👋👋 Good morning real estate watchers! Today, we are going to talk about...

1. Colorado Springs just discovered the perfect way to launder money — literally — by flushing $400 million worth of sewage pipes that just happen to empty straight into Norwood’s bank account.

2. Commercial mortgage spreads are tighter than your uncle’s jeans at Thanksgiving and everyone’s refinancing like it’s 2005, minus the frosted tips.

3. The death of the second-home dream, as wealthy Gen Xers realize that owning a $495K Airbnb in Miami is not a personality, especially when your boss wants you back in the office and your side hustle isn’t side-hustling.

Let’s go!

TOP STORY

DRAMA

Volunteers spent their lunch breaks persuading shoppers to sign a petition on a blustery afternoon outside a Safeway on Colorado Springs’ southeast edge. Within two weeks, nearly 19,000 signatures landed on City Hall’s desk, enough to yank a 1,900-acre annexation known as Karman Line out of council chambers and into a $500,000 special election set for June 17.

What looked like a grass-roots revolt turned into a shoot-out between heavyweight developers. Karman Line’s backers accuse rival Norwood Development Group (a developer feudal lord that controls an estimated 85% of all developable land in the city) of secretly bankrolling the petition to torpedo new competition. “Voters are going to know what is going on, and we intend to expose it,” said Kevin O’Neil, the project’s managing partner. Council President Randy Helms was blunter: “I have no respect for the developer who funded this.”

Norwood won’t confirm or deny the charge, but the allegation fits a pattern. Last year, reporters uncovered an email from Norwood founder David Jenkins urging allies to funnel up to $1 million into mayoral hopeful Wayne Williams via a dark-money fund called Colorado Dawn. “It is absolutely imperative that we support and elect Wayne Williams,” Jenkins wrote. Williams insists, “No one can buy Wayne Williams.” Yet, City Council soon passed a water-supply rule that—critics note—spares Norwood’s own land while hobbling rivals. “This will… create a monopoly for one developer,” warned Doug Quimby of La Plata Communities.

The Water Buffer That Became a Moat

The 2023 ordinance requires the city utility to keep a 128% water-supply surplus before approving new annexations. Councilman Bill Murray called Norwood’s fingerprints “inordinate.”

With most vacant land inside city limits and owned by Norwood, the buffer gives the company first dibs on growth while pushing competing projects like Karman Line to the city’s fringe, where water and emergency-service questions loom.

Mayor Yemi Mobolade supports the annexation and dismisses water-shortage claims as “misleading… We do not have water issues today.” Petition organizer Ann Rush responds, “People came out eagerly to sign. Water is absolutely an issue.”

A $400 Million Flush

Meanwhile, ratepayers began noticing an extra $3 on their monthly bills. The money funds a $400 million Eastern Wastewater System Expansion, pipes and pumps destined to serve Norwood’s 18,000-acre Banning Lewis Ranch and other east-side tracts. Former state senator Bob Gardner told the council the ranch’s 2018 annexation deal makes Norwood, not customers, liable for the cost and warned of a possible class-action suit. “Can Utilities decide to do a project? Yeah!” he quipped, questioning whether they should.

Utilities CFO Tristan Gearheart defends the surcharge as long-term planning: “We’re looking 50-70 years out… recovery will come back through fees.” Yet critics argue the arrangement lets Norwood build now while homeowners foot the interest.

Housing Opportunity Shrinks

All of this ricochets through home prices. In 2019, 74% of Colorado Springs homes were affordable to the median household; by late 2024, that figure had slid to 18%, according to the Housing Opportunity Index. Economists warn that limiting new entrants, via water buffers or pricey infrastructure, keeps supply tight and prices high. Tatiana Bailey, a local economist, calls it “perfect competition without the competition.”

What Happens on June 17?

If voters uphold the Karman Line annexation, a rival developer gains a foothold and the city adds about 6,500 much-needed homes near Schriever Space Force Base. If they reject it, Norwood’s dominance and the political storm around it only deepens. Either way, the election tests whether a fast-growing city can balance water, wallets, and one very powerful land baron.

As Council President Helms told colleagues, “This is a referendum on who runs Colorado Springs—the voters or the developers.” The ballots are in the mail.

SNIPPETS

1️⃣ Lending Lumberjack: In Q1 2025, commercial real estate lending showed impressive momentum, with CBRE's Lending Momentum Index jumping 13% quarter-over-quarter and a staggering 90% year-over-year. Commercial mortgage loan spreads tightened significantly, dropping to 183 basis points (down 29 bps Y-O-Y), while multifamily loan spreads narrowed to 149 bps - the lowest since Q1 2022. Despite ongoing economic uncertainties and volatile Treasury rates, the market is seeing increased investment sales activity, creating new financing opportunities and enabling sponsors to pursue early refinancings and strategic debt acquisitions. (ConnectCRE)

2️⃣ Vacation Home Hangover: In 2024, second-home mortgage originations hit a six-year low at 86,604, representing just 2.6% of all mortgages—the lowest share on record. The decline is driven by several key factors: sky-high prices (median second-home value at $495,000), increased mortgage rates, cooling rental markets, and the return to in-office work. Florida is experiencing the sharpest drop, with metros like Miami seeing a 32.2% year-over-year decline in second-home mortgages. Interestingly, the buyer profile remains consistent: predominantly high-income (86.4%), white (79.7%), and middle-aged Gen Xers (58.6% between ages 45-64). While some markets like Detroit, San Francisco, and San Jose saw slight increases, the overall trend suggests caution for investors eyeing vacation properties. (Redfin)

3️⃣ Oh, And This: The U.S. is projected to lose $12.5 billion in international tourism spending in 2025, according to the World Travel & Tourism Council, due to declining traveler confidence tied to stricter immigration policies and heightened border scrutiny. While domestic tourism remains strong, the U.S. is the only country among 184 studied expected to see a drop in foreign visitor spending, highlighting a growing economic vulnerability masked by reliance on local travel. (Newsweek)

4️⃣ Density Deficiency: The "missing middle" housing sector – encompassing townhouses, duplexes, and small multifamily properties – shows interesting potential. While construction of 2-4 unit properties remains relatively subdued, recent data reveals promising growth: total unit construction for the last four quarters hit 23,000 units, representing a robust 53% increase compared to the previous period. These medium-density housing units comprise just over 6% of total multifamily development, notably lower than the historical 11% seen between 2000 and 2010. (NAHB)

5️⃣ SALT Bae Returns: The proposed federal tax bill would raise the State and Local Tax (SALT) deduction cap from $10,000 to $40,000, potentially providing significant tax relief for homeowners. Key details include full deduction availability for households under $500,000, with a gradual phaseout for higher incomes. The Tax Policy Center estimates that more than half the benefit will go to taxpayers who make at least $400,000. However, this tax break comes with a substantial price tag: the Penn Wharton Budget Model projects the change would result in nearly $334 billion of lost federal tax revenue over the next decade. (CBS)

6️⃣ “You Should Be Worried”: The always compelling tech billionaire Peter Thiel highlights a critical real estate crisis driven by constrained housing supply and restrictive zoning laws. The data is stark: the S&P CoreLogic Case-Shiller U.S. National Home Price Index has surged over 50% in five years, with a 3.9% annual return in December 2024, creating a massive wealth transfer from younger generations to established homeowners and landlords. Thiel argues that population growth combined with limited housing construction leads to disproportionate price increases, with home prices potentially jumping 50% while salaries remain relatively stagnant. The housing shortage is estimated at 3.8 million homes. (Yahoo!)