BiggerPockets Real Estate Podcast - Signs the Housing Market is Becoming “Healthier” in 2025

Episode Date: May 8, 2025

It doesn’t seem like it, but the housing market could be getting a LOT healthier. After years of buyer-seller imbalance, with rising mortgage rates, low affordability, and frozen transaction volume, there are finally some signs of improvement. But are these changes enough to call the market “healthy”? Or are we still a long way from normal? We’re back with a bonus audio-only episode, touching on housing market expert Logan Mohtashami’s recent article, Why the housing market is actually much healthier in 2025. Dave breaks down the five key traits of a healthy housing market—and which ones the 2025 market actually meets. Although things have significantly improved from the supply-starved 2020-2022 period, affordability is still a huge issue. Can we somehow make the jump back to a healthy housing market?  We might not be there yet, but things are shifting. So what does that mean for investors? With uncertainty comes opportunities, even if market conditions aren’t “ideal.” Do you NEED to wait for a healthy housing market to jump into the game? We’re breaking it down today! In This Episode We Cover Signs that the US housing market is becoming (surprisingly) healthier Five factors that make up a “healthy” housing market, and where we need to be to get back to pre-pandemic levels Can we ever solve our affordability crisis and get housing back to reasonable pricing? Signs we’re going in the right direction, EVEN with prices still high  Why a “healthy” housing market doesn’t always mean a good time to invest (and vice versa) And So Much More! Check out more resources from this show on ⁠⁠⁠⁠⁠⁠BiggerPockets.com⁠⁠⁠⁠⁠⁠. 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

Is this housing market healthy? Despite all the news and the noise and the confusion, could we actually be in a healthy housing market right now? Today, we're going to find out. Hey, what's going on, everyone? It's Dave, head of real estate investing at Bigger Pockets. And I was recently reading this article from a housing market analyst who I really respect and I follow closely.

He's also been on the show a couple times. His name is Logan Motashami. He works for Housing Wire. And I follow and have been following Logan for a long time because, like me, he's a data guy. And he doesn't say things just for clicks or hype. He just calls it like he sees it and has a very long, proven track record of really good forecasting. So when I saw a recent headline from him that was titled Why the Housing Market is actually much, healthier in 2025, it really made me think, are we actually in a healthy housing market right now?

I know that might seem crazy because everything feels crazy and confusing, but is there actually some truth to this? I decided to dig in, and I thought about this question a lot. I did some research, and in this episode, I'm going to share with you the conclusions I came with. And just a reminder, this right here is an audio-only bonus podcast episode of the Bigger Pockets podcast. We're dropping them on some Thursdays with my commentary on the housing market in additional to our usual Monday, Wednesday, and Friday episodes. So make sure you're subscribed to this podcast feed so you don't miss any of these bonuses. So in talking about a quote-unquote healthy housing market, the first thing we need to cover

and discuss is what is a healthy housing market in the first place? What makes a market healthy? I actually sat down and thought about this for a while because I never really put pen to paper and defined it before, but I came out with five basic criteria. Number one is a good balance between supply and demand. And this basically means that we have relatively equal numbers of both buyers in the housing market and sellers. And this can be measured in a couple of different ways.

You've probably heard me or other people talk about this. Or maybe you track them yourself. But these are things like inventory, days on market, and months of supply. But basically, whatever way you measure it, it's just the idea. that you need a solid amount of both buyers and sellers to make a healthy housing market, have enough transaction volume, and not have pricing moving too far in either direction, either going up too fast or going down. My second criteria is that prices at least keep up with inflation.

This is actually historically what is normal for the housing market. We have seen periods recently during the pandemic or even really since the Great Recession where prices have outpaced inflation. But if you look back historically, the average appreciation on homes is 2 or 3% about the pace of inflation. And to me, as an investor and someone who cares about housing in this country, I think that's a very good number. It has to at least keep pace with inflation. We don't want prices going down. But on the same rate, I don't think we really want prices going crazy.

That leads us to these unaffordable markets like we see right now. That leads me to my third criteria, which is reasonable levels of afforded. Some investors might love seeing prices go crazy. I personally don't think it's healthy for that to be happening. And I think we need the average American to be able to buy the average price home. That's just good for our society. It's good for wealth building. And I think it's sort of a key component of a healthy housing market. Number four is solid transaction volume. I know that for a lot of casual observers of the real estate market, they just look at prices or price. is going up, that's good. Or prices going down, that's bad. Or maybe you want prices to go down. I don't know. But most people just look at prices. I believe that you need a reasonable amount of transaction volume. You need homes to be bought and sold. This is key for a healthy market. Anyone who's an agent, anyone who's a loan officer already knows this because their whole business

depends on it. But this is important for the whole country. Housing makes up about 16% of our GDP, of total economic output for the country. And so, We want housing to be a pillar of our society and our economy, which I think we do. We need homes to be bought and sold. So that's number four. And then the last one is just low rates of distress, right? We can't have a lot of delinquencies in the market. We can't have a lot of foreclosures in the market.

