A well-intentioned congressional housing package is advancing with a ban on institutional investors. The proposal would apply to corporations owning 350 or more homes—down from the originally proposed 1,000-home threshold—with exemptions for build-to-rent communities and investors who report positive rent payments to credit bureaus.
Meanwhile, affordability continues moving in the wrong direction. The minimum recommended income to purchase a median-priced starter home has climbed to about $86,000, well above the earnings of many younger buyers. Median down payments have also reached roughly $30,400, or about 14.4% of the purchase price.
Financial markets were not particularly helpful either. U.S. Treasury yields jumped as oil price spikes and renewed Middle East tensions outweighed the usual safe-haven demand for government bonds.
On the policy side, the Federal Housing Finance Agency increased multifamily lending caps by 20% to $88 billion each for Fannie Mae and Freddie Mac in 2026. Meanwhile, Walker & Dunlop uncovered $134 million in mortgage fraud across three Freddie Mac loan portfolios and dismissed its banking team.
In commercial real estate, smaller markets quietly outperformed major metros, posting 1.3% monthly gains while large-city assets declined 0.4%. Texas industrial demand surged to an 18.6-million-square-foot quarterly high, while Manhattan office-to-residential conversions continued to accelerate.
Let’s get you caught up and out the door in 3 minutes. Tim
KEY TAKEAWAYS
- Housing supply crisis deepens – U.S. housing shortage expanded to 4.03 million homes in 2025, up from 3.8 million in 2024, as construction continues to lag household formation 1
- Home price growth slows dramatically – National home price appreciation fell to just 1.5% year-over-year in January 2026 according to AEI data, marking the lowest level on record 2
- Fed rate cuts pushed to late 2026 – Financial markets now expect Federal Reserve to delay next rate cut until September amid Middle East tensions and oil price spikes 3
- Major mortgage fraud uncovered – Walker & Dunlop reveals $134 million in fraudulent Freddie Mac loans across three borrowers, dismisses banking team responsible for originations 4
- Congressional housing package advances with Wall Street ban – Senate votes 84-6 to advance bipartisan housing bill that would ban investors with 350+ homes from purchasing single-family properties 5
- Congress targets apartment construction – House passes Housing for the 21st Century bill to expand multifamily lending, potentially adding 500,000+ rental units annually 6
- New anti-money laundering rules take effect – Treasury’s FinCEN implements first nationwide AML safeguards for residential real estate, requiring reporting of non-financed property transfers 7
- 2 million young households missing – Realtor.com reports 1.82 million millennial and Gen Z households delayed independent living due to affordability constraints and limited inventory 1
- FHFA raises GSE multifamily loan caps 20% to $88B each for Fannie Mae and Freddie Mac in 2026, with five metro areas (New York, Los Angeles, Dallas-Fort Worth, Washington D.C., Atlanta) holding $242B in agency-backed loans 1
- Walker & Dunlop discovers $134M in mortgage fraud across three borrower portfolios in Freddie Mac loans, dismissing banking team while expecting full loan repurchase requirements 2
- Small-town CRE assets outperform major metros with equal-weighted index up 1.3% monthly while value-weighted index tracking big-city properties declined 0.4%, reflecting diverging capital flows 3
- Texas industrial demand surges to 18.6M SF in Q4 2025, highest since Q2 2023, driving vacancy down 40 basis points to 8.9% with large spaces (400-800K SF) seeing 9.1% rent growth 4
- RXR secures $500M+ financing for 61 Broadway office-to-residential conversion, transforming 1913 Financial District tower into 796 apartments with 25% affordable housing 5
- Brooklyn multifamily portfolio trades for $79.9M as Camber Property Group exits eight rent-stabilized buildings near Prospect Park, reflecting compressed valuations for regulated assets 6
RESIDENTIAL REAL ESTATE MARKETS
The residential real estate market showed continued signs of cooling in early 2026, with dramatic price deceleration and persistent supply shortages creating a complex landscape for buyers and sellers.
