Prices to Weaken, Buyers Get Better Bargains

Dave:
Mortgage rates are dropping, inventory is rising. There are finally great buying opportunities for real estate, but tariffs and stock market selloffs could upend our entire economy. It’s been an absolutely crazy month. So we got to talk about what all this means for the housing market and what you should do next. This is our April, 2025 housing market update. What’s up everyone? This is Dave Meyer, head of real Estate investing at BiggerPockets. Today we’re going to break down what’s happening across the whole world of real estate investing. We’re going to do today’s show in three different parts. We’re going to discuss first how mortgage rates have dropped to their lowest level in several months, how rising inventory is driving us towards a nice buyer’s market. And we’ll also discuss slowing growth rates for sales prices and changing buyer demand. Then we’ll move on to part two where we’re going to talk about recent news that you’ve probably been hearing about and how all of that will affect real estate.
We’ll have, of course touch on tariffs and how that could spill into the real estate market. We’ll talk about some potential trouble that’s brewing in the condo market and we’ll talk about how mortgage delinquencies are starting to tick up and whether or not real estate investors should be concerned. Then in the last part three, I’ll give you my opinion on what this all means for real estate investors, what I’m doing in my own portfolio and strategies that you may want to consider in your own investing. So that’s the agenda. Let’s jump right into this April, 2025 housing market update. So the first metric that we need to cover is inventory. In a lot of ways, the story of 2025 in the housing market has really been about this steadily rising inventory because if you’ve been following the housing market for the last several years, you know that the defining characteristic has been really low inventory.
Even though mortgage rates have gone up and demand has pulled out of the market, the whole reason prices haven’t softened or crashed is that inventory is just so low. But now at least over the last couple of weeks and months, inventory is starting to rise. We’re at 1.1 million listings now, which probably sounds like a lot and in signs of some improvement to the health of the housing market, it’s up 12% over last year. So that is some really encouraging progress. But don’t get too excited because this is not really where we need to be just yet. When I look at the housing market, I often think about what would happen in a normal year. And to do that you have to look all the way back to 2019 because every year since then has had some weird anomaly going on. And so comparing today to 2022 or 2023 doesn’t really make a lot of sense.
So when we look back to 2019, we would expect in the month of February about one and a half million listings. We’re at 1.14, so we’re still 30% basically below what we had in the last normal year that anyone can remember and inventory this metric. There’s a reason I’m starting with this because inventory it matters a lot. It is a great indicator of the direction of the housing market because it sort of measures the balance between supply and demand. It measures the balance between how many people want to buy homes and how many people want to sell homes. And generally speaking, as a rule of thumb, when you have low inventory, it is a seller’s market. You have a limited amount of properties that are for sale and you have more buyers than homes for sale, and that generally drives up prices. And the reason that’s called the seller’s market is because sellers have the power in those negotiations.
They can usually get what they’re asking on their list price and maybe even a little bit more. On the other end of the spectrum, when inventory is super high, that is considered a buyer’s market because buyers have the power in that scenario, there are fewer buyers than homes on the market, and that means that sellers have to compete for that smaller pool of buyers, and they do that by offering concessions or lowering prices, and that gives buyers a better position. And right now what we’re seeing is that we are moving towards a buyer’s market. We are still below average, but just about the fact that inventory is rising means that we are moving steadily towards that buyer’s market. Now, it is worth mentioning that there are a lot of different ways to measure inventory. I’m looking at active listings right now, but there are other ways, and one of the other popular ones called Days on Market basically measures how long it takes for a property gets listed for sale to get put under contract.
And that metric is actually basically back to pre pandemic levels. And I think this is important, and I’m mentioning it for a reason because I think that we might be in a new era inventory wise, we might not get back to pre pandemic levels of active inventory and we still might have a buyer’s market. There might just be a new normal. We don’t know that yet, but we do know that days on market it shows us that the market is tilting back towards that balanced market. It is similar to what we had in 2019. Now if it goes beyond that, we start to see days on market tick up even beyond that. That would be really important to note when we’re forecasting prices. That could put downward pressure on prices, but we’ll talk about that a little bit later in the episode. But for now, we got to talk about why inventory is rising.