People who are not paying their mortgages or, you know, are being forced to sell their property at inopportune times. We can't have those. So those are the five criteria. Just as a reminder, it's a good balance between supply. and demand, prices keeping up with inflation, reasonable affordability, solid transaction volume, and low rates of distress. And by these criteria, the housing market has not been healthy at all in recent years. Think about 2022 to now. We are missing at least three of the five criteria.

Supply and demand balance? No, it has been a strong seller's market for five plus years, so we definitely haven't had balance. Transaction volume, it's terrible. It's down 50% for from 2022. It's down 30% from what is normal. So I would definitely say we're failing on that one. Affordability, it is close to the worst we have seen in 40 years. So those three, right there, three criteria that we are missing. We are and have been hitting the other two, which is prices keeping up with inflation. They have done that at least and more for many, many years now. And we've also had low rates of distress. That's actually been a bright spot for the housing market. And despite the fact that the housing market is sort of softening, that continues to be

one of the bright spots for the housing market. It has been a signal of health. So all this to say, I wouldn't blame anyone for thinking that the idea that we're in a healthy housing market is just absolutely insane, given where we've been in the last few years. But Logan, getting back to the article that sort of brought about this episode, Logan has some points here that I want to share. In just the last few weeks, we have now seen year-over-year pending sales growth. So that means despite higher mortgage rates, we're actually starting to see transaction volume go up on a year-over-year basis. And just so you know, I tend to like year-over-year data when I look at the housing market because it is a seasonal market. And so we need to compare March to March, April to April. That's the

best way to look at sort of long-term trends and patterns in the housing market. And what we're seeing it's not a lot, but it is modest growth in sales volume in just the last few weeks. The second thing that's gone on is even though mortgage rates have really gone up and stayed higher than a lot of people were calling for and expecting, demand has actually remained pretty high. It's up year over year. I like to measure demand in the housing market by looking at something called the mortgage purchase index. It's basically how many people are applying to buy new homes right now. And that is still up. And so that's encouraging as well. The last thing is that inventory is rising. The number of homes for sale at any given point is up.

32% over last year, still well below pre-pandemic levels. But if we want to tick one of those boxes, in my criteria for a healthy housing market, we need more supply, and supply is going up. So all of these are pretty good points here. And I should mention that this article talks about a lot of the points and data that we share with you or I share with you every month in our housing market updates. And I am working on that one for May. That will be out in a couple of weeks. But if you want to know in-depth more what's going on with inventory, pending, demand, all of that, I'm going to give a really detailed update on that in just a couple of weeks. But back to our article here, what Logan has pointed out is that even though we're not sort of back to pre-pandemic levels,

things are moving back towards something that resembles at least normality. But does that make it healthy? Are we actually in a market that is good and healthy? We do have to take a quick break, but I'll give you my take when we get back. Here's why savvy real estate investors are obsessed with bonus depreciation. It lets you take that rental property or commercial building you own

and depreciate most of the cost against your income. Legally, 100% IRS compliant. That's instant cash flow improvement. Cost segregation guys is the number one firm nationwide, specializing and identifying these faster depreciating assets in your property. They've completed tens of thousands of studies across all 50 states from remote cabins to apartment complexes. So if you own investment property, this is a no brainer. So visit costsegregationguise.com slash BP for your free proposal and find out how much

you could save this tax season. Managing properties can feel like a full-on circus. You're juggling vendors, tracking payments, chasing approvals across multiple properties, and maybe a few HOA all while trying to keep tenants happy and owners confident. One delay can throw everything off and suddenly your day is all clean up, no progress. That's why hundreds of property managers rely on bill to streamline their finances. Bill for property management lets you add all your properties, assign permissions, pay bills, and receive payments quickly and efficiently without the usual bottlenecks. It syncs with platforms like QuickBooks, Zero, NetSuite, and Sage intact, so your accounting

stays aligned. You can automate bulk payments across properties and HOAs. Choose flexible payment methods like same-day ACH, international wires, card or check, and set custom roles in approval policies. There's even a dedicated bill inbox for each property to keep everything organized. Ready to simplify your workflow, book your free demo at bill.com slash bigger pockets and get a $100 Amazon gift card. That's bill.com slash bigger pockets. If the new year means getting rentals back in order, listings are a good place to start. Avail. Part ofreel.com makes it simple to list a rental for free and get it in front of millions of renters. One listing, one click, posted across 24 top rental sites.

