CRE crash deepens

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CRE crash deepens—banks exposed as delinquencies surge link

• Office property prices have dropped 40% from their peak nationwide, and high interest rates are keeping pressure on valuations for multifamily and healthcare real estate. This is a growing concern for banks holding large commercial real estate (CRE) exposure.

• Credit card and auto loan delinquencies are peaking, with small banks seeing much higher delinquency rates than large banks. Restarted student loan payments are expected to add more strain on consumer credit quality.

• Despite these stress points, large banks are still actively lending, supporting credit growth. This increased lending poses a potential upside risk for consumer credit availability in the near term.

My Take: I don’t think this breaks everything overnight, but pressure’s building. If you’re exposed to CRE or relying on cheap credit, now’s a good time to de-risk.

6 Cities Where Rent Prices Still Rose—While the Rest of the U.S. Took a Hit link

• Anaheim held the highest new lease trade-out among the six standout markets, bottoming out at a still-positive 1.4%, while other cities like Austin and Denver were slashing rents by up to 10% at the same time.

• Columbus, Kansas City, and New York posted slight but positive lease growth between 0.5% and 1% during late 2024, when national rent cuts hit 4.4% on average.

• These six cities—Anaheim, Columbus, Kansas City, New York, Philadelphia, and Virginia Beach—generally saw slower apartment construction compared to the 3% national inventory growth, helping landlords keep pricing power.

Investors Dump Condos—Lowest Purchase Rates in a Decade link

• Investor condo purchases dropped 3% year-over-year to a 10-year low, as nearly 70% of condos sold below list price in early 2025—more than any time in the past five years.

• Florida is a major drag on the condo market, with surging HOA fees and rising insurance costs due to climate risks pushing investors out.

• Despite the condo slowdown, overall U.S. investor home purchases rose 2% in Q1 2025, showing a stable but shifting landscape away from condos.

My take: I’m not surprised. Investors are chasing yield, and condos just don’t cut it right now—between bloated HOA dues, insurance spikes, and limited control over long-term costs, it’s getting harder to make the math work.

Office Market Rebounds—But Long-Term Demand Could Stay Crushed link

• U.S. office space saw a fourth straight quarter of net absorption in Q1 2025, totaling 5.6 million sq. ft.—a key turnaround after a sharp 30 million sq. ft. drop in early 2024. Vacancy held at 11.8%.

• NAIOP projects 24.98 million sq. ft. of absorption for the rest of 2025, but that forecast assumes only a mild recession with a 70% probability. Structural downsizing and long-term lease expirations may limit recovery.

• The four-quarter rolling average of absorption is now just 3.6 million sq. ft.—an 84% drop from the 2010–2019 norm of 22.9 million annually. Slower job growth (projected at 6.7 million jobs through 2033) will keep demand below pre-COVID levels.

Foreclosures Rise in Key U.S. Markets Despite Fewer New Defaults link

• Completed foreclosures jumped 7% from April and are up 34% from last year, signaling that lenders are aggressively clearing out backlogs even as new starts decline.

• Florida cities dominate the top foreclosure rates in large metros, with Lakeland, Cape Coral, and Jacksonville all reporting over 1 in every 1,900 homes in foreclosure.

• Texas, Florida, and California saw the highest number of foreclosure starts in May, led by Houston, Miami, and Los Angeles, showing persistent financial stress in high-growth areas.

May 2025 Hottest Housing Markets link

• Springfield, MA topped the list for the fourth time, with homes getting 3.6x more views than the U.S. average and selling in just 24 days. Amherst-Northampton followed close behind with a 17.3% price spike in Monroe, MI, and 11.4% in Amherst itself—far above the national growth rate.

• 13 of the top 20 hottest markets were in the Northeast, driven by low inventory and limited new construction. In May, the Northeast had the weakest inventory recovery nationwide—only 19% year-over-year—fueling faster home sales and worsening affordability.

• Despite stable national prices, hot markets saw price per square foot rise 2.7% year-over-year, over 4x the national rate. More than half of these markets remain below the national median price, with investor interest likely to intensify competition in affordable metros.

California and New Jersey Counties Face Biggest Housing Market Risks link

• Nearly half of the 50 most at-risk U.S. housing markets are in California (14) and New Jersey (9), with the top three in wildfire-prone Northern California counties: Butte, Humboldt, and Shasta. These markets struggle with affordability, foreclosure exposure, and underwater mortgages.

• In 109 counties, homebuyers must spend over 50% of their annual income just to afford a median-priced home, with Kings County, NY topping the list at 109.5%. Nationally, 339 of 572 counties exceed the affordability threshold of 32.5% income-to-expense ratio.

• Some Southern and Midwestern counties offer strong fundamentals, like Loudoun County, VA with just 0.5% seriously underwater mortgages and Arlington County, VA with only one foreclosure per 17,249 homes. These areas also have unemployment rates well below the national average of 4.3%.

ZestyAI

ZestyAI applies machine learning to high-resolution aerial imagery, automatically identifying property features and risk factors for over 150 million buildings.

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