BiggerPockets Real Estate Podcast - June 2025 Housing Market Update: The Biggest Shift in Decades

Episode Date: June 20, 2025

June 2025 Housing Market Update: The Biggest Shift in Decades Podcast Description The housing market is experiencing its most significant shift in decades. Sellers are returning in full force, outnumbering buyers by a substantial margin. Homes are selling for under-asking, giving investors and first-time homebuyers discounts previously unheard of. Are we on our way to a housing market crash, correction, or a much-needed reset, which would return us to the “normal” housing market many of us have been asking for over the past few years? We’re breaking it all down—best and worst markets, home prices, mortgage rates, supply and demand, and more—in our June 2025 housing market update! Mortgage delinquencies are rising—which could spell trouble. Are we heading back to foreclosure territory of the last housing crash? Not quite, but this is good news for buyers. Dave shares his 2025 investing plan so you can follow along, find better deals, and reduce your risk. Plus, will we see interest rates reverse with good inflation data and a worrying jobs report? The Fed could make moves; stick around to hear how they'll affect you! In This Episode We Cover A June 2025 housing market update and the ballooning buyer’s market  Home price shifts and how to get a serious discount on your next real estate deal Whether the Fed will finally lower rates with cooled inflation reports  Why mortgage delinquencies are rising and whether we should worry  The best and worst real estate markets to buy or sell in  And So Much More! Check out more resources from this show on ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠BiggerPockets.com⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://www.biggerpockets.com/blog/real-estate-1137 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

The housing market is experiencing one of its biggest shifts in decades. Opportunities are becoming more abundant, but so are risks. So you have to be an informed investor to learn how to separate good deals from bad and dominate in this new era of the housing market. Here's what you need to know. Hey, what's up, everyone? It's Dave Meyer, head of real estate investing at Bigger Pockets. Welcome to our monthly housing market update amidst all of the crazy stuff.

going on, the continuous change in the economy and the housing market. This segment, this monthly housing market update that we do, is quickly becoming one of our most popular, important shows that we do every single month. So we're excited to have you here with us to talk to you about what's going on. In today's episode, we're going to start with an overview of the national housing market. And we always talk about how real estate is local, and that is true. But there are a lot of things that you need to know about the broad, biggest high-level. trends that will inform what's going on in your market and will inform your strategy. So we're going to start there.

We'll also talk about some of those regional trends. Obviously, we can't get into every single market, but we're going to talk about broadly what's happening in different pockets of the country. We'll next talk about macroeconomics. I know that sounds boring, but we need to sort of understand the why behind what's going on in the housing market. Yes, inventory is going up. Yes, we are seeing higher mortgage rates, but why are those things happening? By understanding

why those things are going on in the first place, we can start to get an idea of what might come next. We obviously cannot predict the future, but sort of understanding the background to what's happening in the market will help us prepare for everything that's going to come. So that will be second. And then lastly, although this show and episode is mostly focused on data, I am at the and going to talk a little bit about strategy and just share some of my personal perspectives I am using to guide my own decision making. Let's do this.

First things first, like I said, we're going to start with the national housing market. And I'm going to share with you the biggest, broadest picture first. We have entered and are in what is an expanding buyers market. You may have heard me say this on recent shows recently. But basically what this means, what being in a buyer's market means, is that there are now more sellers than there are buyers.

A recent study just came out from Redfin that shows that there are about 1.95 million sellers in the housing market. So let's just round up to 2 million. And there are about 1.45 million buyers in the housing market. So there are 500,000, half a million more sellers today in the housing market than there are buyers. And the reason that makes this a buyer, market is because all of those sellers, there's all those extra sellers, they're going to have to compete for buyers, right? If there are two million properties, two million people trying to sell

their house. But there are only 1.5 million roughly, I am rounding here, 1.5 million buyers, those sellers are going to have to compete for the buyers. And the way that they do that is by either lowering their price or offering concessions like rate buy downs, covering closing costs, or any a million different concessions that a seller can offer. But because they are competing for buyers, that's what makes it the buyer's market. That means that buyers have the leverage to negotiate with sellers when they're going to buy deals. So that's sort of the exciting thing about what's going on in the housing market because that means if you're in acquisition mode, if you're looking to build your portfolio, you are going to be able to get better deals today than you were three

