June 9th, 2025
Labor Market & Economic Update: May 2025
Healthcare and Hospitality Drive Job Gains
The U.S. added 139,000 jobs in May, beating expectations. Healthcare led with +62,000 jobs, hospitality followed with +48,000 as tourism ramps up. Social assistance jobs rose by 16,000; federal government jobs declined by 22,000 due to agency cuts.
Unemployment rate held steady at 4.2%. Hiring pace continues to slow compared to last year but remains above the breakeven level needed to stabilize unemployment.
Tariff Impact and Fed Outlook
Labor market shows only partial drag from ongoing trade tariffs despite business pessimism. Forecasts indicate the Fed likely won’t cut rates until December 2025 as inflation and tariff impacts are assessed. Next consumer inflation data due June 11; Fed meets June 17-18.
Housing Market: Mortgage Rates & Sales Outlook
30-year fixed mortgage rates declined slightly to 6.85%, down from 6.99% a year ago. The National Association of Realtors projects existing home sales to rise 6% in 2025 and 11% in 2026, aided by easing mortgage rates. However, market recovery remains slow due to Fed’s extended pause on interest rate cuts. Steady job growth in healthcare and hospitality supports regional housing demand, particularly in rental markets near major medical and tourism hubs. Corporate workforce realignments reflect cautious business sentiment but do not yet indicate broad economic slowdown.
🏢 Capital Moves: Fannie Mae & Freddie Mac Turn Competitive to Capture Multifamily Deal Flow
Fannie Mae and Freddie Mac are turning more aggressive in the multifamily lending space — and that could mean more favorable financing terms and greater liquidity for deals in 2025.
Both agencies are zeroing in on their $73 billion multifamily loan purchase caps, and insiders suggest they’re willing to adjust program features and underwriting to hit those targets. The Federal Housing Finance Agency (FHFA) may even raise the caps if demand continues at its current pace.
Why the push? Besides competitive pressure and rising deal flow, there’s political momentum building again around privatizing the GSEs, which could increase the agencies’ incentive to grow market share and boost their valuation ahead of a potential public offering.
📊 Deal Volume Up, Especially at Fannie Mae
Fannie Mae is off to a strong start, with $22.85 billion in loan purchases through May, a 47% jump over last year. Freddie Mac’s pace is flatter year-over-year, but both have full pipelines heading into summer, thanks in part to April’s brief Treasury yield dip below 4%, which spurred a surge of rate-sensitive transactions. For investors, this means now may be a prime time to lock in agency debt — especially if you’re navigating rising refinancing needs, capex-heavy repositioning projects, or seeking leverage for new acquisitions.
💸 Agencies Sharpen Terms: What’s New for Investors
To stay competitive, both Fannie and Freddie have made key program changes that can increase proceeds and improve deal economics — particularly useful in today’s constrained capital environment.
Freddie Mac eliminated the SOFR pay-rate test on floating-rate loans, allowing for higher proceeds. The trade-off? A slightly higher minimum DSCR tied to the strike rate of the interest-rate cap.
Fannie Mae now formally allows 35-year amortization on select low-leverage loans for larger portfolio borrowers — reducing debt service and freeing up cash flow.
Freddie has also relaxed credit standards on 10-year loans, while Fannie has eased requirements on near-stabilization assets, making agency capital more accessible for value-add or transitional deals.
These shifts may seem minor, but collectively they mark a strategic pivot: the GSEs are more flexible, more responsive, and more willing to stretch on structure than they were in 2024.
📉 Secondary Market Support = Tighter Spreads
Another benefit for investors: agency pricing remains highly competitive due to strong secondary market appetite. Despite recent noise out of Washington — including privatization chatter and ratings pressure — investors are still snapping up agency paper. Spreads are near year-to-date lows, keeping agency execution sharp.
🧭 Investor Takeaways
If you’re active in multifamily — especially in the $10M–$100M range — now may be the best window in months to access long-term, fixed or floating-rate financing on attractive terms through Fannie or Freddie. Here’s what to consider:
Evaluate refinancing earlier: If you have debt maturing in 2025 or 2026, the current agency appetite and pricing may make early execution worthwhile.
Explore 35-year amortization (Fannie) for long-hold, low-leverage strategies.
Use floating-rate options (Freddie) to enhance proceeds on deals with solid DSCR projections and rate caps in place.
Target near-stabilization deals that may now qualify for agency execution, offering a cheaper alternative to debt funds or bridge lenders.
Bottom Line for Investors:
The agencies are open for business — more so than they’ve been in years. Whether you’re looking to refinance, buy, or recapitalize, Fannie and Freddie are ready to compete for your next deal. In a market where every basis point counts, agency debt could be the key to unlocking better returns and improved capital stack efficiency.
