Homebuyers are finally getting more options as inventory grows. Problem is that the properties could be uninsurable. Mortgage rates are making a modest retreat in the face of weaker economic data and lower inflation. Hudson Yards is supersizing its residential plans to 4,000 units in response to ever increasing household formations and the unaffordable housing market. Let’s get you caught up and out the door in 3 minutes. Tim 

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Key Takeaways

• Mortgage rates declined for the second consecutive week to 6.76% as of May 1, down from 6.81% last week and 7.22% a year ago. 1
• The U.S. economy contracted by 0.3% in the first quarter of 2025, largely due to a surge in imports before tariff implementation. 2
• Consumer confidence plunged in April amid growing concerns about the economy, labor market, and interest rates. 3
• Half of home insurance policyholders fear their homes will become uninsurable in the future, nearly double from 26% last year. 4
• Related Companies and Oxford Properties Group have proposed expanding Hudson Yards West in Manhattan from 1,500 to 4,000 residential units. 5
• Serious delinquency rates are rising, particularly for FHA and VA loans, while housing equity declined for the second consecutive quarter. 6

Residential Real Estate Markets

Overview: The housing market continues to rebalance with inventory growth providing more options for buyers. Despite improving supply, affordability challenges and economic uncertainty are tempering demand, resulting in longer days on market and increased price reductions.

• Inventory Growth: Active listings rose 30.6% year-over-year in April, marking the 18th consecutive month of inventory growth. 7
• Regional Variations: The West (+41.7%) and South (+33.3%) lead in inventory growth, while the Midwest (+18.7%) and Northeast (+12.4%) show more modest gains. 7
• Days on Market: Homes now spend 50 days on market, 4 days longer than last year but still 5 days faster than pre-pandemic norms. 7
• Price Trends: The national median list price held steady at $431,250 in April, just 0.3% higher than a year ago. 7
• Price Reductions: 18% of home listings had price reductions in April—up 2.5 percentage points from last year and the highest April share since at least 2016. 7
• New Listings: New listings increased by 11.2% compared to the same week last year, helping sustain overall inventory growth. 3

Mortgage Markets

Overview: Mortgage rates have declined for the second consecutive week, offering a modest reprieve to potential homebuyers. Despite this recent improvement, affordability remains challenging with mortgage payments requiring a historically high percentage of median income.

• Current Rates: 30-year fixed-rate mortgages averaged 6.76% as of May 1, down from 6.81% last week and 7.22% a year ago. 1
• Expert Forecasts: Mortgage experts predict rates may decrease slightly in May, with the average 30-year fixed potentially dropping to 6.75%. 8
• Fed Outlook: Traders are pricing in approximately 2:1 odds that the Fed will announce its first 2025 rate cut on June 18, with a quarter-point reduction. 9
• Student Loan Impact: Beginning May 5, the Trump administration will resume collection of defaulted student loans, potentially affecting 5.3 million borrowers’ mortgage qualification. 10
• Affordability Crisis: With a 20% down payment, the share of median income needed for the median monthly mortgage payment was 31.5% in March 2025, above the 30.9% peak during the housing bubble. 6
• FHA Loans: With a 3.5% down payment, the housing cost burden rises to 36.5%, also exceeding the 35.8% prior peak in November 2005. 6

Economic & Political News

Overview: The U.S. economy showed signs of contraction in Q1 2025, with GDP declining by 0.3%. Rising delinquency rates, stagnating home values, and declining housing equity suggest potential stress in certain market segments.

• GDP Contraction: The economy declined by 0.3% in Q1 2025, largely attributed to a surge in imports before tariff implementation. 2
• Labor Market: Compensation costs increased 0.9% for civilian workers from December 2024 to March 2025, and rose 3.6% over the year. 11
• Unemployment Variations: The national unemployment rate stood at 4.2% in March, with state rates ranging from 1.8% in South Dakota to 5.7% in Nevada. 11
• Consumer Sentiment: Consumer confidence fell sharply in April amid growing concerns about the economy, labor market, and interest rates. 3
• IMF Warning: The International Monetary Fund warns that sustained tariffs could lead to long-term reductions in economic output. 12
• Fannie Mae Forecast: Economic growth is expected to decline to 0.5% this year before rising to 1.9% in 2026, with home prices projected to rise 4.1% this year and 2% in 2026. 13
• Delinquency Trends: Serious delinquency rates are rising, particularly for FHA and VA loans, which increased by 102 and 51 basis points, respectively. 6
• Housing Wealth: The total value of the single-family housing market owned by households decreased by 0.4% to $48.1 trillion, while housing equity fell from $35.1 trillion to $34.7 trillion. 6

Industry News

Overview: The real estate industry faces mounting challenges from the home insurance crisis while continuing to see significant development projects and property transactions. Technology adoption accelerates as companies seek competitive advantages in an uncertain market.

