The Brick Breakdown

Hello Brick Brief readers, 

Thank you for your continued support! Today we’re seeing rising Treasury yields, Fannie Mae and Freddie Mac privatization discussions, and retailer earnings that point to a cautious consumer. 

📈 Deficit Worries Push Long-Term Yields Higher
Treasury yields surged following a weak 20-year auction, with the 30-year yield jumping 11 basis points to 5.1% as concerns over deficit spending and Moody’s U.S. downgrade drove a bond selloff. The spike in long-end rates raises borrowing costs across real estate, pressuring mortgage rates, construction loans, and CMBS pricing at a time when affordability and deal volume remain fragile.

🏘️ Fannie, Forecasts, and Housing Finance in Flux
Residential forecasts improved as Zillow and Fannie Mae revised their 2025 home sales and value projections upward, reflecting stronger GDP expectations and easing rate pressures. However, Trump's renewed push to privatize Fannie Mae and Freddie Mac could raise mortgage yields by removing implicit government guarantees and increasing the risk premium on agency MBS.

🛍️ Consumer Signals from Retail Earnings
Earnings results from Lowe’s, TJX, and Target point to a cautious consumer shaped by high interest rates, delayed discretionary spending, and tariff-driven uncertainty. Lowe’s leaned on growth from home professionals to offset weak DIY homeowner demand, while Target’s earnings miss highlighted mounting pressure on mid-tier shoppers.

This Week in Real Estate: Key Events & Data

Quick Markets

30Y Mortgage: 6.94%
10Y Treasury Yield: 4.59% (+10 bps)
FTSE NAREIT Index: 753.25 (-2.57%)
30-day SOFR Average: 4.32%

Market Pulse

Rising long-term Treasury yields increase borrowing costs for real estate developers and homeowners, pressuring mortgage rates, construction loans, and investment returns across the sector

Treasury yields surge on weak 20-year auction – 30Y Treasury yield jumps 11 bps to 5.1% as deficit fears and Moody’s downgrade drive long-end bond selloff and equity losses (Bloomberg)

Brick by Brick: Trump Signals Possible Privatization of Fannie Mae and Freddie Mac

Trump said he is seriously considering taking Fannie Mae and Freddie Mac public, reviving long-stalled efforts to end government control of the mortgage giants and return capital to taxpayers.

• The two firms have remained under federal conservatorship since the 2008 financial crisis despite multiple past attempts to release them
• Trump allies argue that privatization could help reduce the national deficit, with internal estimates valuing the government’s stake at over $250B
• A potential IPO could raise $20B-$30B, rivaling the largest offerings in U.S. history and reshaping the structure of the mortgage market
• Critics warn that an abrupt transition could disrupt MBS markets and raise mortgage rates, especially if investor confidence weakens
• Mortgage yields could increase due to the loss of implicit government backing, higher capital requirements, and a greater risk premium on agency MBS
• The firms play a critical role in the housing system by backing the majority of 30Y fixed-rate mortgages by providing liquidity and stability
• Trump said he will make a decision “in the near future,” following discussions with Treasury Secretary Scott Bessent and FHFA Director William Pulte

Takeaway: Fannie and Freddie’s privatization could raise mortgage yields by removing the implied government guarantee, increasing capital requirements, and prompting investors to demand a higher risk premium. While the move could unlock billions for the Treasury, it also risks disrupting the housing finance system at a time when affordability remains strained. Real estate markets should watch closely for policy clarity and investor response.

Policy & Industry Shifts

Privatizing Fannie and Freddie could lift mortgage rates by removing their implicit government guarantee, prompting investors to demand higher risk premiums on agency-backed loans

Trump considers privatizing Fannie and Freddie – Potential $330B valuation eyed as administration weighs IPO to reduce deficit and return funds to taxpayers (WSJ)

Residential

Upward revisions to 2025 home sales and price forecasts from Zillow and Fannie Mae suggest improving confidence in housing demand, supported by a stronger GDP outlook and easing mortgage rate pressures

Zillow revises 2025 home value forecast upward to -1.4% from -1.9% – Existing sales rise 1.4% to 4.12M as inventory builds and buyer uncertainty eases (Zillow)

Fannie Mae lifts 2025 home sales forecast – Existing and new-home sales now expected to hit 4.92M as GDP outlook improves and mortgage rates projected to end year at 6.1% (HousingWire)

Apartment sales rise 36% YoY in Q1 2025 – $30B in transactions recorded despite quarterly slowdown, with Park 12 in San Diego leading top five $180M+ deals (RealPage)

Pool premium cools from pandemic highs – Homes with pools now list for 54% more than pool-less homes, down from a 61% peak, as buyers grow more value-conscious in a shifting market (Realtor.com)

Mortgage rates climb amid U.S. credit concerns – Moody’s downgrade and deficit negotiations push Treasury yields higher, dampening April sales despite improved inventory and affordability (Zillow)

Regional

State Farm seeks 30% home insurance hike in California – Insurer follows emergency 17% increase with request for 13% more, citing $7.6B in wildfire claims (TheRealDeal)

NYC multifamily permits jump 65% in Q1 – Developers file for 6,871 units, mostly in Brooklyn, as 485x tax incentive drives smaller project sizes under 100 units (CommercialObserver)

Office

Office leasing momentum is improving, but lingering macro uncertainty is driving a preference for renewals and premium Class A+ space, highlighting a bifurcated recovery shaped by tenant caution and flight to quality