Avail even helps generate listing titles and descriptions to save time. More visibility means fewer days sitting vacant and getting your property rented quickly. It's a fast, free way to find renters without the usual hassle. Get started at Avail. That's A-V-A-I-L-C-O-Bigger Pockets. You just realized your business needed to hire someone yesterday. How can you find amazing candidates fast? Easy.

Just use Indeed. When it comes to hiring, Indeed is all you need. That means you can stop struggling to get your job notice on other job sites. Indeed, sponsor job posts help you stand out and hire the right people quickly. Your job post jumps straight to the top of the page where your ideal candidates are looking. And it works. Sponsored jobs on Indeed get 45% more applications than non-sponsored post. The best part, no monthly subscriptions or long-term contracts. You only pay for results. And speaking of results, in the minute I've been talking to you, 23 people just got hired through Indeed worldwide.

There's no need to wait any longer. Speed up your hiring right now with Indeed. And listeners of the show will get a $75 sponsored job credit to get your jobs more visibility at Indeed.com. slash rookie. Just go to Indeed.com slash rookie right now and support our show by saying you heard about Indeed on this podcast. That's indeed.com slash rookie. Terms and conditions apply. Hiring Indeed is all you need. Welcome back to the Bigger Pockets podcast where we're talking about whether or not we're actually in a healthy housing market. And when we left off, I was sharing some thoughts of Logan Motashami and his belief that the housing market is healthier in 2025 than it has been in years. And now we're going to check

for ourselves whether we believe this assertion. Now, just as a reminder, my personal criteria, which I stated for what a healthy housing market is, are number one, a good balance between supply and demand, two, prices keeping pace with inflation, three, solid transaction volume, four, reasonable affordability, and lastly, low rates of distress, delinquency, foreclosures, all of that. So let's go one by one and look at how these have changed and whether or not they are actually healthy right now. First up is the balance of supply and demand. For this, I like to look at inventory. Again, there's other ways to look at it, but if you look at inventory, like I said earlier, it is up and rising. It is still below pre-pandemic levels, but it is trending in the right direction.

Days on market, which is another good measure of the balance of supply and demand, is actually pretty darn close to pre-pandemic levels. Normally, we expect about 60 days on market. We're at 53. So that is like pretty darn close to normal. So that measure, I think we're close to healthy. I think overall with the balance of supply and demand, I actually think we're healthy. Are we at 2019 levels? No.

But was 2019 some perfect model of a healthy housing market that we have to absolutely get back? to? Also, no. I think that was sort of the best that we have because the last years have been so crazy. But I think if we get in range of what was going on in 2017, 2018, 2019, that's more of a model of a normal, healthier housing market. And so being closer on inventory, especially given where we are with interest rates, I think this is pretty good. Of course, there's a question if it will blow past our 2019 levels of inventory and we'll start to see higher inventory and prices might go down, I think that's a good question. But for our purposes, we need to just talk about where we are in 2025.

And right now, I think we are moving towards health. All right. On to our second criteria, which is our prices keeping up with inflation. Yes. Just short answer. Yes, they are right now. Again, if inventory keeps going up, that could change in the future. But we're just doing this analysis right now.

Snapshot in time, 2025. Are prices keeping up with inflation? Yeah, pretty much. They're pretty darn close. Some markets aren't going to be there. But I think if you're in, you know, 0.5 of inflation in most markets, you could say that that's pretty much keeping pace. So I think we check the box there. Our third criteria is transaction volume.

And that's how many homes are being sold. And this is still just an enormous fail. We are taking a huge L on this one. We are averaging about 4 million home sales per year right now. That sounds like a lot. It's not compared to normal healthy markets. Normally, we'd expect about 5.25, 5.3 million. That's about a good average.

So we are about 30% below that. We are way below where we were in 2021. Not that we should expect to get back to those. Those are sort of like peak levels. We shouldn't expect to get back there. But transaction volume, big fail. And I don't think that one's getting better anytime soon. Affordability, also just a huge fail.

