July 2025 Housing Market Update: A New “Correction” Begins

The real estate correctionThe buyer’s market is here. So if you’ve been sitting on the sideline saying you can’t invest again until the market is better, no more excuses, the water is warm, it is time to dive in. Today I’m explaining how we know it’s becoming a good time to buy and the best ways to take advantage and grow your portfolio before the housing market shifts again. Hey everyone, welcome to BiggerPockets monthly housing market update. I’m Dave Meyer, real estate investor, housing market analyst, and obsessive follower of economic data. And if you listen to the show often, you know that we do these housing market updates monthly as they’re an important context for your investing decisions. And since we are doing this here in July, we’re now halfway through the year, so I’m going to spend the episode today giving you a summary of what we’ve seen in the first half of 2025 and then move on to some thoughts on what we can all expect for the rest of the year.In this episode, I’m going to mostly focus on first the big shifts we’re seeing in inventory and new listings and the transition to a buyer’s market that I alluded to because this is the big change many of us have been waiting for. So we’re really going to want to dig into this data. Next we’ll talk about what’s going on with buyer demand because I’m hearing so many people say there are no buyers out there, but is that actually true? Well next talk about how home prices are trending both on a national and regional level and my projections for the rest of 2025 and I’ll also cover a few key crash watch metrics that we need to keep an eye on to ensure that we’re not tipping too far into the buyer’s market and heading into the danger zone. So we’ll talk about that at the end as well.Let’s do it. Alright, first and foremost, like we said, we’re going to talk about inventory because the story of 2025, at least so far, first half has been about inventory. The story of 2024 was also about inventory 2023, inventory 2022. Also inventory. This is what’s really been driving prices and activity on both a national and a regional level for the last couple of years. And what you need to know about 2025 is unlike the last few years when the story was slowing and very low inventory is that inventory now for the last year or so has been going up and this is a really big and really important change according to Redfin and different providers measure this differently, but they’re all showing that it’s going up. General inventory, which is the number of properties that are for sale at any given time is up 15% year over year.That’s a pretty big jump in a single year, but it’s important to keep this in context and know that it’s still under pre pandemic levels. If you go look at any historical charts, what you can see is that back in 2012 to 15, the average amount of inventory on the market was about 2 million. Then from 2016 to 2020 it dropped to 1.7 million. Right now we’re still below 1.5 million. So even though it’s up from where we were in the depths of the pandemic, whereas all the way down to 1 million, we are still not back to what anyone I think would call normal levels of inventory. So that’s sort of the big picture on inventory, but I do think we need to talk about why inventory is moving the way. It’s because a lot of people when they hear the idea of inventory and that it measures how many properties are for sale, they think, oh, it’s just because everyone’s listing.There are no buyers. But there’s actually different ways that inventory can move because why inventory is so important in the market is because it measures the balance between supply and demand. So we’re going to dig in a little bit into what’s actually driving this. The big thing that has changed over the last year is that we are now seeing more new listings that is the supply side of inventory because we need to track how many people are putting up their houses for sale on the market. That’s what new listings is. The difference is that inventory is how many properties are for sale at any given time. And so you can have a lot of new listings, but if there are a lot of buyers, inventory can stay low. That’s sort of what was going on in 2020 and 2021, but right now inventory is mostly rising just because more people are listing their properties for sale.It is absolutely up on a year over year basis. This is a continuation of a trend, but that growth, how much it’s going up is actually slowing down. So we’re not seeing it grow as quickly as it had been in the first half of 2025, first quarter of the year. It was going up pretty quickly and that’s why price growth slowed and why a lot of very loud people were saying the market is crashing and running around fear mongering and all of that. But the new growth listing is slowing and this is a super important point. I’m going to come back to this in a little bit. So remember that. Remember that new listing growth is slowing down because this little tidbit matters a lot when we talk about what we think is going to happen for the rest of the year. Now of course what I’m talking about is on a national basis and what’s