June 16th, 2025
📈 Lending Market Reopens with Competitive Tailwinds
Despite market turbulence earlier this year — including a >20% S&P drop and a temporary CMBS freeze during April’s tariff shock — real estate lending is showing remarkable resilience. Loan brokers reported record placement activity during the volatility, particularly among balance sheet lenders, signaling growing confidence in real estate credit's relative value.
Loan spread volatility has calmed, providing borrowers more rate certainty. Loan demand remains muted compared to 2021–22 highs due to base rate instability. Borrowers increasingly favor floating-rate or short-term fixed debt (3–5 years), pushing traditional lenders (insurance firms, CMBS originators) into shorter-duration products. This convergence of loan offerings has made lending markets more liquid for borrowers and more competitive for lenders. Borrowers are actively seeking dual quotes — one for CMBS, another as a balance sheet backstop — with portfolio lenders gaining share as certainty of execution becomes a premium feature.
🏘️ Multifamily: Still the Darling, But Fiercely Competitive
All lender groups — banks, debt funds, insurers, CMBS shops, and GSEs — are actively chasing multifamily. GSEs (Fannie & Freddie) are poised to hit their $73B origination cap for the first time since 2022. Looser credit standards, longer amortization, and reduced occupancy hurdles are driving this momentum. Apartment loans now offer lowest spreads and most aggressive bidding, particularly on smaller deal sizes.
🧮 Debt Funds: Bridge-to-Bridge and CLOs Drive Growth
Bridge-to-bridge loans are booming, as asset sales stall and modified/extended debt comes due. The new wave of originations includes more stabilized, cash-flowing assets, shifting away from "story" deals. CLO issuance has accelerated, fueled by: Tighter spreads, High advance rates, Improved credit profiles of loans
📌 Key Takeaways:
Real estate debt markets are wide open, but structure and duration preferences have shifted. Borrowers are being strategic, and lenders are adapting — making for a highly competitive yet disciplined market. While capital is abundant, volatility in base rates and macro uncertainty still limit full-scale recovery in long-term fixed-rate demand. Multifamily continues to lead—but with tight pricing and lender crowding.
🏛️ GSE Watch
Leadership Shuffle Clouds Fannie & Freddie Privatization Plans
The Trump administration’s latest effort to privatize Fannie Mae and Freddie Mac has taken another turn, with Jeff Wrase, a Capitol Hill veteran and economist, reportedly assuming a lead role in the initiative. The shift adds to the growing uncertainty surrounding the government's long-standing conservatorship of the two mortgage finance giants.
Jeff Wrase, a seasoned economic adviser recently appointed as special assistant to the National Economic Council, is now seen by insiders as the administration’s “point person” for GSE reform. Wrase brings deep institutional knowledge, having served as chief economist for multiple congressional committees and as an economist at the Federal Reserve Bank of Philadelphia.
💬 Mixed Messaging from the Top
The move follows a May 22 Truth Social post by President Trump hinting at serious consideration of an IPO for Fannie and Freddie, echoing a plan once spearheaded by Mark Calabria, the former FHFA director. However, current FHFA head Bill Pulte has recently suggested that the GSEs may remain under federal oversight, creating mixed signals and industry confusion.
🏗️ Calabria Still in the Picture
Though no longer at FHFA, Mark Calabria remains involved from his new post at the Office of Management and Budget, where he oversees Treasury, Housing, and Commerce. Known for his hardline stance on winding down federal involvement in housing finance, Calabria previously attempted a $200B+ recapitalization plan to prepare Fannie and Freddie for exit, but was removed under President Biden.
⚠️ Industry Implications
The lack of policy clarity — particularly regarding the government guarantee behind GSE mortgages — is creating hesitation among lenders and investors. While Trump has affirmed that the guarantee would remain in place, Calabria’s ongoing role raises questions, given his public opposition to such a guarantee.
📌 Bottom Line:
The Trump administration appears to be reigniting its push to move Fannie and Freddie out of conservatorship, but leadership changes and conflicting messages have left stakeholders unclear on both the strategy and the endgame. With Wrase now at the helm and both Pulte and Calabria in orbit, the market is watching closely for signs of whether this effort will result in a serious move toward privatization — or remain just political theater.
One Click for Pricing Guidance on Fannie/Freddie/HUD
🔍 Immigration-Fueled Apartment Demand at Risk in Key Gateway Markets
International immigration has been a critical driver of apartment demand in major U.S. metros since 2020, accounting for more than 80% of population growth in cities like South Florida, Dallas-Fort Worth, Los Angeles, and Orange County. However, Oxford Economics now projects a slowdown in immigration, posing new risks to rental markets that have leaned heavily on foreign-born demand.
