March 2025 Housing Market Update: Are Price Declines Coming?

Dave:Your actual property shopping for window is open. Nicely, perhaps that’s proper. The housing market is softening after a number of years of supreme vendor energy. Potential worth declines is usually a boon for actual property traders trying to negotiate, however in addition they create threat for those who purchase on the improper second. So which means is the housing market heading and how will you take most benefit in your individual portfolio? At present I’m providing you with my March, 2025 housing market replace. Hey everybody, it’s Dave head of Actual Property investing at BiggerPockets, and if you realize me, I consider being a profitable investor is about studying and repeatedly enhancing in your abilities. Issues like deal discovering, tenant screening, managing rehabs, all that stuff is tremendous essential. However you additionally want to grasp the broad traits which might be taking place within the housing market with a purpose to optimize your portfolio to seek out the perfect offers and to keep away from any pointless ranges of threat.For that reason, I like to offer a abstract of what’s going on within the housing market and I additionally like to offer my private evaluation and skim on the scenario. I’ll even let you know what I’m interested by and doing with my very own portfolio. That is for March, 2025. So traits could also be completely different for those who’re watching this a bit of bit additional into the longer term. Now I need to simply say that I’ve been analyzing the housing marketplace for a really very long time. I’ve been an investor for 15 years. I’ve been working at BiggerPockets for 9 and proper now issues are altering just about as rapidly as they ever have and that makes it extra essential than ever to grasp what’s taking place in your personal portfolio and reaching your monetary targets. Alright, so let’s discuss this softening market and what it really seems like within the numbers and naturally what it means to you.Now for those who take a look at sure web sites like Redfin, you’ll see that dwelling costs are up 4% yr over yr in accordance with what knowledge they’ve collected and after they seasonally regulate it. While you take a look at a few of the different knowledge sources, there’s a supply known as the Case Schiller Index and that makes use of a distinct methodology the place it principally tracks how the worth of the identical dwelling change over time. And what you see while you take a look at the case Schiller is it’s a lot nearer to flat. And so we’re most likely in someplace in between these two. There’s no good measure, however we’re most likely flat-ish housing costs perhaps up a bit of bit relying on what market that you simply’re taking a look at. So that’s on no account any form of correction or crash at this level. It’s additionally not likely thrilling knowledge when it comes to appreciation, however I believe the essential factor right here is that the pattern is simply actually flat or a bit of bit down.We’re not likely seeing appreciation or worth progress begin to speed up once more. And so that is simply one of many causes I’m saying that the market’s flat. Now to grasp if this pattern goes to proceed or if we’re going to see the market reverse in some form of means, we to dig in a bit of bit deeper, go one stage decrease to attempt to perceive why the market is considerably flat. And I at all times discuss this, however we’ve got to do it. We obtained to speak about provide and demand. That’s what dictates costs within the housing market. And so we have to see what’s happening with provide, which is simply what number of houses are on the market at any given level or how many individuals are itemizing their houses. And we obtained to take a look at demand. How many individuals need to purchase houses? Let’s begin with the availability facet.There’s actually good knowledge about this. It’s a bit of bit simpler. So we’re going to speak first about one thing known as new listings. It is a measurement of how many individuals put their properties up on the market in any given month, and that’s up yr over yr. It’s up 6% in accordance with Redfin, which is sweet in some methods, nevertheless it’s not loopy, proper? We’ve got seen actually low stock and to return to a more healthy housing market, there should be extra properties listed on the market. And so having that go up, at the least within the quick time period is mostly seen as a great factor, however you must look not at simply how many individuals are itemizing their properties on the market. You even have to take a look at how lengthy these properties are staying in the marketplace as a result of in the event that they’re getting listed and going rapidly, then costs can preserve going up.But when extra issues are getting listed this yr than final yr they usually’re simply sitting there and not likely promoting, then costs are most likely going to go flat or go down as a result of as property house owners who need to promote their property are seeing their properties simply sit there in the marketplace week after week or month after month, they decrease their worth or they’re prepared to supply concessions. And that’s what in the end pushes costs down. And what’s taking place proper now’s that energetic listings are up 10% yr over yr. And once more, that’s not loopy as a result of we’ve got to take a look at the historic context right here. So that you would possibly know this, however again in 2019, energetic listings had been averaging someplace