going on regionally is totally different.So there are markets where new listings are actually climbing pretty rapidly. These are places in the Midwest, so we see Warren, Michigan up 10%, Cleveland, seven and a half Milwaukee, 5% Boston 5%. Whereas on the other end of the spectrum some of the markets that are seeing declines in new listings are Tampa, Florida 18%, Orlando 16%, San Diego 12%. So we’re seeing pretty big differences. Some are really down, some are really up. We’re going to come back to that in a little bit, but you should be looking at your own market to really understand the dynamics going on there. So that is what’s happening on the supply side of the equation. We are seeing new listings are absolutely up year over year, but they actually went down monthly and it’s the biggest increase that we’ve seen year over year in more than six months. So that’s really notable.Active listings are still up year over year, but it’s the smallest increase we’ve seen in over a year. So again, that growth is starting to slow down and just as a reminder, this stuff really matters because prices and the number of homes that are sold all come down to supply and demand and we’re clearly seeing supply has gone up. Not crazy up, not crash levels don’t freak out, but it is up. Next, let’s turn to the demand side. How we really understand what’s going to happen in the future. Demand is a little bit harder to track in the housing market, but we use one metric called mortgage purchase applications and this is basically how many people are applying for a mortgage every month and it is a good directional indicator of how much demand there is for housing at a given time. And what we’re seeing in this data I think is going to really surprise people because everyone on social media is saying there’s no buyers out there.No one wants to buy a home with these interest rates. No one wants to buy a home at these prices. That is not true. That is absolutely false. Actually what we’re seeing is mortgage purchase applications, the total number has gone up 22 weeks in a row. We are sitting in the beginning of July right now. That’s basically the whole year. We have seen every week the number of mortgage purchase applications go up. So if you hear people telling you that there are no buyers out there, that is incorrect. The number of buyers is actually going up on a year over year basis and the reason that inventory is going up where you can sort of get the whole picture now is not because there are no buyers, it’s just that there are more sellers. So that’s sort of what’s going on. And the interesting thing here is remember I said that yes inventory is up but that’s slowing down.Well demand is up and that’s actually getting faster. We’ve actually now had nine weeks in a row of double digit increases to buyer demand. That is significant mostly because even though rates are down a little bit recently, they’re not down by that much, right? They haven’t gone below 6.65 ish in a really long time. So people are just getting more comfortable with mortgage rates and want to buy and this is all national data. Unfortunately we don’t really get good regional data for this, so I can’t really say much about what’s going on in one market or another that would just be more guessing. So I’m not even going to go into that, but it is a good indicator for demand overall. So now that we’ve covered this, we know what’s happening with the key variables, supply and demand, and if you remember anything from maybe being in an econ class, then you know that with supply and demand. Once we understand those things and what direction that they’re moving, we can understand what is likely to happen with prices and home sales volume, which is what we as investors really want to dig into. And I will get into that and my expectations for pricing for the rest of the year right after this break, this week’s bigger news is brought to you by the Fundrise Flagship fund, invest in private market real estate with the Fundrise flagship fund. Check out fundrise.com/pockets to learn more.Welcome back to the BiggerPockets podcast. I’m Dave Meyer doing our July sort of mid-year housing market review and look forward for the rest of 2025. Before the break, we covered the major things we need to understand supply and demand to sort of extrapolate what we think might happen for the rest of the year in terms of prices and in terms of total home sales. What you should know right now is that nationally home prices are still appreciating. They’re up 1.4% year over year, but again, that growth rate is falling and that really is what matters. As an analyst, what I usually try and look for, the absolute number kind of matters, 1.4%. I don’t care if that’s 1.42%. What I care about is trend, which way did the line is going and their trend is clearly down. Just as an example, like a year ago last May, the appreciation rate nationally was 5%.Now it’s 1.4% and it has been going down pretty steadily. It’s not volatile going up and down. It has just been slowly declining from 5% a year ago down to about 1.4%. There’s just one point I want to make here is that that 1.4% increase is not adjusted for inflation. And so