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CREFC’s 2Q 2025 Sentiment Index Jumps as CRE Market Optimism Rebounds

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New York, July 30, 2025 – The CRE Finance Council (CREFC), the industry association representing the $6.2 trillion commercial and multifamily real estate finance sector, today released its Second-Quarter 2025 (2Q25) Board of Governors (BOG) Sentiment Index survey results. The index surged 27.8% to 112.3 from 87.9 in 1Q25, marking a decisive return to positive territory, reversing last quarter’s sharp decline, and climbing back above the neutral 100 baseline.

• Economic Outlook: Sentiment flipped positive, with only 27% of respondents expecting worse economic conditions over the next 12 months, a dramatic improvement from 80% last quarter. 54% expect stable conditions and 19% anticipate improvement.
• Federal Policy: Governors see a much more favorable policy landscape, with 49% expecting a positive impact from government actions (up from 11% in 1Q25) and only 16% anticipating a negative impact (down from 59%).
• Rate Impact: Positive shift with 38% seeing favorable rate movement (up from 30%), while negative sentiment dropped to 27% (from 30%).
  
• CRE Fundamentals: The outlook for fundamentals stabilized, with only 19% of respondents expecting worsening conditions (down from 50% last quarter). 81% now foresee fundamentals improving or remaining unchanged.
  
• Transaction Activity: Expectations for investor demand soared, with 65% predicting more demand (up from 35%) and only 3% expecting less demand (down from 20%).
  
• Financing Demand: The board is exceptionally bullish on financing demand. 86% of respondents expect more borrower demand, up from 48% in 1Q25. Notably, 0% of respondents expect less demand.
  
• Market Liquidity: Confidence in capital availability returned, with 92% expecting better or the same liquidity (up from 74% last quarter) and only 8% expecting worse conditions (down from 26%).
  
• Overall Sentiment: The industry’s overall outlook showed a robust recovery, with 49% now holding a favorable view (up from 22%) and only 8% remaining negative (down from 43%).

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CREFC’s 2Q 2025 Sentiment Index Jumps as CRE Market Optimism Rebounds

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The CRE Finance Council (CREFC) today released its Second-Quarter 2025 (2Q25) Board of Governors (BOG) Sentiment Index survey results. The index surged 27.8% to 112.3 from 87.9 in 1Q25, marking a decisive return to positive territory, reversing last quarter’s sharp decline, and climbing back above the neutral 100 baseline.   
 
Conducted from July 8 to July 22, 2025, the survey captured a dramatic shift in sentiment as market participants adapted to the evolving economic landscape and found renewed optimism in stabilizing interest-rate expectations and improving capital market conditions. The rebound represents one of the strongest quarterly improvements in the index’s history.
  
Key Highlights From 2Q25 Index Core Questions:

• Economic Outlook: Sentiment flipped positive, with only 27% of respondents expecting worse economic conditions over the next 12 months, a dramatic improvement from 80% last quarter. 54% expect stable conditions and 19% anticipate improvement.
• Federal Policy: Governors see a much more favorable policy landscape, with 49% expecting a positive impact from government actions (up from 11% in 1Q25) and only 16% anticipating a negative impact (down from 59%).
• Rate Impact: Positive shift with 38% seeing favorable rate movement (up from 30%), while negative sentiment dropped to 27% (from 30%).
• CRE Fundamentals: The outlook for fundamentals stabilized, with only 19% of respondents expecting worsening conditions (down from 50% last quarter). 81% now foresee fundamentals improving or remaining unchanged.
  
• Transaction Activity: Expectations for investor demand soared, with 65% predicting more demand (up from 35%) and only 3% expecting less demand (down from 20%).
  
• Financing Demand: The board is exceptionally bullish on financing demand. 86% of respondents expect more borrower demand, up from 48% in 1Q25. Notably, 0% of respondents expect less demand.
  
• Market Liquidity: Confidence in capital availability returned, with 92% expecting better or the same liquidity (up from 74% last quarter) and only 8% expecting worse conditions (down from 26%).
  