round 2.3, 2.4 million. Then through the pandemic they went right down to 1.6. We really bottomed out at 1.1 million and though they’re going again up proper now, they’re nonetheless at 1.5 million, they’ll most likely go up over the summer season and get someplace near 1.9 million.In order that they’re going up, however they’re nonetheless not at pre pandemic ranges. And that’s one of many major issues as we discuss in regards to the housing market that it is advisable to bear in mind is after we examine what’s taking place now to what was taking place through the pandemic, it’s not the perfect comparability truthfully, as a result of what occurred through the pandemic was simply so uncommon. So to say, oh my god, stock has gone up in comparison with the pandemic. In fact it did as a result of it was like in any respect time lows. I personally like to take a look at that also, however in comparison with 2019, and so we’re seeing issues come again nearer to pre pandemic ranges, however we’re not there but. And so that is the rationale why I’m saying that the market is softening. It’s again to the place it was. I might even say it’s simply form of a normalization of the market, however as a result of we’ve gotten used to this tremendous heated market that’s very tight, there usually are not numerous issues in the marketplace, there are nonetheless numerous demand.And so issues are transferring actually rapidly. That’s why I’m saying it’s softening as a result of we’re simply transferring again to a extra balanced housing market. So that you positively see that within the energetic listings numbers. You see that in another knowledge that you would be able to take a look at for this stuff like days on market, these are going again up or months of provide. These are simply different methods to measure the housing market. We don’t have to get into them immediately, however what you must most likely know is that the entire measures of housing market well being are simply saying that we’re getting nearer again to pre pandemic ranges of the steadiness between provide and demand. Now in fact, what I’ve been speaking about to date is in regards to the nationwide housing market, however there are enormous regional variations. We’re really seeing numerous indicators that the market is sort of splitting. Some markets are rising in a single path, others are going within the different path. So we’re going to interrupt down these regional variations in only a minute. However first we’ve got to take a fast break. And this week’s larger information is dropped at you by the Fundrise Flagship Fund, put money into personal market actual property with the Fundrise Flagship fund. Try fundrise.com/pockets to study extra.Welcome again to the BiggerPockets podcast. We’re right here doing our March housing market replace. Earlier than the break, we talked about how numerous the info means that the nationwide housing market is transferring to a extra balanced market, a extra purchaser’s market, however that’s not taking place in every single place within the nation. So let’s simply take a minute right here and discuss how stock modifications are completely different in several areas of the nation. First issues first, what it is advisable to know is that each single state within the nation is experiencing will increase in stock besides North Dakota. North Dakota is down 2%, in every single place else is up. That is simply yr over yr since 2024 in February to 2025 in February. And once more, I’m recording this in early March. So the final month that we’ve got knowledge for is February. The state that has the best shift in stock during the last yr is Nevada.We see California at 44%, Arizona at 41%. Vermont is up there, Hawaii is close to 50%. In order that’s taking place in every single place the place if you wish to know regionally the place issues are taking place within the least, it’s largely within the northeast and the Midwest. So I mentioned North Dakota, that’s sort of an outlier, however New York for instance, solely up 3%. New jersey’s 9%, Illinois is 9%. So it’s form of a continuation of the traits the place the most well liked or the strongest housing markets, I ought to say are within the Midwest and the Northeast. A number of the weaker ones are within the mountain west and west coast and the southeast as effectively. Georgia’s up 37%, Florida’s up 34%. That’s simply at a state stage. However given what I used to be saying earlier than in regards to the utility and usefulness of evaluating knowledge from this previous yr to the yr prior, it’s useful. We have to comprehend it as a result of it is advisable to understand how the market’s altering.However I additionally like to offer this context of how issues have modified since earlier than the pandemic as a result of that can actually give us some clues about the place costs are heading in any given market. And while you take a look at the info this fashion, it is extremely, very completely different. Bear in mind I simply mentioned that every part’s going up yr over yr as a result of it was tremendous low. However after we take a look at how February, 2025 compares to February, 2019, it’s a fairly completely different story. We’ve got sure markets the place we’re nonetheless nowhere even near the degrees of stock that we had been at in 2019. Once I take a look at a state like Pennsylvania, it’s down 50%, nonetheless over 2019. Maine is down 61%. New Hampshire, 61%, Illinois, 63%, nearly all of it’s concentrated within the Northeast and the Midwest. So Wisconsin, Michigan, Virginia, all of