the appreciation rate in the US right now is now below the rate of inflation, which is roughly 2.5% ish. And so I think this is sort of a key thing to remember is that for me as an investor, I really want my property values to keep pace with inflation. That can’t always happen. Sometimes the market just turns and you can’t do anything about it, but you do want to sort of adjust your expectations and what deals you’re kind of buying. If that’s true, and right now we are seeing values lower than inflation.Now that’s going to impact people who have no debt on their property more. If you have leverage, if you are five to one leverage, you put of 20% down, then you’re still beating inflation because you basically multiply your appreciation rate by five, which would be roughly 7.5%. You compare that to inflation, you’re still doing better, but it is a point I just think is really important to note. Now of course there are some regional differences that I want to call out the metros with The biggest year over year increases are in the Midwest and are in the northeast. So we have Detroit at 10%, Newark, New Jersey, 10% roughly Cleveland at seven, Nassau County, New York, six, New York, six a lot around New York City, three of the top five are close to New York City, New York metro area there. The markets that are declining the fastest are expensive markets.Top two are in California in Oakland and San Diego, west Palm Beach, Florida, Atlanta, and then Tampa. So we have seen 11 of the top 50 markets decline just in the last month, so that’s notable, but on an overall national level, most markets they’re still at least up even if it’s just mildly year over year. So that’s sort of what we got price wise. In terms of home volumes, this is just not doing well. We have seen pretty darn low home sales volume over the last couple of years. During the pandemic we shot up to about 6.2 million home sales per year, which was really high. That was unusually high. A normal level of home sales is like five and a quarter million, 5.25 million. Right now we’re at 4 million or maybe even a little bit below. And so for investors, if you’re just buying your first deal, this might not matter that much to you, but if you’re a real estate agent or a loan officer or a property manager, you are noticing this.This is like the recession, the slump that we have been seeing and unfortunately this is continuing. I was hoping and actually projected, I want to be candid about my forecast. I was forecasting a very modest increase in volume growth this year. I was expecting it to grow like two, three, 5%, but just having hit bottom and going up a little bit, but unfortunately we haven’t hit bottom and we’re actually down a little bit year over year, not a lot 1%, but I was hoping we’d start to see just a little bit of improvement. Unfortunately, we’re seeing just a little bit of declines continuing there, so that stinks for our industry. It also drags on us GDP and is going to slow down growth. And so total home sales volume, I know a lot of people focus on price, but volume is really important for the industry in general, just the health of the housing market and when volume is as low as it is, it’s just not a healthy housing market.So hopefully that will turn around, but so far this year it has not. So big picture when we’re looking at what has been going on in the first half of 2025 is that we are sort of entering a normal correction and correction can mean different things to different people, but we had five plus years of abnormally high appreciation in the housing market and that happened even after interest rates went up even in 22 and 23 and 24 5% year over year growth that we saw last May, that’s abnormally high. The long-term average for appreciation in real estate is 3.4%. And so what we’re seeing is a reversion back and so that correction is going to look different nationally than it looks different in your market and different markets are going to respond to this differently, but I think it’s safe to say at this point we are going to see this wholesale slowing down of appreciation.So in markets that are hot right now that are growing at 8%, that might not mean they go negative, they might just mean they drop down to 3%, but I think a lot of markets that are sort of close to even right now may turn negative in the next couple of months because affordability I think is the big problem here with mortgage rates staying as high as they have at 6.6, 6.7% with prices continuing to go up, there just aren’t enough buyers for the number of sellers that are going out there. Remember we said there are still buyers and that’s actually growing a little bit, but the number of sellers in the market is starting to outpace those buyers and that’s going to put downward pressure on pricing. Now, I don’t think that means we are going to go in a crash, right? Because I want to come back to something that we talked about earlier, these types of corrections where home prices slow down after years of growth is totally normal.Housing market is cyclical just like every market. The stock market is cyclical, the business cycle is cyclical. These things happen and we are entering just