• Overall Sentiment: The industry’s overall outlook showed a robust recovery, with 49% now holding a favorable view (up from 22%) and only 8% remaining negative (down from 43%).

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CRE Securitized Debt Update

 

Private-Label CMBS and CRE CLOs

Only one transaction priced last week:

• BMARK 2025-V16, a $624.7 million conduit backed by 31 five-year loans secured by 157 properties across 36 states and Washington, D.C., from Citi, Goldman, DB, BMO, and Barclays.

By the numbers: Year-to-date private-label CMBS and CRE CLO issuance totaled $84.7 billion, representing a 45% increase from the $58.5 billion recorded for same-period 2024. 

Spreads Hold Steady

• Conduit AAA spreads tightened 2 bps to +81, while A-S spreads were unchanged at +113. YTD, AAA and A-S spreads are wider by 6 and 8 bps, respectively.
• Conduit AA and A spreads were unchanged at +160 and +200, respectively. YTD, they are wider by 25 bps and 35 bps, respectively.
• Conduit BBB- spreads were unchanged at +500. YTD, they are wider by 75 bps.
• SASB AAA spreads were tighter by 1 - 2 bps to a range of +102 to +128, depending on property type.
• CRE CLO AAA spreads were tighter by 5 bps to +130, while BBB- spreads were unchanged at +375.

Agency CMBS

• Agency issuance totaled $2.5 billion last week, comprising $1.4 billion of Fannie DUS, $932.6 million of Freddie K, Q, and Multi-PC transactions, and $194.8 million of Ginnie Mae transactions.
• Agency issuance for the year totaled $79.1 billion, 38% higher than the $57.4 billion for same-period 2024.

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Bank Capital Conference Hints at Significant Reform

July 29, 2025

On July 22, the Federal Reserve hosted a highly anticipated conference on the state of and potential reforms to the bank regulatory capital framework. Fed Chair Jerome Powell and Vice-Chair of Supervision Michelle Bowman were both in attendance. 

• Leverage ratio reform
• Evolution of the capital framework
• Reforms to the Global Systemically Important Bank surcharge (G-SIB) framework 
• Evaluating the stress test regime
• Chief Financial Officers' perspectives on reforms to the capital framework

Basel III: The Central Theme at the Conference 

• Most participants favored moving forward with Basel “Endgame” implementation, but with tailoring to account for bank size and business model. 
• Many panelists voiced concerns about the risk of double-counting capital requirements given overlaps between stress testing frameworks and Basel III. 

Other key themes included the need to:

• View the capital framework holistically rather than as a loose compilation of different rules. Speakers consistently argued that changes in one part of the framework (e.g., leverage ratios, G-SIB surcharge, stress tests) can have unintended consequences or create redundancies elsewhere, leading to suboptimal outcomes.
• Approach regulation pragmatically, focusing on identifying problems and developing efficient, simple solutions. Many speakers advocated for reducing bureaucracy, streamlining processes, and ensuring clearer, more predictable rules to enhance banks' abilities to serve customers and support economic growth.
• Ensure greater transparency in regulatory models, scenarios, and data to help identify and correct flaws, build trust with the public and investors, and enable banks to better manage risk and capital needs.
• Prevent regulations, particularly the enhanced supplementary leverage ratio (eSLR) and GSIB surcharge, from disincentivizing bank engagement in low-risk activities (like Treasury market intermediation) or pushing credit origination outside the regulated banking system.

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CBO Report Examines GSE Conservatorship Exit Costs

July 29, 2025

The nonpartisan Congressional Budget Office, which is tasked with calculating the federal budgetary costs of proposed legislation or policy changes, recently issued a report that examines the costs and benefits of ending Fannie Mae and Freddie Mac (the GSEs) conservatorship. 