those states are actually down. Really Alaska’s down too.That’s sort of the one one which’s on the market aside from North Dakota. Once more, these are form of probably the most considerably down, however even all through the remainder of the nation, most states are nonetheless down in comparison with pre pandemic ranges. If we take a look at the Carolinas, California, Nevada, Washington, Oregon, all of them are nonetheless down. So that’s form of the large image factor that you must remember is that though stock is returning, most states are nonetheless down in comparison with pre pandemic. In order that they’re nonetheless not again to what can be thought of a traditional market. There are 4 states, nonetheless which might be above pre pandemic ranges. The primary with probably the most stock progress above pre pandemic ranges is Texas. It’s 15% above the place it was in 2019. Then comes Florida with 9% above Colorado at 7%, and Tennessee really with 2% as effectively. So once more, the regional variations actually matter, and I’m speaking about states.I can’t get into each particular person metro space on the podcast, it’s simply an excessive amount of to do. However what my advice for all of you is to take a look at these two issues in your particular person market as a result of even inside Texas which has rising stock, there are particular markets and there are particular neighborhoods the place stock continues to be down. Or for those who take a look at Pennsylvania, which has 50% declines in stock, I’m positive there are nonetheless neighborhoods in areas the place stock is growing. So I actually advocate you take a look at two issues in your market. Go and examine stock ranges proper now in February of 2025 to the place it was final yr, see how a lot that’s rising after which examine it to 2019 and also you’ll get a way of how rapidly the market is shifting from that basically robust sellers market. That was sort of common for years again to what can be a extra regular form of steadiness sort of market.So what does this all imply? The stuff I mentioned and the analysis you must most likely be doing by yourself as effectively. Any market the place stock goes up quickly has the largest possibilities of worth progress slowing. And in some markets that imply it’d go from 10% appreciation to five% appreciation. In some markets that may imply six to 2. Some markets it’d imply going from flat to unfavorable. And so it actually relies on the size of the stock modifications and what’s happening in your specific market. However as a complete, simply going again, zooming again out to the nationwide stage, I do suppose that given stock is rising and demand hasn’t picked again up, at the least within the final couple of months, we’re going to see additional softening. And that is a type of the explanation why I’ve mentioned repeatedly that I do suppose costs will likely be perhaps modestly up this yr or someplace close to flat, particularly while you examine these issues to inflation, they could be a bit of bit unfavorable primarily based on the info that we’re seeing right here immediately.Now once more, that’s not going to occur in each market and what meaning for actual property traders is just not as apparent as you suppose. Declining costs usually are not essentially a foul factor. Lots of people, I’d say perhaps even most traders suppose that’s really a great factor. So we’ll discuss extra about what a softening market means, however we form of have to handle one different massive factor earlier than we get into what you must do subsequent, which is in fact mortgage charges. Mortgage charges have been within the information rather a lot and as of this recording, they’ve dropped down to six.64% for a 30 yr repair, which is down practically 0.6% from the place they had been. That they had shot up all the best way to 7.25%. They’ve come down rather a lot and that’s typically excellent news for actual property traders. However in fact the rationale that is taking place is as a result of there may be dangerous financial information.So we’ve got to dig into this a bit of bit and form of unpack what’s taking place and what this implies. So why have charges fallen a lot during the last couple of weeks? We’ve talked about this in different episodes, you may go hear about it in additional element, however we’ve seen a bunch of soppy financial knowledge. The very first thing was we had low client sentiment. We really had the largest month over month drop in 4 years. It’s not like that is going loopy, it’s decrease than it was over the previous couple of months, nevertheless it’s just about in keeping with the place it’s been from 2022 to 2025. However after the election, client confidence had been rising and that has reversed itself during the last couple of weeks, and that decline in client confidence worries traders. And so we’ve seen some weak point within the comfortable market. I’ll get to that in a second.The opposite factor that we’ve seen is an uptick in unemployment claims. There are many methods to measure unemployment. That is one I prefer to measure as a result of it principally seems on the variety of layoffs. And so we’ve seen layoffs begin to tick up. Once more, nothing loopy, however these are simply small issues that begin to spook the market, proper? And what we’re speaking about after we discuss mortgage charges is basically how bond traders and inventory traders are reacting to all this information. And proper now, given the extent of uncertainty on this planet, given the extent of uncertainty within the markets, individuals