HOME PRICE GROWTH HITS RECORD LOW
- National home price appreciation slowed to just 1.5% year-over-year in January 2026, marking the lowest level on record according to AEI Housing Market Indicators 2
- The dramatic deceleration reflects a cooling market with buyers gaining more negotiating power after years of rapid price increases
- Price growth has been consistently declining for six consecutive months, suggesting a sustained trend rather than temporary market fluctuation
REGIONAL PERFORMANCE DIVERGES SIGNIFICANTLY
- The year-over-year spread widened to 17.3 percentage points between fastest-growing Milwaukee, WI (+10.1%) and slowest-growing Cape Coral, FL (-7.2%) metros 2
- A strong reversion to the mean is underway in metros in the South and West due to elevated pandemic prices and higher interest rates
- The regional divergence reflects varying local economic conditions, inventory levels, and migration patterns affecting supply and demand dynamics
HOUSING SUPPLY CRISIS WORSENS
- The U.S. housing supply gap expanded to an estimated 4.03 million homes in 2025, up from approximately 3.8 million in 2024 1
- Last year saw 1.41 million new households formed compared to 1.36 million housing starts, creating a shortfall of roughly 50,000 units
- Roughly 1.82 million millennial and Gen Z households were “missing” in 2025, delaying independent living due to limited housing options and affordability constraints
- Even under optimistic building scenarios, it would take roughly seven years to eliminate the existing deficit
MORTGAGE MARKETS
Mortgage markets faced renewed uncertainty as geopolitical tensions and inflation concerns pushed back expectations for Federal Reserve rate cuts, while the mortgage rate lock-in effect continued to suppress housing turnover.
RATE CUT TIMELINE PUSHED BACK
- Financial markets shifted expectations for Federal Reserve policy, with traders now betting the central bank won’t deliver its next rate cut until September 3
- The revised timeline reflects concerns about renewed energy-driven inflation from Middle East conflicts and rising oil prices
- Fed officials maintain that rate reductions remain on the table if inflation eases as expected
MORTGAGE RATE LOCK-IN EFFECT INTENSIFIES
- The median purchase rate fell slightly to 5.9% in week 9, 2026, down 1.75 percentage points from the series peak in week 43, 2023 2
- Homeowners are staying in their properties for an average of 12 years, with economists attributing this pattern to mortgage rate lock-in effects
- FHFA research shows every percentage point gap between existing and prevailing rates reduces sale probability by 18.1%
- The lock-in effect contributed to 1.33 million “missing” home sales between mid-2022 and late 2023
TREASURY YIELDS SURGE ON GEOPOLITICAL TENSIONS
- U.S. Treasury yields jumped higher as oil price spikes and renewed Middle East conflict outweighed typical safe-haven demand
- The 10-year Treasury yield rose to 4.038%, up 0.076 percentage points, while the 30-day average SOFR remained steady at 3.67%
- Higher Treasury yields typically translate to increased mortgage rates, potentially further dampening refinancing activity
REGULATORY & POLICY DEVELOPMENTS
Significant regulatory changes took effect while Congress advanced major housing legislation targeting institutional investors and expanding affordable housing programs.
