US CRE market faces slower hiring, real home price declines, and tighter construction pipeline in mid-2026

US nonfarm payrolls averaged just 36,000 new jobs per month over the past 12 months after downward revisions to April and May data totaling 74,000 positions, according to the Bureau of Labor Statistics Employment Situation released July 2. That figure, combined with a string of softening macro prints, gives commercial real estate operators concrete reason to revisit demand assumptions across nearly every asset class entering the second half of 2026.

Altus Group's research team compiled the indicators below as part of its weekly CRE This Week series, drawing on data released during the week of June 30 through July 2. Taken together, they describe a market where borrowing costs are unlikely to ease soon, regional performance is diverging sharply, and the construction pipeline is contracting.

Labor market: positive but thin

The BLS Employment Situation for June showed total nonfarm payrolls rose just 57,000, well below the 98,000 private-sector figure reported separately by ADP and the Stanford Digital Economy Lab on July 1. The gap was largely driven by leisure and hospitality, which shed 61,000 jobs on weaker seasonal hiring in the BLS count after posting weak gains in the ADP report. Professional and business services led BLS gains at 36,000, followed by social assistance at 25,000 and health care at 22,000.

The unemployment rate held at 4.2%, and average hourly earnings rose 3.5% year over year to $37.64. Labor force participation slipped 0.3 percentage points to 61.5%. For CRE operators, the most actionable read comes from the BLS JOLTS data for May, also released June 30: the hires rate held at 3.3%, below the 3.7, 4.0% range that characterized the active office leasing years of 2021 to 2022. The quits rate at 1.9% reflects a workforce with limited mobility. Neither figure points toward near-term expansion-driven leasing.

For hotel operators and experiential retail, the leisure and hospitality signal is the sharpest warning in the June data. The sector posted its sixth consecutive month of weak hiring in the ADP report before the BLS count showed an outright decline. That trajectory suggests softer conditions are arriving, not already priced in.

Home prices: 11 months of real declines, wide regional splits

S&P Dow Jones Indices released the April 2026 S&P Cotality Case-Shiller Home Price Index on June 30. The National Home Price Index rose 0.8% year over year in nominal terms, but with April CPI running at 3.8%, US home values have now fallen in real terms for 11 consecutive months. The 20-City Composite gained 1.1% annually and the 10-City Composite 1.8%, though both trail inflation by a substantial margin.

The regional picture matters most for multifamily underwriting. Chicago led all tracked cities at plus 6.5% year over year, followed by New York at plus 3.8% and Cleveland at plus 3.2%. At the other end, Seattle fell 2.3% and Denver, Tampa, Dallas, and Phoenix each declined more than 1.5%. Sun Belt metros facing home price declines also contend with greater competition from for-sale inventory, which presses against rent growth assumptions. Constrained Midwest and Northeast markets retain a structural tailwind on rental demand.

The 30-year mortgage rate sat at 6.3% as of the reporting period, having briefly dipped below 6% earlier in 2026 before reversing. At that rate, the path to ownership remains closed for a significant share of households, keeping rental demand elevated in undersupplied markets even as homebuying intentions tick up on a six-month rolling basis per the Conference Board.

Consumer confidence: headline up, present situation down

The Conference Board's Consumer Confidence Index for June edged up 0.6 points to 91.2, following a downwardly revised 90.6 in May. The gain was uneven. The Present Situation Index fell 3.0 points to 116.4, with the share of consumers describing jobs as hard to get rising to 22.5%, the highest since January 2021. The Expectations Index rose 3.0 points to 74.4, driven mainly by falling oil prices improving near-term sentiment.

The Expectations Index has now held below 80 for two consecutive months, a level the Conference Board has historically associated with weaker consumer spending. Discretionary retail and hospitality would be the most exposed CRE sectors if the labor-market perception in the Present Situation component reflects actual softening in hiring rather than sentiment alone.

Construction spending: down 2.7% year-to-date

Total US construction spending through the first five months of 2026 reached $858.4 billion, running 2.7% below the same period in 2025, according to the US Census Bureau's Value of Construction Put in Place release on July 1. The seasonally adjusted annual rate for May came in at $2,210.2 billion, essentially flat month over month within the margin of error and down 1.5% year over year.

The sharpest move was in manufacturing construction, which fell 1.3% in May to a $173.6 billion annualized rate and dropped 22.0% year over year. Altus Group attributed the decline to IRA- and CHIPS Act-supported factory projects completing their initial construction phases. Commercial construction, covering retail and warehouse, slipped 0.3% on the month and 5.5% year over year. Health care fell 5.9% year over year and lodging 10.5%.

Private residential construction ticked up 0.3% to a $930.2 billion annualized rate, and public construction rose 0.5% to $541.2 billion, with gains in educational spending at $113.4 billion and highway spending at $150.6 billion. For industrial and logistics operators, the manufacturing construction decline is worth tracking closely: fewer new facilities in the pipeline reduces future supply competition, but it also signals that occupiers tied to domestic manufacturing expansion are pulling back on footprint growth.

What this means for your team

• Multifamily underwriting by metro: stress-test rent growth assumptions differently for Sun Belt markets with declining nominal home prices versus supply-constrained Midwest and Northeast markets where the rental demand tailwind is more durable.
• Office demand assumptions: the 3.3% hires rate in May JOLTS and thin professional and business services job gains in June support keeping expansion-driven leasing forecasts conservative through year-end.
• Hotel and experiential retail operators: the sixth consecutive month of weak leisure and hospitality hiring in the ADP data, followed by an outright BLS decline in June, is a forward signal to monitor occupancy and RevPAR trends closely in Q3.
• Capital markets planning: with the Fed holding rates steady given persistent inflation and a labor market that has not deteriorated sharply, underwriting should not assume near-term rate relief; the 6.3% mortgage rate environment and corresponding cap rate pressure are likely to persist.