Daily Dose of Real Estate

Daily Dose of Real estate for October 24

Big moves at the GSEs have a lot of folks scratching their heads. The Trump administration clearly has something in mind, but what that is—well, that’s anybody’s guess right now.

Mortgage rates are moving down, and existing home sales are snapping back as rates approach 6%. The Fed is signaling more rate cuts next week, and households are celebrating with a surge in cash-out refinances.

CMBS issuance is resurging, on pace to beat last year by 25%. But it’s not all good news—CMBS special servicing rates are approaching 11%, up nearly 200 basis points from last year.

Let’s get you caught up and out the door in three minutes.

—Tim

Today’s newsletter was prepared by our AI platform ALFReD. Know Better.

Table of Contents

KEY TAKEAWAYS

Mortgage rates hit 2025 lows at 6.19% for 30-year fixed mortgages, marking the lowest level in over a year as government shutdown and economic uncertainty drive investors to bonds 1
Existing home sales surge 1.5% in September to 4.06 million seasonally adjusted annual rate, with inventory reaching a five-year high at 1.55 million units 2
Major Fannie Mae leadership shakeup as Peter Akwaboah becomes Acting CEO while John Roscoe and Brandon Hamara are promoted to Co-Presidents, effective immediately 3
Refinancing activity explodes 81% year-over-year despite overall mortgage applications declining 0.3%, driven by the lowest rates in a month 4
Manchester-Nashua, NH retains top spot in Realtor.com’s Fall 2025 housing market ranking, with Midwest markets dominating the top 20 due to affordability and economic stability 5
Federal Reserve officials signal continued rate cuts with Governor Michael Barr delivering speeches on community development finance and financial inclusion amid expectations for quarter-point cuts at the October 28-29 FOMC meeting 6
CMBS Issuance Surging: Lenders issued nearly $92.5 billion in domestic CMBS loans year-to-date through September, approaching 2024’s total of $104.1 billion and potentially reaching $123 billion by year-end—the largest annual volume since 2007 1
Dallas-Fort Worth Office Momentum: “Y’all Street” continues gaining traction with Class A prime effective rents rising 104% since mid-2020, while FIRE sector accounts for 36.7% of new leasing activity year-to-date in 2025 2
Cold Storage Market Under Pressure: Chicago cold storage in-place rents lag 21% behind national average as new supply floods the market, pushing vacancy rates to their highest levels in two decades 2
Special Servicing Rates Rising: The CMBS special servicing rate jumped to 10.65% overall in September, up 186 basis points year-over-year, with multifamily financing seeing 8.20% of loans in special servicing versus 6.07% last year 1
Private Capital Filling Bank Void: As banks retreat from CRE lending, private lenders are stepping in aggressively with faster deals, flexible terms, and tighter pricing, reshaping the financing landscape 3
Federal Support for Community Investment: Fed Governor Michael Barr celebrated the permanent extension of the New Markets Tax Credit, emphasizing its role in bringing investment to underserved communities with affordable real estate opportunities 4

RESIDENTIAL REAL ESTATE MARKETS

The residential market showed encouraging momentum in September with existing home sales climbing 1.5% as mortgage rates declined to yearly lows. Regional dynamics favored affordable Midwest and Northeast markets, while inventory conditions continued improving nationwide. Market rankings revealed a shift toward value-driven locations with strong economic fundamentals.

HOME SALES AND INVENTORY TRENDS

Existing home sales increased 1.5% month-over-month to 4.06 million seasonally adjusted annual rate in September, marking the strongest pace since February and representing a 4.1% increase compared to September 2024 2
Total housing inventory reached 1.55 million units, up 1.3% from August and 14.0% from September 2024, representing a 4.6-month supply of unsold inventory—matching a five-year high 2
Median existing-home price held at $415,200, marking the 27th consecutive month of year-over-year price increases with a 2.1% gain from September 2024 2
Geographic sales gains occurred in the Northeast, South, and West, while only the Midwest experienced a decline, with year-over-year gains recorded in Northeast, Midwest, and South 2