are very delicate. They’re reacting fairly dramatically forwards and backwards to all of the information that they’re getting. And so little modifications in unemployment claims, little modifications in client sentiment are most likely impacting markets greater than they’d if this was 10 years in the past in the midst of only a regular financial cycle.So that’s two issues which might be taking place. And so there’s really one factor that has occurred during the last simply two weeks that I believe has additional spooked traders, not tariffs. These are form of apparent. That’s positively one thing that’s been weighing on individuals’s thoughts. However one thing that I believe obtained misplaced within the shuffle over the previous couple of weeks is that there’s this device known as the GDP Now device. It’s put out by the Atlanta Fed, and it principally predicts the place gross home product goes to go for the present quarter that we’re in. If you happen to don’t know what GDP is gross home product, it’s principally the full measurement of financial output and it’s tremendous essential, proper? If the financial system is rising, that’s typically a great factor for the US. If the financial system contracts, meaning individuals’s high quality of life spending energy is mostly happening.And anyway, what occurred was the Atlanta Fed device, which has confirmed to be very correct traditionally, has modified its prediction. Simply two weeks in the past it was predicting 2% progress for GDP, which isn’t nice. It’s not like a tremendous quarter, nevertheless it’s not dangerous. It’s sort of identical to a traditional sort of quarter. It principally plummeted and the estimate now went to about unfavorable 2.5% and has held there for 3 consecutive weeks. And so now they’re predicting that GDP is definitely going to say no right here within the first quarter of 2025, and that’s tremendous vital for all the explanations that I simply talked about. So between softer client sentiment and uptick in unemployment claims, softer GDP projections, uncertainty round tariffs, this has simply principally spooked traders and it has led to a big inventory market selloff. We’ve seen the NASDAQ was down 10% at sure factors, which is correction territory.That’s a major decline. We’re principally seeing the complete increase within the inventory market that we noticed after the Trump election erased we’re again to principally the place we had been earlier than the election. And what occurs for actual property traders for mortgages is when individuals unload their inventory market, sometimes what they do is that they take their cash they usually put it in bonds. And I’m not speaking about me. If I bought off a few of my inventory, I most likely wouldn’t go do that, however we’re speaking in regards to the massive cash movers. Individuals who handle pension plans or hedge funds, they should put that cash someplace. And so after they take it out of inventory market, they sometimes put it into bonds as a result of they’re seen as secure after they’re spooked about what’s taking place within the inventory market or the financial system as a complete, they take the cash, they put it in bonds, and that will increase demand for bonds as a result of everybody desires them.And that pushes down yields, proper? If lots of people need to lend cash to the federal government, the federal government can borrow that cash at a decrease rates of interest. That’s yields coming down. And since yields and mortgage charges are nearly completely correlated, that can take mortgage charges down with them. And so that’s the reason mortgage charges have come down. In fact, nobody is aware of for positive what will occur, however I’ll offer you at the least my opinion and what I’m interested by and doing with my very own portfolio. However first, we’ve got to take a fast break. We’ll be proper again. If you happen to’re desperate to get began in actual property investing, a wise first step is to companion with an investor pleasant monetary planner who may also help you get your home so as and make sure you’re arrange for monetary success from the get go to biggerpockets.com/tax finder to get matched with a tax skilled or monetary planner in your space.Welcome again to the BiggerPockets podcast. We’re right here doing our March housing market replace and the place we left off, I used to be going to attempt to make sense of this entire scenario and share with you what I believe this all means. Now, all the info, every part that I’ve shared with you, the longer term and path of the housing market to me is basically about financial sentiment. And that principally simply sucks as a result of it’s laborious to foretell, proper? I’m sorry, however I do know different influencers, creators, they’re going to let you know definitively what’s going to occur, however they’re deceptive. I’m an analyst and the one factor I can let you know with certainty is that proper now issues are notably unsure and that’s a very powerful factor to recollect. It’s okay in your investing thesis or speculation to be that it’s unsure. It’s higher to confess that than to behave on a false interpretation or false certainty since you don’t actually know.However right here’s how I’m personally seeing this. It appears to me that financial pessimism is gaining steam and folks may have completely different opinions about what’s going to occur sooner or later. I’m taking a look at knowledge, I’m taking a look at traits, and that is what the info reveals. It reveals that investor confidence is down, the inventory market