• “If CBO no longer considered the GSEs to be government entities, it would incorporate the estimated cost of any explicit federal guarantee in its future cost estimates and baseline projections.”
• As a reminder, the pre-2008 guarantee was “implicit” such that investors expected the government would step in to ensure timely repayment of defaulted loans—which it did. 
• The Treasury’s support is explicit to the entities themselves, but not the MBS. A change in the conservatorship would open questions on how the government would backstop the GSEs or mortgages. 
• Even if the guarantee were implicit, CBO says it would consider assessing the costs: “Before the GSEs were placed in conservatorships, CBO did not incorporate their implicit federal guarantee in its budget estimates. But the events of 2008 provide support for recording the cost of such a guarantee if the GSEs were released from government control without an explicit federal backstop.”

Go deeper: The report’s seven considerations are listed below: 

1. CBO projects that the GSEs’ future mortgage guarantees have a budgetary cost.
2. CBO treats the GSEs as if they were part of the government.
3. Releasing the GSEs from government control would result in both federal savings and federal costs.
4. CBO projects the budgetary effects of the GSEs’ mortgage guarantees on a fair-value basis.
5. CBO’s baseline budget projections and cost estimates incorporate administrative and judicial actions.
6. CBO would incorporate the cost of the Treasury’s implicit or explicit commitments to the GSEs in cost estimates.
7. CBO’s estimate of the proceeds earned from selling the Treasury’s shares in the GSEs would depend on many factors.

Contact David McCarthy (dmccarthy@crefc.org) with any questions. 

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Senate Banking Requests Feedback on Crypto Legislation

July 29, 2025

Now that the House has cleared three digital asset bills, the Senate is beginning robust consideration of the market structure legislation that would set up a regulatory regime for digital asset investments and exchanges. 

• The legislation is focused on digital assets, but it contemplates updates to “investment contract” definitions and numerous reporting regulations. 
• While the intent is to update the law to allow for a digital asset market and oversight, it is important that lawmakers receive feedback from existing securities market participants on potential intended or unintended consequences of the effort. 
• CREFC will send additional details to our Legal Advisory and Advocacy Committees. 

Please contact David McCarthy (dmccarthy@crefc.org) with any feedback, responses, or questions on the RFI. 

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The Economy, the Fed, and Rates

The Economy, the Fed, and Rates…

• GDP Outlook Surprises to the Upside: Despite aggressive tariff policies and restrictive immigration measures under President Trump’s second term, the U.S. economy has remained resilient. After a Q1 GDP contraction of 0.5%, widely attributed to pre-tariff inventory stockpiling, Q2 growth is projected at 2.4% according to the Atlanta Fed’s GDPNow forecast. This defied expectations of a slowdown.
• Durable Goods Weakness: U.S. durable goods orders plunged 9.3% in June, reversing a strong May gain driven by aircraft orders. Excluding transportation, orders rose only 0.2%, suggesting business investment is weakening.
• Housing Market Slump: The housing sector has slumped under the weight of high prices and high mortgage rates. Sales of existing homes dropped to a nine-month low in June, indicating that tight monetary conditions and affordability challenges continue to constrain the market.

Federal Reserve Policy

• Status Quo at July FOMC, But September Cut Likely: The Fed is expected to hold rates at 4.25%-4.50% at its July 30 meeting, despite heavy political pressure from President Trump for immediate cuts. Fed funds futures assign ~60% probability of a 25-bp cut in September, with markets pricing in a second cut by year-end.
• Internal Division Emerging: Two Trump-appointed governors, Christopher Waller and Michelle Bowman, may dissent in favor of an immediate cut. A double dissent by governors would mark the first such event since 1993 and could indicate a meaningful policy shift ahead.
• Fed Communication under Scrutiny: Former Chair Bernanke recommends greater transparency and use of a “central forecast,” but risks include confusing markets and exposing the Fed to more political attack in a uniquely toxic environment.
• Powell under Pressure: Political attacks on Fed Chair Jerome Powell have intensified, including the president’s questioning whether he should fire him. Though Powell’s term runs through May 2026, speculation about his potential ouster has unsettled markets. PIMCO warned that any move undermining Fed independence would be “very bad for markets.”

