Hello Brick Brief readers, 

Happy Monday. Recent real estate news has remained light, and we are seeing affordability drive housing demand toward cheaper Midwest markets while office recovery remains concentrated in a handful of core cities.

🏠 Housing Affordability Is Driving Demand Shifts
According to the First American Home Price Index, U.S. home prices rose 0.7% YoY in November as Rust Belt markets held up better while higher-inventory Sun Belt metros declined. Affordability is set to stay front and center into the new year as buyers continue moving out of high-cost coastal markets and into cheaper Midwest and core Rust Belt metros where home prices remain below the national median.

🏢 Office Recovery Remains Uneven
Manhattan and San Francisco are leading the office recovery, while office recovery elsewhere remains uneven and varies market by market. Manhattan office leasing hit 33M SF in 2025 as a late-year surge pushed activity above its pre-pandemic average.

U.S. productivity is set to extend its global lead – A large majority of economists expect AI adoption, deep capital markets, and lower energy costs to keep the U.S. ahead of Europe and other G7 peers even as some warn of AI-related bubble risks (FT)

December saw modest U.S. hiring – Economists projected roughly 60,000 jobs were added and unemployment eased to 4.5% (Bloomberg)

Fed’s Paulson says rate cuts may take time – Anna Paulson says policy remains mildly restrictive and officials want clearer evidence on inflation and labor-market trends before easing further in 2026 (Reuters)

First American Home Price Index showed 0.7% YoY growth in November – Price appreciation remained muted in the low single digits; Rust Belt markets held up better while higher-inventory Sun Belt metros saw prices decline (MortgageOrb)

Americans are turning to the Midwest for housing affordability – Home prices below the national median and steadier wage growth are drawing buyers out of high-cost coastal markets as affordability pressures persist nationwide (WSJ)

Affordability remained the top priority for U.S. homebuyers last year and is set to stay front and center into the new year. Housing affordability continues to push buyers out of high-cost coastal markets and is pulling demand toward Midwest and core Rust Belt metros where home prices remain below the national median.

FHA insurance fund hit a record $189B reserve – Capital buffers built during prior housing strength now stand against rising borrower delinquencies near 12%, prompting tighter underwriting to limit future losses (Inman)

Manhattan office leasing hits 33M SF in 2025 – A late-year surge pushed activity above its pre-pandemic average, giving the market renewed momentum heading into 2026 (CoStar)

U.S. office construction fell to 1.7% of existing stock in 2025 – Manhattan and San Francisco stood out as office demand bright spots; coworking grew nationwide and lifted flexible office market share above 2% (ConnectCRE).

Office of New York State Attorney General expands to 378K SF at 28 Liberty Street in Manhattan Financial District with 36K SF of new space -- Fosun International re-signed and expanded the tenant at mid-$70s asking rents(CommercialObserver)

MedStar inks 50K SF office lease at Capital Gateway II at 6710 Rockledge Drive in Bethesda, MD -- Nuveen-owned building landed largest suburban Maryland office lease of Q4 2025 as regional vacancy climbed to 21.8% (CommercialObserver)

Value retailers led modest 2025 holiday gains – Foot traffic held roughly steady overall; value-oriented stores saw the strongest increases as shoppers prioritized discounts and essentials (CommercialObserver)

Holiday traffic surged at Michaels and Hobby Lobby in 2025 – Store visits rose by double digits YoY as closures of Party City and JOANN consolidated demand and younger urban shoppers drove a shift toward trend-driven in-store holiday décor (Placerai)

$1T+ data center buildout accelerates AI infrastructure boom – Hyperscaler-led spending is set to overtake office construction as investor capital floods into a concentrated tenant base, raising bubble risk if AI demand or funding cools (ConnectCRE)

Tariffs and higher costs drive 2026 hotel design shifts – Hoteliers are favoring quiet luxury, simpler materials, and local sourcing as supply chains tighten and financing stays constrained (CoStar)

Saks seeks a $1B bankruptcy loan to keep stores operating – The luxury retailer is lining up debtor-in-possession financing after missing a $100M+ bond interest payment as weak sales and inventory issues strain liquidity (Bloomberg)

Clipper Realty’s office building at 141 Livingston Street in Downtown Brooklyn, NY sees $100M CMBS loan reinstated -- Modification negotiated by Iron Hound Management resolved default claims after new five-year lease was signed with key tenant, stabilizing cash flow (CommercialObserver)