Hello Brick Brief readers, 

Happy Monday. In recent news, weak jobs fueled rate cut pressure, housing may be nearing an affordability turning point, and CRE credit strength is supporting CMBS momentum.

This week, we are watching for key August PPI and CPI inflation data, which will be released on Wednesday and Thursday, respectively.

📉 Weak Jobs Data Fuels Rate Cut Pressure
Unemployment rose to 4.3% in August with just 22K jobs added, while June was revised to show the first monthly job loss since 2020. With fewer than 600K jobs created through August, markets now expect back-to-back Fed cuts, driving yields and mortgage rates lower. The 30Y mortgage rate fell to 6.29% (-16 bps) and the 10Y Treasury yield slipped to 4.08% (-8 bps), marking the sharpest pullback in weeks as investors priced in a softer policy path.

🏠 Is Housing Near an Affordability Turning Point?
After years of worsening affordability, falling mortgage rates and early signs of price weakness could bring relief. Rates dropped to 6.29% in early September, lowering payments and boosting purchasing power, while Parcl’s index turned negative as oversupply in the Sun Belt weighs on values. Affordability remains historically strained, but the shift in rates and pricing hints at a possible easing ahead.

🏢 CRE Credit Strength Meets CMBS Opportunity
S&P reports that REIT credit quality remains solid, supported by stronger leasing in office and retail, even as multifamily softens under tariff-driven costs. CMBS markets are eyeing renewed issuance momentum if the Fed cuts in September, with SASB deals positioned to lead the rebound despite ongoing distress in lodging and weaker office loans.

30Y Mortgage: 6.29% (-16 bps)

10Y Treasury Yield: 4.08% (-8 bps)

WSJ Prime Rate: 7.50%

FTSE NAREIT Index: 779.05 (+0.98%) 

30-day SOFR Average: 4.36%

Weak August job growth signaled a cooling labor market, driving the 10Y yield down to 4.08% and the 30Y mortgage rate to 6.29% as markets price in consecutive Fed cuts

US unemployment rose to 4.3% in August with just 22K jobs added – June figures were revised to show a 13K job loss, the first decline since 2020 (WSJ)

US adds fewer than 600K jobs through August – Weak hiring has markets pricing in consecutive Fed rate cuts this fall, though stalled inflation progress could slow the pace (WSJ)

US services activity hits six-month high – ISM index rose to 52 in August on strongest order growth since last September, though tariff-driven costs kept inflation pressures elevated (Bloomberg)

Kevin Hassett, Christopher Waller, and Kevin Warsh named Fed chair finalists – Trump confirmed the trio to replace Jerome Powell, with Treasury Secretary Scott Bessent overseeing the search (Bloomberg)

Fed’s Goolsbee undecided on September cut – The Chicago Fed chief said he’s weighing weak job data but stressed the need to protect Fed independence from political pressure (Reuters)

Housing affordability is at its worst point in decades. Home prices have risen 40% over the past five years, and in Q2 homeowner households fell 0.1% year over year for the first time since 2016. Renter households climbed 2.6% to 46.4 million, while investor purchases slipped 6% to about 52,000 homes, the weakest spring since 2020. All of this unfolded when mortgage rates hovered near 7%, freezing both buyers and sellers.

🧱 Mortgage rates fell to 6.29% on Sept 5, down 30 basis points in a month and the lowest in 11 months. Markets are pricing in Fed rate cuts as weak labor data builds pressure, with just 22,000 jobs added in August, June revised to a loss of 13,000, and unemployment climbing to 4.3%
🧱 Lower rates are already improving affordability. A household with a $3,000 monthly budget can now purchase a $468,000 home, $22,000 more than in June. Typical monthly payments eased to $2,593 in late August, the lowest since January
🧱 Signs of pricing pressure are emerging. Parcl Labs’ real time index turned negative in August, showing a 0.4% year over year drop in U.S. home values. Oversupply in the Sun Belt is forcing cuts, while constrained supply in the Northeast and Midwest is keeping prices elevated

Takeaway: Affordability remains strained after years of rising prices, yet falling mortgage rates and early signs of price weakness point to a possible shift. The question now is whether this marks the start of a real easing in affordability or just a momentary dip before conditions tighten again.