REGIONAL MARKET PERFORMANCE

Manchester-Nashua, New Hampshire retained top position as the nation’s hottest housing market for the second consecutive quarter in Realtor.com’s Fall 2025 ranking of 200 metropolitan areas 5
South Bend-Mishawaka, Indiana-Michigan climbed 21 spots to rank third overall, benefiting from proximity to Chicago, Grand Rapids, and Fort Wayne while maintaining affordability with a median listing price of $312,000—nearly 40% below the national median 5
Pennsylvania housing market showed growth with over 43,000 homes on the market in September—up 7% from last year and representing the largest number of listings since 2022, with median home price at $299,900, up 3.4% year-over-year 7
Midwest markets dominated top 20 rankings due to combination of affordability, economic stability, and climate resilience factors 5

BUYER BEHAVIOR AND MARKET CONDITIONS

Only 25.3% of homes sold above final asking price in September, down from 28.5% year-over-year and marking the smallest percentage in six years, indicating growing buyer negotiating power 8
Typical home sold for 1.4% below final list price versus 0.9% last year, further demonstrating improved buyer leverage in negotiations 8
First-time homebuyers represented 30% of sales in September, up from 28% in July and 26% in September 2024, showing increased participation from entry-level buyers 2
Cash sales accounted for 30% of transactions, up from 28% the previous month but unchanged from September 2024, while median time on market increased to 33 days from 31 days in August 2

MORTGAGE MARKETS

Mortgage rates fell to their lowest levels in over a year, triggering a massive refinancing surge while purchase applications remained mixed. The rate environment was driven by government shutdown uncertainty and bond market dynamics, with significant variations across loan products and borrower segments.

INTEREST RATE ENVIRONMENT

30-year fixed-rate mortgage averaged 6.19% according to Freddie Mac, down 8 basis points from 6.27% the previous week and marking the lowest level in over a year 1
15-year average declined to 5.44% from 5.52% the previous week, while 10-year Treasury yields remained near 3.99% amid ongoing government shutdown and economic uncertainty 1
Rate decline represents nearly full percentage point improvement from early 2025 when rates surpassed 7%, providing significant relief for potential borrowers 1
Jumbo loans (greater than $806,500) saw rates fall to 6.39% from 6.47%, while FHA-backed mortgages declined to 6.12% from 6.19% 4
Conventional refinances increased 6% and FHA refinance applications jumped 12%, while VA refinances declined 12% 4

MORTGAGE APPLICATION ACTIVITY

Overall mortgage applications decreased 0.3% for the week ending October 17, despite favorable rate environment, according to MBA’s Weekly Applications Survey 4
Refinance applications surged 4% week-over-week and posted an 81% increase compared to the same week last year, driven by lowest rates in a month 4
Purchase applications declined 5% from the previous week but remained 20% higher than the same week in 2024, showing continued year-over-year strength 4
Refinance share jumped to 55.9% from 53.6% the previous week, while ARM applications increased 16% over the week, pushing ARM share to 10.8% of total applications 4

CAPITAL MARKETS AND SERVICING

46.1% of mortgaged properties considered equity-rich in Q3, down from 47.4% in the previous quarter and 48.3% at the same time last year, despite record median home prices of $370,000 9
Community lenders pushed for GSE intervention to reduce mortgage rates, with CHLA and ICBA urging Treasury Secretary Bessent and FHFA Director Pulte to have GSEs purchase additional MBS, potentially reducing rates by 35 basis points 10

REGULATORY DEVELOPMENTS IN REAL ESTATE

Major leadership changes at Fannie Mae dominated regulatory news, while FHLB system developments and GSE privatization discussions continued. Federal agencies maintained focus on housing finance reform amid ongoing political and economic uncertainty.

Fannie Mae Executive Shakeup

Source: 1

CEO Transition: Priscilla Almodovar steps down as Fannie Mae President and CEO, with Chief Operating Officer Peter Akwaboah named interim CEO while board conducts permanent replacement search
New Leadership Structure: Brandon Hamara (former Tri Pointe Homes executive) and John Roscoe (former FHFA chief of staff) promoted to co-presidents, with Hamara taking additional role overseeing single-family and multifamily operations starting November
Compensation Constraints: Congressional salary cap limiting CEO base pay to $600,000 annually complicates permanent CEO search, as current executives earn significantly more through deferred compensation packages
Board Transformation: Latest leadership change follows FHFA Director Bill Pulte’s March dismissal of 14 board members and Freddie Mac CEO Diana Reid as part of comprehensive GSE restructuring ahead of planned public offering.
Strategic Positioning: Akwaboah’s appointment leverages his background as former Morgan Stanley COO of Global Technology, positioning Fannie Mae for operational efficiency during transition period.
FHFA Chairman William J. Pulte praised appointments, stating Akwaboah’s “deep operating background as former Morgan Stanley COO of Global Tech makes him perfect fit for Acting CEO position” 3