months ago or six months ago or, you know, really over the last couple of years, I think. The other side of that, though, is that prices could be falling. Like I just said, the way that sellers compete for these buyers are by offering concessions. And the primary concession that buyers typically want is a lower acquisition price. And this dynamic can drive down prices in the housing market. And I think it's really important to know that prices are still up year over year. We are not in any sort of crash, but I believe that the probability of a correction on a national level, basically prices falling modestly on a national level, is pretty high. I obviously can't say for certain, but I agree with recent updates on forecasts that we got

from Redfin and Zillow that they think that prices are going to fall one to two percent year over year by the end of this year. And I think the probability of that happening is pretty high. And so that's sort of the big broad picture that we're seeing on a national level. Prices are likely to go down a little bit. That means there are going to be better deals for investors. But obviously, that comes with risk of price declines that as investors we need to mitigate because we don't want to buy something where prices are just going to drop off a cliff after we buy it.

So that's what we're going to be talking about a little today. And again, that is sort of the national housing market. Not every market has the exact same dynamics, but as I'll show, almost all markets are following this trend. So that doesn't mean that every single region, every single market is going to go from, you know, plus two, plus three percent growth this year to negative prices. But a lot of markets, even the hottest ones might go from plus seven to plus four. So all of them are sort of cooling off.

There are very few markets that are actually heating up and where acceleration and price growth are appreciating and going up. So that's the big picture, but let's talk for a minute about why this is happening, because as you can imagine, there's basically two reasons. There's two ways that we can go from a seller's market like we've been in for the last couple of years into the buyer's market that we're in today. You could have more sellers or you could have fewer buyers. You could also have some combination of two, but we're actually having one clear thing.

What is happening is that we have more sellers. More people are putting their homes on the market for sale. It may not seem like this when you read the news or when you hear about consumer sentiment or everything else that's going on in the economy. But buyers are actually pretty stable. You look at the amount of people looking for homes. If you actually look at home sales, if you look at the number of people who are applying for mortgages. They're all pretty stable year over year. Actually, the most recent data shows that the number of people applying for mortgages,

in May of 2025 was 20% higher than the year before. And so that part is not going away. So if you hear people saying no one's buying, no one wants to buy, that's not true. What's happening is more people are selling. And honestly, this has taken a long time. I think we've had really, really low numbers of sellers in the housing market for years now. And so we're basically heading back towards something that's more normal. Like I said before, Redfin right now is estimating that we're at about 2 million sellers in the market.

And that number has been rising quickly over the last two years, let's say. But we are still below where we were pre-pandemic. Like in 2019, before everything changed, we were at about 2.2, 2.3 million. So we're still about 10, 15% below what would be a pre-pandemic norm of sellers. So let's just keep that all in proper perspective. perspective because it's easy to say, hey, there's so many sellers, there are less buyers, everything's going to crash. But we need to remember that the data is showing us it's going back towards more normal

pre-pandemic levels, not that we are going anywhere close to sort of the red flag territory that we're in in 2007, 2008, that kind of thing. You see this across all of the data, and I'll just share some of that with you, but basically inventory, which is a really good metric. If you want to learn one metric in the housing market, learn what inventory means and start following it because it really measures the balance between supply and demand. It measures the balance between buyers and sellers. And what we're seeing right now is that inventory is about $1.5 million. That is still below about the $1.8, $1.9 million that we expected before the pandemic.

So things are moving back towards that more traditional level. We don't know if it will go all the way back up. We don't know if we'll go past that, but we're still below that pre-pandemic level. So that's, I think, a good sign for the short-term stability of the market. We see the same thing in days on market. Another really good way to measure the balance between supply and demand. That's still well below pre-pandemic levels. And I think if you are worried about the crash, if you were looking at or hearing people

saying that the housing market is crashing, I think there's one other data point. One thing that I always look at and I recommend people. look at as well, which is mortgage delinquencies, because prices going down a correction, like the one I was talking about before, where prices go down, you know, 1%, 2%, even up to 5, 6%. These types of things are normal in the housing market. The housing market, just like a lot of other markets, are cyclical. And so things go up. We've had an amazing run of home prices for the last 15 years, basically.