CONGRESSIONAL HOUSING PACKAGE ADVANCES WITH INSTITUTIONAL INVESTOR BAN
- The Senate voted 84-6 to advance a comprehensive bipartisan housing affordability package that includes provisions aimed at limiting Wall Street’s footprint in the housing market 5
- The bill incorporates 36 of the 40 provisions the Senate had in an initial version, plus six additional housing provisions from House-passed legislation
- The institutional investor ban applies to corporations that own 350 or more homes, with exemptions for build-to-rent communities and investors who report positive rent payments to credit bureaus
- The provision includes a 15-year sunset clause and does not address private equity investment in multifamily or manufactured housing
CONGRESS TARGETS APARTMENT CONSTRUCTION
- The House passed the Housing for the 21st Century bill by a 309-9 vote last month, which would change how apartment building construction is financed 6
- The legislation allows banks to lend more money for multifamily projects by changing financing rules, potentially resulting in more apartments
- Builders added more than 500,000 rental units in both 2024 and 2025, hitting record levels, with affordable housing construction growing 73% from 2020 to 2024
- The bill will need to be reconciled with the ROAD to Housing Act, which passed the Senate in October
NEW ANTI-MONEY LAUNDERING RULES LAUNCH
- The Treasury Department’s FinCEN implemented the Residential Real Estate Rule effective March 1, 2026, marking the first nationwide anti-money laundering safeguards targeting residential real estate 7
- The rule requires certain professionals involved in real estate closings to report specified non-financed transfers of residential property
- This represents a significant expansion of AML oversight into the real estate sector, previously limited to geographic targeting orders
ECONOMIC NEWS
Economic indicators showed mixed signals for the housing market, with geopolitical tensions driving Treasury yields higher while Federal Reserve officials maintained a cautious stance on future rate cuts.
FED OFFICIALS SIGNAL CAUTIOUS APPROACH
- New York Fed President John Williams reiterated that rate reductions remain on the table if inflation eases, stating that “further reductions in the federal funds rate will eventually be warranted” 3
- Minneapolis Fed President Neel Kashkari noted the market was in “a pretty good place” until Iran conflict concerns emerged
- The Federal Reserve’s cautious stance reflects ongoing concerns about inflation persistence and the need to maintain flexibility
AFFORDABILITY REMAINS A MAJOR BARRIER
- The minimum recommended income to purchase a median-priced starter home was about $86,000, well above the earnings of many younger buyers 1
- The median down payment reached approximately $30,400 — equivalent to roughly 14.4% of the purchase price
- It could take a typical household seven years or more to save for a down payment at current savings rates
GEOPOLITICAL TENSIONS IMPACT MARKETS
- Middle East conflicts and rising oil prices have created new inflationary pressures that could complicate Federal Reserve policy decisions
- Energy price spikes historically translate to broader inflation concerns, potentially delaying monetary policy easing that would benefit mortgage markets
COMMERCIAL REAL ESTATE MARKETS (INCLUDING MULTIFAMILY)
Federal regulators boosted GSE multifamily lending capacity while Walker & Dunlop uncovered $134 million in loan fraud, as small-town commercial properties outperformed major metros amid continued office-to-residential conversion activity. Texas industrial markets showed strong absorption and Manhattan developers secured major financing for office conversions, reflecting divergent performance across property types and geographic markets.
CAPITAL MARKETS & GSE ACTIVITYÂ
- FHFA Boosts Multifamily Loan Caps 20% to $88B Per GSE Federal Housing Finance Agency set 2026 multifamily loan caps at $88B each for Fannie Mae and Freddie Mac, marking a 20% increase from 2025 limits as five major metros dominate GSE securitized portfolios with $242B in combined exposure. 1
- Walker & Dunlop Uncovers $134M Fraud in Freddie Mac Loans Major lender revealed fraud across three separate loan portfolios totaling $134M in Freddie Mac loans, dismissing banking team led by former senior managing director while expecting full loan repurchase requirements from GSE. 2
- Fitch Rates BMO 2026-5C14 CMBS Trust Rating agency assigned expected AAA ratings to senior classes of $766.7M commercial mortgage trust backed by 33 loans secured by 95 properties, with Fitch net cash flow analysis showing 14% decline from issuer underwriting. 7
TRANSACTION ACTIVITY & PRICINGÂ