Yeah, we’re moving towards that buyer’s market, but the reasons behind it really matter for investors because there are actually two different things that can be happening and they sort of mean different things. So the first thing that could happen is that fewer people could be looking for properties. That’s also known as lower demand. Just fewer people want to participate in the housing market right now. The second thing is that more properties could be listed for sale, right? You could have the same amount of people looking, but if there’s more homes being offered that would drive up inventory, right? So let’s look at which of these causes are there. We’ll first look at new listings, the supply side, and that’s actually what’s driving this. We see that new listings are up 13% year over years. Again, similar to active listings, not back to pre pandemic levels.
It’s not even back to 2022 levels, but it’s higher than where we were in 23 and 24. And just to give you some sense of scale, in February of this year, we had 475,000 new listings. In February of 2019, we had 552,000. So there’s still 16% more in a normal market, but we’re seeing this go up. So it is true if you see those headlines saying listings are going crazy, inventory is going up, those things are true, but it’s not some emergency. If you see something on social media saying listings are going up and every market’s going crash, that is not what’s happening on a national level. We are seeing new listings go up a significant amount 13% year over year, but we are not at pre pandemic levels. And more importantly, this is not happening equally across different places. We see states like Florida and Texas with rapidly rising inventory where a lot of places in the northeast and the Midwest are flat or are still down.
So take all of those scary headlines that you see with this important grain of salt. Next, let’s look at that other thing that could be driving inventory, which is demand. We measure demand in a couple of different ways. The way I like to look at it is something called the purchase index. It basically measures how many people apply for a mortgage to buy a home in a given week. And when you look at that, it’s pretty flat over the last couple of weeks and months of 2025, but it is actually up year over year. And that is not just seasonality, it’s not just because we’re going from January to February to March to April. We are seeing this when comparing March to March, April to April, it is actually going up, which is super interesting and sort of counter to the narrative that you might be hearing in the media about the housing market, about how people are fleeing.
It is up and this is likely an impact of lower rates. We have seen mortgage rates go from sort of their recent high or at least their 2025 high in January is at 7.15. To as of this recording it’s about 6.5, 6.6%. And that is honestly, it’s a pretty meaningful difference. It’s obviously not where we were a couple of years ago, but if you were to buy an average $400,000 house in the United States, that savings, just the move from January to where we are today, would save you 140 bucks a month. That is a pretty meaningful improvement in affordability or improvement in your cashflow if you are an investor. So just to summarize here, what’s happening with inventory. So you can make sense of the news stories you’re probably hearing is yes, inventory is up, but it’s not because people are fleeing the housing market.
More people are listing their properties for sale and we are not at pre pandemic level. So this is not an emergency, but the trend is back towards a buyer’s market and something we should all be keeping an eye on. Now, last metric I want to just touch on is of course sale prices. This is what a lot of people focus on and now that we’ve talked about inventory and what’s happening here, it will sort of make sense to you that we are seeing sales prices still up according to Redfin and a couple other surveys, they’re between two and a half and three point a half percent up year over year, and that is close to what you would expect in a healthy housing market. Is this a healthy housing market? No, it is definitely not a healthy housing market. Ask any real estate agent or lending officer loan officer right now it is not, but this is a somewhat normal appreciation rate and I think the thing that is important here is it’s great that it’s up.
It is matching inflation. That is a great benchmark for us as real estate investors to pay attention to that our properties are at least keeping pace with inflation. But the trend is declining right at the end of 2024 is up 5% year over year. Then it was 4% year over year. Now it’s 3% year over year. It has sorted flattened out over the last couple of months. We haven’t seen further declines here in 2025, but that downward trend is important now that we’ve discussed inventory in the role it plays in the housing market, this should make sense to you. Prices should be softening given the dynamics we discussed. If there is more inventory, that means there are more properties for a similar amount of buyers that’s going to put downward pressure on pricing. So even though they’re up 3%, the growth rate declining doesn’t surprise me.