FHFA Embeds Builder Expertise Deep Into Fannie Mae Operations

Source: 2

Dual-Role Appointment: Brandon Hamara joins Fannie Mae board while simultaneously serving as Senior VP of Operations for Single-Family and Multifamily, bringing Tri Pointe Homes land strategy expertise directly into GSE leadership with $1.9M compensation package
Production Accountability: FHFA Director Bill Pulte directly challenges builders holding entitled lots, stating “blaming local ordinances is not a solution” and emphasizing GSE liquidity leverage to drive housing production outcomes
Financial Leverage Strategy: Fannie and Freddie provide over $30 billion annually to top homebuilders, with Pulte signaling this capital support will be explicitly tied to production metrics and margin discipline moving forward
Operational Oversight: FHFA conducting individual builder meetings to review pricing strategies, balance-sheet land holdings, and liquidity practices as part of new collaborative but accountable framework
Lennar Benchmark: Pulte highlights Lennar as model builder for lowering margins while maintaining profitability and working through inventory, suggesting this approach may become standard expectation for GSE support

FHLB SYSTEM DEVELOPMENTS

Federal Home Loan Bank of Des Moines initiated 2025 director election on October 22, issuing electronic ballots to all eligible voting members for one independent director seat 11
Members in Alaska, Missouri, South Dakota, and Utah will vote for member directors, with all ballots due by December 2, 2025, at 5 PM CDT 11
FHFA Director Pulte addressed Democratic senators regarding Federal Home Loan Bank reform, telling Senator Cortez Masto that comprehensive review is ongoing 12

GSE PRIVATIZATION DISCUSSIONS

Trump administration considering taking GSEs public as early as end of 2025, with Pulte noting “President Trump is opportunistically evaluating an offering this time around” 3
Potential IPO could value combined entities at approximately $500 billion with over $7 trillion in combined assets on Fannie Mae and Freddie Mac balance sheets, representing one of largest public offerings in history 13
Wall Street banks reportedly scrambling for roles in high-stakes public offering, with timing dependent on market conditions and regulatory approval processes 13

ECONOMIC NEWS

Federal Reserve officials signaled continued rate cuts while economists debated the appropriate pace of monetary easing. The ongoing government shutdown affected data releases and market sentiment, while Treasury officials expressed optimism about inflation trends.

FEDERAL RESERVE POLICY AND OUTLOOK

Governor Michael S. Barr delivered two speeches on October 22 addressing community development finance and financial inclusion, as markets expect 25 basis point cut to 3.75%-4% range at October 28-29 FOMC meeting 6
Economists predict two additional rate cuts by year-end according to Reuters survey, though responses ranged from 2.25%-2.50% to 3.75%-4.00% for where rates would stand by end of next year 14
76% of economists flagged risk that rates could be cut too low, raising concerns about Fed independence amid ongoing political pressure 14
Former Treasury Secretary Lawrence Summers warned MBA convention attendees that Fed may be misjudging economy’s neutral rate, suggesting interest rates could climb instead of decline 14

GOVERNMENT SHUTDOWN IMPACT

Three-week government shutdown continued to affect economic data releases and market sentiment, with investors flocking to bonds amid uncertainty and delayed key economic indicators 1
Data blackout contributed to mortgage rate decline as Treasury yields remain suppressed, providing little guidance for mortgage lenders setting rates 1

INFLATION AND ECONOMIC INDICATORS

Treasury Secretary Scott Bessent expressed optimism about affordability crisis, expecting “CPI numbers start coming down next month, the month after” 15
Bureau of Labor Statistics scheduled to release September Consumer Price Index report on Friday, with surveyed economists expecting 3.1% increase year-over-year 15
Employment data showed cooling labor market with job growth slowing and unemployment hovering near 4%, prompting Fed to begin cutting rates in September 5
Stock markets faced pressure amid earnings reports and renewed U.S.-China trade tensions, with major indexes closing lower on October 22 16
Inflation Pressures Persist: The Personal Consumption Expenditures (PCE) Chain-Type Price Index increased to 2.7% in the 12 months through August in the first rise since June. The Producer Price Index for nonresidential construction inputs rose for the eighth straight month in August 2025, reaching 166.2 as tariffs continue pushing material costs higher 2
Consumer Sentiment Challenges: Consumer Sentiment slipped slightly in October to 55.0, indicating very little recent change despite the ongoing federal government shutdown, but remains significantly lower than one year ago 2

