Dave:
Hey friends, it’s Dave Meyer, host of the BiggerPockets Podcast. I hope you are all enjoying the holiday season. To close out the air here on the BiggerPockets podcast, we’re republishing a few of our most popular episodes this year from across the entire BiggerPockets Podcast network. Today, it’s an episode of On The Market originally published back on October 30th. This show is me breaking down Zillow’s 2026 Metro level price forecast. So if you are curious whether Zillow thinks prices are going to go up or go down in your region of the country, or maybe you’re looking for a new market to invest in, or maybe you just want to nerd out with me because you love looking at which cities are trending up and down, the next 30 minutes has all of that. So enjoy and I’ll be back with fresh new episodes starting January 2nd.
Hey, everyone. Welcome to On the Market. Thank you all so much for being here. I’m Dave Meyer, and today sort of going back to my roots, this is one of my favorite things to study and talk about real estate markets. We’re going to talk about the regional trends that we’re seeing, the opportunities to be had, and the risks you probably want to avoid. You might already know this, but there isn’t really such thing as “the real estate market.” On the show, we cover the national market a lot because it’s helpful to understand some big macro trends, but what really matters most to your actual portfolios, to the profits that you’re actually generating is what’s happening on the ground in your local market. And of course, we cannot cover every market in the US and today’s show alone, but in this episode, we are going to do a deep dive into housing prices into different regions, different states, different cities across the US, and help interpret what it all means.
We’ll start with just talking about what has been going on in 2025 and what we know about regional markets as of today in October 2025. Then we’re going to talk about this sort of interesting and fascinating paradox that’s going on in the investing climate right now. Next, we’ll talk about rent growth and how regional variances there should factor into your investing decisions. Then we’ll even talk about forecast because we just got brand new forecast showing where prices are likely to go by city across the US into 2026. And lastly, I’ll just go over my thesis about markets in general and just remind people what I recommend you do about all the information that we’re going to be sharing in today’s episode. Let’s do it. We’re going to start with the big picture. You’ve heard this on the show a lot recently, but everything is slowing down.
That’s what’s happening on a national level. Of course, we’ve seen regional differences across the years, but the main thing I want everyone to know is even the markets that have been growing the last couple of years, these are your Northeast, your Midwest, places like Milwaukee and Detroit and all across Western New York and Connecticut. They are still up year over year in nominal terms, but their growth rate, which is something we’re going to talk about a lot today, is slowing down. And in case you’re not familiar with the difference, when I say the growth rate is going down is that maybe last year Milwaukee was up 7% year over year and now it’s up 3% year over year. So still positive growth, but the amount of growth is less and the trend continues to go down. That is the big broad trend that we’re seeing pretty much everywhere in the United States.
And just to hammer home this point, I want to show that in previous years, well, obviously during the pandemic, we saw places with 10, 15% year over year growth. That’s not normal. Actually, normal appreciation in the housing market is about 3.5%. And so what we’re seeing now is the hottest markets are now at normal. For example, I call that Milwaukee. That’s been a really hot market the last couple of years. That’s now at 3.2%. Detroit’s at 3.7, Rochester, New York at 3.2, Hartford, Connecticut, which has been on fire at 4.2%. So I’m not saying that there’s no pockets of higher growth. I’m just showing that these years of abnormally high growth appear to be over in almost every market in the United States. There are obviously smaller markets, but I’m talking about big major metro areas and almost all of those are now at normal or below average for growth.
And as we’ve talked about in recent episodes where we talked about the difference between nominal, not inflation adjusted prices and real prices, we are also seeing that almost every market is negative in terms of real prices. Inflation right now is 3%. And so any market where prices are up less than 3% nominally, you could argue is actually down because it’s not growing as fast as the pace of inflation. So that’s where we’re at right now with the hot markets, but obviously there’s the other end of the spectrum too. And I hate to pick on Florida, but when you look at what is going on with Florida, it really is getting pretty bad. I am pretty measured, I feel like about these things. I have not called for a crash the last four years like everyone else has, but what’s going on in Florida specifically is getting to that territory in some areas.
