Treasury Secretary Bessent jets off to Switzerland for a high-stakes trade showdown with China – Godspeed. Mortgage rates continue to hover just below 7%. AI is rapidly transforming real estate with 9 in 10 agents now embracing the technology. Return-to-office policies are gaining traction due to stronger labor market conditions, supporting CRE demand recovery. Let’s get you caught up and out the door in 3 minutes. Tim

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Key Takeaways

• Treasury Secretary Scott Bessent testified before Congress yesterday that U.S.-China trade talks will begin Saturday in Switzerland, marking the first high-level negotiations since President Trump imposed 145% tariffs on Chinese goods. 1

• Home staging significantly impacts buyer perceptions, with 83% of buyers’ agents reporting that staging makes it easier for buyers to visualize a property as their future home, while 19% of sellers’ agents reported a 1-5% increase in dollar value for staged homes. 2

• National home insurance premiums have surged by nearly 78% over the past six years, with average annual premiums jumping 20% in 2024 alone, hitting homeowners in coastal states particularly hard. 3

• Fannie Mae’s Home Purchase Sentiment Index increased 1.1 points to 69.2 in April 2025, though it remains 2.7 points lower than the same period last year, reflecting mixed consumer attitudes toward the housing market. 4

• Mortgage rates remain elevated with the 30-year fixed rate averaging 6.85% as of May 8, 2025, up 6 basis points over the last week, while the 15-year fixed refinance rate stands at 6.24%. 5

Secretary Bessent’s Congressional Testimony: Trade Talks and Economic Outlook

Treasury Secretary Scott Bessent testified before the House Financial Services Committee on May 7, providing insights on international financial institutions, trade policy, and upcoming negotiations with China.

Key points from his testimony:

• China Trade Talks: Bessent confirmed that negotiations with China will begin Saturday in Switzerland, representing the first high-level discussions since President Trump imposed 145% tariffs on Chinese imports. 1

• Trade Negotiations Progress: The U.S. is currently in discussions with 17 of its 18 most important trading partners, with China being the exception until now. Bessent expressed optimism that 80-90% of trade deals could be concluded by year-end. 6

• China’s Economic Challenges: Bessent claimed that China’s economy is facing significant pressure, potentially losing 5-10 million jobs due to tariffs, which he believes gives the U.S. leverage in negotiations. 7

• Manufacturing Focus: He emphasized President Trump’s goal of reorienting the U.S. economy toward manufacturing, stating that a “big deal” with China would involve rebalancing trade relationships to support this shift. 7

• China Shock Claims: In a recent Wall Street Journal op-ed, Bessent claimed that 3.7 million Americans lost their jobs due to the “China Shock” following China’s entry into the WTO, though some economists have disputed this figure. 8

• International Financial Institutions: Bessent criticized “mission creep” at institutions like the IMF and World Bank, urging a return to core missions rather than focusing on climate change and social policy initiatives. 9

Residential Real Estate Markets: Home Staging Delivers Results

The National Association of REALTORS® has released its 2025 Profile of Home Staging, revealing the significant impact staging has on buyer perceptions and sales outcomes.

• Buyer Perceptions: 60% of buyers’ agents indicated that home staging affected most buyers’ view of a home, while 83% reported that staging made it easier for buyers to visualize the property as their future home. 2

• Priority Rooms: The most important rooms to stage are the living room (37%), primary bedroom (34%), and kitchen (23%), allowing sellers to maximize their staging investment. 2

• Staging Practices: 21% of sellers’ agents reported staging all homes prior to listing, while 10% staged only difficult-to-sell properties. The median cost was $1,500 when using a professional service versus $500 when the agent personally staged the home. 2

• Value Impact: 19% of sellers’ agents reported a 1-5% increase in dollar value offered by buyers for staged homes compared to similar unstaged properties. 2

• Market Time: 30% of sellers’ agents reported slight decreases in time on market for staged homes, while 19% noted that staging greatly decreased market time. Only 4% reported that staging increased time on market. 2

• Media Influence: Nearly half (48%) of respondents indicated that buyers expect homes to look like those staged on TV shows, and 58% reported that buyers were disappointed by how homes looked compared to those seen on television. 2

Mortgage Markets: Rates Hold Steady Amid Economic Uncertainty

Mortgage rates remain elevated as markets digest mixed economic signals and await potential policy shifts.

• Current Rates: The average 30-year fixed mortgage rate is 6.85%, up 6 basis points over the last week. The 30-year fixed refinance rate stands at 6.94%, while the 15-year refinance rate is 6.24%. 5

• Fed Policy: The Federal Reserve is maintaining its current policy stance, with 97% odds on rates remaining at 4.25% to 4.5%, according to the CME Group’s FedWatch tool. About 30% predict a 25-basis-point cut next month. 10

• Market Forecast: The Mortgage Bankers Association projects purchase and refinance volume to rise from $1.79 trillion in 2024 to $2.08 trillion in 2025, despite elevated rates. 10

• First-Time Buyers: First-time homebuyers accounted for a record share of agency purchase lending in Q1 2025, with Gen Z representing one in four first-time homebuyer loans. 11

• Rate Outlook: Industry experts suggest mortgage rates will not change significantly in the near term, with the “best-case scenario” being rates around 6% for the next two years. 10

Economic & Political News: Insurance Costs Surge Amid Climate Concerns

Home insurance costs have skyrocketed across the United States, creating significant financial pressure for homeowners and potential buyers.