a slower period of appreciation and we need that. I think we need affordability to start to get restored and I think we are going to enter a period where affordability might start to get a little bit better, but I want to say, and this is really important for your own decision making about your portfolio, is that just because prices start to decline, that does not mean that there is going to be a crash. And I know that the last time that crisis declined in the financial crisis, there was a crash that is absolutely indisputably true, but that does not always happen and in fact, that is the exception to what normally happens that has only happened one time in the last 100 years.And I want to share with you guys some data about this because I know people have very loud opinions and you might be hearing some things on social media and the media about a crash and I want to share with you just some of the fundamentals and mechanics of how the housing market works and why I think a correction is likely, but a crash is very unlikely to do this. I want to go back to the thing I told you to remember earlier. Remember I said there’s this tidbit that new listings are going up, but the amount they’re going up by is slowing down new listing growth is moderating. Why is this happening? Because it’s not a good time to sell. Remember I started the show by saying that we are entering a buyer’s market. That means it’s a more advantageous time for buyers because they have the leverage in the housing market.There are fewer buyers than there are sellers, meaning sellers have to compete for the buyers and they do that by negotiating. So it’s a good time to be a buyer because you get to negotiate. Now sellers are looking at the situation saying it’s a buyer’s market. Maybe I won’t choose to put my house up for sale. Maybe I’ll just wait a little bit because housing is unique. People don’t have to sell their property, they could just choose not to. They probably are locked in at super low mortgage rates, like 90% of people have a mortgage rate below 5%. So they’re just saying, looking at their market saying, I’m not going to get the price that I want or it’s going to take me six months to sell this house instead of three months, so I’m just not going to sell. I’m just going to keep paying my mortgage and living in my house.And this is super important, right? Because this is how a normal correction works, right? The pendulum swings back and forth right now it is swinging towards a buyer’s market and so sellers have to reconsider whether or not they want to sell. Eventually the market will again reach equilibrium because fewer people will list their markets, more buyers will come back. We’ll achieve some sort of balance and then maybe it will swing back in the seller’s direction. That’s how this thing goes and that’s why sometimes we are seeing modest declines in housing prices, but for the most part in most years we see modestly increasing housing prices. And so the fact that this is happening and that new listing growth is moderating is super important because you’ll see these people on social media, they’ll point to a chart and say new listings are up and they extrapolate that new listings are going to grow forever and that’s why there’s going to be a crash.But new listings are not going to grow forever. Sellers are logical people. They’re going to react to what is going on in the market and fewer people are going to start listing their home for sale if it’s not a good time to list. Just look at the data that I shared with you early about the different regions. Where were new listings decreasing the most? Well, it’s the places where prices are declining the most, right? Talk about Tampa. Why are new listings going down there? Because prices are going down there and people don’t want to sell when prices are going down. Why is Orlando and Austin and these places seeing new listings decline because prices are going down. Think about the other thing. Why was Cleveland on both of our lists for most new listings and price appreciation? Because people are seeing great selling conditions in Cleveland, and so more people are trying to sell their house.This makes total sense. It is the thing that the crash bros and people who are fear-mongering on the internet completely miss. This is exactly what is supposed to happen. It is the logical thing that happens in the housing market and this to me is why we are likely to see a correction in a lot of markets and maybe even on a national basis but not a crash. I really want to hammer this home because if you are afraid of a crash in a correction, you might miss out on a buying opportunity. So I want to share with you one more super important data set about a potential crash. We do have to take one more quick break though. We’ll be right back.Welcome back to the BiggerPockets podcast. I’m Dave Meyer giving you my mid-year update on the housing market. So far we’ve gone over everything that happened for the first half of the year and we talked about why I think it’s likely that there could be a correction in the housing market, maybe even likely on a national level. We could see prices decline one 2% this year, but why