You see in Punta Gorda, for example, it’s down 13% in just a year. Cape Coral is down 10% in just a year. And we’ll talk about forecasts in just a little bit, but they’re not forecast to get better. And when I’m looking at a map right now as I talk, it’s from Zillow. It just shows basically what’s happened year over year in all these markets. And a lot of states are a mixed bag. Even states like Texas, which has a lot of declining markets, a lot of them are just kind of flat. And there are still some markets that are positive. There are pockets of good. That’s not happening in Florida. Florida has been just hit by so many different things, whether it’s the oversupply issue, the insurance cost issue, the special assessments going on with condos there, the overbuilding issue. There’s just so much going on there that I think it would be safe to say that Florida is on a statewide sort of crash watch.
It’s not there yet, but I think there is a decent chance that we will see double-digit losses across the state of Florida from the peak of where they were to the bottom where they will eventually bottom out, but I don’t think we’re close to that right now. Other areas of weakness, like I said, are Texas and really along the Gulf Coast with Louisiana seeing pretty weak areas too. Arizona has also been struggling. And then on the West Coast, it’s kind of just all flat. There are some markets in California that definitely aren’t doing well. There’s some that are mildly up. Same thing’s going on with Oregon, same things going on with Washington, Idaho. All along there, you’re kind of seeing just a mixed flag of mostly flat stuff. I want to also just talk quickly about a recent report that I saw from realtor.com talking about the hottest markets in the US because realtor.com, they can look at this stuff in real time, which properties are getting the most listings, have the shortest inventory, shortest days on market.
And so they put out this report for the hottest markets in the US. And I want you all to think about what the common thread is while I read off a couple of these things and we’ll talk about it. Number one, Springfield, Massachusetts, then we have Hartford. So again, Hartford hottest growth last year, still really hot. Kenosha, Wisconsin, Lancaster, Pennsylvania, Appleton, Wisconsin, Wassaw, Wisconsin, Racine, Wisconsin, Rockford, Illinois, Beloit, Wisconsin, Green Bay, Wisconsin, all in the top 10. Then we have a couple others. I’m not going to read them all, but in the Northeast, like Manchester, New Hampshire, Providence, Rhode Island, Worcester, Massachusetts, Milwaukee, all of this. So what do you notice about these markets? Well, yeah, a lot of them are in Wisconsin. Wisconsin is on fire right now. But what I notice here and has been my thesis about the housing market for, God, years now, is affordability.
All of these markets, all of the markets that are still doing well, that are still hot, are relatively affordable. Meaning the people who live in that market can afford to buy homes. It’s not like you need inbound migration or you need massive amounts of job growth right now. It’s just that regular people who are gainfully employed in this market can go out and buy a home. Those are the markets that are doing well, and I believe it’s the markets that are going to continue to do well. And you might be thinking, wow, the Northeast is very unaffordable. Why are you calling those markets affordable? It’s all relative because even with a generally expensive region like New England or the Northeast, there are more affordable options that are hot right now. For example, New Haven, Hartford, Connecticut, New London, Connecticut. All these places in Connecticut, why are they so hot right now?
Well, they’re directly between Boston, an enormous economic hub that is very expensive, and New York City, an enormous economic hub that is very expensive. So if you’re looking to live in this region and maybe you only have to go into the office a couple of days a week, Connecticut is looking like a very attractive option because it is relatively far more affordable than these other options in the Northeast. That’s why I say it’s all about affordability. Providence, Rhode Island been a very, very hot market the last couple of years, same with Worcester, Massachusetts. And yeah, the median home price in those markets is way above the national average at $550,000, but it’s not Boston where the median home price is over $800,000. So to me, what’s happening is it’s all about relative affordability. And this is a really important takeaway because people say things like, “You can’t invest in the Northeast or California or Washington state.” Well, clearly there are pockets of places that are growing.
And I am not saying that affordable markets are going to be completely insulated from the correction that we’re in because I believe a lot of these markets are going to decline, but affordable places in my mind are going to see the least dramatic dips in the coming years. So look at Austin. That is an awesome market, but it got way more expensive for the average person who lives there over the last couple of years, combined that with supply issues and you see a big correction. Same thing went out in Boise, same thing going on in Las Vegas. And actually that brings us to the next thing I wanted to talk about, which is the other side of the coin. We just talked about the top 20 or so markets that are the hottest right now. What about the coolest? Or if you want to frame it in positive terms, you could call it the strongest buyer’s market in the United States right now.
