Housing inventory is starting to bulge especially in the South – up 28.5% year-over-year. Mortgage rates are promising to behave better by year-end at a more palatable 6.3%. Commercial real estate lenders “extend and pretend” by extending a whopping $384 billion in loans rather than face reality. Homeowners insurance premiums are skyrocketing with 42% of homeowners forced to choose between their insurance bills and other necessities. Let’s get you caught up and out the door in three minutes. Tim

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Key Takeaways

• Housing inventory continues its upward trajectory, with active listings up 28.5% year-over-year as of mid-March, marking 71 consecutive weeks of higher inventory compared to the previous year. This trend is creating more options for buyers but putting pressure on sellers to price competitively. 1
• Mortgage rates are expected to end 2025 at 6.3% and 2026 at 6.2%, according to Fannie Mae’s March 2025 Economic Outlook, which could provide a modest boost to home sales despite a softer economic outlook. 2
• The Case-Shiller National Index increased 3.9% year-over-year in December, with the Northeast showing above-trend home price growth led by New York City, Chicago, and Boston, while Florida and Arizona markets face the highest risk of price declines. 3
• Commercial real estate transaction volume surged 42% in Q1 2025 compared to the same period last year, with multifamily and industrial sectors leading the recovery, while office properties continue to face challenges with vacancy rates reaching 18.7% nationally. 4
• The rising cost of homeowners insurance is becoming a significant barrier to homeownership, with premiums increasing by an average of 21% nationwide since 2022, forcing many homeowners to make difficult financial choices and threatening housing affordability across the country. 5

Residential Real Estate Markets

Housing inventory continues to grow, creating a more balanced market with regional price variations and increasing insurance costs posing new challenges for homebuyers and owners.

• Inventory up 28.5% year-over-year as of mid-March, marking 71 consecutive weeks of higher inventory compared to the previous year. 1
• New listings increased 10.4% year-over-year in mid-March, indicating growing seller confidence despite high mortgage rates. 6
• Homes taking 4 days longer to sell compared to the same period last year, reflecting the shift toward a more balanced market. 6
• Case-Shiller National Index rose 3.9% year-over-year in December, a moderate pace compared to the 18.9% peak in 2021. 7
• Northeast markets showing above-trend growth, particularly New York City, Chicago, and Boston, while Florida and Arizona markets face highest risk of price declines. 3
• Months-of-supply at 3.5 months in January 2025, up from 3.0 months in January 2024 but still below the 5.5-6 months considered balanced. 8
• Homeowners insurance premiums up 21% nationwide since 2022, with Florida seeing a 57% increase and California 35%. 5
• 42% of homeowners cutting back on essential expenses to afford rising insurance premiums, creating an additional barrier to homeownership beyond mortgage costs. 5

Mortgage Markets

Mortgage rates remain elevated but are forecast to moderate by year-end, with affordability metrics stabilizing and borrowers increasingly turning to alternative loan products.

• 30-year fixed mortgage rate at 6.7% as of late March, below late 2023 peaks but still significantly higher than pre-pandemic levels. 9
• Mortgage rates projected to end 2025 at 6.3% and 2026 at 6.2%, according to Fannie Mae’s March forecast, representing downward revisions of three-tenths from previous projections. 2
• Monthly mortgage payments up 96% between 2020 and 2025, severely impacting affordability for potential homebuyers. 7
• MBA’s Purchase Applications Payment Index unchanged at $2,205 in February, indicating flat affordability after months of deterioration. 10
• Highest affordability challenges in Idaho (252.5), Nevada (241.8), Rhode Island (224.7), Arizona (222.9), and Tennessee (209.4). 10
• Best affordability conditions in Louisiana (121.9), Connecticut (125.0), North Dakota (126.1), New York (131.3), and Oklahoma (132.1). 10
• Non-QM loans, HELOCs, and second mortgages gaining traction as borrowers adapt to the higher rate environment and seek alternative financing options. 11

Economic & Political News

Policy changes under the new administration are reshaping the housing landscape, with GSE program terminations, ambitious construction initiatives, and a focus on addressing the severe housing supply shortage.

