The Brick Breakdown

Hello Brick Brief readers, 

Thank you for your continued support! Today, we’re seeing new trade deals with Japan and Indonesia, tariffs starting to bleed into the economy, and homebuilders thriving thanks to builder incentives. 

🛒 Tariffs Fuel Inflation Fears
Trump announced new trade deals with Japan and Indonesia featuring tariffs of 15% and 19%, respectively, while Goldman Sachs forecasted slower U.S. GDP of 1.1% annually in 2025 due to tariffs. Recent earnings indicate domestic firms initially absorbed higher tariff costs, but consumers are now increasingly facing price hikes.

🏠 Homebuilders Thrive on Buyer Incentives
Shares of D.R. Horton (+17%) and PulteGroup (+11.5%) jumped this week, as they boosted sales with mortgage rate buydowns and smaller, affordable home designs. Builders expect incentives to remain crucial, as consumer sentiment stays cautious and affordability pressures persist. Stay tuned for an investigation into mortgage buydowns as we watch June's new versus existing home sales data this week.

🧬 Life Sciences Sector Faces Headwinds
Alexandria Real Estate reported mixed Q2 results, beating earnings estimates but facing oversupply and weaker tenant funding conditions. Occupancy remains healthy at 91%, and Alexandria expects market conditions to improve once Fed rate cuts stimulate renewed funding activity.

This Week in Real Estate: Key Events & Data

Quick Markets

30Y Mortgage: 6.77% (-1 bps) 

10Y Treasury Yield: 4.36% (-1 bps)

WSJ Prime Rate: 7.50%

FTSE NAREIT Index: 785.37 (+1.82%)

30-day SOFR Average: 4.35%

Market Pulse & Rate Watch

Rising tariffs are increasing inflationary pressure, which may prompt the Fed to keep interest rates elevated longer, further restraining consumer spending and economic growth.

Trump announces 15% tariff in new Japan trade deal -- Japan to invest $550B in the U.S. and open markets to more U.S. goods (Reuters)

U.S. sets 19% tariff in new Indonesia trade deal -- Indonesia will cut tariffs and non-tariff barriers on over 99% of U.S. goods and scrap data flow duties (Reuters)

Goldman Sachs warns of slower U.S. growth in 2025 – Tariffs will raise inflation and reduce consumer spending, slowing GDP to 1.1% annually (CNBC) 

U.S. companies and consumers are bearing the cost of Trump's tariffs — Domestic firms absorb higher costs now but are beginning to pass them on to consumers through price increases (Bloomberg)

Insight: GM’s Q2 results highlight this trend, as the carmaker reported a $1B dent to its profits from tariffs. Although car prices didn’t rise in last week’s inflation data, GM exemplifies how domestic firms initially absorb these costs but are likely to gradually increase consumer prices over the next 6 to 9 months to restore margins. 

Brick by Brick: Homebuilders Lean on Incentives to Keep Sales Afloat

D.R. Horton (+17%) and PulteGroup (+11.5%) shares rose after earnings beats this week, as both builders pointed to incentives and price-conscious design as the keys to holding buyer interest in a fragile housing market.

• PulteGroup exceeded revenue expectations and cited steady homebuyer demand supported by mortgage buydowns, closing cost support, and smaller, more affordable floor plans
• D.R. Horton also saw a stock gain after earnings, even as it lowered full-year revenue guidance, signaling that investors are focused on how builders manage volume and pricing
• Mortgage buydowns remain the most important incentive, allowing buyers to reduce monthly payments without requiring the builder to cut the list price
• Homebuilders are also designing smaller homes and offering streamlined upgrade packages to reach buyers priced out of the resale market
• Buyers continue to face pressure from high interest rates, record-high insurance costs in some markets, and limited wage growth, making affordability the top concern across segments
• Consumer activity improved modestly in late June as rates declined, but demand remains sensitive and uneven heading into the second half of the year
• Builders expect the rest of 2025 to remain choppy, with incentives playing a central role in converting interest into contracts

Takeaway: Homebuilders are adapting to affordability constraints with rate buydowns and smaller homes, helping to stabilize sales despite economic headwinds. The stock market rewarded D.R. Horton and PulteGroup for navigating this environment with discipline, but housing demand will remain fragile as long as mortgage rates and costs stay elevated.

Policy & Industry Shifts

Uncertainty from stalled rental aid cuts is causing lenders to pull back on affordable housing projects, while a proposed capital gains tax repeal on home sales could boost seller incentives and market activity

Trump’s proposed $27B rental aid cut stalls affordable housing -- Lenders pull back as Section 8 funding uncertainty halts new projects (WSJ)

Trump considers removing capital gains tax on home sales -- Move would eliminate federal tax on profits from selling a primary residence (Reuters)

Residential

U.S. home prices fell 0.1% in June for the third consecutive month, driven by weak demand and job cuts in major metros, signaling ongoing pressure on housing affordability

U.S. home prices fell 0.1% in June, marking the third straight monthly dip -- Declines were led by Washington, Austin, and San Diego, as weak demand and federal job cuts pushed prices down in 30 of the 50 largest metros (Redfin)

Federal land sales won’t fix the housing crisis -- Most shortages are in the Northeast, not on federal land out West (Realtor.com)

Nearly a quarter of Zillow agent reviews in 2025 are AI-generated, up from 4% in 2019 -- The surge is raising credibility concerns as consumers rely on agent ratings for key homebuying decisions (TheRealDeal)

Insight: AI is revolutionizing real estate in unexpected ways, such as flooding Zillow with fake agent reviews, which could undermine trust in the ratings that buyers previously relied on.