I don’t think there’s going to be a crash, and I pointed to some data before the break about new listing growth moderating. I want to bring up a second point here. This is super important. People talk about crashes like, oh, it went up 50%, it has to come down. No, that is just straight up not how it works. The way it works is if there’s going to be a crash in the housing market, you need two conditions.You need prices to start declining like a normal correction. So we do have that part, but the second thing that must happen for a true crash to happen is that people need to be forced to sell. Forced selling is this really important element of a housing market crash. It is basically when sellers lose their ability to choose whether or not they’re going to sell their house, because if they have the choice, they’re going to do what we’re seeing right now. Like I said, sellers aren’t forced to sell right now, and so new listings are starting to go down in those markets that are seeing correction, that is good, that is healthy, that is what we would expect. The only thing that would change this up and tilt us towards a crash scenario is if people stop paying their mortgage and instead of people opting out of selling, the bank says, actually, you’re not paying your mortgage so you have to sell so we can call your loan due and we can get repaid.That’s what happened in 2008. We saw prices start to decline, people weren’t able to pay their mortgages, banks started to foreclosure and it created this sort of cycle, right? So the question then is, is there for selling, are there foreclosures? This is super important to the health of the housing market and the answer right now is a resounding no. Fannie Mae and Freddie Mac, two mortgage giants put out some data about this every single month and what we saw in the single family. So for average homeowners, the delinquency rate for 90 plus days, so like serious delinquencies or in foreclosure, so any stage of foreclosure, a lot of people think like, oh, there just haven’t been foreclosed on yet. This is any day’s serious delinquency or later in the foreclosure process, it actually went down last month. Both Fannie and Freddie show modest declines for the last months we have from April to May, it actually went down.That is super important. The delinquency rate is about 0.0, 0.55%, so that’s about one in every 200 mortgages, so not that much now it is up a little bit year over year, so it has grown over the last year that is important, but it is still below pre pandemic levels and I know people said there was foreclosures, forbearances, all that stuff is over and we are seeing it go down. It just went down last month. Now of course things could change. It could go up in the, but there is no data evidence right now at all that foreclosures or delinquencies are going up and it is just a fraction of what it was during the financial crisis back then the delinquency rate, this exact metric was up to about five, five and a half percent, literally 10 times more. The foreclosure and delinquency rate than we are seeing right now.And again, what we’re seeing right now is below 2019 levels. No one was saying we’re having a foreclosure issue in 2019 and we are below those levels. So yes, risk of correction, medium to high, I would say risk of a crash, still very low. There is just no evidence other than people’s fear that this is going to happen. Now, you may have seen a chart floating around the internet of this delinquency rate going up and this chart has driven me nuts over the last three months because people send it to me all the time. They’re like, this guy is falling. Look at these delinquencies that is multifamily delinquencies. Please look at the charts that you are examining and understand what metric they’re measuring because a lot of pretty famous real estate personalities put out this chart and said that the market is crashing, which drives me absolutely insane because they’re just misrepresenting data to people and they’re honestly just fear mongering.But that multifamily delinquency rate is real. It is up to about the levels that we saw during the great recession, and so that is significant, but it is also the least surprising news in the world. If you are a data analyst, if you follow the housing market, everyone since 2022 has known this was going to happen. When interest rates go up, commercial debt starts to get delinquent because it is not fixed rate debt like we see in the single family market and single families, people lock in the rates for 30 years. So if you can service your debt when you get the mortgage, it is very likely that you can service the debt for the lifetime of your mortgage. In commercial real estate, when you get your debt, it’s going to change every 3, 5, 7 years. And so every month right now we have more and more commercial operators who have to refinance to much, much higher rates.They have to do this, and so that is causing more delinquencies and everyone knew this was going to happen. I want to point out that even though this is going up a lot, the total rate right now is still like 0.6%. So again, about one out of every 170, 180 properties are seeing this