Number one, I didn’t even plan this, but is Austin, Texas, shocking, shocking, where you are in a place where sellers outnumber buyers by 130%. This is wild. Think about this. So this is a report that came out from Redfin and it shows that right now in Austin, there are 17,403 sellers right now. How many buyers are there?
7,568. That’s a difference of nearly 10,000 buyers. There are 10,000 buyers missing in Austin right now. So if you want to just peek ahead to what we’re going to talk about soon about where these prices are going, in a market like that, they’re going down. See similar things in Fort Lauderdale where it’s 118%, West Palm Beach, Miami, Nashville, San Antonio, Dallas, Jacksonville, Las Vegas, and Houston. Those are the top 10. So pretty much all in Texas and Florida. You also have Nashville and Las Vegas thrown in there, but those of the biggest markets in the country are seeing the biggest imbalances right now, which means buyers have the most power, but prices are also likely to drop. And this situation actually brings up this kind of interesting paradox that’s going on in real estate right now where there are some really good markets that are in deep corrections.
So does that make that a really good opportunity or a lot of risk? We’ll get into that right after this break. Stay with us. This week’s bigger news is brought to you by the Fundrise Flagship Fund. Invest in private market real estate with the Fundrise Flagship Fund. Check out fundrise.com/pockets to learn more. The Cashflow Roadshow is back. Me, Henry, and other BiggerPockets personalities are coming to the Texas area from January 13th to 16th. We’re going to be in Dallas. We’re going to be in Austin. We’re going to Houston and we have a whole slate of events. We’re definitely going to have meetups. We’re doing our first ever live podcast recording of the BiggerPockets Podcast. And we’re also doing our first ever one-day workshop where Henry and I and other experts are going to be giving you hands-on advice on your personalized strategy. So if you want to join us, which I hope you will, go to biggerpockets.com/texas.
You can get all the information and tickets there.
Welcome back to On The Market. I’m Dave Meyer going over some regional trends that we’re seeing in the housing market right now. Before the break, we talked about what’s been going on with prices. We talked about some of the hottest markets mostly in the Northeast and in Wisconsin specifically. We talked about the coolest markets, which are mostly in Florida and Texas. We had Vegas and Nashville on top of that. But I wanted to talk about this a little bit more because I think there’s this interesting paradox that’s been going on for a couple of years, and I think it’s just going to get more dramatic, which is that some of the markets that are experiencing the biggest corrections and are likely to go into further corrections are markets with pretty good long-term fundamentals. Austin, Texas, it gets picked on a lot because it’s been beat up for three years right now, but there’s still a lot of good stuff going on in Austin.
It’s still a very desirable place to live. It has good job growth. It’s the state capital. There’s a giant university. There are a lot of things to like about the Austin market. The same thing goes with Nashville, right? That’s been one of the hottest, most popular cities in the country. Dallas has a lot of great fundamentals. And the list goes on. I invest in Denver. It’s not on this top 10 list, but the same thing is absolutely going on in Denver where prices are going down a little bit. Rents are even going down in Denver, but it’s a city with really good long-term fundamentals. And so this is something I just think that you should consider as an investor. I’ll talk about this a little bit more at the end when I talk about what to do about this. But if you are an investor who is willing to take risk and wants to take a big swing, you’re going to be able to buy good deals in these markets.
Good deals are coming in Austin. They’re coming in Nashville. They’re coming in Dallas. I can tell you that. If you are looking at a market like Dallas where there’s 32,000 sellers and only 16,000 buyers, you’re going to be able to negotiate because for every single buyer, there’s two homes. So there is going to be tons of opportunity to negotiate. Now, of course, you’re going to have to protect yourself and you do need to take a long-term mindset because we don’t know when these markets are going to bottom out. But I do think this situation is going to become even more dramatic where I’m going to borrow word from the stock market, but some of these markets might become what you would call oversold. The supply and demand dynamics just shift in a way where prices go down probably more than they should. A lot of these markets do need to come down in terms of affordability, but I think you’re going to be able to find good deals in these markets in the next couple of years if you are willing to take on a little bit of extra risk to realize what will potentially be some outsized gains in the future.