Well, 14 years. But there are times when prices flying out or decline, and I think we are entering. one of those periods. But to have a true crash, two things have to be true. It can't just be prices going down 5%. That is not a crash. That is a normal correction. For things to enter that true crash territory, price declines have to combine with forced

selling. Basically, people have to stop paying their mortgages because they can no longer afford to do that. That gets them in the situation where you could be underwater on your mortgage. And since you're not paying on that mortgage, the banks could foreclose on you. And that can create this sort of vicious cycle of increasing inventory, falling prices, people defaulting. That's a really bad situation. And so in these housing market updates, one of the things I'm going to continuously remind you about.

So every month, I'm going to share this with you, is the mortgage delinquency rate. Because this thing, if mortgage delinquencies stay relatively low, like they are now, it is below 1% of all mortgage are seriously delinquent, we're at 0.86%. Things will correct. Prices could go down, but there's not really a risk of a big, true crash. Of course, this can change. Everything can change. But right now, that is not looking very likely because that 0.86%, less than 1% of people, is below where we were in 2017. It was below where we were in 2018. So it is going up a little bit, but I think a lot of that is due to the end of moratoriums on foreclosures and the end of forbearance programs. And we're still actually below where we were like in 2000, 2002. Just for some context,

when we're in 2007, 2008, the true crash, that delinquency rate was literally nine to 10 times higher. It was above 7%. And so we are not really at risk of that right now, but that is something that we should all be keeping an eye on. So that's my big picture overview of the national. housing market, things are cooling, prices are softening, but the risk of a crash still remains relatively low in my mind. That said, there are tons of uncertainties geopolitically right now, trade policy, all of that could change. And so the chances of some black swan event coming and totally changing everything that I'm

saying here are a bit higher than normal. But I'm trying to just share with you what we know. This is the data that we have today, and this is how I interpret that data. I do want to talk a little bit about regional differences, but we do have to take a quick break. We'll be right back. This segment is brought to you by Resimpley, the all-in-one CRM built for real estate investors. You can automate your marketing, skip trace for free, send direct mail, and connect with your leads all in one place. Head over to reSimply.com slash Bigger Pockets Now to start your free trial and get 50% off your first month.

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Fundrise Flagship Fund before investing. This and other information can be found in the fund's prospectus at fundrise.com slash flagship. This is a paid advertisement. Welcome back to the Bigger Pockets podcast. Here is our June housing market update. Before the break, I shared with you some broad trends about the housing market on a national level, but I now want to turn to some of our regional differences because, of course,

not everything is the same. there are still many markets that are growing and are actually seeing above average appreciation. And I'm looking sort of at the biggest markets in the country right now. So there are probably towns, smaller cities that are growing even faster than this or slower than the ones I'm going to share. But sort of big metro areas across the country, the fastest year-over-year increases we're seeing goes to a very polarizing market that a lot of people might not believe. it is Detroit, Michigan has seen nearly 9% year-over-year growth.

The second highest is another one that I don't think people were expecting earlier this year or recently. That is New York City at nearly 6% growth. Then we had Pittsburgh, which I've been calling out on this show as a great market for years. 6% Virginia Beach at 5% and Chicago. Another one I'm always hyping up is 5.2%. So all of those are above long-term. averages, a normal year in the housing market, you see prices go up three to four percent. We are seeing these markets at above 5 percent, all of them.

On the flip side, we are seeing other markets in pretty serious declines. The biggest decline is in Oakland, California, which has seen nearly an 8 percent decline year over year with median home price, followed by Dallas at minus 5 percent, Jacksonville, Florida, four, Tampa at 2.4 percent, and San Diego, 2.1 percent. So not hugely surprising here that we're seeing the biggest upticks in the Midwest and the Northeast. That's a trend we've been talking about and seeing for years now. And the ones with the biggest decreases are relatively, you know, expensive markets, not

actually expensive, but ones that got expensive, where prices really grew in the last couple of years. So Oakland already expensive got more expensive. Dallas is still a relatively affordable market, but that just went up like crazy over the last couple of years. So it's not surprising to see it come down a little bit. Same with Jacksonville and Tampa, San Diego, another super expensive market as well. Now, all of that can obviously change. And I try and sort of look forward at to what might be happening. And so one of the things I like to look at, given what we said earlier about the big shift in the housing market is more people

are listing their properties for sale. So where are listings going up the most? Well, they are actually kind of spread out and we're starting to see listings go up a bit in these more Midwest, more affordable market. So we'll see if that cools off the housing market. But Houston has the most new listings at 15%, followed by Columbus, Ohio at 12, Boston at 11, Indianapolis at 11, and Cincinnati, 10%. So 10% year over year. None of these numbers are super crazy.

