August 11th, 2025

📊 Real Estate Market Outlook: Key Takeaways for Investors

 Despite ongoing macroeconomic uncertainty, CBRE projects a 10% increase in U.S. commercial real estate investment activity in 2025 — signaling renewed confidence across key property sectors.

 🏘️ Multifamily: Rent Recovery Underway

 Rents have likely bottomed, with the Midwest and Pacific Northwest expected to lead in rent growth over the next 12 months. Investors may find value in stabilized assets with room for upside.

🏢 Office: Stabilization in Progress

 CBRE believes the office sector has moved past its bottom, with leasing activity expected to gradually recover. While challenges remain, especially in older assets, demand is stabilizing in quality, well-located buildings.

📦 Industrial & Logistics: Steady Demand

Leasing volumes are expected to match 2024 levels, as occupiers continue seeking modern, strategically located facilities near consumer hubs. Urban logistics remains a focal point for growth and investor attention.

🛍️ Retail: Limited Space, High Demand

Retail availability will stay tight, thanks to a decade of limited new development. Retailers are showing strong preference for high-traffic, open-air centers in growth markets — especially those with strong demographic trends.

🖥️ Data Centers & Credit Markets: Niche Opportunities

CBRE highlights data centers and credit-driven investments (e.g., debt strategies, distressed opportunities) as areas where agile investors could find attractive risk-adjusted returns in 2025.

 🏗️ Multifamily Builder Confidence Rises, But Challenges Persist

Confidence among multifamily builders has improved, according to the National Association of Home Builders (NAHB). The Multifamily Production Index rose to 46 in Q2, a slight gain over last year. The increase is partly driven by new federal support for affordable housing. However, challenges like high interest rates, rising construction costs, and limited land availability persist. Confidence in subsidized housing has notably strengthened due to expanded federal funding under recent legislation.

🏠 Fannie Mae & Freddie Mac IPO Could Raise $30B

There’s speculation that Fannie Mae and Freddie Mac could go public as early as this year, potentially raising $30 billion in an IPO. The government plans to sell 5% to 15% of its stake in the agencies, which could be valued at $500 billion combined. This move follows recent legislation aimed at expanding resources for affordable housing development through LIHTC programs. Investors should watch for updates as these changes could impact the broader housing finance landscape.

💵 Inflation Expectations on the Rise

Consumer expectations for future inflation have edged up, with the Federal Reserve Bank of New York reporting a median inflation expectation of 3.1% for the next year, up from 3% in the previous survey. Import tariffs, set to affect over 60 countries, are expected to raise consumer prices soon. Despite these concerns, many respondents remain optimistic about their household finances, which could signal potential shifts in consumer behavior.

🚨 Freddie Mac Nudges Borrowers Toward Longer-Term Debt

Freddie Mac is dialing up pressure on borrowers to shift away from the increasingly popular five-year, interest-only loans — a financing tool widely used in recent years — in favor of longer-term structures. As of July 31, the agency implemented another round of changes to its refinancing test, further reducing the proceeds borrowers can access when using shorter-term debt structures. This marks at least the second policy tweak this year, as Freddie steers more activity toward seven- and 10-year loans — the backbone of its highly liquid K-Deal platform.

📉 What Changed?

While the specific assumptions in the refi test weren’t disclosed, the effect was immediate:

Borrowers scrambled to close deals ahead of the deadline. Some extended loan terms. Others sought alternative capital sources.

🔍 What Is the Refi Test?

Freddie Mac’s refinancing test estimates whether a borrower will be able to refinance at maturity. It models:

1. Future property value

2. Interest rate projections

3. Rental income growth assumptions

Longer-term loans typically perform better under this test, as there's more time for rental income to appreciate — offsetting the risk of tighter lending conditions or rate hikes down the line.

💡 Investor Takeaway

Freddie Mac’s push is clear: drive more volume into longer-dated paper to stabilize future refi risk and bolster K-Deal liquidity. For investors and borrowers alike, this means:

 Short-term, interest-only loans may face tighter economics going forward

 7- and 10-year loans could offer more favorable treatment in underwriting

🏡 Affordable Housing Alert – FHFA Doubles GSE LIHTC Cap to $4B Annually

💰 Major Capital Boost for LIHTC: $4B Inflow from Fannie & Freddie

In a significant policy shift aimed at strengthening the affordable housing market, the Federal Housing Finance Agency (FHFA) has doubled the amount that Fannie Mae and Freddie Mac can invest in Low-Income Housing Tax Credit (LIHTC) properties — raising the cap to $2 billion each per year, for a total of $4 billion annually.

