The Brick Breakdown

Hello Brick Brief readers, 

Good morning. Today we’re seeing affordability continue to dictate the housing market dynamics, office occupancy hit a new post-pandemic high, and a continued AI infrastructure boom. 

🏠 Housing Affordability Remains the Market’s Central Challenge
Home prices reached a record $435K in June as sales slid to a 9-month low, with 6.5%+ mortgage rates and elevated prices continuing to shut out buyers. Even with rising listings, affordability remains the dominant barrier, with more buyers forced to settle for older, smaller homes or exit the market entirely. That’s why mortgage buydowns have become builders’ most effective tool to maintain home sales velocity, so stay tuned for this weekend’s investigation🕵️.

🏢 Office Usage Hits Post-Pandemic Highs as Return Accelerates
Office occupancy surged to a new post-pandemic high, with 54.9% of workers now back at their desks in the 10 largest U.S. metros. Companies are shifting back to 5-day office mandates, led by major employers like JPMorgan and Amazon, which has driven occupancy gains and set new highs for Class A+ buildings in cities like Chicago and LA.

🤖 AI Infrastructure Drives a New Investment Boom and New Strains
Google hiked its capital spending plans by $10B to meet surging cloud demand, while Trump’s new AI policy aims to ramp up chip exports and accelerate data center construction. The rapid expansion of AI infrastructure is now straining power grids and pushing policymakers to fast-track reforms to keep up with the sector’s explosive growth.

This Week in Real Estate: Key Events & Data

Quick Markets

30Y Mortgage: 6.78% (+1 bps) 

10Y Treasury Yield: 4.38% (+1 bps)

WSJ Prime Rate: 7.50%

FTSE NAREIT Index: 785.17 

30-day SOFR Average: 4.35%

Market Pulse & Rate Watch

US nears EU trade deal after Japan pact – Trump eyes 15% baseline tariff with carveouts as EU scrambles to avoid 30% duties, mirroring Japan's $550B deal that cuts auto tariffs and boosts U.S. investment (Reuters)

Trump sets global tariffs at 15%–50% starting Aug. 1 – New baseline marks shift toward more aggressive trade policy, with limited exemptions and pressure on EU, Asia, and Latin America to cut deals (Bloomberg)

Brick by Brick: Home Prices Hit Record High, Freezing Out Buyers

Existing home sales fell 2.7% MoM in June to a 9-month low, while the national median price reached a record $435,300 as affordability pressures deepened despite rising inventory.

• Mortgage rates above 6.5% and record prices have pushed monthly payments beyond what most median earners can handle
• Zillow estimates the typical buyer now needs a $17,000 raise to afford a median-priced home with 20% down
• Inventory rose nearly 16% from last year, but most listings came from life-driven sellers rather than opportunistic investors
• Demand remains soft, with homes sitting longer and nearly 27% of June listings seeing price cuts
• Discounts are more common in Texas and Florida, but national prices remain elevated due to years of undersupply
• Buyers are turning to smaller homes, co-buying arrangements, and assumable loans to reduce monthly costs
• A modest drop in rates in late June pulled in some buyers, but the market remains extremely price sensitive

Takeaway: Affordability is the biggest challenge in today’s housing market. Supply is growing, but not enough to offset high prices and borrowing costs, leaving many buyers still stuck on the sidelines despite record listings. This data builds on yesterday’s homebuilder earnings, which showed how mortgage buydowns and incentives are helping builders sustain sales by improving affordability for buyers, even as those strategies eat into profit margins.

Policy & Industry Shifts

Chicago signals property tax hike for 2026 budget – Facing a $1B deficit and $37B in pension debt, the city may raise levies and push to tax services as spending shifts away from goods (Bloomberg)

Residential

Record-high home prices and 6.5%+ mortgage rates have stalled the housing recovery, pushing buyers toward older, smaller homes and keeping sales near multi-year lows despite rising inventory

Home prices hit $435K record in June – Spring sales slumped to 3.93M pace as affordability strained by 6.5%+ mortgage rates and low inventory, stalling housing market recovery (WSJ)

Mortgage rates hover near 6.6% as data slows – With light economic news this week, rates remain range-bound and Zillow maintains a year-end forecast near mid-6%, projecting a 2% home value drop in 2025 (Zillow)

Insight: Zillow’s forecast for mortgage rates to stay near the mid-6% range through year-end suggests they expect minimal Fed easing ahead, signaling that affordability relief will remain limited well into 2025.