EMPLOYMENT MARKET PRESSURES
Job Openings Decline: Job openings declined across the board in July and the number of unemployed rose. Office-using employment dropped 3.2% from June and 3.0% year over year while other private sector openings fell 1.6% monthly and 2.7% annually 2
Rising Unemployment: Overall unemployment rose 3.2% from June and was 2.0% higher than a year ago, indicating continued labor market softening 2

COMMERCIAL REAL ESTATE MARKETS (INCLUDING MULTIFAMILY)

Major portfolio transactions are driving market activity while multifamily fundamentals show steady improvement. Office markets like Dallas-Fort Worth are showing strong momentum, while industrial sectors face supply pressures. Regional investment patterns favor the Southeast, though institutional allocations are shifting toward other asset classes for the first time in over a decade.

OFFICE MARKETS SHOW REGIONAL STRENGTH

Dallas-Fort Worth “Y’all Street” Momentum: The DFW office market continued gaining traction in Q3, led by major leases and renewals from financial services firms. Trophy and Class A properties dominated activity with asking rents at record highs and availability rates declining 2
Exceptional Rent Growth: Prime Class A effective rents have risen 104% since mid-2020, compared with 44% growth across the rest of Class A and 42% in Class B/C properties. All six Dallas-Fort Worth submarkets/building classes ranked within the top ten nationally for largest spreads between market and in-place rents 2
Financial Services Dominance: The FIRE sector’s share of new leasing activity reached 36.7% year-to-date in 2025, one of the highest levels since 2019, cementing the area’s “Y’all Street” nickname 2

INDUSTRIAL MARKETS FACE SUPPLY PRESSURES

Chicago Cold Storage Struggles: In-place Chicago cold storage rents lag 21% behind the national average ($9.97 for newer facilities versus $9.68 for older ones in Chicago), while the market ranks among those with highest construction activity at 15% of current inventory 2
National Cold Storage Pressures: New supply is outpacing demand, pushing vacancy rates to their highest levels in two decades. While newer facilities command premium rents ($12.65 per square foot nationwide versus $12.23 for older buildings), many modern build-to-suit or speculative warehouses are staying empty longer 2

RETAIL MARKETS SHOW MIXED SIGNALS

South Florida Grocery-Anchored Retail: Despite shrinking lease terms, institutional appetite remains strong. Asana Partners’ recent $62.1 million acquisition of the grocery-anchored Red Bird Center near Coral Gables was strategic due to above-average lease term length in place 2
Lease Term Compression: Average lease term length for grocery-anchored retail fell from 136.5 months in 2020 to 84.2 months in 2025, while non-grocery properties dropped from 123.8 months in 2019 to 69.4 months in 2025. However, grocery-anchored centers maintain lower in-place rents at $24.40 per square foot versus $29.82 for non-grocery-anchored centers
Premium Tenant Performance: The highest-rent grocery-anchored retail transactions in 2025 show notable outperformers, with specialized concepts like Heyday Cookshop and established tenants like PNC Bank achieving starting rents between $45 and $60 per square foot in Publix-anchored centers—more than double the 2025 South Florida average 2

MAJOR PORTFOLIO TRANSACTIONS DRIVE MARKET ACTIVITY

West Shore’s $600M Mega-Deal: Securing financing for 3,241 units across six states through a $550M CMBS note from Citi Real Estate Funding plus $50M mezzanine loan. The package funds $332.9M in acquisitions of 1,496 units and refinances $252.8M of existing debt across five communities 1
Value-Add Success Story: West Shore raised weighted average occupancy from 90.0% to 94.2% while improving net operating income by 54.9% after investing $12M in capital improvements. The entire collection maintains 93.4% occupancy with total appraised value of $785.1M 1
Student Housing Development: Core Spaces and Wexford broke ground on a 30-story, nearly 2,000-bed tower in downtown Tempe, demonstrating continued confidence in specialized multifamily sectors 5

