CFPB’s self-induced coma is likely to continue—either until most of the staff resigns once paychecks stop arriving in early 2026 (no funding), or until the stalemate becomes a bargaining chip for Democrats seeking major CFPB and Dodd-Frank reforms in 2026. The combination of near-record low affordability and Americans’ strong preference for living indoors has produced a new migration trend: back home to the basement. Young adults are returning home in force, with 32.5% of adults ages 18–34 living with their parents in 2024, up from 31.8% in 2023, as housing costs squeeze budgets.
After two lackluster years, the existing-home market is finally showing signs of life, with sales beginning to pick up from a very slow pace as mortgage rates ease—if only slightly. Meanwhile, the mortgage industry is unloading on the credit bureaus over their latest price hikes, calling for fundamental reform of the tri-merge credit reporting system. MBA President Bob Broeksmit accused the bureaus of “abusing their government-granted oligopoly” to gouge consumers in a flawed, outdated, and anticompetitive framework.
Ever wonder how consumer sentiment can be in the gutter while consumer spending stays strong? Nearly half of all consumer spending (49.2%) now comes from the top 10% of earners, the highest share since 1989. In CRE, senior housing is leading all sectors with 2.88% Q3 returns and 7% YTD gains—double the broader index—as occupancy climbs to multi-year highs amid limited construction. And on a less cheerful note, $23B in CMBS loans are now overdue, reflecting a twist on an old favorite: the “extend-and-amend” trend, as lenders increasingly opt for maturity extensions over forced sales.
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.
KEY TAKEAWAYS
- Luxury home prices surged 5.5% year-over-year in October to a record $1.28 million, triple the pace of non-luxury homes which rose just 1.8% to $373,249, highlighting the divergent performance between market segments 1
- Buyers are slowly returning as mortgage rates ease, with NAR economists noting that even small rate drops can bring buyers back from “wait and see” mode, particularly in the luxury segment above $750,000 2
- Young adults moving back home due to affordability crisis, with 32.5% of adults ages 18-34 living with parents in 2024, up from 31.8% in 2023, as housing costs strain household budgets 3
- Federal Reserve officials remain divided on December rate cuts, with New York Fed President John Williams signaling support for further easing while market expectations jumped to 73% probability following his comments 4
- CFPB transfers all active litigation to DOJ as funding crisis deepens, with acting director Russell Vought indicating the agency will exhaust funds in early 2026 and all employees face potential furloughs 5
- 2026 housing outlook shows continued challenges, with experts warning that elevated home prices, rising insurance premiums, and mortgage rates above 6% will persist despite potential Fed rate cuts 6
- Industrial real estate leads with 0.56% delinquency rates while office hits record 11.76%, highlighting the stark sector divide driven by logistics demand versus remote work impacts 1
- Senior housing tops all CRE sectors with 2.88% Q3 returns and 7% YTD gains – double the broader index – as occupancy hits multi-year highs amid limited new construction 2
- REIT M&A surges with $3B in take-private deals since September, including major industrial and office acquisitions as REITs trade significantly below NAV 3
- CMBS issuance hits $92.48B YTD on track for highest level since 2007 while spreads tighten to 2025 lows, despite $23B in overdue loans as extend-and-amend strategies dominate 1
- NYC markets show continued strength with $70M Brooklyn multifamily deal topping Octoberand 269 transactions totaling $379M in single day, demonstrating liquidity in major metros 4 5
RESIDENTIAL REAL ESTATE MARKETS
The residential market shows stark divergence between luxury and non-luxury segments, with luxury properties demonstrating remarkable resilience while broader market conditions remain challenging. Buyers are slowly returning as rates ease, but affordability pressures are forcing young adults back into parental homes at increasing rates.