Now, I want to turn our attention now to some forecasts for what is likely to happen over the next year because Zillow actually just put out their forecast for metro price changes between September 2025, September 2026. And I know people like to hate on zestimates, but Zillow’s been pretty good about this. They’ve been pretty accurate about their aggregate macro level forecasts, and it’s something I definitely look at. And what they’re forecasting is a lot more of a mixed bag. So we are going to see the Northeast and the Midwest that have been pretty good, still be pretty good. They’re probably still going to lead the country regionally, but it’s going to come a lot closer to flat in the next year. And they’re also forecasting that even the markets that are down, Austin, for example, they’re also going to come closer to flat. Just as an example, Zillow believes that the fastest growing market over the next year will be Atlantic City, New Jersey with 5% growth.
We have Rockford, Illinois and Concord, New Hampshire at 5%, Knoxville, Tennessee at 5%, Saginaw, Michigan at 5%. Fayetteville, Arkansas, shout out to Henry at 4.8%, Hilton Head, Connecticut, and then more places in Connecticut, but we’re getting some other places towards the bottom of the list. Jacksonville, North Carolina. We’re seeing Morristown, Tennessee. So a lot of places in the Northeast. They’re projecting that the Midwest cools down a little bit, but the Carolinas and Tennessee, which have been really strong for the last decade, but a little weak in the last year starting to rebound. Meanwhile, if you look at what they’re forecasting for the lowest performing markets, it doesn’t look good for Louisiana. The bottom five markets are all forecasted to be in Louisiana, Huma, Lake Charles, Lafayette, New Orleans, Shreveport. You skip a couple and then Alexandria, Louisiana, Monroe, Louisiana, all told seven out of the top 10 are in Louisiana.
The rest are mostly in Texas. We have Beaumont, Odessa, Corpus Christi. Then we see San Francisco, California, Chico, California, Punta Gorda, Florida. Mostly what they’re projecting is a year of more flatness. They’re not projecting most markets to go down by more than one or 2%. The majority of markets in Zillow’s forecast are between negative 2% and plus 2%. So that’s where Zillow thinks we’re going in. Most other forecasters don’t put out monthly forecasts like Zillow. That’s why I like this is they are just constantly looking at new data, taking it in and updating their forecast, whereas a lot of the other companies put this out annually. And so we will get a lot more forecast towards the end of the year, but this is the most recent one we have. And I do think it’s pretty reasonable. Obviously, they’re not going to be right about everything, but I think they’re generally in the right direction based on the other data that I’ve been tracking, inventory levels, housing dynamic levels across the country.
I think they’ve done a good job here. All right, we got to take one more quick break, but when we come back, we’re looking at rents and how that factors into the equation, regional differences there. And we’ll talk about what you should do about all this and how you should be making investing decisions based on this information. We’ll be right back.
Welcome back to On The Market. I’m Dave Meyer going over regional data that we’re seeing in the housing market. We’ve now gone deep into prices in the US. We’ve talked about what happened over the last year, what’s happening right now in the hottest markets, biggest buyers markets. And then we looked at Zillow’s forecast for what’s likely to happen over the next year. I want to turn our attention to one more dataset before we do the whole so what of this whole thing and talk about what you should be doing about this. And that’s rent because obviously this is going to matter a great deal in your own investing decisions. What we see over the last year is largely similar regional trends. There are some differences that we are going to talk about, but if you look at where rent growth has been the hottest, it has been in the Northeast and in the Midwest.
I’m looking at a map of it right now and they’re showing they’re using a color code where anything that grew is red. It’s all red. There’s no place in the Northeast or the Midwest, maybe one place in Iowa, but the rest are all positive. Meanwhile, if you look at the place where rents are declining the most, you see Arizona and the Phoenix area is bad. The west coast of Florida, which is just getting hammered, Denver, which I alluded to before, Houston and Dallas, and in places like Georgia and in Tennessee as well. If you want the official list, the fastest year-over-year rent change, this is going to surprise you guys. You are not going to guess this because it’s not in the Northeast and it’s not in the Midwest. Fastest year over year rent growth in the country goes to San Francisco, California at 5%.