• Premium Increases: National home insurance premiums have surged by nearly 78% over the past six years, with average annual premiums jumping 20% in 2024 alone. 3

• Regional Impact: Homeowners in coastal states are experiencing the steepest increases as insurers respond to growing climate-related risks. 3

• Consumer Concerns: According to a ValuePenguin survey, 67% of U.S. homeowners saw their insurance rates increase in 2024, with 38% reporting premium hikes of 10% or more. 12

• Future Expectations: 75% of policyholders expect their rates to rise again in 2025, with 44% saying that premiums are more difficult to afford than in past years. 12

• Uninsurable Fears: The share of policyholders who fear their homes will eventually become uninsurable nearly doubled over the past year, rising from 26% to 50%. 12

• Consumer Sentiment: Fannie Mae’s Home Purchase Sentiment Index increased 1.1 points to 69.2 in April, though it remains 2.7 points lower than the same period last year, suggesting cautious adaptation to current market conditions. 4

Commercial Real Estate Markets (including Multifamily)

Overview: Commercial real estate markets show mixed signals in early May 2025, with office sales rebounding despite ongoing valuation challenges, industrial remaining resilient amid tariff concerns, and multifamily construction slowing significantly. CMBS delinquencies have reached concerning levels, particularly in lodging and warehouse sectors, while industry experts prepare to address emerging challenges at upcoming conferences.

Office Sector

• Office property sales reached $6.2 billion in January 2025, an 80% increase compared to January 2024, though prices remain 20% below their 2022 peak 1

• Office-backed loans now comprise 16.13% of CMBS conduit collateral in Q1 2025, up from 13.03% a year prior 1

• Tech hubs (San Francisco, Seattle, Boston) are driving recovery, contrasting with continued challenges in traditional markets like New York City and Los Angeles 2

• Return-to-office policies are gaining traction due to stronger labor market conditions, supporting demand recovery after a February 2025 dip 2

Industrial Market

• E-commerce sales reached $1.19 trillion in 2024, sustaining demand for warehouse space despite tariff-related uncertainties 3

• Industrial rents have increased 6.8% year-over-year nationally, with Sun Belt markets showing particularly strong growth 3

• New construction has slowed due to rising material costs from tariffs, though substantial space remains under development 3

• National vacancy rates have reached 8.5%, but experts predict stabilization once tariff negotiations conclude 3

• Phoenix is emerging as a key industrial hub, particularly for data centers 3

Multifamily Sector

• Multifamily permits have decreased 27.1% from pandemic highs due to high borrowing costs and decreased rental demand 4

• Southern markets (Austin, Cape Coral) continue to show strong permitting activity despite the national downturn 4

• National permitting rates have fallen below pre-pandemic levels, with forecasts indicating further declines in the coming years 4

• Dallas-Fort Worth leads in multifamily unit financing, while New York leads in loan volume and property count 5

• Reduced construction is expected to lead to tighter rental supply and increased rental prices in the near future 4

CMBS and Servicing

• CMBS delinquencies have crossed 7% for the first time since January 2021, with particular pressure in lodging and warehouse sectors 6

• Market stalemate persists as sellers resist selling without suitable replacement properties and banks hesitate to offload bad loans 6

• MBA’s Commercial/Multifamily Finance Servicing and Technology Conference (May 18-21, 2025, in Hollywood, Florida) will address industry challenges and technology solutions 7

• Conference topics include loan administration, asset management, workout strategies, and technology advancements for various transaction types 7

Industry News: AI Adoption Accelerates as Consolidation Continues

Technology adoption and industry consolidation are reshaping the real estate landscape, with AI becoming increasingly central to business operations.

• AI Integration: Over 51.6% of technology products listed in T3 Sixty’s annual Tech 200 now incorporate AI, representing a significant increase from the previous year. 13

• Industry Attitudes: Nearly 90% of brokerage leaders report their agents are using AI, and concerns about the technology have decreased, with 42% saying they were “highly concerned” about AI, down from 50% a year earlier. 13

• Market Consolidation: Six companies in the 2024 edition of the Tech 200 were acquired in the past year, including Collabra Technology and Curated Social, reflecting ongoing industry evolution. 13

• Major Transactions: The Sobrato Organization acquired Soma Towers in Bellevue, Washington, for approximately $192.9 million, marking their first property in Bellevue. 14

• Affordable Housing Investment: WNC & Associates closed its Institutional Tax Credit Fund 57, raising $228 million to support the development and preservation of 26 affordable properties across 17 states. 15

• Financing Activity: Harbor Group International provided a $64 million senior bridge loan for Sunela, a luxury apartment complex in Phoenix, Arizona, supporting the property during its lease-up and stabilization phase. 11