🌴 South Florida
Immigration = Lifeline for Rent Demand. Since 2020, 90%+ of population growth stemmed from international migration. Renter demand is projected to drop 30% in 2026, with further declines through 2028. Labor force growth is slowing, signaling a pullback in working-age immigration. Despite strong historical performance, lease-up periods are lengthening for new luxury units. High construction pipeline (17% of Class A stock) risks oversaturating the market, especially in Miami and Fort Lauderdale.
⚠️ Watch for: Extended concessions and slower rent recovery in high-supply urban submarkets.
🏗️ Dallas–Fort Worth
Strong Past Growth, Suburban Risk Ahead. Foreign-born residents accounted for 90%+ of DFW’s growth since 2020. Dallas County has seen stagnant immigrant growth (+1.7%), while overall population rose 9.2%. Suburban counties (Collin, Denton) captured the bulk of new residents but face supply pressure as builders flooded markets like Frisco and Allen/McKinney. Luxury inventory additions have moderated, dropping from 12.4% (2023 peak) to 3.7% today.
⚠️ Watch for: Demand softening in overbuilt suburban submarkets despite resilient fundamentals.
☀️ Orange County
Quiet Demand, Elevated Risk for Lower-End Stock. Immigration helped reverse population losses in 2024, but future gains may slow. Class A product remains tight, with new supply increasing stock by just 8%. Vacancy among mid- and low-end apartments is rising, particularly in Santa Ana, Garden Grove, and Westminster — areas with high foreign-born populations.
⚠️ Watch for: Soft performance in Class B/C assets as occupancy slides and rent growth underperforms.
🎥 Los Angeles
Emerging Recovery, But Still Below Pre-COVID Levels LA’s population turned positive in 2024, aided by foreign immigration, yet still 2.4% below 2020 levels due to earlier outflows. Class A vacancy = 6.5%, with 10% new supply underway. Rent growth remains muted (<1% YoY), continuing to lag inflation. Fires briefly tightened supply, but a moderation in immigration could disrupt the nascent recovery.
⚠️ Watch for: Rent stagnation if demand doesn’t keep pace with new luxury deliveries.
📌 Takeaway
Foreign-born populations have outsized influence on apartment demand, with over 60% renting, compared to just 33% of native-born households. As immigration moderates, Class B/C assets in immigrant-heavy submarkets may see the greatest impact, while lease-ups and pricing power in new luxury developments could also be tested. Investors and developers should brace for uneven market shifts and focus on submarket-level fundamentals — especially in metros where immigration has propped up net demand.
📍 Seattle Multifamily Market Update
🏙️ Demand Surges as Construction Slows: Rent Growth Poised to Accelerate
Seattle’s apartment market is regaining its stride, with trailing 12-month absorption topping 12,000 units — the strongest pace of leasing activity in three years and well above the pre-pandemic norm. While down from the post-pandemic peak of over 16,000 units, this level of demand marks one of the region’s highest on record.
📈 Net Demand Doubles
Absorption has doubled since bottoming out two years ago. For context, annual demand averaged fewer than 10,000 units between 2015 and 2019.
🌍 Population Drivers: Immigration Offsets Domestic Losses
The Seattle metro area added approximately 163,000 international migrants since 2020, even as it lost nearly 100,000 domestic residents.
The tech sector remains a magnet for talent, particularly from abroad. Information sector employment rose 2.4% year-over-year, reversing losses from the 2022–2023 wave of tech layoffs.
🏗️ Supply Side Response: Construction Cut in Half
New development has slowed dramatically, with 50% fewer units under construction compared to two years ago. As a result, supply and demand are finally nearing equilibrium, helping to stabilize vacancy rates around 7.3% in late 2024 — with signs of further tightening emerging in 2025.
💸 What It Means for Rents
Expect rent growth to accelerate, particularly in high-demand, low-supply submarkets like Bellevue. Over the past two years, rent trends have shifted from a supply-driven cooling to a demand-led rebound. With new deliveries tapering off and net demand rising, landlords are regaining pricing power — a trend likely to persist for at least the next couple of years.
📌 Takeaway:
Seattle’s multifamily market is turning a corner. Robust demand driven by immigration and tech sector stabilization, combined with a sharp pullback in new construction, is laying the groundwork for a sustained rent growth cycle. Developers, investors, and operators should prepare for a tightening rental landscape, especially in core and Eastside submarkets.