is popping, the housing market is beginning to soften, and does that imply we’re going to a recession? I don’t know. I believe it’s far too early to say that the GDP now factor is only one estimate, however I’m simply telling you that the change from the place we had been in January to the place the info was in February is fairly vital. There was numerous financial optimism in December and January that has shifted in February and it’d shift again, however proper now it does really feel like financial pessimism is gaining steam.And for me, there are a pair issues to remove from this. The very first thing that has been coming to my thoughts just lately is that if we enter in a recession, and once more, that may be a massive if, however one thing I’ve been interested by is may this form as much as be what’s type a traditional financial cycle the place actual property is the quote first in first out, for those who haven’t heard of this, there’s this sample that has existed in numerous recessions previously the place issues are going off nice, we’re in an growth, companies are booming, the inventory market’s going up, every part is nice, individuals are taking out debt. At a sure level, the financial system begins to overheat and that results in inflation. At that time, the Federal Reserve raises rates of interest, proper? Sound acquainted? That is what’s been happening. And when the Federal Reserve raises rates of interest, it impacts actual property first.And I’m not saying this simply because this can be a actual property podcast, however actual property is simply principally probably the most leveraged asset class. And really as we’ve seen during the last a number of a long time, it’s develop into actually form of by itself in how leveraged it’s, which principally means it makes use of probably the most debt. And positive individuals take out debt to finance buildings and manufacturing and expansions for companies, however actual property is basically extremely leveraged. And so that you see actual property bear the brunt of a recession really at first else. And for those who’re on this trade, you’ve been most likely saying this and screaming that we’re in an actual property recession for the final two or three years, transaction quantity has been down, costs have been largely flat, proper? We’ve form of been in an actual property recession for some time. However what’s been superb is that different components of the American financial system has remained resilient regardless of these larger rates of interest.And for one cause or one other, perhaps that resilience is cracking proper now and it’s reverting again to what we’d’ve anticipated that the remainder of the financial system is beginning to really feel a few of the ache of upper rates of interest. In order that’s form of the traditional begin of a recession, proper? Actual property comes first after which the remainder of the financial system comes second. However then what occurs when the remainder of the financial system begins to decelerate? Nicely, the Federal Reserve desires to stimulate the financial system. They’re now not as afraid of inflation, so that they decrease rates of interest, and that offers a stimulus first to actual property, proper? As a result of it’s a leveraged asset class. In order these charges begin to come down, it kickstarts financial exercise, notably in the actual property part, and that may really assist lead the complete financial system out of a recession. And actual property is large enough.It’s a large enough a part of our financial system to each assist carry the financial system right into a recession. And out of it, it’s estimated to be about 16% of GDP. That’s enormous for anybody trade. Now, for those who’re pondering that’s not what occurred in 2008, that’s positively true. It’s form of the exception to this sample, and we don’t know what’s going to occur. However the perception amongst most economists is it didn’t occur in 2008 as a result of not like this present time in 2008, housing was the issue. That’s what created the recession within the first place. Whereas proper now, housing is just not the issue. Housing, numerous the basics are basically sound. What’s happening with housing is known as a response to rates of interest. And so what I see rising is doubtlessly this primary in first out scenario. That’s most likely what I believe is the almost definitely state of affairs as we’re taking a look at it immediately.I believe there are two different issues which might be potential that I’ll simply point out, however I believe they’re much less probably. So the second factor that may occur is perhaps that is only a blip in financial knowledge and there’s really going to be robust progress and folks regain their confidence, during which case we’ll most likely see mortgage charges return up a bit of bit. I don’t know in the event that they’re going to return as much as 7.25, however they’ll most likely return up once more. During which case, I believe the housing market will proceed on its present softening trajectory. Once more, I don’t suppose meaning a crash. It most likely means corrections in sure markets the place different markets are going to continue to grow. However I believe we’ll proceed on the pattern that we’ve been on for the final couple of months. So that may be a second risk. It’s not that unlikely, it simply doesn’t look like the almost definitely state of affairs.After which the third one, I don’t suppose that is so probably proper now, however really while you take a look at a few of the knowledge, there’s a