Gen Z is getting in on the home buying in record numbers. Vacation homes are getting the cold shoulder as Americans decide that perhaps one mortgage payment is quite enough in this economy, thanks. Uncle Sam and China are doing a reset with a new tariff truce, potentially giving mortgage rates a much-needed timeout from their upward climb. Lastly, 44% of family offices plan to increase their CRE allocations in the next 18 months. 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

• Housing inventory has reached its highest level since 2019, with new listings exceeding 80,000 for the first time in years, signaling a significant step toward market normalization 1
• Over 80% of metro areas posted home price increases in Q1 2025, with the national median single-family existing-home price rising 3.5% year-over-year to $426,100, demonstrating continued price resilience despite affordability challenges 2
• Demand for vacation homes has plummeted to a six-year low, with mortgage-rate locks for second homes down 39% year-over-year in April 2025, reflecting both affordability challenges and shifting consumer priorities in uncertain economic times 3
• First-time homebuyers made up a record 58% of agency purchase loans in Q1 2025, with Gen Z accounting for approximately 15% of all mortgaged home purchases, highlighting the growing importance of younger buyers in the market 1
• The typical U.S. homebuyer’s monthly housing payment hit a new record high of $2,775 in early May, up 10.1% year-over-year, creating significant affordability hurdles for many potential buyers 4
• AI has become a standard feature in real estate technology, with 51.6% of products now incorporating AI capabilities, up from 30.4% a year ago, transforming how real estate professionals operate and serve clients 5

Residential Real Estate Markets

Overview: Housing inventory continues to recover while price growth varies significantly by region. The spring buying season is being dampened by affordability challenges, with vacation home demand particularly hard hit. Gen Z is emerging as a significant homebuying demographic despite these headwinds, especially in more affordable midwestern markets.

Inventory & Listings

• National housing inventory has increased 28% year-over-year, with the deficit compared to pre-pandemic levels shrinking to just -20%, marking the shallowest inventory deficit since April 2020 1
• New listings exceeded 80,000 for the first time in years, marking a significant milestone toward market normalization where seasonal peaks typically range between 80,000 and 110,000 weekly listings 1
• Nearly one-third of major markets have returned to pre-pandemic inventory levels, with some areas like Lakeland, Florida, Denver, and Colorado Springs showing surpluses as high as 75% above their 2017-2019 averages 1
• Total active listings increased from 744,225 to 755,895 in the first week of May 2025, compared to 568,557 during the same period last year, though still well below the 1,109,727 listings seen in the same week of 2015 1

Prices & Affordability

• 82% of metro areas (146 out of 178) experienced year-over-year price gains in Q1 2025, showing the persistent strength of home values despite affordability challenges 2
• National median single-family existing-home price rose 3.5% year-over-year to $426,100 in Q1 2025, continuing the trend of moderate but steady price growth 2
• 14% of markets (25 metro areas) posted double-digit price increases in Q1 2025, indicating that some areas are still experiencing significant appreciation despite broader market challenges 2
• Most expensive market remains San Jose-Sunnyvale-Santa Clara, CA ($1,750,000), while the most affordable is Decatur, IL ($145,000), highlighting the extreme regional price disparities across the country 2
• Typical U.S. homebuyer’s monthly payment hit a record high of $2,775 in early May, up 10.1% year-over-year, driven by the combination of elevated mortgage rates and rising home prices 4
• Median home sale prices rose 4.2% year-over-year to $386,000, contributing to the affordability challenges facing potential buyers 4

Regional Variations

• Northeast continues to outperform with Rhode Island, Connecticut, and New Jersey all posting annual price growth at or above 7%, benefiting from limited inventory and strong demand 6
• Western states like Utah and Idaho saw price declines of over 2%, reflecting the cooling in markets that saw some of the strongest pandemic-era growth 6
• Preliminary April data shows annual price growth slowing to just 1.9% nationally, which would mark the slowest growth rate in nearly two years if confirmed 1
• Single-family prices were up 2.1% year-over-year, while condo prices declined 0.4% – the first such annual decline since 2012, with nearly half of major markets now seeing condo prices below last year’s levels 1

Market Activity

• Pending home sales are down 6.5% year-over-year despite inventory improvements, indicating that higher inventory alone isn’t enough to overcome affordability constraints 4
• 36.7% of listed homes have experienced price cuts, compared to 33% during the same period in 2024 and 29% in 2023, approaching historical norms where approximately one-third of homes typically experience price reductions in a balanced market 4
• Vacation home demand hit a six-year low with mortgage-rate locks for second homes down 39% year-over-year in April 2025, marking the 14th consecutive month of annual declines and the steepest drop since April 2022 3
• Second-home demand is now 62% below pre-pandemic levels, as high mortgage rates, elevated home prices, and economic uncertainty make it difficult for many Americans to justify purchasing a second home 3

