Mortgage Rates Predicted to End 2025 at 6.6%

Good morning, Dwellers! Welcome to another edition of Dwellings Digest, a realtor and investor driven newsletter simplifying real estate, exploring the economy-stock-real estate link, adding a fun twist with niche topics and more. Enjoy!

In today’s edition - Stocks extend losses as economic fears grow, with the Nasdaq down 1.4%. Mortgage rates are projected to hit 6.6% by year-end, impacting affordability. FHFA nominee Bill Pulte’s real estate ties spark debate over housing finance oversight. Meanwhile, NexMetro’s $620M recapitalization fuels Sunbelt rental expansion. Plus, Florida’s inland condos outperform coastal markets due to rising HOA and insurance costs. Stay ahead with the latest real estate insights!

Quote of the day - "Real estate isn’t about waiting for the perfect market—it’s about making the right move at the right time." 

If you missed yesterday’s newsletter, click here

What to know about the Feb. 28 "economic blackout"

Mortgage & Stocks

Average going rates as of Feb 25 2025

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🏛️ Economic & Market Sentiment

Markets Extend Losing Streak as Economic Fears Mount

• Tech & AI Selloff Deepens – The Nasdaq fell 1.4%, marking its fourth straight decline, as investors pulled back from risk assets. Nvidia (-2.8%) slumped ahead of earnings, while the Magnificent Seven ETF entered correction territory (-10% from highs).

• Recession Fears Resurface – The Conference Board’s Consumer Sentiment Index fell to 98.3, the largest drop since August 2021, reviving economic concerns. Investors shifted to Treasurys (yields down to 4.297%) and defensive consumer-staples stocks (+1.7%).

• Tesla & Crypto Take Hits – Tesla’s market cap slipped below $1T, plunging 8.4% after European sales dropped 45% YoY. Bitcoin dropped below $88K following a $1.4B hack of Bybit, triggering an 11% decline in MicroStrategy shares.

🎢 Impact on Real Estate

U.S. Economy Enters 2025 Strong, But Housing Faces Rate Pressures

• GDP Holds, Inflation Revised Higher – Fannie Mae maintains a 2.2% GDP growth forecast for 2025 but raises its CPI outlook to 2.8% (from 2.5%) due to persistent inflation pressures and new 10% tariffs on Chinese imports.

• Mortgage Rates Edge Up – The ESR Group now expects 6.6% mortgage rates by year-end 2025, up from prior estimates. Rate volatility is likely as markets react to economic data and trade policy shifts.

• Home Sales See Slight Lift but Lag 2019 Levels – Despite a stronger-than-expected December sales pace, existing home sales are projected to stay 22% below 2019 levels, as affordability challenges persist due to the "lock-in effect."

While economic momentum remains strong, housing affordability depends on where mortgage rates land—higher rates could slow sales, while a drop might revive activity.

FHFA nominee Bill Pulte discloses investments in rental properties, HVAC firms and … MrBeast

• $190M+ in Diverse Investments – Pulte’s holdings span rental properties, HVAC firms, entertainment, and a stake in MrBeast’s company & Elon Musk’s X. He pledged to recuse himself from decisions impacting his assets but won’t divest.

• No Direct Housing Finance Experience – While Pulte has deep real estate ties through his family’s homebuilding empire, he lacks experience in GSE oversight or housing finance policy, a key concern as he faces Senate confirmation hearings.

•  Fannie & Freddie’s Future in Question – The Trump administration favors ending conservatorship for Fannie Mae & Freddie Mac, but Pulte has yet to state his position. Expect scrutiny from lawmakers, especially Elizabeth Warren, on his approach.

Will a real estate investor and social media philanthropist be the right fit to oversee housing finance? The upcoming hearings will shape the future of U.S. mortgage policy.

🎙️ RE Spotlight

$620M NexMetro BTR Recapitalization Fuels Sunbelt Expansion

• $620M Portfolio Recapitalization – JLL Capital Markets secured $65.9M in preferred equity from Stockbridge, paired with $206M in assumable agency financing. This follows a prior $238.7M deal, bringing total equity to $145M and senior debt to $366M.

• 1,061 BTR Homes Across 3 States – The recapitalized NexMetro assets span Arizona, Colorado, and Texas, featuring single-level rental homes built between 2018-2019. The firm continues its rapid expansion with 60 active projects across the Sunbelt.

• Investor Returns & Future Growth – The deal enables NexMetro to return capital while fueling its pipeline of high-quality build-to-rent communities, leveraging strong demand in key growth markets.

Build-to-rent demand remains strong, and NexMetro’s strategic recapitalization signals continued investor confidence in Sunbelt rental housing.

U.S. Zombie Foreclosures Decline in Q1 2025 as Housing Market Remains Strong

• Zombie Foreclosures Declining: The U.S. recorded 7,094 zombie foreclosures in Q1 2025, down 3.3% from last year and continuing a five-quarter downward trend in foreclosure activity.

• Stable Vacancy Rates: Nationwide residential vacancy remains at 1.3% (one in 76 homes), with Oklahoma (2.41%) and Kansas (2.34%) leading in highest vacancy rates, while New Hampshire (0.34%) has the lowest.

• Investor-Owned & Bank-Owned Properties: Of 24.8M investor-owned homes, 3.5% are vacant, with Indiana (6.9%) leading. Bank-owned foreclosures saw a 14% vacancy rate, with Kansas topping at 37.7%.

1.4M Vacant Homes Nationwide, Zombie Foreclosures Down 3.3% Year Over Year

🏰 RE State Zone

Florida Condo Prices Are Holding Up Best Away From the Coast

• Inland Florida Condos Up 5% YoY – While condo prices fell 5% on the Gulf Coast and 3% on the Atlantic Coast, inland areas (Orlando, Gainesville, Lakeland, etc.) saw a 5.4% rise. Lower insurance costs and newer buildings help keep HOA fees down.

• HOA Costs Driving Market Shifts – After Senate Bill 4-D, requiring structural inspections and reserve funds, HOA fees and special assessments surged across Florida, making older coastal condos less affordable. Inland areas, with mostly newer and smaller buildings, are less impacted.

• Insurance & Risk Affecting Demand – Median HOA fees in inland metros ($250-$346) are significantly lower than in coastal cities like Miami ($965). Coastal properties face higher insurance costs and natural disaster risks, further dampening demand.

With affordability in focus, will inland Florida continue to outperform coastal markets?

🏕️ Niche-RE

Volatile Hotel Prices—Not Rents—Pushed January Inflation Numbers Higher

• Shelter Inflation Rises Slightly – January’s CPI shelter component increased 0.4%, but the primary driver was hotel prices (+1.4%), a volatile category. Rent and owners' equivalent rent held steady at +0.3%, in line with recent trends.

• CPI vs. Market Rent Lag – While CPI rent data remains elevated, Redfin reports market rents have been flat for two years. This lag keeps inflation above the Fed’s target, but the Fed closely tracks real-time rental trends to gauge future inflation shifts.

• Beyond Shelter: Other Inflation Drivers – Inflation surprises also came from car insurance and used cars, categories known for volatility and early-year price resets. The Fed’s preferred core PCE inflation measure (where shelter is just 16% vs. CPI’s 42%) will be key for rate decisions.

Will the Fed look past these short-term bumps, or will sticky inflation delay rate cuts?

Read Full Economic Report

🖼️ Chart-Tastic

🤪 Fun for the Road

And…that's a wrap on this edition!

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