BUYERS SLOWLY RETURNING AS RATES EASE
- Market improvement finally emerging after two challenging years, with existing-home sales beginning to pick up from very slow pace seen in previous year as mortgage rates eased 2
- Buyers re-engaging as affordability conditions improve, though activity remains below expectations and far from pandemic-era highs 2
- People in “wait and see” mode starting to call again, with more buyers getting pre-approved in case rates fall further, according to NAR Senior Economist Nadia Evangelou 2
- Well-priced homes sell nearly five times faster, typically in 10 days versus 46 days for homes that need price cuts, emphasizing importance of realistic pricing 2
LUXURY MARKET OUTPERFORMS AMID BROADER SLOWDOWN
- Luxury home prices jumped 5.5% year-over-year to record $1.28 million in October, significantly outpacing non-luxury homes which saw modest 1.8% appreciation to $373,249 1
- Strongest year-over-year gains continue in homes priced above $750,000, especially those priced over $1 million, reflecting broader economic trends where higher-income households continue spending 2
- Warren, Michigan led luxury price gains at 14.9% to $1.09 million, followed by Milwaukee at 13.5% to $1.14 million, and San Jose at 11.9% to $5.60 million 1
- Cash purchases, larger down payments, and lifestyle-driven moves keep luxury segment active even during broader slowdown, with buyers less affected by mortgage rate changes 2
AFFORDABILITY CRISIS FORCES YOUNG ADULTS HOME
- 32.5% of adults ages 18-34 lived with parents in 2024, up from 31.8% in 2023, interrupting post-pandemic trend of moving out of parental homes 3
- New Jersey leads with 44% of young adults living with parents, followed by Connecticut at 41%, California at 39%, and Maryland at 38% 3
- Statistical analysis confirms clear link between expensive housing and young adults living with parents, particularly in states with higher shares of renters paying 30% or more of income on housing 3
- North Dakota records nation’s lowest share at 12%, while South Dakota registers 18% and District of Columbia shows less than 13% of young adults living with parents 3
MARKET DYNAMICS SHOW MIXED SIGNALS
- Middle-income households can afford only 21% of listings currently for sale, while market still needs half a million listings priced up to $260,000 to reach balanced condition 2
- Both luxury and non-luxury sales remain near decade-low October levels, with luxury sales up just 2.9% year-over-year and non-luxury sales rising 0.7% 1
- Luxury inventory climbed 6.4% year-over-year while non-luxury inventory surged 9.5%, both reaching their highest October levels in at least five years 1
- Sellers outnumber buyers by 37% as the number of U.S. homebuyers dropped 1.7% to the lowest level on record aside from the pandemic’s start 7
MORTGAGE MARKETS
Mortgage markets have stabilized around 6.25% for 30-year fixed loans, providing relief from earlier highs above 7%. This stability has enabled growth in refinancing and HELOC activity, though purchase demand remains constrained by affordability challenges and persistent supply-demand imbalances. The 2026 outlook suggests continued challenges despite potential Fed rate cuts.
RATE ENVIRONMENT STABILIZES AROUND 6.25%
- Mortgage rates stabilized in narrow range around 6.25% for 30-year fixed loans, down from above 7% at the start of 2025 8
- Rate stability contributed to fourth consecutive month of yearly sales gains and continued home price growth across most markets 9
- October existing-home sales rose to highest level in eight months despite government shutdown’s impact on data collection 9
- Even small rate drops can bring buyers back, with people who had been in “wait and see” mode starting to call again and getting pre-approved 2
2026 OUTLOOK SHOWS PERSISTENT CHALLENGES
- Mortgage rates expected to remain well above pre-pandemic levels, with 30-year fixed rates hovering between 6-7% despite potential Fed cuts, compared to ~4% average from 2009-2022 6
- Combination of elevated home prices, rising insurance premiums, and higher rates will continue posing challenges for first-generation and first-time buyers in 2026 6
- Median 2024 home price was five times median household income, far above traditional affordable price-to-income ratio threshold of 3:1, according to Harvard Joint Center for Housing Studies 6
- Closing-cost assistance, down-payment grants, and interest-rate buydowns identified as key tools for expanding homeownership access and creating wealth-building opportunities 6
ORIGINATION ACTIVITY SHOWS GROWTH
- Q3 mortgage origination activity grew year-over-year, driven primarily by refinancing and home equity line of credit (HELOC) activity 7
- Homeowners capitalized on modest rate improvements to tap into equity and reduce monthly payments through strategic refinancing 7
- Mortgage volumes likely to remain muted in 2026, though refinancing could increase if interest rates move lower, according to Federal Home Loan Bank economist 6
- Federal Home Loan Banks supporting $693.5 billion in advances and maintaining on-balance-sheet mortgage portfolio exceeding $77 billion as of September 30, 2025 6
REGULATORY DEVELOPMENTS IN REAL ESTATE
Regulatory developments are dominated by the CFPB’s unprecedented funding crisis and transfer of litigation to DOJ, while new housing policy measures take effect in 2026. The MBA challenges credit reporting practices, and experts warn about underappreciated risks in property insurance markets that could impact mortgage credit.