Home Insurance Crisis

• Growing Concerns: 50% of home insurance policyholders fear their homes will become uninsurable, nearly double the 26% from last year. 4
• Generational Divide: 84% of Gen Z policyholders are concerned about future insurability, the highest among all age groups. 4
• Nonrenewal Notices: 25% of policyholders have received nonrenewal notices, up from 19% last year. 4
• Rate Increases: 67% of policyholders reported rate increases in 2024, with 38% experiencing hikes of 10% or higher. 4
• Cost Management: 34% have downgraded or reduced coverage to save money (average savings: $782 annually), while successful rate-shoppers saved an average of $1,034 yearly. 4

Development & Acquisitions

• Hudson Yards Expansion: Related Companies and Oxford Properties Group proposed increasing Hudson Yards West from 1,500 to 4,000 residential units as part of a $12 billion mixed-use development. 5
• Phoenix BTR Market: Tower 16 Capital Partners and Raith Capital Partners acquired Sanctuary at South Mountain, a build-to-rent community in Phoenix, for $48 million. 14
• Maryland Multifamily: Willton Investment Management and 29th Street Capital purchased Fenwick Apartments, a 311-unit Class A community in Silver Spring, Maryland, assuming a $61.6 million Fannie Mae loan. 15

Commercial Real Estate Markets (including Multifamily)

Commercial real estate markets are showing mixed signals in early May 2025, with certain sectors demonstrating resilience while others continue to face headwinds. Multifamily remains a bright spot in the investment landscape, while office properties show early signs of selective recovery amid persistent challenges.

• Q1 office sales hit $10.1 billion, marking a 48.5% increase compared to Q1 2024, with 61.6 million square feet of office space traded and average sale price per square foot rising to $181.46. 1
• National multifamily rents increased by $5 to $1,755 in March, with a year-over-year growth rate of 1.0%, while occupancy rates remained stable at around 94.5%. 2
• Small markets experienced a 2.6% increase in property prices, reversing a previous decline, while big-city office prices fell by 2.5% quarter-over-quarter and 9.2% year-over-year. 3
• Office vacancy rates continue to rise across the US, with Austin leading major markets in vacancy increases as tech companies reassess their space needs. 4

CRE Financing Trends

Financing activity has rebounded significantly from 2023 lows, with multifamily leading the charge and new capital sources emerging to fill gaps left by traditional lenders. Upcoming loan maturities are expected to drive substantial activity through 2025.

• Total commercial real estate mortgage borrowing and lending reached $498 billion in 2024, a 16% increase from 2023, though still 39% below 2022 levels. 5
• Multifamily properties dominated lending activity in 2024, accounting for $326 billion of total volume, with dedicated mortgage bankers originating $411 billion in loans, a 34% increase from 2023. 6
• Depositories led capital sources for CRE mortgage debt in 2024, followed by life insurance companies and pension funds, private label CMBS, GSEs, and investor-driven lenders. 5
• Senators Ruben Gallego (D-AZ) and Dave McCormick (R-PA) introduced a bipartisan bill to increase FHA multifamily statutory loan limits for the first time in more than two decades, aiming to boost rental housing production and improve affordability. 7
• PMG secured $413 million in construction financing for luxury towers in Miami, demonstrating continued lender appetite for well-positioned multifamily developments in strong markets. 8

CRE Servicing & Investment Outlook

Loan servicing challenges persist as maturity pressures build, while investors increasingly pivot toward alternative property types seeking higher yields and diversification benefits. Special servicing activity remains elevated for certain property types.

• CMBS loan losses increased significantly in March 2025, with $157.5 million across six loans resolved with $128.0 million in total losses and an average loss severity of 81.27%, up from February’s 47.87%. 9
• The 12-month moving average loss severity for CMBS loans increased to 62.97% in March, up from 61.96% in February, indicating persistent challenges in resolving distressed commercial mortgages. 9
• Alternative CRE sectors such as data centers, single-family rentals, self-storage, and student housing have grown at a 10% CAGR since 2000, with Deloitte projecting they could comprise nearly 70% of industry portfolios by 2034. 10
• With an estimated $957 billion in CRE mortgage maturities coming due in 2025, demand for refinancing and new capital will be key drivers of market activity. 5
• The first-quarter 2025 CRE Finance Council Board of Governors Sentiment Index fell nearly 31% from the prior quarter, reflecting concerns about economic uncertainties and tariff impacts on the market. 11