BiggerPockets Real Estate Podcast - 98% of Housing Markets “Weaker” Than Last Year: Good News for Investors?

Episode Date: May 22, 2025

49 of the nation’s 50 largest metro area housing markets are showing “weaker” home price growth in 2025. For some, this signals a long-predicted crash/correction on the horizon. But for others (like Dave), it’s something very different, and could be a huge help for the aspiring real estate investor.  For years, we’ve been struggling with a dangerous combination of high rates, high home prices, and low affordability. If top markets are starting to weaken and prices are softening, could this actually be a good sign for investors and buyers waiting on the sidelines? If mortgage rates come down and wages continue to grow, are we inching closer to equilibrium and the more affordable housing market we’ve all been waiting for? In this bonus episode, Dave is explaining why housing market “weakness” is a sign of long-term strength and a huge opportunity for investors willing to make moves. Don’t believe him? Dave shares a personal bet he’s making on the housing market—with a lot of money on the line—that could turn out to be a genius move in the years ahead. What’s his plan? Stick around, we’re getting into it! In This Episode We Cover Why 98% of major housing markets are seeing “weaker” home price growth in 2025 Why price softness does NOT signal a crash or correction Good news for first-time homebuyers: purchasing could become more affordable The three factors of an affordable housing market (and are we shifting to better affordability?) Dave’s recent rental property move to capitalize on this window of opportunity  And So Much More! Check out more resources from this show on ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠BiggerPockets.com⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://www.biggerpockets.com/blog/real-estate-1124⁠-5 Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠[e-mail]⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Learn more about your ad choices. Visit megaphone.fm/adchoices

49 of the country's 50 largest housing markets are showing weaker year-over-year price growth. Is this time to worry or is it an opportunity? Let's take a look. Hey everyone, it's Dave and I got a bonus episode for you today. We're going to be publishing a couple of these quick sort of reaction style shows only on the audio podcast feed. So make sure that you're subscribed so you catch all of our newest content. Today, I wanted to share my reaction and open a conversation in the Bigger Pockets community about a pretty important topic, the widespread softening of the housing market.

And when I say softening, I mean slowing, weakening, whatever. I am purposely not using the word correction or the word crash because first and foremost, a crash is not happening in any big sense. In fact, prices are still up year over year nationally. in a lot of markets. And although some markets are correcting and have actually turned negative price-wise, many are still positive. But the characteristic that is present in almost all markets, right, as I said, 49 out of 50 are experiencing this is what I would call softening. And for some markets, softening does actually mean that prices have turned negative. But for other markets,

softening just means that prices are growing up slower. this year than they were at the same time last year. And the reason I'm talking about this, and the thing that I'm actually reacting to in this audio bonus is a recent report from Rezi Club. They're a great data provider. They basically showed that in March of 2024, so a year ago, data-wise, I know we're in May when I'm recording this, but data lags a month or two. So March of 2024, out of those 50 biggest housing markets in the country, 47 of them. So basically, all of them saw rising prices, year-over-year price growth, and three of them saw negative growth. Fast forward to this March, March of 2025, only 34 housing markets saw positive year-over-year growth,

while 16 are negative. So keep that in mind as we're talking about this, and the reason, again, that I'm using the word softening is that 34 markets are still growing, so we're not in this widespread correction or a crash, but these markets, even if they are still positive, they are just growing slowly. Now, regionally, of course, there are a lot of differences. You probably won't be surprised to hear that the weakest markets are in Florida. They're in Texas. They're in Louisiana.

And they're going to be strongest, mostly in the northeast and the Midwest. In this sort of aggregate context, if we're looking at this holistically, though, according to Zillow, which is just one measure of different ways that we look at this, but Zillow has this thing called the home value index. And if you look at it for U.S. home prices between March of 2023 and 2024, so this is last year's data. It grew 4.6%. This year, from 24 to 25, it went up just 1.2%.