🔧 What’s LIHTC?

The LIHTC program is the federal government’s leading tool for incentivizing affordable rental housing development. It offers tax credits to developers who set aside units for low-income households. Allocations are made to states based on population — currently $3 per capita, with a 12% permanent increase in allocation authority starting next year, thanks to the One Big Beautiful Bill.

🏘️ Targeting Underserved Areas

The FHFA expansion includes a mandate that:

$2 billion total (across both GSEs) must flow to underserved markets

At least $400 million must support rural housing efforts

"Rural areas often face financing gaps due to lower volumes and smaller deal sizes,” said David Lipsetz of the Housing Assistance Council (HAC).

HAC applauded the move, noting that 20% of Americans live in rural areas, yet these communities often struggle to access fair LIHTC equity pricing.

🧾 Market Impact & Participation to Date

Fannie Mae has invested $4.7 billion in LIHTC equity since its return to the space in 2018. It currently partners with 15 syndicators, including five nonprofit equity funds.

Freddie Mac closed 2024 with $4.3 billion in LIHTC investments.

The LIHTC database, maintained by HUD, currently tracks over 54,000 projects and 3.7 million housing units developed between 1987 and 2023. 2024 data will be available in spring 2026.

🧠 Investor Takeaway:

This policy expansion represents a major capital injection into the affordable housing ecosystem — particularly for rural markets and underserved areas. For developers and investors:

LIHTC deals may become more competitive as capital availability increases.

New partnerships with Fannie and Freddie could offer expanded financing pathways.

The shift may accelerate deal flow ahead of the 2026 allocation update. 

🚨 CMBS Market Heating Up – No Summer Slowdown in Sight

The commercial mortgage-backed securities (CMBS) market is defying seasonal trends, with over $13 billion in new deals expected to price before Labor Day. Amid strong borrower demand and a favorable rate environment, issuers are accelerating timelines, signaling a potential break from the industry’s usual late-summer lull.

What’s Driving the Momentum?

At least three conduit deals and six+ single-borrower transactions are in the near-term pipeline.

Lenders and borrowers are racing to lock in terms ahead of a potential Fed rate cut in September.

10-year Treasury yields have dipped 20 basis points to 4.22% (As of writing, 4.26%), making debt markets more attractive.

Traditional portfolio lenders — including banks and insurers — have pulled back, reducing competition for CMBS originators.

💡 Investor Takeaways:

Short-term CMBS activity is high, but late-summer bottlenecks remain a risk.

Look for issuance to surge again in the fall, especially if rate cuts materialize.

CRE CLO spreads must tighten to remain competitive in a market flush with capital.

Keep an eye on private and single-borrower transactions, which are moving faster than ever.

🔍 Mortgage Delinquencies Edge Up in June

Delinquencies ticked upward across most categories of securitized residential mortgage loans during the June collection period, according to the latest data from KBRA.

📈 Key Delinquency Movements:

Prime Loans (30–59 days past due):
Rose 6 basis points (bps) to 0.41%

Nonprime Loans (30–59 days past due):
Up 7 bps to 2.35%

Prime Loans (60–89 days past due):
Slight increase of 1 bp to 0.11%

Nonprime Loans (60–89 days past due):
Unchanged at 0.97%

Despite the uptick in early-stage delinquencies, annualized net losses remain minimal across both prime and nonprime loan segments.

🔄 Prepayment Activity Slows

Constant prepayment rates (CPR) took a hit in both sectors:

Prime Loans: Dropped 119 bps to 7.64%

Nonprime Loans: Fell 48 bps to 13.47%

This signals a potential cooling in refinancing or selling activity.

Annualized Net Losses:
Remain well under 1%

🧠 Investor Insight:

While overall loan performance remains healthy, the subtle rise in early delinquencies suggests investors should monitor for signs of softening borrower performance — particularly in the nonprime and CRT segments. Slower prepayment speeds may also point to less turnover in mortgage portfolios, which could affect cash flow modeling.