One Click for Pricing Guidance on Fannie/Freddie/HUD
📢 High-Yield Lending Surges as Subordinate Capital Becomes Critical in CRE Financing
High-yield lenders are seeing a banner year in 2025, with subordinate debt and preferred equity playing a central role in keeping commercial real estate (CRE) transactions afloat. Amid tighter credit conditions and looming loan maturities, borrowers are increasingly relying on mezzanine financing and other forms of subordinate capital to refinance debt-heavy properties and close acquisition deals.
📈 A Growing Market with Bullish Outlooks
The number of participating lenders continues to rise, with roughly a dozen new entrants added annually over the past four years. Leading the charge is JPMorgan Chase, which anticipates $3 billion in originations this year. Blackstone follows closely behind with a $2–3 billion forecast. Other major players include Kayne Anderson Real Estate ($2.5 billion), Nuveen Real Estate ($2 billion), Wells Fargo ($1.6–2 billion), and Affinius Capital ($1.5 billion). Several other firms — including Madison Realty Capital, Deutsche Bank, and BlackRock — are targeting lending volumes in the $1–2 billion range.
💼 Why the Surge in Subordinate Financing?
The surge in demand is rooted in persistent volatility in the financial markets. Higher interest rates, lower CRE valuations, and stricter senior lending terms have pushed borrowers to seek alternative sources of capital. With traditional senior loans covering less of a property’s value, subordinate financing fills the gap — especially for borrowers looking to avoid diluting their equity or selling assets prematurely.
🔎 Still, Caution Remains
Despite the upbeat forecasts, not everyone sees subordinate debt as a silver bullet. Layering high interest rate mezzanine loans on top of senior debt can make recapitalizing down the line difficult. In such cases, an outright sale or a further recapitalization may be the only practical solution. Lenders also stress that strong fundamentals — such as quality assets in solid markets with long-term upside — remain essential for securing subordinate capital.
🔚 Bottom Line
As a wave of CRE loans comes due, and senior lenders remain cautious, the role of high-yield and subordinate lenders has never been more pivotal. While risks remain, especially with interest rates still elevated, 2025 is shaping up to be a landmark year for mezzanine lenders — as long as borrowers and lenders alike stay grounded in asset fundamentals and disciplined deal structures.
One Click for Pricing Guidance on Mezz/Debt Fund/CMBS
📍 Market Focus: Seattle Metro Office – Eastside Tightens While City Core Starts to Stabilize
Despite well-publicized space givebacks by major tenants like Microsoft, Seattle’s Eastside office market remains significantly healthier than Seattle proper, especially among newer, top-tier properties. For real estate investors and developers, this divergence highlights a shifting but still active leasing environment — with signs of recovery stirring within the urban core.
🔑 Key Highlights: Eastside vs. Seattle Office Trends 🏢 Modern Class A Inventory (Built 2020+)
Eastside Availability:
Just 5.5% available — and <3% if you exclude under-construction assets.
Seattle Proper Availability:
A steep 37% of this same vintage is available — a clear oversupply in the urban core.
💡 Investor Insight:
The flight to quality remains dominant on the Eastside, with limited modern supply and steady leasing velocity. Newer assets here are functionally fully leased, driving demand to older Class A buildings.
🏢 Older Class A Inventory (Pre-2020)
Seattle Proper: 27% availability
Eastside: Slightly higher at 32%, though plateauing over the past year
In contrast, Seattle’s older stock availability continues to rise.
💡 Investor Insight:
With modern space largely absorbed, tenants are now eyeing older top-tier options on the Eastside — as seen with continued backfilling of vacated Microsoft space in Bellevue.
📈 Microsoft’s Consolidation: Pressure & Opportunity
Microsoft has vacated ~2M SF in the Eastside over the past few years, consolidating to its Redmond campus.
However, key blocks are quickly leasing up — e.g., TikTok’s 300,000 SF lease in Lincoln Square North.
💡 Investor Insight:
While a major source of short-term vacancy, Microsoft's exits have also created opportunity for new entrants and reset pricing in trophy assets.
📊 Eastside by the Numbers
Total availability (all 4- & 5-star properties): ~3.2M SF
Represents ~15% of total inventory
Downtown Bellevue remains the epicenter of leasing activity, with strong demand absorption
💡 Investor Insight:
Trophy locations with amenities, walkability, and transit access continue to outperform — supporting Eastside’s long-term value thesis.
🔄 Signs of Recovery in Seattle Proper
While Seattle’s overall availability remains elevated, some submarkets show improvement:
Downtown Seattle and Lake Union have seen an uptick in leasing activity
Share of regional leasing in these neighborhoods has increased over the past two years
💡 Investor Insight: While recovery is early and uneven, renewed activity in Seattle’s core could signal a turning point, especially as pricing softens and tenants seek flexibility.