Multifamily

U.S. multifamily demand remains strong as new apartment construction slows -- Net absorption hit 268,000 units in H1 2025, third-highest start to a year on record (CoStar)

Multifamily managers stay optimistic on retention -- 73% expect rates to rise next year, though 2025 average fell to 58% vs. 63% target (GlobeSt)

Office

Leasing

Two federal agencies renewed 57K sf of leases at 1800 M Street NW in D.C. -- The office tower is now lender-owned after Columbia Property Trust defaulted on $302M in debt (CommercialObserver)

Stantec renewed its 47K-sf lease at 475 Fifth Avenue in Manhattan -- The engineering firm has been a tenant since 2014 (CommercialObserver)

Industrial

Mid-Atlantic factory activity fell sharply in July, with the Richmond Fed index dropping to -20 from -8 -- Shipments, new orders, and employment all declined as trade uncertainty weighed on manufacturers (WSJ)

Market Mix

Retail

Luxury grocers in LA and Seattle use narrow aisles, bars, and unique design to encourage longer visits –- Foot traffic is up 10.9% since 2019 as stores focus on community and experience (CoStar)

Glasses chain Warby Parker’s Q2 visits rose 4.2% but dipped 2.7% per store -- Allbirds’ store closures cut total visits 12.5% but visits per location jumped 18.5% (Placer.ai)

Data Centers

xAI seeks $12B in private credit for Nvidia chips to build giant data centers – Musk’s startup is burning cash and leveraging Grok’s IP to stay in the AI race (WSJ)

Earnings & Real Estate Impact

Alexandria Real Estate Equities beat second-quarter FFO estimates but posted a mixed quarter as the life sciences sector faces a supply glut and weaker tenant funding. Occupancy held near 91%, and Alexandria plans $1.1B in asset sales to refocus on megacampuses as the industry looks to Fed rate cuts for relief (CommercialObserver)

Homebuilder D.R. Horton’s shares jumped 17% after beating Q3 earnings expectations, although the company trimmed its revenue guidance for 2025 and flagged persistent affordability challenges and cautious consumer sentiment. Closings and profits fell YoY, and management expects sales incentives to increase further in the coming months to help offset sluggish demand (WSJ)

Homebuilder Pultegroup’s shares jumped 11.5% after beating Q2 revenue expectations thanks to steady home sales from buyer incentives. While the company continues to face weak consumer sentiment and shrinking gross margins, management noted a positive response to lower interest rates in late June and expects incentives like mortgage rate buydowns to remain key to supporting demand (Reuters)

Insight: Affordability remains the top concern for homebuyers, and homebuilders’ results show that mortgage buydowns and other incentives are key to keeping homes competitive and sustaining sales despite challenging market conditions.

Financings

Rithm Capital and an institutional investor launch $1.5B partnership to fund residential transitional loans – Genesis Capital will service the loans (BusinessWire)

Loans

Stephen Ross’ Related nears $700M construction loan from Ares, Monarch to build two CityPlace office towers in West Palm Beach, FL -- Financing will add 1M sf of office and retail space to the downtown complex (CommercialObserver)

Montperia lands $115M construction loan for 216-unit condo tower in NYC LIC -- 40-story project at 24-02 Queens Plaza South will include ground-floor retail (TheRealDeal)

Banner Real Estate secures $84M construction loan for 334-unit luxury multifamily project in downtown Wheaton, IL -- The Faywell will include ground-floor retail fully leased to Egg Harbor Café (ConnectCRE)

Structured Finance

Buckingham refinances 2,381-unit multifamily portfolio with $330M CMBS loan from Goldman Sachs, Atlas -- Properties span Indiana, Ohio, Kentucky, Tennessee, and Georgia (CommercialObserver)

M&A

Building & Portfolio M&A

Hospitality

Hawkins Way buys NYC’s 99 Washington St. hotel for $155M -- The former migrant shelter will be repositioned with new amenities (CommercialObserver)

Retail

Invesco Real Estate buys Georgia Crossing in Buford, GA for $82.3M from Washington Prime Group -- The 317,301 SF shopping center sits across from the Mall of Georgia in the state’s busiest retail corridor (IREI)

CBL sells Gulf Coast Promenade in D’Iberville, MS for just over $80M – Regional retail center features major tenants on Promenade Pkwy (CoStar)

Industrial

Alterra IOS acquires a 12-site industrial outdoor storage portfolio for $67M -- Fully leased assets span 43 acres across markets like Austin, Phoenix, Raleigh-Durham, and Tampa (CommercialObserver)

Office

Rockwood Capital lists NYC office tower 2 Grand Central for $270M-plus -- 667,000-sf Midtown East asset sits near Grand Central Terminal (CommercialObserver)

Multifamily

Grubb Properties and PCCP buy 280-unit Hollywood Blvd. apartment building in LA metro for $98.4M -- Asset includes 12K SF of ground-floor retail and amenities (TheRealDeal)

Institutional Fundraising

​​Walton Global launches $250M Builder Land Finance Fund III targeting 9–11.5% returns -- Debt fund supports land buys for top U.S. homebuilders with investor income secured by land assets (ConnectCRE)

Distress Watch

Foreclosure auction volume up 19% YoY in Q2 2025 – VA-backed homes surged 428% as expiring moratorium pushed more properties to auction (HousingWire)

CGI faces foreclosure on Miami Beach’s Gabriel hotel after $69M default -- Latest in a series of property losses for Raoul Thomas’ firm (TheRealDeal)