It’s interesting because prices are going down there, but rents are going up. We also see Chicago at 4%. I am always boostering Chicago. This is why 4% year over year. Other rent growth, really strong in California, Fresno and San Jose, Providence, Rhode Island, Minneapolis, Virginia Beach, Pittsburgh, New York, and Richmond, Virginia. So not huge surprises there, but I didn’t expect San Francisco and Chicago to be at the top of that list. Meanwhile, the slowest year over year rent growth, this one doesn’t surprise me at all. Number one. Sorry, Austin, but you are taking the top spot again, or I should say bottom spot because negative 6.5% year over year. My own portfolio’s feeling it with the number two spot in Denver, Colorado, negative 5%. Then we see Arizona, Phoenix, and Tucson, New Orleans, and San Antonio at negative three and a half. And we have Memphis, Orlando, and Dallas as well.
Now, I’m calling this out because I think, again, there are some really interesting dynamics here. I’ll call out my own portfolio and just admit that I am seeing rent declines in my bad apartments. Any of my units that are really great, unique properties that have a lot of value, those are renting fine. Nothing has happened to those. But for example, I was just renting a basement unit. It’s just kind of a bad unit. I’ve tried renovating it. The layout just doesn’t work, but it’s a basement and I can’t move the walls and it just kind of stinks. And the rent has fallen there from 1,900 bucks a month to 1,700 bucks a month. That’s what I was just able to lease it out for. So that’s a pretty significant decline. I could have maybe held on longer, but I didn’t want vacancy, but that’s the kind of stuff I’m seeing in my own market.
Now, that worries me about buying in Denver right now because I am not really that worried about price declines, but price declines combining with rent declines, it’s not the best, right?That’s not exactly what you want to be investing in. Now you still can find pockets where things are growing, for sure. There are going to be neighborhoods and areas for sure. But if I’m just looking on a metro level, that worries me a little bit. Meanwhile, when you look at some markets like in California or in Washington, or actually a bunch of markets in Texas, for example, or South Carolina, we’re seeing this as well. Prices are flat to falling, but rents are still going up. And this is something that I feel like is lost in all this discussion about what’s happening in the real estate market right now, is that in some of these markets, arguably in many of these markets over the next two to three years, cashflow prospects will finally be getting better after years of getting worse.
We are definitely seeing this across a lot of the country, and I think it’s a trend that is going to continue. So I really recommend as we sort of move into our next section here talking about what to do about this, looking at these things in conjunction, because again, you can invest in a market with declining rents and declining prices, but you got to get a killer deal. You have to get a smoking deal for that to work. Meanwhile, if you’re buying in a market that’s flat, which I think is going to be the majority of markets for the next few years, I think they’re going to be relatively flat. If you’re buying in a market that’s flat, but rents are going up, that’s still a good deal to me. Obviously, you still want to try and get a great deal, but if you can buy something at a good price and prices maybe don’t appreciate for a couple years, but rents are going up, I still think that has a lot of upside potential, and those are the kinds of markets and deals that I would still personally be interested in.
So that is one of my takeaways, but just a couple other takeaways before we get out of here. I personally believe affordability is going to continue to drive market divergence. This has been the thing I’ve been harping on for years, and I’m sorry if you’re tired of me saying it, but it’s still true. I will be wrong about many things, but I have been accurate about this, that affordability is going to drive market divergence, and I think this is still going to be true. And I encourage you to not just look at home prices, but look at total affordability because again, people might look at a $550,000 home in Providence, Rhode Island and say that’s not affordable, but for people who live there who make good salaries and where the tax burden isn’t as high as certain places, it is relatively more affordable. And I think this is what’s happening to Florida right now.
Prices went up, insurance went up, special assessments went up. It is expensive in Florida right now, and that is a major reason that we’re seeing those corrections there. So I would really, if you want to be a conservative investor, and if you’re worried about price declines, I really think affordability is probably one of the two best ways I would look at data to try and mitigate risk. So affordability is one, the second one I alluded to a minute ago, which is supply. You need to look at places that are not going to have massive increases in supply. The reason we’re seeing bad conditions in Florida or in Nashville or in places in Texas because they’re also overbuilt. They are having the combined issues of affordability and too much supply. That’s why they’re seeing corrections. And so if you want to find places to invest, I think looking for places that are affordable with limited supply risk is probably going to be the lowest risk potential for deals over the next couple of years.