MULTIFAMILY MARKET SHOWS STEADY GROWTH PATTERNS

Rent Growth Stability: 69.4% of U.S. markets experienced rent increases in September 2025, with cities like Syracuse and Akron leading gains while many Sun Belt areas faced declines, highlighting regional divergence amid ongoing inflation pressures 6
Payment Performance Improving: On-time payments at mom-and-pop rentals ticked up to 83.5% in October, signaling slow but steady improvement in the multifamily sector 5
Lease Renewal Trends: Lease renewals are outpacing new leases in both volume and rent growth, helping operators preserve margins in a cooling market 5

REGIONAL INVESTMENT TRENDS FAVOR SOUTHEAST

Southeast Dominance: The region captured 66% of CRE project activity in early 2025, leading the nation in project volume and capital deployment. However, despite this dominance, a notable decline in capital share signals tightening fundraising conditions 7
Complex Investment Landscape: Investor sentiment often diverges from actual capital flows, revealing a market where project activity doesn’t always translate to proportional capital deployment 7

COMMERCIAL FINANCING MARKETS

CMBS issuance is experiencing robust growth while private lenders aggressively fill the void left by retreating banks. The Federal Reserve cut rates for the first time in 2025, though economic pressures from tariffs and inflation persist. Interest rates remain elevated, affecting cap rate dynamics, and institutional investors are reallocating away from real estate for the first time since 2013.

CMBS MARKET EXPERIENCES ROBUST GROWTH

Record-Breaking Issuance: Nearly $92.5B in domestic, private-label CMBS loans originated year-to-date through September, positioned to overtake 2024’s total of $104.1B. If conditions hold, 2025 could conclude with $123B in deals—the largest annual volume since 2007 1
Market Momentum Building: Strong issuance momentum continues as lenders capitalize on improving market conditions and increased transaction activity across commercial real estate sectors 1

PRIVATE LENDING RESHAPES FINANCING LANDSCAPE

Banks Retreat, Private Capital Advances: As banks pull back from CRE lending, private capital steps in aggressively with faster deals, flexible terms, and tighter pricing. This shift provides higher leverage and quicker access to funds even as recovery signs emerge 3
Sales Volume Recovery: Commercial real estate sales rose over 25% in the first half of 2025, with even the struggling office sector seeing $26B in sales—a 42% increase year-over-year 3
Office Sector Stabilization: Office vacancy declined in Q3 for the first time since 2019, as conversions and renewed tenant demand helped lift the sector 3

INTEREST RATE ENVIRONMENT AND CAP RATE DYNAMICS

CBRE Cap Rate Forecast: Cap rates will slowly fall and stabilize at higher levels than in the last cycle due to interest rates remaining elevated compared to pre-pandemic levels. The firm expects cap rates compressing more than exit cap rates as the Federal Reserve cuts rates 8
Valuation Gap Concerns: Private appraisal lag is creating valuation gaps, with the spread between private appraisal cap rates and the 10-year Treasury yield averaging just 32 basis points from Q2 2024 through Q2 2025—an unusually tight margin that doesn’t reflect broader market realities 9

INSTITUTIONAL INVESTMENT ALLOCATION SHIFTS

Historic Allocation Decline: For the first time since 2013, institutional investors trimmed their real estate allocations to 10.7% in 2025, pivoting toward more lucrative sectors like infrastructure and private credit 10
2026 Rebound Expected: Despite the pullback, optimism is rising with expectations for a rebound in 2026, particularly in sectors like housing, logistics, and digital infrastructure 10

COMMERCIAL SERVICING MARKETS

Special servicing rates continue climbing alongside increased CMBS originations, while major banks show confidence in CRE market recovery by reducing credit reserves. Regional banks face challenges from fraud scandals, and the CRE secondaries market gains traction as investors seek liquidity.