And I’m mentioning this because I just want to underscore the importance of looking at inventory. I could have told you and I based a lot of my predictions in 2025, which have so far proven fairly accurate based on these inventory trends. I was saying that housing prices were going to soften based on rising inventory and we’re seeing exactly that. The question of course that comes up next is wills continue, will prices stay up? Are they going to decline? And I will get to some forecasts and expectations for the rest of the year soon. But first I want to talk about what’s new and noteworthy in the housing market beyond just the metrics that we track each and every month. And I have three breaking stories to share with you when we come back from this quick break. This segment is brought to you by reim, the all-in-one CRM built for real estate investors. Automate your marketing skiptrace for free, send direct mail and connect with your leads all in one place. Head over to re simply.com/biggerpockets now to start your free trial and get 50% off your first month.
Hey everyone, welcome back to the BiggerPockets Real Estate podcast. We’re here today talking about new trends from the last month that you should be paying attention to and the first one is tariffs. I know you thought maybe you’re going to get through an entire day or maybe an entire episode without hearing the word tariff, but I’m going to ruin that for you. I have to mention it. It is really important. Now of course, it is very early into this new tariff policy and it’s a little early to tell exactly what’s going to happen with tariffs and how they relate to the housing market. I certainly have theories, but I would prefer to wait and see for a couple of months before offering any concrete predictions here. So instead of offering forecasts before really anyone knows what’s going to happen, I’m going to just tell you the things that I’m personally going to be looking at to make those predictions so you can all follow along.
The first thing is inflation. This is going to tell us a lot about the direction of the housing market because it will tell us the likelihood of fed rate cuts. It’ll also dictate a lot of the direction of the bond market. And tariffs are going to play this big role in inflation because economists believe that tariffs cause inflation. Even Trump himself has said that there is going to be some short-term pain due to his policy and I believe based on watching the news conferences that he’s referring to inflation. So to me, this is the big thing to watch over the next couple of months. And inflation, just so you know, sometimes it takes a couple of months to show up in the data. So even if it’s not high in April, I don’t think that means we’re out of the woods. We probably need to look at this April, may, June before forming an opinion.
The second thing I am going to be watching for is buyer demand from this recent stock sell off. There’s conflicting data. There’s all sorts of information about how much the stock market and real estate are correlated, but I did some research and I can just tell you that 11% of people in the housing market use money from the stock market to finance their down payment. And 11% might not sound like a lot, but we’re already at relatively low levels of overall demand. And if we saw even a 5% decline in demand, that would translate to the housing market. So that’s one part of it, but I think probably the bigger part of it is that there’s just overall fear and uncertainty about the economy. I’m sure you were seeing this on social media, I’m sure you’re talking about it with your friends and your family.
Everyone who looks at two huge declines in the stock market naturally gets a little bit fearful. Now it’s important to remember that the stock market is not the overall economy and the stock market is not the real estate market. And you have to remember that finance investing the economy, it’s not always logical. People like to think that it’s this perfectly rational thing, but it’s not. A lot of it is psychological. And so what I’m going to be looking for is how home buyer demand is impacted by the psychological impact of two huge stock market declines. And I’m recording this on April 8th, so by the time you might be listening to this, the stock market might have rebounded. It might’ve crashed really more, but even still, just the volatility that we’ve seen over the last couple of weeks has some psychological effect. We already see consumer confidence declining.
We see inflation expectations ticking up, and so I want to see how the psychological elements of what’s been going on translates to buyer demand over the next couple of months. So that’s what I’m looking for in terms of the impact of tariffs, inflation and buyer demand. I will definitely be updating you when we get that data. So stay tuned for that next month when we do our next housing market update. The second story that’s emerging right now that I want to share is that the condo market is showing a couple signs of strain. And I don’t want to be alarmist, but I do think that when these trends start to emerge, it’s worth mentioning and you can all factor it into your own investing however you want. Right now, 68%, so more than two thirds of condos are selling for less than their list price, and that is higher, but actually not that much higher than the rate for single family homes.