• Building costs expected to increase significantly due to tariffs, deportations, and changes to immigration policies implemented by the new administration. 12
• Housing inventory projected to reach 2019 levels by end of 2025, potentially putting downward pressure on prices if sales remain sluggish. 13
• U.S. has underbuilt housing by millions of units over the past decade, with restrictive zoning laws and lengthy approval processes identified as major culprits. 3
• Housing starts declining relative to population growth most severely in productive metropolitan areas where demand is highest, contributing to rapid price appreciation. 3
• FHFA directed Fannie Mae and Freddie Mac to terminate support for Special Purpose Credit Programs (SPCPs), though HomeReady and Home Possible programs remain unaffected. 14
• Trump Administration announced plans to build 3 million new houses, including selling and leasing government land to spur housing market growth. 15
• Nationwide shortfall of 7.1 million affordable housing units for extremely low-income renters continues to deepen the housing crisis. 16
• Florida lawmakers advancing two bills to fix affordable housing law: HB 923 to allow earlier tax break access for developers and HB 943 to limit local zoning restrictions that obstruct affordable housing projects. 17

Commercial Real Estate: Market Snapshot

CRE Markets: Loan Extensions and Distress Signals

Commercial real estate markets are showing mixed signals, with lenders continuing to extend loans rather than force resolutions, while certain sectors face increasing distress. Recent data reveals a market in transition as investors and lenders navigate the challenging interest rate environment.

• Lenders extended a record $384 billion in CRE loans into 2025, representing a 42% jump from 2024’s total of $270 billion and accounting for roughly 40% of all CRE debt coming due this year. 18
• Multifamily saw the largest extension volume at $97 billion, representing about one-third of the sector’s 2025 maturities, while industrial loans were the most extended proportionally at 55% of 2025 maturities. 18
• Office loan extensions reached $85 billion, accounting for 45% of the sector’s $187 billion due this year, with over $1 billion in Manhattan office loans extended in the past month alone. 18
• CMBS loan losses decreased significantly in February 2025, with $79.7 million across 14 loans resolved with $38.2 million in total losses, representing an average loss severity of 47.87% – a substantial pullback from January’s $246.9 million in losses. 19
• Office special servicing rates hit 16.19%, a 25-year high, while overall CMBS special servicing rates jumped from 7.14% in February 2024 to 10.32% in February 2025. 20
• Industrial occupiers increasingly choosing to buy rather than lease properties, with a 32% increase in sales to occupiers in 2024, particularly targeting older buildings constructed before 1980. 21
• Chicago led industrial occupier acquisitions with 188 transactions averaging $93.88 per square foot, followed by Houston with 143 deals at $113.79 PSF and Los Angeles with 123 sales at $287.79 PSF. 21

CRE Financing: High-Profile Deals Amid Challenging Conditions

Despite broader market challenges, well-positioned assets continue to secure financing, while the servicing landscape adapts to the growing volume of maturing debt and loan modifications.

• Blackstone provided a $279 million refinancing for the office portion of Manhattan’s iconic Woolworth Building, owned by Witkoff and Cammeby’s, replacing a previous $256 million loan from 2015 and demonstrating continued investor interest in prime, well-leased historic assets. 22
• Commercial real estate CLO issuance is booming in 2025, with volumes significantly outpacing those seen in 2023 and 2024 as alternative lenders step in where traditional banks have pulled back. 23
• Wells Fargo leads commercial mortgage servicing with $646 billion in total loans serviced as of year-end 2024, followed by PNC/Midland Loan Services with $584 billion and KeyBank with $478 billion. 24
• Private lenders and debt funds are increasingly filling the void as regional banks retreat from CRE lending, with private credit expected to double by 2030, raising concerns about shadow banking risks. 20
• Regional banks face continued pressure from distressed CRE loans, particularly in the office sector, with uninsured bank deposits now making up 40% of all commercial deposits, increasing liquidity risks. 20
• Multifamily permits decreased 4.3% in February while starts surprisingly increased 12.1% compared to January, suggesting the market may be approaching stabilization after a prolonged downturn. 23
• Industrial and logistics led cross-regional investment for the fourth consecutive half-year period, reaching a record 47% share, with investors favoring New York, Boston, and San Francisco for prime industrial, logistics, and office assets. 25