June existing-home sales fall 2.7% MoM to 3.93M – Affordability remains a major drag despite rising inventory, with Zillow projecting just a 2.5% sales rebound in 2025 to 4.16M homes (Zillow)

Housing market shifts toward buyers in 2025 – Home sales steady near 4M as price growth slows to 2.5% and inventory rises, with easing mortgage rates and more price cuts giving buyers greater leverage (Realtor.com)

Old homes replace new builds as starter homes – Rising prices and shrinking affordability push buyers and investors toward smaller, decades-old listings, fueling competition and rental demand (Cotality)

Multifamily

Concession values rise to 9.3%, despite fewer units offering them – RealPage says supply, not demand, is driving discounts, with 2025 deliveries set to fall 25% below 2024 levels (RealPage)

Regional

Austin tops 2025 list for grads – Zillow ranks it #1 for high $71K starting pay, 61% rental concessions, and large 20s population (Zillow)

Office

54% of Fortune 100 employees are now office-bound – JLL finds a sharp shift toward 5-day mandates, up from just 11% last year, as firms like JPMorgan, Amazon, and AT&T lead the return (Bisnow)

Office occupancy hits post-pandemic high at 54.9% – Kastle’s 10-city average rose sharply last week, with Chicago and LA setting new records and Class A+ buildings peaking at 95.8% on Tuesday (KastleSystems)

Leasing

Law firm Steptoe signs 58K-SF lease at NYC’s 1133 Sixth Ave – The firm will occupy three top floors in the Durst tower with asking rents between $115–$120/SF (CommercialObserver)

Industrial

California leads cold storage market with 17% share – Driven by online grocery, pharma, and port access, the state dominates U.S. cold storage as rents hit $32/SF and demand fuels new builds (GlobeSt)

Wistron to build $687M chip plant in Fort Worth – Taiwanese firm enters U.S. market with 1M+ SF of Nvidia-linked factories, aided by tax breaks and expected to create 888 jobs (Bisnow)

Market Mix

58% of CRE firms struggle to raise capital – Amid economic volatility and cautious investors, nearly half have shifted strategies in 2025, cutting acquisitions, downsizing deals, or targeting new asset classes (Bisnow)

Data Centers

Trump’s push to accelerate AI chip exports and data center growth is fueling a new tech boom, but the rapid expansion risks overloading power grids without major infrastructure upgrades

Trump unveils AI export push and deregulation plan – New blueprint expands AI chip sales to allies, rolls back Biden-era restrictions, and fast-tracks data center development by easing environmental rules (Reuters)

Trump’s $90B AI data center push strains grid – Grid operator PJM warns of blackout risks without urgent power system reforms (Bisnow)

Retail

Life sciences real estate is showing signs of recovery, with onshoring and new drugmaker investments helping stabilize demand as the industry begins to move past its recent slump, despite high vacancy in some markets

Developer IQHQ pushes $1.3B South San Francisco biotech project out 10 years as life sciences market slumps -- City to receive $12M in community benefits plus up to $50M in impact fees (TheRealDeal)

US life sciences real estate may be turning a corner – Alexandria’s record 467K-SF San Diego lease with Novartis and $270B+ in new drugmaker investments suggest the worst is over, though major hubs still face high vacancy (CoStar)

Retail

Shake Shack traffic jumps 13.7% in Q2 – Higher-income customers fuel gains as Wingstop sees slower 3.6% growth and falling visits per store amid budget pressure (Placer.ai)

Earnings & Real Estate Impact

Google beat Q2 earnings and revenue forecasts and raised its capital expenditure plans by $10B to $85B due to strong and growing demand for our Cloud products and services (CNBC) 

Hilton raised its 2025 profit outlook after beating Q2 estimates, but projected lower Q3 earnings due to lingering weakness in US room revenue despite signs of travel demand recovery (Reuters)

Chipotle shares fell ~10% after missing Q2 revenue estimates and cutting its 2025 same-store sales forecast. The company cited ongoing consumer uncertainty and a second straight quarter of declining traffic as reasons for the weaker outlook.

Insight:  The same-store visit changes in Q2 between Shake Shack and Chipotle is a very interesting data point. Shake Shack’s 13.7% jump in traffic during Q2 is fueled by higher-income customers and stands in sharp contrast to Chipotle’s second straight quarter of traffic declines. This change underscores how shifting economic conditions can dramatically reshape business performance depending on its customer base.

Financings

Debt strategies shift as $900B in maturities loom – Multifamily investors now prioritize risk, fixed-rate debt, and affordability incentives over growth amid tighter financing and softening rents (GlobeSt)

Refinancings

DiamondRock Hospitality secures $1.5B credit facility refi – REIT will repay $300M in hotel mortgages and have no debt maturities until 2028, boosting financial flexibility (CoStar)

M&A

Building & Portfolio M&A

Multifamily

Greystar acquires Miami, FL multifamily Latitudes at the Moors for $94M from Nuveen -- Walker & Dunlop provided a $65.4M Freddie Mac loan for the 358-unit apartment complex in Miami Gardens (CommercialObserver)

Related Group acquires Boca Raton, FL multifamily site for $55M from BH Group and PEBB -- 500-unit apartment building will replace former Office Depot HQ as part of a new mixed-use complex (CommercialObserver)

Institutional Fundraising

Avila Real Estate Capital closes $700M debut debt fund – The residential-focused lender expands its originations team with five senior hires to support AD&C lending across key growth markets (IREI)

Distress Watch

Developer Five Star wins injunction blocking Madison Realty’s foreclosure on $2B Ritz-Carlton resort in Phoenix, AZ -- Judge finds evidence Madison manufactured loan default amid ongoing legal battle (TheRealDeal) 

Proptech & Innovation

Finance Lobby launches AI platform to match CRE borrowers and lenders – Startup uses machine learning to streamline dealmaking and reduce reliance on personal networks (GlobeSt)