That’s actually 64%. But a lot of what I talk about on the show and I talk about data is this total number isn’t always what matters. It’s the trend that really matters. And what we’re seeing is the rate of condos selling for less than list price is going up faster than any other asset class. And we’ve also seen as an effect that condo prices have dropped over the last year for the first time in more than a decade, and this didn’t just happen in one market. This is happening almost universally. It happened in 97 of the hundred largest US markets. So we are seeing some consistent softness in the condo market. Another thing that I think is worth mentioning is not just that more properties are selling for less than their list price, but the gap between what they originally list their property for and what they eventually sell it for is actually really growing.
The average condo back in February had a sale to list price ratio of 95.4%, meaning sellers are getting almost 5% less than the owner listed it for. That’s down from last year and it’s down a lot from nearly a hundred percent during the pandemic years. Now, as I said, this is happening almost universally across the country, but there are some markets that are getting hit particularly hard. You would probably not be super surprised to hear that Florida is getting hit the hardest. And I don’t mean to laugh at that, it’s not funny, but Florida is continuously in the news for having one of the weaker housing markets right now. And what we’re seeing is that 85% of condos in Florida are selling below list price. It was 68% for the rest of the country. It is 85% for the total Florida market in Orlando, it’s actually 91%.
And there are some unique things going on in Florida. They have high HOA fees, insurance premiums have been going through the roof, which is hurting affordability in Florida. And after the condo collapse a few years ago, new standards, new code were implemented and a lot of condos have had to issue special assessments. Basically they’re going to their condo owners and asking for more money to make necessary upgrades for safety to these condo complexes. And that’s making affordability even tougher in what’s already a difficult affordability situation. And so Florida is just getting hit on all sides. And so I’m not super surprised that the Florida condo market is getting hurt, and I honestly don’t see it getting better in the near term. Now, Florida’s not the only market. My market that I originally started investing in Denver is really doing poorly. We see other popular markets like Virginia Beach and Charlotte also getting hit really hard.
So this doesn’t mean you can’t invest in condos like everything in the housing market we’re investing. There are trade-offs, right? This means you’re probably great buying opportunities, but you have to be careful not to catch the falling knife and negotiate a really good deal. I think this is actually a great opportunity for people who want to get into a housing market and have been previously priced out. Now don’t go and buy anything that’s overpriced, negotiate, ideally buy something under current market value. Clearly this data tells you that you have leverage, right? If the average condo is selling for 4% under list price, see if you can get 5% under list price. See if you can get 8% under list price because that gets you the upside and benefit of buying at a relatively low price, but insulates you against the potential for further price declines.
All right, that was our second story about weakness in the condo market. Third, I want to talk about the situation with mortgage delinquencies because if you are a part of the real estate investing social media world, you have probably been hearing a lot about this in the last week. It has been everywhere, this specific chart. So what happened was a popular influencer and social media personality, Patrick Beda took a chart that showed that mortgage delinquencies are rising and extrapolated it to the entire housing market and said that 6.1 million homeowners were in delinquency. The only problem with this is that he took a chart that was specifically for commercial multifamily assets, which is an entirely different asset class, an entirely different credit market, and applied it to the residential mortgage market and got what are honestly just completely wrong conclusions. So I want to just set the record straight and if you’re curious about this, I actually made an entire episode of On the Market podcast just about this.
You can go check that out on YouTube or on our other feed, but here’s the TLDR big picture situation. The overall delinquency rate for mortgages in the United States is about 3.5% right now. And that might sound high, but that is actually lower than it was in 2019. So lower than pre pandemic, and it is way, way lower than any crash conditions. Back during 2009, it was like 10 or 11% in 2019, the long-term average was about 4.6%. So in terms of mortgage delinquencies for the average American home buyer, we’re still in very good shape. And this is despite forbearance and foreclosure moratoriums expiring years ago, we’ve had years for that all to work itself out and we just haven’t seen this number tick up unless you’re looking at a very specific subsection of the market. When you look at FHA loans, which is about 15% of the overall mortgage market, those are starting to tick up as are VA loans, and that is important to note, but you have to remember what I said earlier, that the overall, even when you factor that in, the delinquency rate is low and actually dropped from January to March.