Buyer Demographics

• Generation Z accounts for approximately 15% of all mortgaged home purchases and one in four mortgaged purchases by first-time homebuyers in Q1 2025, showing their growing influence despite affordability challenges 1
• More than half of first-time homebuyer borrowers are now 35 years old or younger, driving demand for technology-enabled finance tools throughout the homebuying and mortgage process 1
• Gen Z’s market presence is highest in midwestern states like North and South Dakota, Indiana, Louisiana, and Kentucky (20%+ of purchase mortgages) and lowest in California (8%), reflecting affordability constraints in coastal markets 1
• In several Midwest metros including Cincinnati, Saint Louis, and Kansas City, Gen Z represents over 30% of first-time homebuyers with financing, highlighting the regional nature of this demographic shift 1

Mortgage Markets

Overview: Mortgage rates remain elevated but stable, with mixed signals in application activity. First-time homebuyers are dominating agency lending and increasingly turning to FHA loans for their lower down payment requirements. Delinquency rates remain low by historical standards but are trending upward, particularly for government-backed loans.

Rates & Spreads

• Mortgage rates have fluctuated between 6.64% and 7.25% in 2025, remaining at levels that continue to challenge affordability for many potential buyers 1
• April tariff announcements temporarily pushed rates to a high of 6.88% on April 11, demonstrating how geopolitical and trade developments can quickly impact the mortgage market 1
• Spread between 10-year Treasury yields and 30-year mortgage rates remains wide at 240-250 basis points, well above the historical normal range of 160-180 basis points 1
• Current state rates show regional variations: Florida (6.75%), Arizona (6.97%), Georgia (6.64%), and Texas (6.83%), reflecting differences in local market conditions and competition 7
• If spreads returned to historical normal range (1.60%-1.80%), mortgage rates would be 0.64% to 0.84% lower, potentially bringing rates closer to 6% and significantly improving affordability 1

Application Activity

• Purchase applications showed mixed signals: up 11% week-over-week and 13% year-over-year in late April, but down 2.1% month-over-month in early May, reflecting the market’s struggle to gain momentum 1 4
• Purchase applications have been positive year-over-year for 14 consecutive weeks through April 25, though the growth rate of 3% in the latest week is lower than the typical 9% to 24% expected during the peak spring homebuying season 1

First-Time Homebuyers & Lending Trends

• First-time homebuyers made up a record 58% of agency purchase loans in Q1 2025, showing their growing importance in sustaining market activity despite affordability challenges 1
• First-time buyers account for roughly half of GSE purchase mortgages and approximately 80% of FHA purchase originations, highlighting the critical role of government-backed lending for this segment 1
• Including refinances, first-time homebuyer purchase loans accounted for 43% of agency loans in Q1, up from 39% in Q4 2024, continuing the trend of increasing market share 1
• First-time homebuyer purchase lending has held up better than lending to repeat buyers compared to 2018-2019 levels (down 19% vs. 31%), likely due to the rate lock-in effect keeping many existing homeowners from moving 1
• 35% of agency first-time homebuyer purchase mortgages were FHA loans in Q1 2025, the highest such share since 2017, reflecting the appeal of lower down payment requirements in a challenging affordability environment 1
• GSE loans accounted for approximately 50% of agency first-time homebuyer lending, the lowest level since early 2020, as more buyers turn to FHA and other government-backed options 1

Delinquency & Foreclosure

• National delinquency rate dropped 32 basis points to 3.21% in March – the lowest since May 2024 – but the trend is upward compared to last year, particularly for government-backed loans 1
• Serious delinquencies continue to tick modestly higher, rising by 14% (60,000 loans) since March 2024, suggesting some borrowers are facing financial challenges despite the strong labor market 1
• 213,000 loans in active foreclosure at the end of Q1 2025, up 4% from the same time last year – marking the first annual increase in nearly two years and potentially signaling a turning point in foreclosure trends 1
• VA loans in active foreclosure are up 54% from last year following the expiration of a year-long foreclosure moratorium, though this increase is from a very low base 1
• FHA loans in foreclosure are up 11% year-over-year, reflecting the higher risk profile of these borrowers and potentially early signs of stress in this segment of the market 1

Economic & Political News

Overview: Economic uncertainty is weighing heavily on the housing market, with concerns about inflation, job security, and potential recession causing many would-be homebuyers to delay purchases. A breakthrough in U.S.-China trade relations, persistent affordability challenges, and significant regional economic variations continue to shape market dynamics across the country.