SPECIAL SERVICING RATES CONTINUE CLIMBING

Overall Rate Increase: The CMBS special servicing rate reached 10.65% overall in September, up 186 basis points year-over-year, reflecting increased distress as originations rise 1
Multifamily Sector Impact: 8.20% of CMBS multifamily financing loans were in special servicing, a significant increase from just 6.07% last year, indicating sector-specific challenges 1

BANKS REDUCE CREDIT RESERVES AMID RECOVERY SIGNS

Wells Fargo Confidence: Cut its credit loss provision by 30 basis points in Q3, signaling improved outlook for commercial real estate loan performance 3
Bank of America Reserve Reduction: Reduced its CRE reserve to just over $1B from $1.3B, demonstrating confidence in market stabilization 3
Bank OZK Minimal Additions: Added only $14M to its credit loss reserve—the lowest in over three years—and sold its largest foreclosed asset with minimal loss, reducing its criticized loan portfolio by $92M 3

REGIONAL BANK CHALLENGES FROM LANDLORD FRAUD

California Fraud Scandal: MOM CA Investco LLC fraud allegations are sending shockwaves through regional banks, with misleading loan practices leading to significant financial losses 11
Mid-Sized Lender Stability Concerns: As lawsuits unfold and scrutiny of commercial real estate lending intensifies, the fallout raises alarms about the stability of mid-sized lenders in an already precarious market 11

CRE SECONDARIES MARKET GAINS TRACTION

Liquidity Solutions: Real estate secondaries are booming as investors seek cash and general partners use them to extend deals amid tight fundraising conditions 12
Alternative Exit Strategies: More investors are flocking to CRE secondaries for liquidity as traditional exit strategies become more challenging in the current market environment 12

INDUSTRY NEWS

Federal Reserve leadership emphasizes community investment programs, while major real estate companies report strong Q3 earnings. Technology adoption accelerates with blockchain and AI integration, and notable corporate activity includes significant investment commitments and activist campaigns.

FEDERAL RESERVE LEADERSHIP ON COMMUNITY INVESTMENT

Governor Barr’s NMTC Speech: Federal Reserve Governor Michael S. Barr celebrated the 25th anniversary and permanent extension of the New Markets Tax Credit program at the 2025 Fall Conference in New Orleans 4
Underserved Community Focus: Barr emphasized the program’s success in bringing investment to underserved communities, noting “real investment opportunities in lower-income communities” including “affordable real estate, commercial or industrial buildings, and extensive infrastructure that have been underutilized” 4

STRONG Q3 EARNINGS AND PERFORMANCE REPORTS

Baron Real Estate Fund Excellence: Delivered exceptional Q3 2025 performance with 10.25% gains, significantly outperforming the MSCI US REIT Index (4.49%) and broader MSCI USA IMI Extended Real Estate Index (5.65%). Top contributors included Wynn Resorts (up 37.3%), Jones Lang LaSalle, and CRH public limited company 13
KKR Real Estate Finance Trust Results: Reported Q3 2025 GAAP net income of $8M or $0.12 per share, though with a distributable loss of $2M. The firm closed its first real estate credit loan in Europe, secured by a 92.5% occupied portfolio of 12 light industrial assets across Paris 14

TECHNOLOGY AND PRODUCT INNOVATIONS

Union Home Mortgage expanded Non-QM offerings with new Platinum Product Suite launch, introducing bank statement and DSCR loans to enhance flexibility for independent mortgage bankers 17
Sagent partnered with payment security provider to enhance servicing payment security, reflecting industry focus on technological improvements and cybersecurity measures 18
Newfi launched automated bank statement analysis tool to streamline underwriting process for Non-QM loans, addressing growing demand for alternative documentation products 19

CORPORATE EARNINGS AND FINANCIAL RESULTS

CME Group reported strong Q3 2025 results with revenue of $1.5 billion, operating income of $973 million, and net income of $908 million with diluted earnings per share of $2.49 20
NB Bancorp reported Q3 growth with net income of $15.4 million or $0.43 per diluted share, compared to $14.6 million or $0.39 per share in prior quarter, declaring quarterly cash dividend of $0.07 per share 21
QCR Holdings announced record quarterly net income of $36.7 million for Q3, with activity rebounding sharply in low-income housing tax credit (LIHTC) lending business 22

MARKET ANALYSIS AND PROJECTIONS

MBA economists provided 2026 projections at annual convention, revealing how rising unemployment and inflation expectations are reshaping mortgage landscape with more cautious outlook on loan originations 23
Mortgage brokers positioned to capture increased market share as lenders expand product suites to include Non-QM and alternative options, with brokers proving essential in connecting borrowers with specialized lending institutions 24