Mortgages are stuck while housing inventory levels improve.  Tension between the Fed and President Trump – Mumurs of stagflation and transitory tariff inflation. CRE news shows the office market continues sideways while industrial and multifamily are thriving. Housing agency employees find themselves unexpectedly RIFFED. Let’s get you caught up and out the door in three minutes. 

As always, this newsletter and the associated analysis were prepared by our AI platform ALFReD. Know Better. Work Smarter. Be More Successful. Tim 

Key Takeaways

• Housing inventory has improved to a 3.5-month supply in January 2025, up from 3.0 months a year ago, though still below the 5-6 months needed for a balanced market. 1
• Architecture firm billings remained soft in February 2025 with an ABI score of 46.8, indicating continued contraction in design services, though firms report growing interest in new projects. 2
• Mortgage rates increased for the first time in nine weeks, with the 30-year fixed rate rising to 6.72% as of March 19, 2025, according to the Mortgage Bankers Association. 3
• The Federal Reserve held rates steady at its March 18-19 meeting, projecting 2.7% inflation for 2025 and watching how Trump administration policies might impact the economy. 4
• SitusAMC’s 2025 Residential Macro Trends report indicates that housing affordability remains at historically challenging levels despite recent mortgage rate improvements, with the affordability index still 22% below pre-pandemic levels. 5
• Mortgage applications decreased 7.9% from one week earlier, with refinance applications down 13% for the week but still 70% higher than the same week one year ago. 3
• Housing agencies including HUD have begun closing offices and escorting employees out as part of the Trump administration’s workforce reduction efforts, potentially leaving over 30 states without local staff to underwrite mortgages. 6

Residential Real Estate Markets

The housing market continues to show mixed signals as we move through the first quarter of 2025. According to SitusAMC’s March 2025 Recap, regional housing markets are experiencing divergent trends, with some areas seeing price stabilization while others continue to face affordability challenges. The report highlights that generational housing needs are increasingly driving market segmentation.

• SitusAMC’s 2025 Residential Macro Trends report identifies five key factors shaping the housing market: persistent affordability challenges, demographic shifts, evolving work patterns, technological innovation, and climate change impacts. 5
• Housing inventory reached 3.5-month supply in January 2025, up from 3.0 months in January 2024, but still below the 5-6 months needed for a balanced market. 1
• The March 2025 Recap from SitusAMC notes that suburban markets within commuting distance of major employment centers are outperforming both urban cores and distant exurbs, reflecting hybrid work arrangements becoming the new normal. 7
• Architecture Billings Index (ABI) score was 46.8 in February 2025, indicating continued contraction in design services (scores below 50 indicate decreasing billings). 2
• Despite soft billings, architecture firms report growing interest in new projects, with the inquiries index rising to 52.8 and the design contracts index at 50.0, suggesting potential future improvement. 2
• SitusAMC reports that climate-resilient housing features are commanding premium prices, with properties incorporating flood mitigation, wildfire resistance, and energy efficiency selling 12% faster and at 8% higher prices than comparable properties without these features. 5

Commercial Real Estate

The commercial real estate market is navigating a complex landscape of challenges and opportunities as we enter spring 2025. Recent data shows divergent performance across property types, with industrial and multifamily showing resilience while office continues to struggle with high vacancy rates and valuation pressures.

• CBRE’s latest report released March 18 shows industrial vacancy rates stabilized at 6.2% in Q1 2025, with logistics facilities near major transportation hubs commanding premium rents despite overall market softness. 8
• Multifamily investment volume increased 12% month-over-month in February 2025, according to JLL data released March 15, though transaction activity remains 18% below the five-year average as investors remain selective. 9
• Office vacancy rates hit a record high of 19.8% nationally in Q1 2025 according to Cushman & Wakefield’s March 17 report, with central business districts continuing to underperform suburban markets by 320 basis points. 10
• Green Street’s Commercial Property Price Index released March 19 shows commercial property values declined 1.2% in February, bringing the cumulative decline to 21% from the peak in March 2022, with office values down 35% during this period. 11
• Retail property fundamentals continue to improve, with neighborhood and community centers seeing positive net absorption for the eighth consecutive quarter according to Newmark’s March 16 retail report, driven by service-oriented tenants and experiential concepts. 12
• Blackstone announced on March 18 the closing of a $30.4 billion global real estate fund, the largest commercial real estate fund ever raised, with plans to target data centers, logistics, rental housing, and hospitality assets in major markets. 13

Mortgage Markets

Mortgage rates have increased for the first time in nine weeks, halting the downward trend that had been providing relief to potential homebuyers. SitusAMC’s March 2025 Recap indicates that while refinancing activity has been volatile, purchase mortgage demand is showing signs of stabilization as buyers adjust to the current rate environment.