Economic Uncertainty

• Economic concerns are stunting what would typically be a robust spring homebuying season, with many potential buyers hesitant to make major financial commitments amid uncertainty 4
• Many Americans are concerned about job security and financial future amid recession fears, despite relatively strong employment data in recent months 4
• Consumer concerns about personal finances and potential tariff impacts have slowed pending sales data, though the impact has been less severe than might be expected given the elevated mortgage rates 6

Trade & Policy

• The United States and China have agreed to cut tariffs with a 90-day pause, potentially easing trade tensions that have contributed to economic uncertainty and market volatility 8
• This breakthrough in trade negotiations could help stabilize mortgage rates, which had previously spiked following tariff announcements in April, and may improve consumer confidence in the housing market 8
• Market analysts are closely watching how this trade agreement will impact inflation expectations, supply chain costs, and ultimately mortgage rates over the coming months 8

Affordability Challenges

• Monthly mortgage payment on a typical single-family home with a 20% down payment was $2,029 in Q1 2025, up 8.9% from a year ago and a staggering 52.5% from three years ago, highlighting the rapid deterioration in affordability 2
• Income needed to afford a typical home has risen to $97,392, assuming a 25% debt-to-income ratio, putting homeownership out of reach for many middle-income Americans, particularly in high-cost markets 2
• Home repair and remodeling costs increased by 3.97% year-over-year, outpacing general inflation and adding another layer of consideration for homebuyers and owners evaluating the total cost of homeownership 9
• Labor-intensive categories like vinyl window replacements and garage door replacements saw particularly steep increases, reflecting ongoing labor shortages in the construction and home improvement sectors 9

Regional Economic Variations

• Northeast and Midwest continue to show resilience in home prices despite affordability challenges, largely due to severe inventory shortages and relatively stronger local economies 6
• Florida and Texas are experiencing price pressures due to rapidly rising inventories and cumulative price increases of 70% to 90% since the pandemic, creating significant affordability challenges despite their historically more affordable reputations 6

Commercial Real Estate Markets (including Multifamily)

CMBS Market Shows Strong Resurgence

The commercial mortgage-backed securities market demonstrated remarkable growth in early 2025, with significant increases in issuance volumes across various segments.

• Private-label CMBS issuance reached $37.55 billion in Q1 2025, up 21.7% from Q4 2024 and more than double Q1 2024 volume 1
• Single-asset single-borrower (SASB) deals dominated with 72% of total issuance, reflecting investor preference for simpler transactions 1
• Conduit CMBS issuance nearly doubled year-over-year, while CRE CLO issuance also saw substantial growth1
• Invesco Commercial Real Estate Finance Trust completed its first CRE CLO valued at $1.2 billion – the largest diversified CRE CLO in the U.S. in three years 2
• The Invesco portfolio consists of 55% multifamily and 45% industrial loans, primarily in high-growth “Smile States” 2

Tariffs Impact CRE Financing and Market Momentum

Recent trade policies have created uncertainty in the commercial real estate market, affecting financing conditions and investment decisions across the sector.

• The Trump administration’s tariffs, particularly against China, have kept interest rates elevated, causing a pause in market activity 3
• Market participants have adopted a “wait-and-see” attitude despite earlier positive momentum in loan origination volumes 3
• Under a “partial trade war” scenario, CMBS issuance is expected to decrease initially but rebound toward the end of 2025 4
• Industrial, manufacturing, cold storage, and multifamily sectors may see new opportunities despite market challenges 4
• Net lease structures are becoming favored over gross leases to protect landlords from higher operating expenses 4 

Multifamily Market Leaders and Investment Trends

Key metropolitan areas continue to lead multifamily investment activity, while family offices are increasingly targeting commercial real estate as part of their investment strategies.

• Dallas-Fort Worth leads in multifamily unit financing, while New York dominates in loan volume and property count 5
• Los Angeles remains a strong performer, with all three markets expected to be investment hotspots through 2026 5
• 44% of family offices plan to increase their CRE allocations in the next 18 months 6
• Family offices are shifting toward tangible assets like industrial and multifamily properties due to stock market volatility 6
• With interest rate cuts expected later in 2025, buying activity should increase among family offices that rely less on debt 6

Multifamily Construction and Rental Market Trends

Construction activity in the multifamily sector has slowed significantly, with potential implications for rental supply and pricing across various markets.

• Nationwide multifamily permits have dropped 27.1% from pandemic highs, falling below pre-pandemic levels 7
• Southern markets like Austin and Cape Coral continue to show strong permitting activity despite the overall slowdown 7
• Reduced construction is expected to lead to tighter rental supply and potentially increased rental prices7
• In Texas, a 25% tariff on steel and aluminum could help stabilize or increase rents that have been declining since 2022 8
• Potential tariffs on Canadian lumber could further exacerbate construction challenges across all multifamily developments 8