Softer, not crashing. But what does this actually mean? What does this softening mean for real estate investors? To different investors and to different people who have different roles in the, you know, housing market or different investors who are at different stages of their investing career, it's going to mean different things. For some people, maybe those people who already own property or who have a large portfolio or people who are approaching retirement, this could be a concern because equity growth is slowing almost everywhere. And in a lot of markets, it has started to

reverse, and I think personally in more markets it is going to start to reverse. That's for some people. Other people, though, may seem this as a sign of some market crash that they've been waiting for, or maybe they've been listening to people who have been predicting some market crash for the last 10 or 12 years, and maybe they're taking this as a sign that that crash is finally, after missing it for many years, going to start. For other people, there's a third group, too, that this is a second group. going to be great, right? A lot of people are going to see this as a welcome relief as housing

affordability could start to improve if prices stagnate or drop, wages grow, mortgage rates stabilize or fall. This could actually be good things. So there is no right answer. And how you interpret this is going to really depend on your personal situation, where you're at with your investing career. I'm very curious how you all are seeing this. And I know this is an all audio episode, but hit me up on Instagram. I would love to know where you fall on this spectrum. I will just tell you where I personally fall. I fall into the third category. Because yes, I do have a property portfolio that I've been building for 15 years and a very large amount of my net worth is in residential real estate. It is definitely the biggest

chunk of my wealth. I also have a lot of investments in commercial real estate, in private lending, and stock market. So yeah, there is definitely a piece of me that hates seeing the value of my properties decline. I think that is very natural. Everyone sort of mentally anchors what their portfolio value is to that peak price that they've seen it. And when you see, at least on paper, that your returns are declining or your equity value is declining, it's not that fun. But when I step back a little bit, take a breath and don't panic and zoom out, take a longer term look at this situation, and that's what I always try and do and advocate for on the show, thinking long-term. I actually think this is kind of good, and it's to be expected. And I'll explain why after a quick

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prices are softening in 49 out of the 50 biggest metro areas in the United States. And right before the break, I was telling you that, yeah, Yes, everyone should interpret this differently based on their own career and what they're trying to accomplish. But for me, I fall into this bucket of people who believes that prices softening right now is actually sort of the best thing long term for my portfolio and basically just for the health of the housing market. Let me explain why. We all know this, but housing is unaffordable right now. We're actually near 40-year lows. It's one of the most unaffordable periods for housing in U.S. history.

And this isn't good, in my opinion, for investors or homeowners or the economy as a whole. First and foremost, it really limits cash flow, right? Because when you're paying a high price for property, your expenses go up. And rent has been relatively flat for the last couple of years. So that has really squeezed cash flow. It's also bad for homeowners as it raises total costs of living. It undermines a lot of what I believe American culture and society. is based around people believe in homeownership in this country, and it's sort of underpinned

a lot of wealth creation for generations. And when it's unaffordable, that is really hard. And I totally appreciate that for value-ad investors, for flippers, that it has been a good period over the last couple of years. But it just can't go on like this forever. There has to be a point where affordability gets restored. And I'm actually not one of those people who believes that affordability needs to come back to some historic average, I actually think there's a better chance that we are in a new era where homes remain less affordable than they were in the 90s or the 80s or anything like that. But right now, it's just so unaffordable that I do think we have to have some reversion to the mean. And the way that you get some reversion back to affordability, it can come in three different

ways, right? You can have slower price growth or declining prices. That's one way based on prices. The second thing is wage growth. If people start earning more money, that is another way where affordability improves, you know, if you are holding prices equal. And then the third way is that mortgage rates start to come down. And I've actually been saying this, God, for two or three years now, but I think the way that we get to more affordability is some combination of these three things. I don't think we're going to have a crash, but I do think prices could soften.

I've said it a couple times this year. I think we might see some modest corrections in nominal home prices. We're seeing corrections in real home prices, which is inflation-adjusted home prices. And I think that's going to continue. So I think this is sort of an important part. I don't necessarily think prices need to come down, but they do need to stagnate a little bit to improve affordability. That will give us time for wages to go up and for mortgage rates to come down slowly like

I think they were going to. So that's why I think this is kind of a good thing, because the other ways we get affordability back is a crash. That's not a good thing. We can get it by runaway wage growth, but that's probably not going to happen. Or we can get it by rapidly declining mortgage rates, which some people think is going to happen. I think it's unlikely, at least in the near term. And the only real way you get rapidly declining mortgage rates is something terrible is going on in the economy, right? The last two times that happened was the Great Recession and COVID. And I don't think anyone wants those things to happen again. And so to me, the best case scenario for the housing market is we have this sort of slow return to affordability. I know it's not what everyone wants.