And a lot of these markets are still hot. So it doesn't necessarily mean that there'll be price declines because there's a lot of buyers in all of those markets, maybe except Houston. You know, Houston, that might be a little bit of a red flag, but the other ones are very hot markets, so those might all get absorbed. On the other hand, we're seeing this interesting dynamic where some of the markets that are seeing declines

are seeing less listings. And this is something we need to be following throughout this market shift because sellers are now reacting, right? We had a lot of people trying to sell because prices were up. Now that prices are flattening or going down a little bit, it, maybe sellers are deciding, yeah, they'll just sit this one out and perhaps choose not to sell. Just as an example, the bottom five markets for new listings, where it's going down the fastest, Fort Worth, Texas, Tampa, Orlando, Fort Lauderdale, and Dallas. So Texas and Florida,

the two markets that are seeing the biggest corrections. Now, this is where really the facts and reality of the situation differ from the people who are calling for a crash and are just making stuff up. They say that when prices go down, more people are going to sell and they're going to sell and it creates this sort of spiral. That's the exact opposite of what is happening, right? Sellers are saying, actually, I don't need to sell right now. I'm not going to put my property on the market. Remember, I said that Tampa was one of the top five markets for price declines. We are now seeing Tampa as the second coolest market for new listings. They are going down the fastest. Same thing with Dallas, right? So sellers are saying, actually, if prices are going down, I'm just not going to sell right now.

And instead, I am going to just wait this out and see what happens next. And so this is sort of the balancing function that happens in the housing market. And yes, creates a correction like we're in right now, but sort of prevents the full-brown crash. Because as I said, until people are forced to sell, they have this option not to sell. And that's exactly what we're seeing in some of the markets that are correcting. So that's the regional update on that housing market, but I want to turn our attention to sort of why some of these things are happening and just some of the things going on in the broader economy that will impact the housing market.

So big picture macro, it is very uncertain right now. You're probably watching the news and seeing all this stuff going on geopolitically. We're seeing a lot of uncertainty on our trade policy. It's really hard to pin things down. But I think it's really important to call out that a lot of the data that we're seeing, at least as of now for the macro climate is actually solid, right? This is good news. I'll break down a couple of these things for you.

First and foremost, inflation. Inflation ticked up as of the last reading in May. It went up from 2.3 to 2.4%. So nothing crazy. You know, this is something I do think we're all going to have to keep an eye out for with tariffs. There might be an uptick inflation. There might not be. It's been more muted than I think a lot of people were expecting.

but inflation usually lags a little bit. We've seen that over the last couple of years. And so if there's going to be an uptick from tariffs, that might not hit until August or September. We're just going to have to keep an eye up. But I do think it's important to say that inflation hasn't really shot up in any considerable way over the last couple of months. And so that is an encouraging sign. The second thing is the labor market.

There are some signs that the labor market is starting to weaken. we're seeing increases in two of the metrics I like to look at. So some people look at total jobs, some people look at the unemployment rate. I think those things are important. But if you want to sort of track things on a really micro level, one of the things I really like to look at is initial claims for unemployment. That's a really good metric to measure how many people are getting laid off in a given week.

It has increased over the last couple of weeks and has sustained there for two or three weeks. It is not at any emergency levels, but this is something to keep an eye on. Same thing for another metric called continuing unemployment claim. So that's basically how many people are looking for work but are having a hard time finding work. That has also gone out. Again, nothing crazy, but they're starting to go up and these are things that we should be keeping an eye on.