So of course this could change if there’s a big recession, but if you look at this overall, people are paying their mortgages and there aren’t a lot of concerns, at least on my end today for the residential market. Now, when we talk about the multifamily market, the chart that was shown, yeah, there are serious concerns there. Delinquencies have been going up, but I think that thing that sort of had me shaking my head about this over the last couple of weeks is that is not new. If you listen to this podcast or you listen to on the market podcast, we’ve been saying for three straight years that multifamily delinquencies were going to go up. We’ve been reporting on that. So none of that is news. The only reason this made news is because they extrapolated the multifamily market to the residential market and you just can’t do that. They’re two totally different situations, so something to keep an eye on. As always, I’m always looking at delinquency rates because they’re super important, but as of right now, they’re pretty much in line with where they’ve been over the last couple of years. I will certainly let you know if that changes. Alright, so those are our breaking stories for April. Let’s shift gears and get away from the news and talk about what this actually means for you and me and our portfolios. We’re going to do that. We right after this break.
Hey everyone, welcome back to the BiggerPockets of Real Estate podcast So far today. We’ve covered the data, we’ve covered the news. Now let’s talk about what this means for you. I’ll start by summarizing my general sense of what’s going on. First things first, the housing market. It’s still doing okay, especially in terms of prices because they’re up year over year. But my general sense when I look at a lot of data beyond what I’ve just reported today, but my general sense is that we’re going to have a continuing softening market. Inventory is going up and as I said, we’ll see what happens with buyer demand, but my gut tells me that we’re going to continue to see some softening prices. Does that mean the market’s going to crash? No, I still don’t see any evidence that that’s happening anytime soon. I think the market is softening.
We could see prices go flat, they could even go modestly negative at some point, but I just don’t see this risk of a huge selloff or huge dropoff in buyer demand, at least as we stand today. That’s what the data says. Is there a bigger chance of a black swan event, the market crashing? Now that the stock market is really volatile and we’ve seen huge declines, does the chance of a crash increase if there is a recession? Perhaps, but not necessarily. I think we have to wait until we see evidence of that and until, and I’m sticking with the trend, I’m sticking with my original predictions nationally, we’re probably going to see home prices continue to move towards flat. Now regionally, of course, that’s going to be super different, but that’s what the data still says and could change my forecast. But that would just be acting on fear and not on data or actual information.
And I prefer to act on actual information, rather just gut reaction to what’s happened in the last week or two. So the question then of course becomes should you consider buying real estate right now, I personally think that in this type of market we’re going to see both ends of the spectrum. We’re going to see some just God awful deals with tons of risk, a lot of hair on them. There’s going to be a lot of that out there. There’s probably going to be the majority of what’s out there. But on the other end of the spectrum, I think we’re going to see really good opportunities for long-term buy and hold that meet the principles of the upside era because we’re moving towards that buyer’s market. And I actually think in the coming months, these extremes may actually move even further apart. We might see even worse deals out there unfortunately, but even better opportunities if you are willing and able to participate in this market.
And I think what you do from here really depends on two things about you and your strategy. First is your risk tolerance and your risk capacity. In my opinion, the market is just riskier right now than it is during normal economic times. There is a lot of uncertainty and it might wind up turning out great, but uncertainty just means risk in my opinion. Does that mean that real estate is particularly risky? Not if you buy. Well, not if you’re looking for a long-term buy and hold. And in fact, I think you can make an argument that real estate is better than almost any other asset class right now, as I’ve been saying for months. But of course, if you’re going to participate in this type of market, you do need to be comfortable with some level of economic certainty and some level of risk. So that’s the first thing.