CFPB CRISIS DEEPENS AS AGENCY TRANSFERS CASES TO DOJ
- CFPB transfers all active litigation to Department of Justice due to funding constraints, with Acting Director Russell Vought announcing the agency will exhaust funds in early 2026 5
- Approximately 170 enforcement division employees face unpaid leave as the agency cannot legally request additional funds from the Federal Reserve under Dodd-Frank Act 10
- All CFPB employees potentially face furloughs by year-end as the constitutional funding crisis deepens without congressional intervention 5
- Senator Elizabeth Warren criticized the move, stating “Donald Trump and Russ Vought are racing to shut down the CFPB while their lawyers tell the courts the opposite” 10
NEW HOUSING POLICY MEASURES TAKE EFFECT IN 2026
- Omnibus economic and housing package passed by Congress in 2025 expanded Low-Income Housing Tax Credit (LIHTC) allocations and established middle-income housing tax credit beginning in 2026 6
- New measures seek to streamline permitting and incentivize infill development, all intended to positively impact housing supply side of affordability equation 6
- LIHTC expansion expected to have most immediate impact, while other measures will have longer implementation timelines according to Federal Home Loan Bank economist 6
- Federal housing policy levers traditionally focused on demand side rather than supply, making these supply-side measures particularly significant 6
PROPERTY INSURANCE MARKET POSES UNDERAPPRECIATED RISK
- Extreme weather events driving premiums and loss rates higher, causing insurers to withdraw from high-risk geographies despite rate hikes 6
- Discussion of capping insurance premium increases growing among state legislators and regulators, though measures could backfire if insurers prevented from recouping losses 6
- Further retrenchment by private carriers could increase reliance on state-backed insurance pools like California’s FAIR Plan and Florida’s Citizens Property Insurance Corporation 6
- Risk shift from experienced insurers to states represents underappreciated negative risk factor for housing markets and mortgage credit in 2026 6
MBA CHALLENGES CREDIT REPORTING PRICE INCREASES
- MBA launches scathing attack on credit bureaus’ latest price increases, calling for fundamental reform of the tri-merge credit reporting system 11
- MBA President Bob Broeksmit stated bureaus are “abusing their government-granted oligopoly” by gouging consumers in a flawed, outdated, and anticompetitive system 11
- MBA advocates transitioning to single-file credit reports used safely in nearly every other consumer finance market to provide price relief for homebuyers 11
- Proposed changes would inject real competition while lowering closing costs and streamlining the mortgage process without compromising sound risk management 11
ECONOMIC NEWS
Federal Reserve officials remain divided on December rate cuts amid incomplete economic data due to the government shutdown. Economic imbalances are emerging with high-income households driving spending while lower-income families struggle, creating potential risks for 2026. Fannie Mae revised its forecasts with more optimistic rate projections but continued housing supply challenges.