🔍 Foreign Capital Faces New Threat Under Section 899 Proposal
A proposed tax provision making its way through Congress—Section 899 of the One Big Beautiful Bill Act—is raising red flags across the commercial real estate and lending sectors. The provision would give the U.S. Treasury authority to impose a new tax on capital from certain foreign countries invested in U.S. assets, with rates starting at 5% and potentially climbing to 20%.
🏦 Capital on Pause:
Industry groups including the CRE Finance Council (CREFC) and the Mortgage Bankers Association are voicing concern that the proposal is already stalling deals. Several foreign banks have reportedly put U.S. lending activity on hold, citing legal uncertainty and potentially significant tax burdens. According to CREFC, even current loan negotiations are being impacted by the uncertainty.
📉 Market Liquidity at Risk:
Lenders warn that if enacted, Section 899 could dramatically shrink liquidity in the U.S. CRE market by discouraging foreign institutions—particularly from Europe and Canada—from providing debt capital. Non-U.S. banks currently hold over $250 billion in U.S. commercial property loans, highlighting the scale of potential disruption.
💼 Industry Response:
CREFC and ten other trade organizations sent a joint letter to Senate leadership last week, urging lawmakers to revise the measure. Their top ask: exempt passive or non-controlling investments, both equity and debt, from the new tax regime.
⚖️ Legislative Outlook:
The Senate is still debating the bill after it cleared the House three weeks ago. While some lawmakers are open to revisions, the tax is expected to generate around $100 billion in federal revenue, making full removal politically challenging.
🌐 Context:
Section 899 is widely viewed as a response to the global tax framework known as Pillar Two, which the U.S. recently exited. The measure is being dubbed a “revenge tax” by some, aimed at countries perceived to be taxing U.S. multinationals unfairly.
📝 What to Watch:
With deal terms under scrutiny and foreign capital hesitating, market participants are advised to review existing loan documents and monitor legislative updates closely. Implementation details remain unclear, but even the proposal's current form is creating a wave of uncertainty that’s already influencing lending behavior.
One Click for Pricing Guidance on Mezz/Debt Fund/CMBS
📊 Macro Snapshot | May Jobs Data Underscores Slower Growth, But No Fed Pivot Yet
The U.S. labor market is cooling — but not fast enough to trigger immediate Fed rate cuts. May’s monthly employment report revealed softer fundamentals behind the headline numbers, with hiring concentrated in low-growth and defensive sectors and an undercurrent of downward revisions pointing to a more sluggish economy than initially portrayed.
📉 Slower Growth Behind the Numbers
Employers added 139,000 jobs in May, but most gains were in non-cyclical, lower-wage sectors like healthcare, education, and hospitality. March and April job growth was revised down by a combined 95,000, reinforcing the trend of overestimated job creation in initial releases. Goods-producing sectors lost 5,000 jobs, including 8,000 in manufacturing — mostly machinery — highlighting ongoing weakness in capital investment and global supply chains.
🏥 Services Led, Again
Healthcare and education added 87,000 jobs, representing 62% of May's total gains. These sectors now account for over half of job growth year-over-year. Leisure and hospitality contributed another 48,000, largely in food service, benefiting from warmer weather and a rebound in consumer sentiment.
🧯 Labor Market Red Flags
Temporary employment declined by 20,000, typically an early indicator of broader labor market weakness. Government jobs dipped slightly, as federal job cuts outpaced modest gains at state and local levels. Labor force participation dropped to 62.4%, its lowest level in three months, with a contraction of 625,000 workers from the labor force overall. Unemployment held steady at 4.2%, but the unrounded figure ticked higher, and 71,000 more people moved into unemployment.
📉 Revisions Matter
Historical downward revisions continue to raise eyebrows: The last annual benchmark cut total 2024 employment by 818,000 jobs. Third estimates have undershot initial payroll figures in 8 of the last 12 months, with an average 14% downward revision. Q4 census data confirms slower year-over-year job growth (0.8% vs. reported 1.3%).
💡 Implications for Real Estate
While inflation has eased — May CPI came in at 2.4% (headline) and 2.8% (core) — the Federal Reserve remains cautious. The jobs report lacked the level of labor market deterioration that would support a near-term rate cut. Stable 3.9% annual wage growth, now in its sixth month, won’t tip the scales either.
For commercial real estate, this translates into continued rate stability and a holding pattern on capital markets activity. Uncertainty around inflation risks, trade policy, and labor force health suggests that deal volume and underwriting assumptions should remain conservative heading into Q3.
📌 Key Takeaway:
The labor market is decelerating, but not breaking. The Fed is watching, but it’s unlikely to act unless job losses accelerate or inflation reemerges decisively off the back of policy shocks or supply chain disruptions.
One Click for Pricing Guidance on Multifamily Equity
News and Notable Reports