If you have the risk tolerance and the risk capacity to participate, I think you should at least be looking at deals because there will be opportunities. The second thing you need to think about is your ability to separate the wheat from the chaff. And I’m going to be honest, I actually don’t know what that phrase means. So I’ll say something that applies to me or I understand, which is separate the signal through the noise or find a needle in the haystack, whatever you want to call it. You need to be able to find good deals, right? That is going to be the really important thing because even if you have risk tolerance and risk capacity, if you can’t identify deals really, really well right now, I would suggest waiting because like I said, there’s going to be both extremes and you need to be really confident in your ability to find those really good long-term assets.
Now, that might sound hard. It’s not that hard. We talk about this all the time on the show. We have tons of content and information on BiggerPockets about how to find good deals, and those principles have not changed. You just need to be disciplined and follow all the fundamentals when looking for deals, especially in this type of market. Now, one last thing I do want to mention about whether it’s a good time to buy is whether or not you’re doing value add and value add investing. It’s basically doing a renovation. So either if you are flipping a house doing a bird or just doing a cosmetic renovation on a rental you already own, you have to remember that things are very likely to get more expensive in the next couple of months. We have seen just in the last couple of days, tariffs on China that provides a lot of building materials go up 34%.
We don’t know if and how much of that increased cost is going to be passed onto the consumers, but my bet is a lot of it is going to get passed on. And so we’re going to see a lot of building materials go up in price and we can even see things go up from a labor standpoint. Again, this does not mean you cannot buy, it does not mean you cannot invest. Almost every experience investor I know is going to keep investing, but it does mean you need to underwrite your deals a little bit differently, analyze your deals differently, and make sure you’re padding how much things you’re expecting them to cost by a lot. I’d say at least 10% if you want to be conservative, more like 15 or 20%. If you’re doing a total renovation, if you were doing select things, I would look at where your materials are coming from.
Look up the tariffs on those countries and adjust your performance accordingly. And I think this example underscores the need to be in tune and be aligned with your risk tolerance because as I said earlier, I think there’s actually going to be perhaps be better buys on the market right now for flippers or people who want to do burrs. But you really need to ask yourself, are you willing to take on the risk of uncertain pricing, of uncertain increases in material costs for that greater potential for return? There’s no right answer. Just think hard about this before you make any investing decisions. Now, for me, what am I doing overall? I’m trying to lower risk. I’ve actually put out an episode recently about my big upside move. I took some money out of the stock market. Fortunately, the timing of that looks really good. I did that at the end of February, and so I avoided some of this volatility because it had a little bit to do with tariffs.
But overall, I just saw a lot of risk in that stock market. And so I decided to take that money out and put it into what I believe is a more stable long-term asset like real estate. I’m taking some money, paying down my residents to save money on my mortgage, and then I’m keeping cash in a money market account while I look for opportunities in real estate. Now, I would definitely buy a deal right now if it was like a no-brainer, great decision. The underwriting worked even with my padded performa, but right now I’m going to be extra conservative and I haven’t found a deal that works for me. I’ve come pretty close, but I just haven’t found something that checks all the boxes for me. So overall, I am just sticking with my plan for 2025. I’m doing a live and flip that’s going well.
I think it’s going to lead to a great return for me. I am actively looking for an underwriting multifamily opportunities in the Midwest, but my main focus for an acquisition right now is trying to find one bigger multifamily property, something like five to 25 units by the end of the year. I’ve been underwriting a bit for that, but I haven’t found anything just yet, but I’m going to keep looking. That is my plan and I’m sticking with it. Alright, everyone, thank you so much for listening to our April Housing market update. If you have any questions or thoughts on what’s going on in the housing market, let me know. If you are watching on YouTube, let me know on the comments or if you’re listening on the podcast, you can always find me on the BiggerPockets website, biggerpockets.com, or on Instagram where I’m at the data deli. Thanks again everyone. I’ll see you next time.