FEDERAL RESERVE OFFICIALS DIVIDED ON DECEMBER RATE CUT
- Fed officials sharply divided over December 9-10 rate cut decision with conflicting signals from inflation and labor market data creating uncertainty 4
- New York Fed President Williams supports further cuts, stating “I view monetary policy as being modestly restrictive” and seeing “room for further adjustment in the near term” 4
- Williams’ comments moved markets significantly with fed funds futures pricing jumping to 73% probability of December cut, up from just 39% the day before 4
- Fed expected to continue cutting rates several more times over next 12 months, helping normalize U-shaped yield curve that has persisted throughout 2025 6
ECONOMIC IMBALANCES POSE 2026 RISKS
- 49.2% of consumer spending comes from top 10% of income earners, the highest share since 1989, reflecting strong wealth effects among high-income households 6
- Concentration of spending driven by recent highs in stock market, cryptocurrencies, and gold, creating vulnerability to market corrections 6
- Market downturn could quickly reverse wealth effects, leading to pullback in consumption and tightening credit conditions that would ripple through housing markets 6
- Economic backdrop increasingly uneven with spending driven by those at the top while lower-income households struggle to keep pace 6
HOUSING MARKET RESPONDS TO RATE STABILITY
- Rate stabilization around 6.25% contributed to improved housing conditions with October existing-home sales rising to highest level in eight months 9
- Normal yield curve means healthy lending margins and increased capacity for community lenders to extend mortgage credit 6
- Home prices have flattened nationally with S&P CoreLogic Case-Shiller National Home Price Index dipping below 2% year-over-year in June 2025 6
- National average masks market bifurcation with HPI gains continuing in some metros (Buffalo, Rochester) while declining in others (Cape Coral, North Port) 6
FANNIE MAE REVISES 2026 FORECASTS
- Fannie Mae projects 30-year fixed-rate mortgages will average 6.2% in Q1 2026 before declining to 5.9% by year-end in November 2025 outlook 12
- Rates expected to remain around 5.9% through 2027, providing more optimistic outlook for housing affordability improvement 12
- Forecast projects 2.5% drop in total housing starts for 2026, continuing sluggish trend from 2024 and 2025 12
- Housing starts and home sales held steady at low levels in 2025 with roughly 1.3 million annual starts and 4 million existing-home sales 6
COMMERCIAL REAL ESTATE MARKETS (INCLUDING MULTIFAMILY)
Commercial real estate markets show stark performance differences across property types, with industrial leading recovery while office properties face continued challenges. Multifamily markets remain active with significant transaction volume in major metropolitan areas.
SECTOR PERFORMANCE SHOWS SHARP DIVIDE
- Industrial sector leads with just 0.56% delinquency rates – lowest among all commercial property types as warehouse and data center demand drives performance 1
- Office sector struggles with record 11.76% delinquency rates in October 2025 – highest among all commercial property sectors due to remote work impacts and urban office demand decline 1
- Retail sector stabilized at 6.76% delinquency rate – showing resilience as consumer spending patterns normalize post-pandemic 1
- Hotel sector improved to 5.81% delinquency – best reading since early 2024 as travel demand continues recovering 1
NYC MULTIFAMILY SALES ACTIVITY
- $70M Brooklyn deal tops October transactions – 1580 Nostrand Ave., a 93-unit Class A building sold from Hello Living to Madison Realty Capital 2
- $30M Tribeca acquisition – 81-83 Franklin St., an 11-unit Manhattan property purchased by Slate Property Group 2
- $21M Prospect Heights sale – 364 Lincoln Place, a 55-unit Brooklyn building acquired by Seastone Capital 2
- Manhattan Valley double deal – 4-6 W. 108th St., two 25-unit buildings sold for $17.8M combined 2
SENIOR HOUSING LEADS ALL CRE SECTORS
- 2.88% Q3 returns make senior housing top performer – more than double the broader NCREIF commercial real estate index performance 3
- 7% year-to-date gains – senior housing significantly outperforms other commercial property types as demographic trends drive demand 3
- Independent living outperforms assisted living – 3.11% vs 2.66% Q3 returns as higher-income seniors drive premium housing demand 3
- Occupancy at multi-year highs – 90%+ for independent living and 87% for assisted living as new construction remains limited 3
COMMERCIAL FINANCING MARKETS
Commercial financing markets show cautious optimism with tightening spreads and increased CMBS issuance, though high interest rates continue to impact borrowing costs. Capital flows increasingly favor industrial and data center properties.
CAPITAL MARKETS SHOW CAUTIOUS OPTIMISM
- CMBS spreads tighten to 2025 lows – low-leverage office loans fall to 204 basis points, indicating improved investor confidence despite sector challenges 1
- Private-label CMBS issuance hits $92.48B year-to-date – on track to exceed $123B annually, which would be the highest level since 2007 1
- $23B in CMBS loans now overdue – reflects “extend-and-amend” trend as lenders prefer maturity extensions over forced sales 1
- Lenders favor maturity extensions over forced sales – reflects cautious approach amid economic uncertainty and challenging market conditions 1
- Government shutdown concerns impact decisions – political uncertainty adds to lender reluctance to pursue aggressive collection strategies 1
CAPITAL CONCENTRATION TRENDS
- Industrial real estate benefits from dual demand – warehouse space for logistics and data center development for AI/cloud infrastructure drive investor interest 1
- Power-ready assets increasingly favored – properties with adequate electrical infrastructure command premium pricing for data center conversion potential 1
- Stable industrial pricing per Trepp’s Q2 2025 index – industrial properties maintain value stability compared to volatile office and retail sectors 1
COMMERCIAL SERVICING MARKETS
Commercial servicing markets face continued stress, particularly in the office sector, with lenders increasingly favoring workout solutions over foreclosures. Extend-and-amend strategies dominate as market conditions remain challenging.
