CRE Servicing & Performance

Delinquency rates are rising across all major capital sources, with CMBS showing the most significant deterioration as refinancing challenges mount.

• CMBS Delinquencies Jump: CMBS delinquency rates reached 6.42% in Q1 2025, up 0.64 percentage points from Q4 2024 – the largest increase among all capital sources 2
• Modest Increases Elsewhere: Banks/thrifts rose to 1.28% (+0.02 pp), life insurance companies to 0.47% (+0.04 pp), Fannie Mae to 0.63% (+0.06 pp), Freddie Mac to 0.46% (+0.06 pp) 2
• Refinancing Stress Signal: MBA’s Reggie Booker noted CMBS uptick signals heightened stress in market segments lacking refinancing options, despite relatively low rates for most investor groups 2

Notable Transactions & Sales Activity

Transaction volumes show concerning sector-specific declines, though total sales volumes remain stable year-over-year.

• Hotel Sales Plummet: Hotel sales dropped 52% year-over-year in April, potentially reflecting early impacts from trade policy changes affecting business travel 3
• Industrial Warehouse Decline: Industrial warehouse sales fell 34% year-over-year in April, possibly due to tariff disruptions affecting global trade and logistics demand 3
• Total Sales Hold Steady: Despite sector declines, total April commercial property sales of $26.1B matched prior year levels according to MSCI data 3
• Seattle Multifamily Sale: Marcus & Millichap closed sale of The Saint Theodore on Roosevelt, a 47-unit Seattle apartment property, for over $17M in its first market offering 7

Regulatory Developments

• Federal Reserve lifts Wells Fargo’s $2 trillion asset cap imposed in 2018 following the unauthorized accounts scandal. Wells Fargo currently ranks No. 21 among mortgage lenders with $4.42 billion in Q1 originations—up 26% annually but still a fraction of pre-scandal volume. 8
• Nonbank market dominance continues with nonbanks originating 82% of all mortgages in April 2023, up from roughly 50% in April 2014. Wells Fargo’s potential re-entry as a major player could significantly impact competitive dynamics and pricing. 8

Economic & Political News

Market Overview: Federal Reserve Chairman Powell faces unprecedented political pressure from President Trump following weak employment data, while Fed officials navigate uncertainty around tariff policies and their potential economic impacts.

Federal Reserve & Political Pressure

• Trump criticizes Powell following weak jobs data after ADP reported only 37,000 private-sector jobs added in May—the lowest total in over two years and well below the expected 130,000. Trump publicly and privately urged rate cuts to make borrowing easier for consumers and businesses. 6 7
• Powell defends Fed independence in Princeton University commencement address, stating: “We are always going to consider only the economic data, the outlook, the balance of risks and that’s it.” The speech served as both a defense of Fed independence and subtle rebuke to political interference. 12
• Market expects 70% chance of rate cut by September according to CME Group’s FedWatch tool. European Central Bank is widely expected to lower rates Thursday, creating additional pressure for U.S. rate cuts. 6

Employment Data

• BLS reports 177,000 nonfarm payroll jobs added in April with unemployment unchanged at 4.2%. Key growth sectors: healthcare (+51,000), transportation/warehousing (+29,000), financial activities (+14,000), social assistance (+8,000). Federal government employment declined by 9,000. 13
• Average hourly earnings rise 0.2% monthly, 3.8% annually indicating continued wage growth despite employment headwinds. ADP data shows goods sector job losses and small businesses (under 50 employees) shedding 13,000 jobs, though wage growth remains robust at 4.5% for job stayers and 7% for job changers. 13 7
• Data accuracy concerns emerge as Wall Street Journal reports staffing shortages at Bureau of Labor Statistics may have compromised inflation data accuracy. This raises questions about reliability of economic indicators the Fed relies upon for policy decisions. 14

Fed Officials on Tariff Uncertainty

• Fed Governor Lisa Cook warns tariffs could raise inflation and complicate rate policy. While core and headline inflation currently at 2.5% and 2.1% respectively, tariff introduction could reverse progress in reducing inflation. 15
• Atlanta Fed President Bostic expects just one rate cut this year, stating “most of the [inflation] measures are still flashing red.” Fed Governor Waller offers more optimistic outlook, expecting tariffs on lower end with potential for “good news” rate cuts before year-end. 15
• ”Uncertainty” emerges as dominant Fed theme with officials adopting cautious, wait-and-see approach as they evaluate how trade policies and tariffs may impact both inflation and employment in coming months. 16

Industry News

Market Overview: The multifamily sector continues attracting significant institutional capital with major refinancing deals, while REIT performance remains strong. Brokerage consolidation accelerates and office-to-residential conversions gain momentum nationwide.

Major Transactions & Financing

• TruAmerica and Oaktree complete $225.3 million refinancing of four-property, 1,324-unit portfolio across Florida and Arizona. Properties built 2001-2017 in Orlando, Tampa, and Scottsdale feature five-year floating-rate loan with full-term interest-only payments and flexible prepayment options. 17
• Hanover Company closes $125 million Opportunities Fund targeting land and underutilized commercial properties for multifamily and industrial development. Fund focuses on distressed office spaces and vacant land across California, Dallas, Atlanta, Boston, and Florida. 18
• Capital City Real Estate secures $48 million construction financing for The Mill, a 281-unit Class A development in Charlotte’s opportunity zone. Project features 62% loan-to-cost ratio with studios, one-bedroom, and two-bedroom apartments plus amenities. 19