NY bill would require out-of-state modular plants to pay local wages – Legislation awaiting Gov. Hochul’s signature could raise construction costs, with unions backing it and affordable housing groups warning of higher project burdens (Bisnow)

A homebuyer on a $3K budget has gained $22K in purchasing power since June – Mortgage rates fell to 6.3%, the lowest in 11 months, after weak jobs data boosted Fed cut expectations (Redfin)

Divorced couples are delaying separation moves – Many ex-spouses remain in shared homes to preserve 2% pandemic mortgages, since refinancing or buying at today’s 6%+ rates would sharply raise costs (WSJ)

Insight: The lock-in effect occurs when homeowners with ultra-low mortgage rates hold off on selling because moving would mean trading a 3% loan for one above 6%. According to Goldman Sachs, 87% of homeowners have rates under 6%, and FHFA research shows that for every one-point gap between a homeowner’s rate and the market, the probability of a sale drops by 18%, keeping over a million listings off the market in 2022–23. As mortgage rates fall with Fed cuts, that grip will ease and sidelined moves like divorces, downsizing, and relocations will begin unlocking long-stalled transaction activity.

Homebuilders weigh Gen Z and falling birth rates – Cotality projects demand shifting to smaller, multigenerational homes as aging households dominate future growth (Cotality)

US apartment rents fell 0.23% in August to $1,713 – Elevated supply drove broad declines, with Richmond posting the steepest monthly drop and Austin leading annual losses amid Sun Belt oversupply (CoStar)

Office occupancy averaged 52.4% last week – NYC fell to 44.1% while Austin hit a post-pandemic record 70%, though Class A+ occupancy slid to its lowest weekly average of the year (KastleSystems)

Port of NY & NJ leasing jumped 76% in H1 2025 – Q2 volume rose 4.9% YoY to 4.4M TEUs, while vacancy climbed to 12.2% and rents fell 2.3% amid tariff uncertainty (GlobeSt)

CRE prices stall in Q2 2025 – Trepp Property Price Index shows flat to declining values as tariffs and high rates weigh on multifamily, office, and lodging, while industrial and retail remain relative bright spots (Trepp)

Skilled construction hiring bucks weak August jobs report – U.S. added 22K jobs as unemployment hit 4.3%, while nonresidential construction gained 59K YoY (CommercialObserver)

Insight: Skilled construction is one of the few bright spots in a cooling labor market, with nonresidential construction jobs up 59K YoY in August even as July spending slipped 0.1% on weaker multifamily and commercial projects. While August construction data isn’t out yet, it will likely mirror July’s softness, and demand for skilled labor continues to hold strong even as entry-level white collar roles face mounting automation risk.

Retail sector posts first pullback since pandemic – Marcus & Millichap report shows nearly 15M SF of negative absorption in H1 2025, as tenant move-outs outpaced leasing across both single- and multi-tenant properties (IREI)

Pumpkin Spice Latte launch drives Starbucks traffic surge – The seasonal drink lifted visits nationwide on Aug. 26, with Utah up 40% and Starbucks far outpacing Dunkin’ and Dutch Bros. (Placer.ai)

Luxury hotels outperform in 2025 – ADR and RevPAR rose 3% at the top end while economy hotels declined, highlighting widening consumer divides and steering investor focus toward high-end assets (Bisnow)

US hotel RevPAR ekes out 0.2% gain for Aug. 24–30 – Labor Day demand lifted New York, Orlando, and Chicago, but Houston and Las Vegas declines kept summer performance flat, while global hotels saw stronger double-digit growth (STR)

DOE to study AI data centers’ power costs – Rep. AOC secured funding to assess how soaring data center demand, which is projected to drive 44% of new U.S. electricity use by 2028, could raise consumer bills and strain grids (Bisnow)

Insight: Data centers’ projected share of 44% of new U.S. electricity demand is staggering and shows how AI infrastructure investments are reshaping power markets. This is a core theme I’m focused on at The Brick Brief, as rising demand is driving grid investment, utility consolidation, and M&A.

Boston life science vacancy hits 33.9% in H1 2025 – Leasing demand reached 95.6% of 2024’s full-year total, with the 128 Belt driving 40.2% of Q2 activity, while rents stabilized at $82.51 psf (CushmanWakefield)

CMBS market eyes late-2025 upswing – KBRA says a September Fed rate cut could boost issuance, with SASB deals leading volume despite rising distress in office, retail, and lodging loans (CommercialObserver)

S&P says CRE credit quality holds firm – Office and retail leasing gains are boosting REIT performance, though multifamily faces weaker demand and tariffs continue to pressure builders (CommercialObserver)

Estate Companies secures $60M construction loan for Riviera Beach, FL multifamily – BB Americas Bank is financing the 255-unit Soleste on the Trail (CommercialObserver)

Texas ERS proposes $450M for real estate – The pension fund outlined 2026 commitments to private real estate, maintaining a 9% allocation target across its $4.1B portfolio (IREI)

Aya Acquisitions buys Cassa Hotel in Midtown, NY out of foreclosure for $55M – The 165-key property at 66–70 West 45th Street was acquired from HNA Group (CommercialObserver)