June 1st, 2025
📊 Market & Economic Snapshot: New Home Sales, Travel, and Employment
New Home Sales See Uptick Amid Volatility
April’s new single-family home sales rose 10.9% month-over-month and 3.3% year-over-year, hitting a seasonally adjusted annual rate of 743,000 units. This offers a positive signal to homebuilders after stagnant existing home sales. Median new home price declined to $407,200, marking the fourth consecutive year-over-year decrease. Despite the gain, homebuilder sentiment dropped sharply in May amid rising tariffs, interest rates, and construction costs. Existing home sales fell 0.5% from March and 2% year-over-year, with rising inventory expected to pressure prices and sales in the coming months.
International Travel Slows, Impacted by Tariffs and Border Issues
Global concerns over U.S. tariff policies and border crossing challenges are cooling inbound international travel. Forecasted inbound visits to the U.S. will decline by 8.7% in 2025, a slight improvement from earlier predictions. Sharpest declines expected from Canada (-20.2%) and Western Europe (-5.8%). Visitor spending projected to drop by $8.5 billion (-4.7%) compared to 2024.
Jobless Claims Decline Amid Mixed Signals
Initial unemployment claims edged down to 227,000 for the week ending May 17, continuing a trend of fluctuation between 200,000 and 250,000 claims over the past year. The job market remains historically stable despite increased corporate and federal layoffs. Federal workforce reductions have paused temporarily due to a court ruling, but layoffs may accelerate in the near term.
We are closely watching the major tax bill backed by former President Donald Trump as it moves to the Senate. The version that narrowly passed the House on May 22 is largely seen as a positive for the commercial real estate industry, with provisions that could support both acquisitions and financing activity. There is also concern that the expansive tax bill could add $3 trillion in new debt. The range in the 10Y-UST has expanded from 3.8%-4.8%.
Key Takeaways for CRE from Tax Bill
Potential Relief: A feared cap on business deductions for state and local taxes (corporate SALT) was excluded. Industry leaders warned that such a cap could have severely impacted debt servicing, possibly triggering defaults and stress in capital markets.
1031 Like-Kind Exchanges would remain in place, letting investors defer capital gains taxes on reinvested property sales.
Section 199A would be made permanent, increasing the pass-through income deduction from 20% to 23%.
Opportunity Zones would be extended to 2033.
The Low-Income Housing Tax Credit would be expanded, encouraging new projects and potentially increasing loan demand.
Caution Ahead:
While the House bill favors CRE, experts caution that significant changes may occur in the Senate. Industry leaders remain vigilant, especially regarding corporate SALT deduction caps, which could resurface.
Moody’s Downgrade:
Moody’s stripped the U.S. of its last remaining AAA credit rating, citing persistent deficit growth and lack of fiscal reform. This completes the downgrade from major rating agencies, with S&P and Fitch having already acted in 2011 and 2023, respectively. Hong Kong investors face regulatory limits on U.S. Treasury holdings tied to AAA-rated sovereign debt. An exception is now being sought.
GSE Privatization Back in Focus
President Trump hinted at reviving plans to take Fannie Mae and Freddie Mac public. While not unexpected, the announcement reintroduces uncertainty into the MBS market. Privatization could strip the agencies of their implicit government backing, which may trigger credit rating downgrades for agency MBS.
🌆 Seattle Metro Sees Strong, Balanced Population Growth
Seattle added nearly 17,000 residents last year—a 2.2% increase—making it the fourth-fastest-growing large U.S. city. While Seattle led in total growth, smaller nearby cities like Sultan and Duvall posted the highest percentage gains, with 7% and 6% increases, respectively.
Suburban expansion is accelerating, especially in areas linked to new light rail stations such as Shoreline and Mountlake Terrace. These transit-oriented suburbs are seeing rapid development and strong housing demand, despite short-term increases in vacancy due to new construction.
Since 2020, outlying towns like Black Diamond and Sultan have grown dramatically, while Seattle’s overall population rose 5.5%. Meanwhile, central neighborhoods like Capitol Hill and downtown Seattle continue to see strong apartment occupancy growth, signaling a resilient urban core amid changing work patterns.
No city in the Puget Sound region lost population in the past year, indicating broad-based regional growth supported by both urban vibrancy and suburban development.
📉 Puget Sound Job Growth Slows in Early 2025
After rebounding in 2024, the Puget Sound region entered 2025 with slower job growth, posting a 0.7% year-over-year increase in April—below the national average of 1.2%, per preliminary Bureau of Labor Statistics data.
This marks the weakest April job growth since the Great Recession, aside from 2020.
Key Trends:
Total jobs added: +32,900 year-over-year
Downward trend: Growth is slowing from 47,100 jobs added in December 2024
Biggest job losses:
Construction: -6.4% (-8,000 jobs)
Manufacturing: -3.7% (-6,300 jobs), largely due to Boeing layoffs
Bright spot: Education and health sector grew by 4.2% (+12,800 jobs)
Between December 2024 and April 2025, the region lost 24,700 jobs—its second-worst seasonal drop since 2009. Although seasonal patterns are partly to blame, the data points to weaker momentum in the labor market.
Despite Seattle's strong GDP growth, job gains have not kept pace. Average annual job growth this decade stands at 0.6%, down from just over 2% in the 2010s.
Implications: Sluggish employment—particularly in construction and manufacturing—could reduce demand for commercial and industrial real estate, a concern as industrial occupancy begins recovering from historic lows.
🏙️ Texas Leads 2024 Population Growth as Major Cities Nationwide Rebound
Newly released U.S. Census Bureau data reveals strong population gains across American cities in 2024, with Texas cities dominating both in volume and growth rate.
National Highlights:
Large cities bounced back, particularly in the Northeast, where cities over 50,000 residents saw an average growth rate of 1.0%—a fivefold increase from 2023.
New York City topped all U.S. cities, adding 87,000+ residents, driven by international migration and improved economic conditions.
International migration surged to 2.7 million nationwide, up from 2.2 million the year prior.
Texas: A Standout in Growth
Houston added 43,000+ residents, ranking second nationally. Strong job creation, a diversified economy, and affordability continue to drive growth.
San Antonio ranked fourth with a gain of nearly 24,000 residents. Analysts cite strong local appeal and migration from smaller Texas markets.
Princeton, TX (near Dallas) saw the highest percentage gain in the U.S. at 30.6%, while Fulshear, TX (outside Houston) followed with 26.9%.
Population Growth by City Size (2024):
<5,000 residents: +0.3%
5,000–9,999: +1.0%
10,000–49,999: +1.1%
50,000+: +1.0%
Minimal Population Decline Nationwide
Cities like Memphis, St. Louis, and New Orleans saw modest population losses in 2024, but the combined decline across these three cities was fewer than 10,000 residents.
