Midwest Dominates 2025 Rankings While Builder Confidence Inches Up

Good morning.

Following Monday’s release of the NAHB Housing Market Index and a flurry of 2025 market forecasts, the narrative for the year ahead is crystallizing around one central theme: affordability is the ultimate kingmaker.

While coastal markets grapple with inventory constraints and insurance headwinds, yesterday’s data confirms a decisive shift in buyer attention toward the Midwest. Meanwhile, builders are showing tentative optimism despite persistent labor shortages. As markets open today, watch for how the 10-year Treasury reacts to the latest jobs revisions—volatility isn't done with us yet.

Here is what you need to know to lead your market today.

Rates hold steady as the labor market sends mixed signals.

Following a week of fluctuation, the 30-year fixed-rate mortgage stabilized yesterday, showing little movement despite broader economic uncertainty. Markets have largely priced in the Federal Reserve’s "higher for longer" stance, keeping borrowing costs elevated but predictable for the moment. The Data: 6.42% (Average 30-year fixed rate as of yesterday’s close). The "So What?": Stability is a double-edged sword. While it prevents panic, a rate entrenched above 6.4% continues to sideline first-time buyers. For clients waiting for a sub-6% drop, today’s advice is caution: trying to time the bottom in this environment is a losing strategy. Source: Money.com

Late yesterday, analysis of the Bureau of Labor Statistics’ recent data revealed a more significant cooling in the labor market than initially touted. While November added jobs, backward revisions painted a bleaker picture of the preceding month, complicating the Fed's inflation fight. The Data: 105,000 (Jobs lost in October, per revised figures). The "So What?": A softening labor market usually pulls rates down, but the mixed nature of this report has left bond markets in a holding pattern. Watch for lenders to tighten qualification standards slightly today in response to perceived employment risk. Source: Real Estate News

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Builder sentiment ticks up as markets eye new starts data.

The National Association of Home Builders (NAHB) released its Housing Market Index yesterday, showing a surprise uptick in builder sentiment. Despite high financing costs, builders are seeing a floor in demand, driven largely by the chronic lack of existing inventory. The Data: 39 (December Housing Market Index score, up 1 point). The "So What?": A score below 50 still signals contraction, but the upward trend suggests builders are adapting to the "new normal" of rates. Expect builders in your market to continue offering aggressive rate buydowns today to capture buyers priced out of the resale market. Source: VT Markets

Ahead of the critical data release, market consensus has coalesced around a steady pace for housing starts. Analysts are projecting a stabilization in the annualized rate, suggesting that despite financing headwinds, the construction pipeline is not collapsing. The Data: 1.325 Million (Projected annualized unit rate). The "So What?": In a volatile rate environment, meeting expectations is a win. If the actual numbers track with this consensus, it validates the "soft landing" narrative for construction and provides a stable supply outlook for Q1 2026. Source: CME Group

Immigration shifts and spending bills loom large.

Redfin’s 2025 outlook, discussed widely in policy circles yesterday, flagged a major risk for the coming year: restrictive immigration policies. With the incoming administration signaling tighter borders, the construction industry faces a potential supply shock. The Data: 30% (Estimated portion of the construction workforce comprised of immigrants). The "So What?": If this labor pool shrinks, labor costs—and consequently home prices—will rise. This is a critical talking point for investors: replacement cost for real estate is likely to increase faster than inflation in 2026. Source: Redfin

Congressional appropriators signaled progress yesterday on the FY26 "minibus" spending package. This legislation is critical for sustaining HUD’s rental assistance and community development block grants, which have been operating under uncertain stopgap measures. The Data: FY26 (The fiscal year funding currently being negotiated). The "So What?": Stability in HUD funding ensures that low-income housing programs—and the developers who rely on them—can plan for the year ahead. A passed budget would be a quiet but massive win for the affordable housing sector. Source: NLIHC

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The Midwest rises as the new affordability haven.

Zillow released its 2025 market rankings yesterday, delivering a shock to coastal elites. The Midwest swept the leaderboard, with Rockford, Illinois taking the top spot. The ranking methodology heavily weighted affordability and market heat. The Data: #1 (Rockford, IL ranking among all U.S. housing markets). The "So What?": The "flight to affordability" is no longer a trend; it is the market. If you are in a high-cost coastal market, your referral network in the Midwest is now your most valuable asset. Clients are leaving not just for taxes, but for survival. Source: Zillow Investors

While Florida’s condo market battles an insurance crisis, Tampa’s commercial sector posted a massive win yesterday. A new report ranks Tampa as the second-strongest retail real estate market in the country, defying the broader narrative of a "Florida slowdown." The Data: No. 2 (Tampa's national rank for retail real estate). The "So What?": Retail follows rooftops—and money. This commercial strength suggests that despite residential headwinds, the underlying economic engine of the Southeast remains robust. Investors should look for mixed-use opportunities in these resilient pockets. Source: Business Observer

AI predictions and viral marketing trends.

Yesterday’s industry chatter centered on a new forecast for 2026 PropTech. The consensus? We are moving from "AI hype" to "AI plumbing," with asset management and office logistics poised for major disruption via automated operations. The Data: 2026 (The target year for widespread AI operational integration). The "So What?": For brokerage owners, the message is clear: the efficiency gains from AI are about to move from "nice to have" to competitive necessity. Start auditing your tech stack today. Source: Commercial Observer

Taking a page from Spotify, a new trend swept through agent social media feeds yesterday: "Real Estate Wrapped." Agents are using the format to showcase their 2025 transaction data in a consumer-friendly, shareable graphic. The Data: 2025 (The year being summarized in social campaigns). The "So What?": It’s a low-cost, high-engagement way to prove production. If you haven't generated your own "Wrapped" graphic yet, you are missing the easiest marketing win of the week. Source: RISMedia

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Yesterday’s data confirms that affordability is the single greatest driver of market activity right now. It is why Rockford is beating Miami, and why builders are pivoting to smaller footprints.

For your clients today, the message is one of strategic compromise. Buyers waiting for a "crash" in rates or prices are likely to be disappointed. The winners in this market are those who expand their search radius (Midwest/South) or adjust their expectations to meet the reality of 6.4% money.

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