delinquency rate. And if you think is this going to cause a crash in commercial real estate, it already caused a crash in commercial real estate office values are down 50%. In some places retail values have been okay, but they’re down in most markets, multifamily is down 15 to 20%. So this is not surprising and that’s why it just kind riles me up because people send out this chart, one extrapolating it and saying that it’s going to cause the single family market to crash. They’re totally different. They have nothing to do with one another that’s totally wrong.Or saying that this is going to cause a crash in commercial real estate that already happened. We already know that values are down in commercial, they might fall another five or 10%. I think that’s entirely possible, but none of this is surprising. So please keep that in mind. If you hear about this or someone you know is talking about a crash, please look at this data, reference this podcast, tell them to come listen to this. I would love to debate them on this because this drives me nuts, some of the fearmongering that goes out here. So let’s talk about what as investors that we can do about all of these information. I think the big picture headline for any buyer’s market is there are going to be good opportunities. I’m already seeing it in my own deals. I am getting much more active in looking for deals right now.That’s absolutely true, but you do have to be careful because prices could decline. I think if you are in some of these fringe areas, if you’re buying something that’s super distressed, prices could decline the value of assets that are stabilized in good condition, those actually will probably hold their value pretty well in most markets. Again, every region’s going to be different, but generally speaking, those tend to hold their value even during a correction. It’s sort of the fringe second tier, third tier kind of properties, not in the best neighborhoods, not updated, really old housing stock. Those types of things tend to decline. And so you want to be careful with these things. So I just want to be clear, there are opportunities. There are also risks, and as an investor, your job is to find the opportunities and avoid the risks. That’s what we’re going to be talking about on this show for as long as we’re in a buyer’s market, we’re here to help you with that.The number one way you do that right now is by negotiating. You want to try and buy below recent comps. If you are looking for a property and they’re trading at, let’s say the properties should cost $300,000. Well right now maybe you try and negotiate that to 2 95 or two 90. If you’re able to do that, and I know people are thinking, oh yeah, of course I’d love them. That sounds so easy. Of course, we just negotiate the price lower, but this is possible. There is actually data that supports this. There is a metric that we track in the housing market called the list to sale ratio. Basically tracks what percentage of the listing price people actually wind up paying. And for years it has been over a hundred. We’ve seen a lot of parts of the country. In 20 20, 21, 20 22, it was at 102, 103%, meaning on average buyers were paying two to 3% over the list price.Right now it has dropped down to 99%, which means on average buyers are paying 1% less than list price. So just if you were the average buyer, you should be negotiating down at least 1%, but we’re investors, we can’t be just being the average buyer. We need to be negotiating down 2, 3, 4, 5%. And if you can do that, that’s the opportunity, right? You’re able to get a great asset below market value. So even if price is correct, two or 3%, you’re still getting a good deal. And I know that sounds overly simplistic, but it’s not. Go do that. That’s what a lot of investors are doing and I recommend you do that as well. So that’s my number one piece of advice is that there’s risk and opportunity, mitigate the risk, but look for those great opportunities. I want to encourage everyone to see what’s happening right now in perspective real estate market’s, correct?The stock market corrects, there are declines, this just happens. They are cyclical, but from what we can see, what all the data shows us right now is this is normal activity. It is not crash or emergency activity. There is a remote small chance that that changes and a crash does materialize, and if I see even a shred of evidence that that is going to happen in the data, I will absolutely let everyone know, but as of right now, it is just not there. Instead, we are in a buyer’s market, which comes again with benefits and risks to investors, but more deals are going to be out there and I encourage you to keep looking for deals that fit your strategy and fit your buy box because there is a good chance that a buying window is going to emerge. That’s what I got for you guys. Hopefully this recap of the market over the first half of 2025 and look forward for the second half of 2025 is helpful to you. If you have any questions about this, please feel free to hit me up on BiggerPockets and biggerpockets.com or on Instagram where I’m at, the data deli. Thank you all so much for listening. We’ll see you next time.