- Small-Town Assets Outpace Major Metro Properties CoStar’s equal-weighted index tracking smaller secondary-market assets gained 1.3% monthly and 1.1% annually, while value-weighted index for higher-end metro properties declined 0.4% in January, remaining 17% below July 2022 peak. 3
- Brooklyn Multifamily Portfolio Sells for $79.9M Camber Property Group exited eight rent-stabilized buildings near Prospect Park containing 387 units, with sale price mirroring 2020 purchase reflecting compressed valuations for regulated assets amid ongoing market pressures. 6
- Hamilton Zanze Expands Nashville Footprint Investment firm acquired 254-unit City Limits garden-style community in Columbia, Tennessee, marking third purchase in Spring Hill/Maury County submarket as firm’s portfolio reaches 88 assets totaling 25,356 units across 29 markets. 8
INDUSTRIAL MARKETSÂ
- Texas Industrial Demand Hits Multi-Year High Net absorption reached 18.6M SF in Q4 2025, highest since Q2 2023, driving vacancy down 40 basis points to 8.9% while large spaces between 400-800K SF led rent growth at 9.1% year-over-year. 4
OFFICE CONVERSIONSÂ
- RXR Secures $500M+ for 61 Broadway Conversion Partnership with One Investment Management landed $420M construction loan from Apollo affiliates plus $55M tax equity from JPMorgan to transform 1913 Financial District tower into 796 apartments with 25% affordable housing, construction starting March 2026. 5
- Manhattan Office Conversion Pipeline Expands Developers converting or planning to convert more than 15.5M SF of NYC office space as RXR advances multiple projects including 5 Times Square transformation into 1,200 apartments and former Pfizer headquarters redevelopment. 5
MULTIFAMILY FUNDAMENTALSÂ
- Nashville Market Shows Mixed Rent Performance Metro vacancy jumped from 8.5% in 2024 to 11.1% in 2025 with median rent falling 4.5% year-over-year to $1,471, though submarkets show divergent trends with Columbia down 6% while Spring Hill gained 4%. 8
- Rent-Stabilized Asset Valuations Remain Compressed Brooklyn multifamily pricing multiples dropped from around 15 times rent rolls in 2015 to roughly six times today as rent caps and operating costs pressure owners, with Article XI tax abatement becoming crucial stabilization strategy. 6
SERVICING & DISTRESSÂ
- Dwight Capital Acquires $500M Senior Housing Servicing Portfolio Commercial lender expanded servicing platform with Midland States Bank’s HUD mortgage servicing rights covering 69 hospitals, skilled nursing and assisted living facilities across 22 states, bringing total servicing collection above $15B. 9
INDUSTRY NEWS
The mortgage and real estate industry faced significant developments including major fraud discoveries, regulatory changes, and evolving market dynamics affecting both lenders and investors.
WALKER & DUNLOP FRAUD INVESTIGATION CONCLUDES
- Walker & Dunlop announced it discovered fraud in approximately $134 million of Freddie Mac loans across three separate portfolios involving three different borrowers 4
- The company dismissed its banking team responsible for the loans but found no evidence employees participated in fraudulent activities
- Walker & Dunlop expects Freddie Mac to require repurchase of all affected loans, representing a significant financial impact
GSE MULTIFAMILY LENDING CAPS INCREASED
- The Federal Housing Finance Agency set 2026 multifamily loan caps at $88 billion for each GSE, representing a 20% increase from 2025 limits 9
- Five metropolitan areas – New York, Los Angeles, Dallas-Fort Worth, Washington D.C., and Atlanta – anchor the GSE securitized multifamily market with $242 billion in agency-backed loans
- The increased caps reflect growing demand for multifamily financing and the GSEs’ expanding role in affordable housing provision
CONNECTICUT TARGETS PRIVATE LISTINGS
- Connecticut lawmakers introduced legislation targeting private real estate listing networks, potentially hampering uptick in private listing usage by real estate brokers 10
- The bills follow similar efforts in Hawaii and reflect ongoing regulatory scrutiny of MLS alternatives
- Private listing networks have grown in popularity as brokers seek alternatives to traditional MLS systems
CFPB ADJUSTS HMDA THRESHOLD
- The Consumer Financial Protection Bureau announced a slight increase in the minimum asset threshold for HMDA reporting, raising it from $58 million to $59 million for 2026 11
- Despite this adjustment, regulators emphasized that oversight will remain stringent due to heavy reliance on HMDA data for examinations
- The threshold adjustment affects which lenders must comply with comprehensive Home Mortgage Disclosure Act reporting requirements