little little bit of threat proper now of what’s generally known as stagflation. And once more, I don’t suppose that is what’s taking place simply but, however I simply need to name it out as a result of it’s potential. Stagflation is when the financial system slows down, however inflation goes up. That is principally the worst case state of affairs for the financial system, however we’ve got seen inflation go up a bit of bit then it’s form of flat, so it’s not tremendous regarding simply but. However there’s a world the place inflation goes again up as a consequence of tariffs. And the GDP now device is appropriate and GDP declines, during which case we’d have a very troublesome financial scenario the place the financial system is contracting, however inflation goes up, and that’s principally the worst case state of affairs.Spending energy goes down, however wages aren’t going up, the inventory market goes down. And so though that’s potential, I wouldn’t fear about that simply but. It’s simply one thing that I needed to say that we’ll keep watch over within the subsequent couple of months. In order we do these updates each single month, I’ll replace you and allow you to know if that’s a priority. There may be some knowledge traits that counsel it’s potential, however I believe we’re nonetheless a far means off from concluding that that’s taking place. So let’s simply return to what I believe is the almost definitely state of affairs, which is sort of this primary in first out scenario with actual property. Does that imply that it’s doubtlessly a great time to purchase actual property, proper? As a result of don’t get me improper, when markets are softening like they’re, that comes with threat.There may be additional threat that costs are going to say no. And I’ve mentioned it earlier than, however there may be numerous rubbish on the market. There’s numerous dangerous offers, overpriced stuff on the market, and issues may worsen earlier than they get higher. However there may be additionally a case that in at the least some and perhaps many regional markets {that a} shopping for window might emerge. Take into consideration the circumstances that we’d have over the following couple of months. Extra stock coming in the marketplace results in worth softness, which supplies you negotiating leverage, proper? As a result of if you realize that costs are comfortable they usually could be declining extra, that’s one thing that you ought to be utilizing in your bid technique. And while you’re providing on properties, attempt to purchase under asking worth or what you suppose the market would possibly backside out at. So that offers you negotiating leverage. Bear in mind I mentioned softening it sounds scary, however that truly means we’re in a purchaser’s market.Consumers have the ability. In order that’s one good factor you may not need to purchase even in a purchaser’s market, for those who suppose that that purchaser’ss market’s going to proceed for a very long time and we’re going to have this form of protracted interval of costs happening. However keep in mind that costs have been largely flat or rising modestly over simply the final couple of years. And so we’ve seen this for some time. And if the present financial temper is appropriate and that we’re going to see a contracting financial system, that signifies that charges would possibly keep as little as they’re now they usually may go down a bit of bit extra. And if that state of affairs occurs, that would carry demand again into the housing market. Folks usually suppose that if the financial system is doing poorly and there’s a recession that causes decrease housing demand, however that’s not at all times the case.Housing demand is nearly at all times tied to affordability. And so sure, for those who don’t have a job, you’re not going to be going on the market and shopping for a house. However for individuals who really feel safe of their jobs, this would possibly really result in higher housing affordability. If the market softens and charges go down, meaning extra individuals are going to have the ability to afford extra houses. That drives up demand and will really reignite worth appreciation within the housing market. That’s not what occurred in 2008, bear in mind, that’s an outlier. However that is what usually occurs. So it’s one thing I’ll be conserving a detailed eye out for, and I like to recommend you do too. Personally, I’ve been in search of offers. I’m at all times in search of offers. I haven’t discovered something to date but this yr. I’ve provided on some, haven’t been capable of make it work, however I’m perhaps surprisingly optimistic in regards to the potential for deal move over the following couple of months and within the second half of this yr.I believe that proper now, we’ve been speaking rather a lot this yr about this potential for upside. And whereas there may be threat, don’t get me improper, there may be threat in these sorts of markets. That upside is there and would possibly even really be rising all through 2025 as a result of if charges do come down and you’ve got the chance to barter higher costs on homes, that would set the stage for actually good upside and future progress. In order that’s how I’m seeing it. I might love for those who’re watching this on YouTube to tell us how you might be decoding this housing market and what selections you’re making about your individual portfolio. Thanks all a lot for listening to this episode of the BiggerPockets podcast. I hope this housing market replace was helpful to you. We’ll see you subsequent time.