But I want to call out that that’s not the only way to invest right now because if you’re a buy and hold investor, it really is a question of preference because with bigger risk often comes bigger reward. If you want to take more risk and pursue more reward with your own investing, now is a decent time to do it. There’s going to be risk, but can you buy something in Austin 10 or 15% off peak? Maybe. What about in California? In Florida, you might be able to buy something 20% off peak. I don’t know for sure, but those kinds of numbers are intriguing. And of course you’re going to have to set yourself up so that you have cashflow, you have sufficient reserves so that you can hold onto that for a long time, but that is not an unreasonable strategy right now. I think we’re probably going to see institutional investors that have a lot of capital start to try and do these things.
Looking at markets like Nashville that have been super hot over the last couple of years, if they could start buying those at 10%, they’ll wait three or four years till the appreciation returns. Not saying this is for everyone, but that is an option that you have as a buy and hold investor. Now, I’m not saying just go and buy in any of those markets. Don’t just buy the dip. Don’t buy in Punta Gorda, Florida right now. One of the reasons Punta Gorda is going down so much is because it doesn’t have an economic engine. It was a lot of people moving during COVID for the lifestyle, which is fine, but when that pulls back, when there’s return to office, that market got hit. Nashville, Austin, Denver, these are places with very strong job markets, right? These are places that have a high quality of life that people want to live there.
And so if you want to take these risks, look for the ones that have these strong fundamentals like the ones I mentioned, and those can be decent options for investing right now. That’s buy and hold. I think flipping is going to be risky right now, especially in correcting markets. But an interesting thing happens in flipping during corrections like this where the price of distressed C class homes go down more than A class homes. And so actually sometimes you get a widening margin, so the opportunity for flipping actually gets better. You just have to prepare for your property to sit on the market for three months or six months instead of two days or three days like we’ve seen over the last couple of years. Last thing I want to say is that I think just generally over the next few years, we’re going to be going back to more normal regional variation because we’ve seen some very, very abnormal stuff over the last couple of years.
It is not normal for all markets to be going up all the time. It is not normal for any market to be growing more than 10% year over year. It’s not normal for most markets to be up over 7% year over year. This stuff that we’ve seen over the last four or five years is not normal. I think instead what we’re going to see is a move back to sort of this traditional trade off that has almost always existed in real estate investing, which is the trade off between appreciation and cashflow. I think Midwest affordable markets are going to go back to being better for cashflow. They’ll still have slow and steady appreciation, but I’m not Sure, we’re going to see this outsized appreciation for years in the Midwest. I think if you want to sort of summarize it, I’d say the Midwest is going to be easier doubles, harder home runs.
Then you look at these other markets like the ones we’ve talked about in Austin and Denver and Vegas and Phoenix, these are markets where you could take bigger swings right now. You might hit a home run, but you could strike out. So you definitely need to mitigate risk in those markets, but I think that’s sort of what we’re going to get to. So that’s what I would prepare for. And to me, that’s good. I want that. I would love to just see a market that we could say for the next three to five years, we’re probably just going to see normal three to 4% appreciation. That would be fantastic. We’re not there yet. We’re in a correction. We don’t know when it’s going to bottom out. But my hope is that because this correction exists because affordability needs to be restored, that once we’ve been in this correction for a little while, we can get back to a normal housing market on a national level.
And to me, that also means we’re going to return to those normal regional variances where markets that have strong economic engines, strong population and household growth are going to see the appreciation, where the other markets that are still good markets are going to be more cashflow centric markets and that’s okay. And as investors, if it becomes predictable again, we can absolutely work with that. I would love to work with that. Let’s all hope that’s what we see after this correction in the next couple of years. All right, that’s what we got for you guys today on On The Market. I’m Dave Meyer. Thank you all so much for listening. If you like this show or think that your friends would benefit from knowing some of this information, please share it with them. Thanks again. We’ll see you next time.