But, you know, the fact that the labor market is doing as well as it is with all this uncertainty, with interest rates being high for three years. years now, I think that says a lot about the U.S. economy and the resilience of the labor market. We'll see if that changes. But I think given where we are with everything else going on, that is an encouraging sign. So those things are good, right? Like inflation is relatively tamed compared to where we've been. It hasn't shut up. The labor market is showing some weakness, but there's no emergency signs, at least as of now. But people, generally speaking, the American consumer, they're just not feeling it right now. They're not happy. They're not happy.

about the economy. If you look at consumer sentiment, which is a measure of it, it is just absolutely fallen off a cliff. It is close to the lowest point. It's been in the last seven, eight years. It was lower than this in 2022 when inflation was really raging at eight, nine percent. But we are getting back to that level. And it's not really necessarily based on any specific thing that's happening because like I said, inflation is back to a normal level. The labor market's okay. It could be a couple of things. One could be just sort of the cumulative effect of all the last few years, right? Like inflation has gone up. I think a lot of people are hoping for prices to go down. That doesn't tend to happen. When I say inflation is down, that means that the

pace of price increases is slowing. It doesn't mean that prices are going down. Prices are still going up, two and a half percent on average. So that could be one thing why people are sort of not feeling it. The other thing is just due to all of the uncertainty. There's this kind of amazing chart right now. There's something called the U.S. economic policy uncertainty index. That is for nerds like me to check out. But this basically is how uncertain the markets feel about what is going on with monetary and fiscal policy in the U.S.

And they measure this. And they index it to 100. That means like a normal level. Right now, it is at 470. This is a very unusually uncertain time in the macro economic climate for geopolitics, for the economy. And that just wears on people. It wears on businesses. They make less decisions.

It wears on consumers. They don't want to make huge commitments to buying a house, to buying a car, to investing in something. So this is one of the major things that's happening on sort of an individual level. But I also think it's one of the things that's driving the housing market because it's also. Also freezing bond yields and mortgage rates. Mortgage rates this year, they've been somewhat consistent, right? They've kind of stuck within this band of 6.75 to 7.15 is sort of where we've been for the last six months, despite all of these wild swings in the stock market and trade policy.

So why are they staying so stable? Why haven't they dropped a little bit? Why haven't they gone up more? Basically, what's going on is uncertainty is freezing the mortgage market in my mind. Because mortgages are based on bonds. We talk about that all the time. And bond investors are afraid of two things. They want to know what's going on with the risk of recession.

If they're afraid of a recession, they're going to put all their money into bonds because that's a safe place to put your money during a recession. That's going to bring down mortgage rates. But at the same time, they're afraid of inflation. And if inflation comes, they don't want their money in bonds or they're going to demand a higher yield, a higher interest rate to lend the government money. and so that could push mortgage rates up. But investors, generally speaking, bond investors seem pretty split.

I mean, if I asked you all listening or watching this right now to raise your hand, who thinks that there's going to be a recession? I bet about half of you would raise your hand. I actually did this at a meetup the other day. And about half the people raise their hand and say, I'm more afraid of a recession. The other people say, I actually think I am more afraid of inflation, right? They're about split right now. And if that is happening in the bond market, that means mortgage rates can't really go anywhere

because half the market wants higher yields. The other half is going to push yields down. So we're basically stuck with mortgage rates until some of this uncertainty works itself out. I think that's true, even if the Fed cuts rates, I think the probability of the Fed cutting rates, as of now recording this in mid-June, is probably going up based on recent activity because there's some weakness in the labor market. Inflation has stayed low. So the probability of a rate cuts going up,

And that could help rates a little bit, but I don't think that's going to give us some big benefits, some big leg down in terms of mortgage rates. It might be marginal. So that's what's going on with the macroeconomics. But let's shift now. We've done the data. We've talked about the national market. We've talked about regional markets.

We've even talked about bond yields. Now let's talk about strategy. What do you actually do with this information to guide your own portfolio in investing decisions? We're going to get into that right after this quick. break, stick with us. Before we take a break, I want to give everyone a heads up that Bigger Pockets is hosting a deal analysis challenge this week only from June 16th to June 23rd. If you analyze seven deals using Bigger Pockets calculators during that time, you can be entered to win in a random drawing, a Bigger Pockets Pro membership, a free general admissions ticket to BPCon

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about the housing market as of June 2025. So far we've talked about some national, regional trends, as well as the macroeconomic climate. But I want to talk about strategy now, because of course this stuff matters the data. But at the end of the day, it's what what you do with this information that actually is going to make a difference in your investing portfolio and on your journey to financial freedom and improving your financial situation. So let's talk about strategy. And the first thing I want to talk about is the opportunities, right? I said at the top of the show that in these type of buyers market, there is risk, but there is also going to be opportunity.