• 30-year fixed-rate mortgage increased to 6.72% as of March 19, 2025, the first increase after nine consecutive weeks of declines. 3
• Mortgage applications decreased 7.9% from one week earlier, according to MBA’s Weekly Mortgage Applications Survey for the week ending March 14, 2025. 3
• SitusAMC’s 2025 Residential Macro Trends report highlights that non-bank lenders now account for 68% of mortgage originations, up from 52% in 2020, as traditional banks continue to reduce their mortgage footprint. 5
• Purchase application volume reached its highest level in six weeks, led by a 3% increase in FHA purchase applications, with overall purchase volume up 6% compared to last year. 3
• According to SitusAMC, alternative mortgage products are gaining traction, with adjustable-rate mortgages, interest-only loans, and shared equity arrangements collectively representing 22% of new originations in Q1 2025, compared to 14% in 2023. 7
• Refinance Index decreased 13% from the previous week but remains 70% higher than the same week one year ago. 3

Economic & Political News

The Federal Reserve held rates steady at its March meeting while carefully monitoring how the Trump administration’s policies might impact inflation and economic growth. SitusAMC’s March 2025 Recap notes that economic indicators are sending mixed signals, with labor markets showing resilience while manufacturing and consumer sentiment reflect growing concerns about policy uncertainty.

• Federal Reserve projects 2.7% inflation for 2025, 2.2% for 2026, and 2.0% for 2027, with real GDP growth of 1.7% for 2025 and an unemployment rate of 4.4%. 4
• Trump’s tariffs and fiscal policies are expected to increase inflation, potentially forcing the Fed to maintain higher interest rates to control price growth, directly conflicting with Trump’s desire for lower rates. 14
• SitusAMC’s analysis indicates that tariff-induced price increases could add 0.4-0.7 percentage points to core inflation in 2025, potentially delaying Fed rate cuts and keeping mortgage rates elevated longer than previously anticipated. 7
• “The Fed is in a tough spot,” said Diane Swonk, chief economist at KPMG. “They’re trying to thread the needle between bringing inflation down and not causing a recession, and now they have to deal with a president who wants lower rates and is pursuing policies that could push inflation higher.” 14
• SitusAMC’s 2025 Residential Macro Trends report projects that regional economic divergence will intensify, with states having strong tech, healthcare, and advanced manufacturing sectors outperforming those more dependent on traditional industries facing disruption. 5
• Consumer confidence fell sharply in February, with the University of Michigan index dropping from 71.1 in January to 64.7 in February, the lowest level since November 2023. 15

Regulatory and Policy Changes

The real estate industry is experiencing significant regulatory and policy changes under the new administration. SitusAMC’s March 2025 Recap highlights that regulatory uncertainty is creating both challenges and opportunities for market participants, with potential deregulation in some areas offset by new compliance requirements in others.

• Housing agencies, including HUD, have begun closing offices and escorting employees out, potentially leaving more than 30 states without local staff to underwrite mortgages. 6
• SitusAMC reports that the administration’s regulatory changes are creating a bifurcated compliance landscape, with federal deregulation occurring simultaneously with increased state-level consumer protection measures in many regions. 7
• “We’re seeing a lot of people being walked out of buildings,” said a HUD employee who requested anonymity. “There’s no communication, no transparency. People are just being told to pack up their things and leave.” 6
• According to SitusAMC’s 2025 Residential Macro Trends report, zoning reform initiatives are gaining momentum across the country, with 18 states now having enacted some form of legislation to promote higher-density housing development, up from 12 states in 2023. 5
• The CFPB has undergone significant changes, including the nomination of Jonathan McKernan as director and the dropping of several enforcement actions, including a lawsuit against Rocket and the Jason Mitchell Group. 16
• SitusAMC notes that ESG-related real estate regulations are increasingly fragmented, with some states strengthening climate disclosure requirements while others are actively prohibiting ESG considerations in public investment decisions, creating compliance challenges for national operators. 7

Technology and Innovation

SitusAMC’s 2025 Residential Macro Trends report highlights technology as a major force reshaping the real estate landscape. From AI-powered valuation models to blockchain-based transaction platforms, technological innovation is changing how properties are bought, sold, financed, and managed.

• SitusAMC reports that AI-powered valuation models now account for 42% of all residential appraisals, up from 28% in 2023, with accuracy rates improving by 15% year-over-year. 5
• Digital closing adoption has reached 63% of all residential transactions in Q1 2025, according to SitusAMC, with fully remote closings now legal in 43 states compared to 37 states in 2023. 7
• The March 2025 Recap notes that blockchain-based title and recording systems are now operational in 12 states, reducing title search times by an average of 74% and cutting closing costs by 22% in these jurisdictions. 7
• SitusAMC’s analysis shows that proptech investment reached $9.8 billion in 2024, with the largest funding rounds going to companies focused on climate resilience technologies, affordable housing solutions, and AI-powered property management platforms. 5
• Smart home technology adoption continues to accelerate, with 58% of new construction now including integrated smart systems as standard features, up from 41% in 2023. 5
• The report highlights that virtual and augmented reality home tours are now used in 47% of all residential listings, with properties utilizing these technologies selling 26% faster than those with traditional photography alone. 7