OFFICE SECTOR DISTRESS INTENSIFIES
- JPMorgan Chase markets $270M soured Chicago loan – debt tied to 500 West Monroe, a 46-story West Loop tower owned by Spear Street Capital 5
- $279 per square foot debt burden – represents significant leverage on the 967,000-square-foot Chicago office building 5
- Building 75% leased with 4.7-year average term – despite decent occupancy, major tenant departures including Motorola Solutions create cash flow concerns 5
- Deed-in-lieu of foreclosure pitched as resolution – lenders prefer negotiated solutions over lengthy foreclosure processes 5
INDUSTRY NEWS
Real estate stocks rallied on rate cut expectations while companies continue strategic expansions. Federal Home Loan Bank elections and construction activity show mixed results, reflecting the complex dynamics. The commercial real estate industry sees increased M&A activity, construction rebounds, and regulatory developments. REIT consolidation accelerates while new technology and infrastructure investments reshape the sector.
REAL ESTATE STOCKS RALLY ON RATE CUT EXPECTATIONS
- Homebuilder stocks surged following Williams’ dovish comments with Builders FirstSource and KB Home each jumping about 7% 13
- Lennar added close to 6% while PulteGroup climbed just over 5% as investors responded positively to rate cut prospects 13
- Zillow Group and Rocket Companies also posted gains along with other real estate-related stocks in broad-based rally 13
- Many housing-related stocks remain negative for 2025 despite rally, reflecting challenging market conditions that persisted throughout the year 13
FEDERAL HOME LOAN BANK OF CINCINNATI DIRECTOR ELECTIONS
- J. Wade Berry and Timothy E. Barnes elected as Member Directors from Kentucky in 2025 director elections 14
- Danny J. Herron from Nashville elected as Independent Public Interest Director while Michael P. Pell will serve as board chair 14
CONSTRUCTION ACTIVITY SHOWS MIXED RESULTS
- Construction starts surged 21% in October led by multibillion-dollar projects, though gains were concentrated in specific sectors 15
- Multifamily starts improved while single-family starts showed modest 2.2% growth indicating continued sector-specific challenges 15
- Total residential groundbreakings fell 3.1% for the 12 months ending October 2025, indicating continued challenges in the construction sector
REIT M&A ACTIVITY SURGES
- $3B in REIT take-private deals since September – ends long M&A pause as valuations become attractive for private buyers 6
- Ares acquires Plymouth Industrial REIT for $2.1B – major industrial REIT transaction reflects strong demand for logistics properties 6
- Rithm Capital’s $1.6B Paramount Group deal – office REIT acquisition despite sector challenges shows opportunistic buying 6
- Office REITs trading 27% below NAV – significant discount creates opportunities for well-capitalized buyers 6
CONSTRUCTION ACTIVITY REBOUNDS
- Construction starts surge 21% – led by multibillion-dollar projects as developers gain confidence in market recovery 7
- Multifamily starts improve 2.2% – apartment construction gains momentum as rental demand remains strong 7
- Single-family construction gains momentum – homebuilding activity increases despite elevated mortgage rates 7
SELF-STORAGE EXPANSION
- Blue Vista-UBS-Extra Space partnership grows – institutional ownership expansion in self-storage sector targets new market standards 8
- Supply challenges drive consolidation – limited new development creates opportunities for established operators to expand market share 8
REGULATORY UPDATE
- Equinix investigation ends without SEC action – removes regulatory overhang for data center REIT as AI infrastructure becomes critical 9
- Data center sector gains regulatory clarity – resolution supports continued investment in AI and cloud infrastructure properties 9
NYC TRANSACTION ACTIVITY
- 269 transactions totaling $379M on November 21 – strong single-day activity demonstrates continued market liquidity in major metropolitan areas 10
- $21M Billionaires’ Row condo sale – luxury residential market remains active despite broader economic uncertainty 10
- $18M+ commercial acquisition by Japanese firm – Hanshin Juken Co. purchase demonstrates continued international investment interest 10