I found this study the other day that shows that the typical sale price for so what something actually transacts for is now, 30 grand, $30,000 lower than the list price. That's on a national average, right? So people can put their house on the market for whatever they want. They can list it for anything that they think that they can get. But as of right now, people are actually bidding down those prices 30K lower. And hopefully as an investor, you are seeing the opportunity here. That means, again, like I said, buyers have the power to negotiate.

When I first got started in real estate, it was 2010, so it was similar. It was in a buyer's market. And you would never bid asking price or above asking price. Never. Things were sitting on the market for 45, 60 days. That was normal back then. And so you would always come in lower and see if the seller was willing to negotiate. Now, in this market, there are still things that are priced competitively.

There are some properties that you need to bid competitively on. That is true. But there are going to be a lot of overpriced property. And that is exactly where this risk and reward comes in, right? Because you, as an investor, face that risk of buying something that you can get for cheaper. And in this type of market, you have to be very, very disciplined about your acquisition price. You need to be making sure that you are buying for less than current comps. Because if the market's going to decline 2% or 3%, you need to be buying today 2% or 3% below

what current comps are going for. That is how you protect yourself and take advantage of this market, right? That is the way that you balance risk and reward. You look for the opportunities to negotiate down because sellers are going to compete for your attention and for your dollars, but you need to really make sure

that you were driving down that price enough so that if prices go down, you're not left holding the bag or catching the falling knife. Just to give you some more information here, the median asking price in the U.S. right now is $425,000. But what they're actually selling for is $397.

And so that gives you a lot of wiggle room. And what you need to do is negotiate, like I said, and to be patient. Because inevitably, some of these negotiations, I'd say probably the majority of these negotiations aren't going to go your way. And I know I said that you have the power, and that is true. But some sellers are just not willing to negotiate at this point. They haven't felt enough pain. And that might not be true on a national level, but you're likely going to encounter some

sellers who are, A, just stubborn, B, not motivated. And they, you know, they put out a price and they're saying to themselves, they're saying to their agent, I'll sell it if I get my price. But if not, I'm just going to pull it back off the market. You're going to encounter those people. Or there are some people who are just saying, I'll wait 60 days or I'll wait 90 days or 120 days before I am willing to lower prices. And so the strategy that you need to employ is to be patient. You really need to be willing to walk away from deals. You need to be willing to come up with

your number, run your numbers, figure out what you're willing to pay and really stick to that. You know, you don't normally want to do this, but there was a period from 2020 to 23 where you could get away with sort of being loosey-goosey on your acquisition price. This is not the time to do that. It is the time to be really disciplined about what you're willing to buy and what you're willing to pay for it. And if you do that, you are going to be able to take advantage of a lot of the long-term upsides in the housing market. Because if you buy below market value, when things start to pick up again, that's when you're going to get a lot of appreciation, leveraged appreciation, which will drive huge returns for a lot of people. But you have to, again, not be one of those people who's buying

something that is unrealistically priced. So that's the number one thing I would recommend around strategy. It's just negotiate and be patient. The second thing is personally, this is what I'm doing. You can choose to do differently. But what I recommend right now is to invest for things other than appreciation. I hope that appreciation will come back. I just expect it to be flat or negative this year. It could be flat or negative next year. We really just don't have enough information right now. And I know that can sound scary for people because appreciation is one of the massive big drivers of wealth building in real estate, but you can still benefit from real estate without short-term appreciation. We still need long-term appreciation because if you're a buy and

hold investor like me, we still need appreciation to start up again in the next couple of years. But my assumption is that appreciation is always going to average out to that 3, 4%. And I'm okay with that. So if it doesn't go, you know, we had years of huge appreciation. So if we have a few years of flatter or even negative appreciation, that's okay because when it starts to balance out in a couple of years, then you'll make it up again. But you need to be able to make it a good investment right now, right? You don't want to put your money into something that's not appreciation and also isn't benefiting you in any other way. That is very silly. That is speculation. And you don't want to do that. And so when I'm evaluating deals right now, I personally am focusing a lot more on