Atlanta’s Built-to-Rent Market Surges Amid Housing Affordability Challenges
Population growth and rising home prices have fueled a major increase in built-to-rent (BTR) townhouses and single-family rental homes in Atlanta, a trend reshaping suburban rental housing.
📈 Key Market Stats:
Built-to-Rent Growth:
Increased 327% since 2015
Total multifamily units up only 34% in the same period
Current Market Share:
BTR accounts for 3.3% of multifamily rentals (vs. 1% in 2015)
Housing Affordability:
Atlanta home prices have doubled since 2015
First-time homebuyers dropped to historic lows (24%), with the average buyer now 38 years old
🏘️ Why Built-to-Rent?
Offers single-family home space and amenities without ownership commitment. Combines multifamily management benefits like community events and on-demand maintenance. Caters to renters seeking more space and suburban lifestyles amid tight ownership market
💡 Investor Insights:
RangeWater’s The Mabry in Lawrenceville exemplifies the trend, offering 3- and 4-bedroom townhouses and single-family homes with rents around $3,000/month.
National investors are actively acquiring BTR portfolios, as seen in Greystar’s $125.8M purchase of nearly 400 units across Gwinnett and Paulding counties at an average of $317K/unit.
BTR units tend to be larger than typical multifamily rentals, supporting higher per-unit prices and attracting institutional capital.
🌍 Development Hot Spots:
Growth centers are in suburban/exurban areas with space for neighborhood-style construction
Counties with notable BTR expansion: Gwinnett, Bartow, and Cherokee
Since 2023, about 10,500 new built-to-rent units have been added in Atlanta
🔑 Takeaway for Investors:
Atlanta’s BTR market is poised for continued growth as homeownership remains out of reach for many, and demand for quality rental housing surges. Suburban and exurban neighborhoods with room to build offer prime opportunities for acquisition, development, and repositioning. Larger unit sizes and strong rental demand provide favorable fundamentals for both cash flow and long-term appreciation.
One Click for Pricing Guidance on BTR Developments
California Housing Development Update: LA & San Francisco
Development Bottlenecks Despite Strong Demand
A newly approved 489-unit apartment near LAX took 3 years to get greenlit, highlighting California’s lengthy, complex approval process. Los Angeles and San Francisco are significantly underperforming on state-mandated housing targets:
LA approved only 17,200 units in 2024, about 30% of its annual goal.
San Francisco permitted a mere 1,074 units, the lowest since the Great Recession, hitting just 9% of its 8-year target.
Both cities face a growing housing shortage amid soaring rents:
LA average rents are 30% above the national average ($2,330/month).
San Francisco rents average $3,280/month, more than double the national average.
Barriers to Building: Costs & Red Tape
High construction costs and slow, unpredictable permitting timelines severely hinder projects, despite streamlined state laws like SB 423.
Local political resistance and bureaucratic inertia further slow approvals—projects often default to discretionary reviews that drag out timelines.
LA multifamily projects average nearly 4 years from start to finish, with 1.5 years just in approvals.
Recent local measures (e.g., LA’s mansion tax) have further dampened multifamily development by nearly 18%.
Policy & Market Responses
LA Mayor Karen Bass has pledged reforms including self-certification, AI review, fee waivers, and faster permitting for 100% affordable housing projects. San Francisco is pushing aggressive zoning changes, tax cuts for office-to-residential conversions, and embracing state streamlining laws to ease construction. Both cities remain far behind pace, but projects like San Francisco’s 88 Bluxome (1,500 homes) show policy can unlock stalled development.
Investor Takeaways
Demand and rents remain robust, especially for multifamily and affordable housing, but development risks and timelines are prolonged in California’s largest markets. Streamlined laws help but real progress needs deeper changes in local politics and bureaucratic culture. Opportunities exist in areas benefiting from zoning reform and state incentives, especially for mixed-income and affordable projects. Investors should factor in longer hold periods and regulatory risk while monitoring ongoing local reforms.
Updated Positive HUD Guidance
FHA has lifted prior limitations on refinancing newly constructed properties under the Section 223(f) program, notably those consisting of single-family homes or predominantly small-scale (≤5 units) buildings. The 2021 guidance restricting such applications has been rescinded, and while new regulatory direction is pending, deals will be evaluated individually for eligibility. In parallel,
FHA is prioritizing streamlining environmental review requirements—specifically addressing radon protocols in light of FHFA’s updates and aligning with the Federal Flood Risk Management Standard—to help reduce costs and delays in multifamily loan processing.
There is a push to change Davis Bacon requirements which would be a win for FHA lenders and borrowers as it would reduce projects costs and streamline the building process.
News and Notable Reports