Market Reaction and Forward Outlook

• Treasury Yields Easing after Prior Surge: The 10-year Treasury yield fell 3 bps to 4.39% this week, snapping a three-week streak of increases. The decline came amid a flurry of economic data and developments in the ongoing trade negotiations. However, yields remain elevated, reflecting lingering concerns about inflation risks and skepticism regarding fiscal discipline.
• Equities and Corporate Earnings: U.S. equities have rebounded after an early-year dip, supported by strong Q2 earnings – 80% of S&P 500 companies reporting so far have beaten estimates. Another reason for the rebound is that employers continue to hire at a solid clip, and businesses aren't firing people, keeping the unemployment rate at a historically low rate of 4.1%. This resilience comes even as concerns mount about tariffs and Fed policy. 
• Tariff Impact Still to Come: While the immediate inflationary effects of tariffs have been muted, analysts caution that cost pass-throughs by businesses could accelerate if tariffs remain in place through year-end. Goldman Sachs cut its 2025 GDP forecast to 1.1%, citing policy uncertainty and structural drags from immigration curbs.

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Congressional Outlook: Bipartisan Housing Bills on Tap

July 29, 2025

August recess is almost here, but Congress will have a busy fall with the September 30 government funding deadline. 

• The House is out until September, and the Senate is expected to wrap up late this week after working through confirming nominees. 
• Additionally, key legislators introduced bipartisan housing bills, and the Senate Banking Committee plans to hold a housing-focused markup today. 

Why it matters: The bipartisan, bicameral efforts on housing are a promising sign toward advancing legislation to target a variety of housing issues and needs. 

• Increasing Housing in Opportunity Zones: Enables the HUD Secretary to give added weight to applicants for competitive HUD grants that are located in or primarily serve designated Opportunity Zones to support housing preservation and construction.
• Build More Housing Near Transit Act: Amends the Capital Investment Grants (CIG) program in the Federal Transit Administration to provide an optional increased rating in the Federal Transit Authority’s evaluation process for projects in areas that establish pro-housing policy near public transportation routes.
• Revitalizing Empty Structures into Desirable Environments (RESIDE) Act: Creates a competitive pilot discretionary program within the HOME Investment Partnerships program if the annual appropriation exceeds $1.35 billion to convert vacant and abandoned buildings into attainable housing.
• Housing Affordability Act: Requires the Federal Housing Administration (FHA) to study multifamily loan limits and then grants HUD rulemaking authority, with FHA input, to adjust those limits to better match housing market costs and enhance affordability.
• For a section-by-section breakdown of the bill, click here. For legislative text, click here.

The Identifying Regulatory Barriers to Housing Supply Act, which aims to reduce state and local barriers to housing creation, was introduced by Republicans and Democrats last week.

• Representatives Mike Flood (R-NE) and Brittany Pettersen (D-CO) and Senators Brian Schatz (D-HI) and Todd Young (R-IN) introduced the House and Senate versions of the bill. 
• The bill highlights the restrictive practices embedded in traditional zoning laws, pushes communities to streamline excessive local regulations, and promotes greater openness in how neighborhoods are planned and developed. 
• The bill also reinforces the long-standing effectiveness of the Community Development Block Grant program in efforts to expand housing supply.
• A full copy of the legislation can be accessed here.

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CREFC Publishes Updated Sustainability Strategic Issues Monitor

July 29, 2025

The CRE Finance Council announced the fourth update of its Sustainability Trends in the Commercial Real Estate Finance Industry: Update Report, July 2025, which outlines sustainability-related risks and opportunities for the commercial real estate (CRE) sector.

• Resiliency and efficiency standards, including the implications for insurance pricing, clean energy incentives, and decarbonization;
• Regulation, policy, and political dynamics, with an accompanying outlook on deregulatory trends, legal challenges, and nation-wide policy fragmentation; and
• Emerging trends such as data center energy use and resiliency, nuclear power, and biodiversity investments.

What they're saying: CREFC's Property Risk & Resilience Committee, launched in 2021 as the Sustainability Initiative, recognized the need for a reliable monitoring system to help industry partners navigate the complicated U.S. sustainability landscape.

• Given growing resiliency and energy needs, this monitoring system identifies both risks and opportunities for the CRE industry.

Please contact Sairah Burki (sburki@crefc.org) with any comments.

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