three things. The first is cash flow. And I know people have different opinions on that, but I believe that right now in this kind of market, you need deals that at least break even cash flow. And I mean real cash flow, not that social media cash flow. You know, you're taking into account capx, vacancy, turnover costs, all of that. You need to be at least break even cash flow. These properties need to pay for themselves during a period of really good appreciation because that's going to make sure that you can hold on to that property for the next period of appreciation. That's the main thing about cash flow. It could also give you some money in your pocket, which is great. But the main thing you want to do with that cash flow is make sure you can buy right now because you're going

to get a good deal, but then you can hold on to it until the next expansion cycle that we go into in the housing market. So that's the first thing I'm looking for. The second thing that I'm buying for is tax benefits. That's always around in real estate. Those are always true. That cash flow is going to be offset a lot by depreciation. And, you know, I'm not a tax expert, but you can do things like a live and flip. If you have real estate professional status, there are great tax benefits you can take advantage of as a real estate investor. And the third thing is value at. This is really important. It's a way that you drive appreciation without just waiting for the market to appreciate for you, you actually improve the property and drive up the value of your home. So this can be done with a flip. It can be done with a

live-in flip. It can be done with a burr. It can be done with just a regular rental property or a short-term rental. But I believe that right now, because prices are softening, you're going to be able to buy for better deals right now. You're going to be able to drive down your acquisition costs where the price for things that are actually renovated and stabilized haven't gone down that much, and I think they'll be a little bit more insulated. We're going to see this sort of split of the market where properties that need a lot of love and a lot of work, they're going to fall in price faster and further than properties that are well renovated.

And so if you're the person to renovate those properties, you're still going to have a good margin. And so that's why I think value ads are going to become particularly important during this period that we're in right now. So those are the three things that I'm focusing on. Cash flow, tax benefits, value add. I'm still trying to buy in the path of progress, places that I do think appreciation is going to come back.

But I just want to be clear with everyone that I am not feeling super confident about appreciation coming back in 2025. We'll see about 2026. But I think it makes most sense for investors right now to assume that you're not getting market appreciation this year or next year. That's just the safe prudent. thing to do. Maybe you think I'm wrong. That's fine. Maybe you think I'm underestimating the risk. That's also fine. But I think we're going to probably see a modest correction in housing prices

on a national basis. And even in the hot markets, we'll see a cooling of those markets. And so I think it makes sense to just be very conservative right now with your underwriting and your estimates about what deals are going to do. And if I'm wrong, and appreciation takes off that, that is a good thing. That's great. You'll be happy to be wrong on that. But right now, you need a shift in mindset from investors to sort of capital preservation, being cautious, buying good long-term assets, but not overestimating what returns are going to be in the next 12 months, right? That's what I think is really important. And this, this strategy might be thinking, oh, that is very cautious or maybe I just won't invest at all. But this is honestly how people have

been investing forever. Before this Goldilocks period where appreciation went crazy during the 2010s and early 2020s, this is how people invested, right? You needed to have cash flow. You needed to be able to add value. You needed tax benefits. You couldn't just buy a house and wait for it to go up in price. That is speculation. And yes, it worked for a little while. But the fact that it may not work over the next couple of years is not abnormal. That is normal real estate investing. And so if you focus on cash flow and tax benefits, value at, you buy in the path of progress, you look for zoning upsides. If you find these upsides, there are still great assets that you can buy and there are still good deals for real estate investors.

So that's how I am thinking about it. That's how I'm personally going to be handling my own portfolio. Hopefully this information is helpful to you. As I said at the beginning of the show, right now, there are opportunities and there are risks. The key is to be informed investor. Know what is going on in the national level. Know what is going on in a macroeconomic level. know what is going on in your market.

And if you do those three things, and this sounds like a lot, it's not that hard. Spend an hour a month studying these things. Spend a couple of minutes every week talking to other investors or agents or just meeting with property managers. Figure out what's going on in your market and you will be able to find opportunities. This is happening in the markets I operate in. Every investor I know is saying that deals are easy to come by. Again, you have to mitigate those risks.

but if you are diligent and informed, you will be able to find opportunities in this market. Like I said, I recommend being very conservative when you underwrite these deals. But keep your eyes open. That's going to be the key to managing the next couple of months, maybe even the next year or two, in the housing market. Thank you all so much for watching or listening. I'm Dave Meyer, the head of real estate for Bigger Pockets. I'll see you next time. Thank you all for listening to the Bigger Pockets Real Estate podcast.

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