People want it fixed right now. That's just how people are. But that's not going to happen. Instead, we need to have sort of stagnating price appreciation. We need wages to keep growing and we need mortgage rates to come down generally. And so I see this sort of as one of the steps for that to happen. and this is kind of what I've been saying for years is I think would happen. And so makes sense to me that this is happening. So that's one reason I personally believe that this is good because I'm trying to build a portfolio for the long run. And I want the housing market to be healthy for the lifetime of my investing career. The second reason I think this is generally a good thing is that lower prices means less competition and it means that there can be better deals.

This is just true. The way that prices come down is that. there are more sellers than buyers. That's just how economics works, right? Supply and demand. There's more supply than demand. More people want to sell their home than people want to buy their home. And so how do those sellers compete for the limited pool of buyers? They negotiate and they lower prices, right? And so this just means that in this type of market, there's a reason we call it a buyer's market. When we have this kind of situation, we as investors are able to find better deals, we'll be able to find more motivated sellers, we're able to negotiate. And this presents an opportunity to buy great long-term assets and a discounted price. And this is kind of a

cornerstone of the upside era that I've been talking about. If you are a believer in an upside investor like I am, lower prices right now are necessarily a bad thing. Of course, you do not want to buy a bad deal. You want to find great intrinsic value and you have to be comfortable with the idea that prices might be stagnant for a year two. But if you're like me and you're in it for the long run, prices are going to go back up long term. That has always happened in the United States. And long term, I still think those things are true. And so lower prices, less competition, could be good in the short run. So that's the second thing, right? Like I said, first thing is an improvement in affordability. The second thing is less competition and better deals. And then the third thing

of why I think this is not bad. I don't think this is necessarily a reason it's good, but it's not bad, is that if you own property and prices are going down, it is what is called a quote unquote paper loss. That basically means, yeah, sure, on paper, if you're looking up your zestimate and calculating your net worth, yeah, maybe your equity has gone down and your portfolio has gone down. But you hadn't realized that gain. You didn't sell your property. And so it's not like you've lost actual money. It's what, again, it's called a paper loss. because it's kind of just this hypothetical mode. And again, I think that is worth it.

If you're in building mode or in growth mode in your investing career, you cannot always have great growth and good prices and low competition all at once. There's going to be tradeoffs. And I think if you're in building mode, the temporary situation where we're going to have lower prices for a lot of investors, not everyone, but probably for most investors, that can be a good thing. and to endure some paper losses in the short term to get those better prices, to me, at this stage of my career is worth it. And again, I want to caveat all of this by saying, these types of markets are riskier. Absolutely, when prices are going down, they are riskier. But they do present these

opportunities if you have the ability to find great deals. So what does this mean? What am I doing? Personally, I think better deals are coming. And I'm already starting to see some. There's a I was looking at in January, still sitting on the market, still trying to negotiate that price down. But you're starting to see people take your calls. You're starting to see more price drops on the segment that I personally target, which is small multifamilies. That's been super inflated over the last couple of years. And it's starting to weaken a little bit. And to me, that's a good opportunity to buy at a better rent to price ratio and to get better value and potential for future equity growth than I've seen in the last couple of years. And because I'm

seeing these better deals, I'm actually starting to raise some cash. I'm starting to think about how I can put myself in a position to buy either more small multifamilies or single families, but also potentially some multifamily as well, probably not this year, maybe at the end of this year or next year. But that's sort of what I'm thinking. And to do that, I'm actually, almost certainly I'm going to decide on the next day or two. But I think I'm going to put one of my properties on the market to raise some cash so that I can go out and buy more deals. And the property, I'm probably going to sell. It's not a bad one, but I just kind of think the appreciation has sort of run its course and it's going to stagnate, like I said. And the cash flows okay. It's not

special. It's solid, but it's not amazing. And I want to basically reposition to a property that is going to be lower priced and will grow in value once that market pendulum swings back in the other direction, which it is inevitably going to do. So that's how I see all this, what I'm planning to do. but what do you think? Is this a good thing for investors or should we all be sort of collectively worried? Hit me up on Instagram or share your thoughts on the Bigger Pockets forums. I think it would be a great conversation for all of us to have. Thank you all so much for listening to this bonus episode of the Bigger Pockets podcast. I'm Dave Meyer. I'll see you next time. Thank you all for listening to the Bigger Pockets Real Estate podcast. Make sure you get all our new episodes by

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