And I think these things go hand in hand, which I'll explain in just a minute. But we're still near historic lows for affordability. it has actually flattened out, so it's not actively getting worse, but, you know, mortgage rates are fluctuating, home prices are still high. So I think we're really not doing well in terms of housing affordability. So through the first four, we're only hitting two of those five criteria, but luckily the last one we are hitting, which is foreclosures. So this is still pretty good. I would give this one a check. They are going up a little bit for certain segments of the market. but if you look at sort of the big picture, you zoom out where closures are still really low,

delinquencies are still pretty low despite some upticks for VA and FHA loans. Overall, I don't think we're seeing high levels of distress in the housing market by any sort of historical standards. So is this a healthy housing market? I would say no. I don't think we are. We just have three of my five criteria. Now, we are doing better than we have been because I think the one thing that has in

is that balance of supply and demand. And that single improvement is notable. Seeing an improvement in supply and demand is something we all feel and notice as investors, right? We see better deals. We have less competition. We have more time to make decisions about potential deals. This is actually really helpful.

So although we've only gone from meeting two out of five of the criteria to three out of the five criteria, I think that is a notable one particularly for investment. investors. And now, I do want to give Logan credit. He didn't say this is a super healthy housing market. He said that it is a more healthy housing market than it has been in recent years. And I do agree with that. I, you know, just like I said, I have these five criteria. We've gone from meeting two to meeting three. That is progress. The thing, though, is I think it's super unclear when these last two criteria are going to improve. I do think that they will happen eventually and they'll happen together because transaction volume, the reason we're not hitting that is because affordability

is low, at least in my opinion. That is not some proven thing, but I personally believe that if we see affordability improve, we're going to see transaction volume improve. Now, sure, transaction volume could get marginally better, like we're starting to see some signs of without better affordability, but there's also chances that it could get worse. And I think for the housing market to truly get restored to normal, healthy levels, we need affordability to come back. That could come in the form of prices coming down, but that would take away one of our other criteria.

That could come in the form of lower mortgage rates or rising wages. And we don't really know, I actually think it will probably be some combination of these three things, but we don't know exactly when and how that will happen. So overall, as we're asking ourselves in this bonus episode, are we in a healthy housing market?

I would say no, but we are moving in the right direction. and my hope is that we'll see a return to a healthy housing market sometime soon. How soon? I'm personally not holding my breath for the next few months. I think rates are likely to stay relatively high, which means that we're not going to get restored affordability or transaction volume. I also think we might actually go backwards in the short term because prices may not outpace inflation for parts of 2025. I'll get into why I believe that in our May housing market update, which will be coming out in a couple of weeks. But I just think we still have a

way to go before a healthy housing market. And we might actually go in reverse a little bit before we get better. But I do think it will get better eventually. Before we go, I want to make one last really, really important point here is that a healthy housing market does not mean investability. Right? The housing market was anything but healthy in 2020 and 2021. And that was a great time to invest. I bought my first property in 2010. It was a super. unhealthy time in the housing market. There was a lot going on. There was horrible distress. Prices were definitely not keeping pace with inflation. And it turned out to be a great time to invest as well. These are not the same things. Healthy markets can be great times to invest,

but often what you see is the best opportunities come during these periods of uncertainty. And this is basically another word for an unhealthy housing market, right? That's what hats. When it's unhealthy, you get this uncertainty. That's what we're seeing right now. So I just want to encourage people to, although this idea that we need to get back to a healthy housing market is true, I do think that's important. That doesn't mean there aren't short-term opportunities. In fact, it probably means there will be a lot of short-term opportunities, but you have to sort through a lot of junk on the market there to find really valuable assets. And again, that is what the upside error that we are in is all about. So that's where I come out, but I would love your take.

And everyone, make sure to tune in for the May housing market update in just a week or two, because I'll get into more details about what's happening in the market, what regions are at risks, what regions are doing really well, and my outlook for the summer market. I'll see you then, but I'll also see you for a couple other episodes before that. Thanks for listening. Thank you all for listening to the Bigger Pockets Real Estate podcast. Make sure you get all our new episodes by subscribing on YouTube, Apple, Spotify, or any other podcast platform. Our new episodes come out Monday, Wednesday, and Friday. I'm the host and

executive producer of the show, Dave Meyer. The show is produced by Ian K. Copywriting is by Calico content, and editing is by Exodus Media. If you'd like to learn more about real estate investing, or to sign up for our free newsletter, please visit www.com. The content of this podcast is for informational purposes only. All host and participant opinions are their own. Investment in any asset, real estate included, involves risk. So use your best judgment and consult with qualified advisors before investing. You should only risk capital you can afford to lose. And remember, past performance is not indicative of future results. Bigger Pocket's LLC disclaims all liability for direct, indirect, consequential, or other damages arising from a reliance on

information presented in this podcast.