Office leasing rises 18% QoQ – 32 of 40 top markets saw net absorption gains in Q1, though macro uncertainty is pushing tenants toward renewals over relocations (CBRE)

Law firms double office leasing in Q1 2025 – Sector signed 3.4M sq. ft. nationally, led by renewals and long-term deals in tight markets like NYC and LA (CommercialObserver)

Office occupancy steady at 53.4% last week – Chicago leads with 1.8-point gain to 72%, while D.C. drops 2.5 points; Class A+ buildings hit 93.2% peak on Tuesday (Kastle)

Industrial

Tariff pressures and shifting trade dynamics are slowing industrial leasing demand, though short-term port activity remains elevated as importers front-load shipments ahead of cost increases

Industrial leasing slows under tariff pressure – Q1 volume reached 189M sq. ft., but CBRE forecasts a 5–10% annual decline as trade shifts and inflation weigh on demand (CBRE)

Port of Savannah sets April container record with 515,500 TEUs – Importers accelerated shipments ahead of tariffs, marking third straight monthly high and 11% FY growth (FreightWaves)

Market Mix

Markets

Capital is flowing into real estate through private REITs and BDCs as investors seek yield in a high-rate environment, even as elevated borrowing costs and caution reshape broader deal activity

Capital markets post $88B in Q1 volume – Investment up 14% YoY, led by multifamily and industrial demand as elevated rates and cautious sentiment reshape deal flow (CBRE)

Private placement REITs and BDCs surge in Q1 – REIT NAV hits $21.8B (+11%) and BDCs reach $63.5B (+13%) as fundraising tops $6.5B, capturing larger share of alts market (ConnectCRE)

Construction

Payment delays squeeze construction sector – 70% of contractors report chronic slow payments, inflating bids by 8% and delaying projects as developers face rising costs and tighter margins (Built)

Private project stress climbs on economic uncertainty – Non-public construction delays rose 40% and abandonments 14.1% over the past year, while public projects remain comparatively stable (ConstructionDive)

Data Centers

OpenAI data center in Texas secures $11.6B – Crusoe’s eight-building Abilene site to house 400K Nvidia chips as part of OpenAI’s push to reduce dependence on Microsoft (WSJ)

Hospitality

Extended-stay hotels feel pressure in Q1 2025 – RevPAR rises just 1% as 4% supply growth and softening demand weigh on sector performance (CoStar)

Retail

Retail absorption turns negative in Q1 – Availability rose to 4.8% as consumer pullbacks and tariff-driven cost pressures hit big-box and apparel tenants hardest (CBRE)

Earnings & Real Estate Impact

Lowe’s strong Pro segment performance signals resilience in the home improvement market despite high rates, as professional demand helps offset weaker spending from rate-sensitive DIY homeowners. Tariff-related uncertainty and inflationary pressure are weighing on consumer confidence, with TJX leveraging sourcing agility to stay competitive while Target’s miss highlights growing strain on discretionary spending and middle-income budgets.

Lowe’s beat Q1 earnings expectations, reported slightly lower-than-expected revenue, and reaffirmed its full-year guidance as growth from home professionals helped offset slower demand from DIY homeowners. The company continues to face headwinds from high rates and delayed discretionary projects, but plans to manage tariff pressures through supplier collaboration, sourcing diversification, and a commitment to competitive pricing (CNBC) 

TJX, the owner of TJ Maxx and Marshalls, beat Q1 earnings and revenue expectations but issued a weak Q2 forecast due to tariff-related pressures. Executives pointed to their flexible sourcing strategy and broad vendor network as key tools to navigate rising import costs. (Bloomberg)

Target shares declined ~5% after the retailer missed Q1 earnings and revenue expectations, citing weaker discretionary spending, consumer uncertainty about tariffs, and backlash against its DEI rollback. (CNBC) 

Financings

Loans

Truist lends $84M for Savannah, GA industrial project – McCraney secures financing for Phase 1 of 1M sq. ft. Logistics 16 at Ottawa Farms, now 85% leased (CommercialObserver)

Refinancings

Trammell Crow secures $186M refinance for D.C. NoMa apartments – Artemis lends on 640-unit Rigby and Market House buildings (Bisnow)

M&A

Building & Portfolio M&A

Related sells Bronx affordable housing for $193M – Longacre acquires 2,021-unit rent-stabilized portfolio with $141M loan from PGIM to revitalize and lease 264 vacant units (CommercialObserver)

304-unit One East Delaware hits Chicago – Golub and Alcion list Gold Coast tower nearly a decade after buying it for $146M, with occupancy above 98% and rents topping $4/SF (CoStar)

Clermont buys four Chicago garages for over $100M – Canadian investor acquires 3,237 spaces downtown, including Zell’s former asset, amid broader parking sector headwinds (CoStar)

VTA buys San Jose, CA office tower for $64M – Transit agency acquires Almaden Crossing at 59% discount from 2021 price and plans $43M HQ buildout and housing redevelopment (TheRealDeal)

Institutional Fundraising

Beach Point raises $545M for real estate debt fund – New platform targets U.S. middle-market assets with a flexible, opportunistic strategy (Bisnow)

Schools developer Fortec launches $100M fund for early education centers – Miami firm targets 60 new facilities across nine states to meet demand in underserved childcare markets (TheRealDeal)