Ashley:
If you’re thinking about getting into real estate, you’ve probably asked yourself, “Where do I even start?” There’s so many strategies, house hacking, flipping, a burg, short-term rentals. That’s honestly a little overwhelming for most rookies.

Tony:
But what if we told you there’s a simple framework that can help you pick the right investment strategy today without second guessing yourself?

Ashley:
In this episode, we’re giving you this step-by-step formula to figure out which strategy is right for you. By the end, you’ll have the clarity and confidence to take action and start investing.

Tony:
Look, we see it all the time. New investors jump into real estate without a clear plan and they either burn out or they get stuck in analysis paralysis.

Ashley:
But not today. We’re going to break it down so you can avoid the common mistakes rookies make. I’m Ashley Kehr.

Tony:
And I’m Tony D. Robinson, and welcome to the Real Estate Rookie Podcast.

Ashley:
So there’s no one size fits all in real estate. Each person has a different set of circumstances.

Tony:
So we wanted to give you a super simple kind of four-step formula that’ll help you figure out exactly what strategy makes most sense for you to start with. Now, be sure to stick around until the very end, because we’re going to talk about some of the biggest mistakes we see Ricky investors make when choosing the strategy, but let’s get into the actual four steps of this framework first. So I think the first step, and we’ve talked about this a few times in the podcast, but it’s really just about defining your goals and your motivations. And I won’t beat a dead horse here because if you’ve listened to previous episodes, you’ve heard us say this before, but before you can really identify what strategy makes the most sense for you, you have to ask yourself, why am I doing this? Why am I investing in real estate?
Is it you want immediate cashflow today? Do you want long-term wealth for tomorrow? Are you looking to replace your day job? Is this just something that you want as a side hustle? What is it that’s actually motivating you to do this? And specifically when I think about motivations, you have cash flow, you have tax benefits, you have appreciation, and to a lesser extent, you have the ability to use properties yourself for vacations if you’re doing something like midterm or short term. But in most scenarios, you will not be able to equally satisfy all four of those motivations at the same time. So you’ve got to pick and choose which one is most important, second and most important, third most important. And then you can make a better decision around what strategy might actually satisfy those motivations.

Ashley:
Yeah. And some of the common mistakes that I see new investors make when they’re trying to determine their strategy is they jump in without knowing their true motivation, which can lead you to choose the wrong strategy. When you choose the wrong strategy and it doesn’t align with your why or your goals, you’re going to feel burnout. You’re probably not going to like doing it and you’re going to get frustrated because you’re not closer to achieving your goal. Even though this might have been a shiny object that you listened about on a podcast and you wanted to do this investment because it seemed like it was going to bring you lots and lots of money, but if that wasn’t your true goal was high cash flow and now you’re spending every single night and every single weekend operating a short-term rental that you definitely didn’t want to do, maybe you make that pivot and that change you realize it was actually time that I desired financial freedom and time to actually do the things I wanted to do.
So a high demanding operational investment was not actually the right strategy for you. So there should be some additional questions that you’re asking yourself, what is your desired monthly cash flow goal or how soon do I want to see results from my investments? Are you financially comfortable right now? Do you enjoy your W2 job? Are you not strained for cash and you don’t need anything immediately right now, you’re looking farther down the road. So you really need to know your motivations and why you’re actually investing to make sure that the strategy you choose aligns with that.

Tony:
So that’s a super important first step. It’s just making sure you understand your motivations. I think the second step is just really taking a moment to define not only the time that you have available, but also kind of lifestyle that you want to live. It kind of ties into that first piece of the motivations, but like how much time do you really have? I mean, most people listening to this probably have some combination of family commitments, work commitments, hobbies, community commitments. Maybe they just want free time in general, but there are always demands on our time. No one has absolutely nothing to do. So ask yourself, how much free time do you have within those other responsibilities to actually dedicate toward building this real estate portfolio?

Ashley:
Garrett Brown, who kind of leads the Bigger Stays YouTube channel, we’ve had him on before to co-host with us. He tells a story about how he did this $50,000 glamping investment where he bought the 10 and all of these gurus told him, “You’re going to make tons of money just from this $50,000 investment.” And he said he’s never worked harder in his life to actually make that investment become successful that he didn’t anticipate the operational, the hospitality and the work that would actually have to go into it besides just making up that initial investment and setting up the tent. So you really do have to look at what goes into it other than just purchasing the deal.

Tony:
Yeah. I mean, we talk a lot about like lifestyle, and that’s a big reason why people get into real estate investing is because they have this idea of the life they want to live, but then they pick a strategy that doesn’t actually give them that lifestyle. It’s like, like you said, short-term rentals, right? The niche that I’m in, we have a hotel. Those aren’t passive. Those are things that we’re actively involved in on a day-to-day basis. And if you really want just to be sipping my ties on the beach in Cancun, then maybe you need to be a private money lender, maybe you need to be something else. But anyway, we’ll get into the examples later, but I think the goal is understanding the lifestyle and the time that you have available to kind of help point you in the right direction.

Ashley:
And we know this because we both started or at some point in our journey picked the wrong strategy and realized with that we needed to pivot. Tony started out with long-term rentals and pivoted to short-term rentals. I started out with long-term rentals, but then I got Shiny Object Syndrome and I went to campgrounds and I almost bought a million dollar campground and did a whole syndication deal. And that was my pivotal moment as to like, I actually don’t want to do a syndication deal. I don’t want to run this million dollar property. And I pivoted back to what I was good at and what was actually helping me reach my end goal of getting more time and being financially free. Some of the questions you should ask yourself is, do you want this to be a side hustle or a full-time pursuit? And even when we say side hustle, you still want to operate it as a business, but are you going to keep doing what you’re doing, whether you’re running a business already, you have a W-2 job, and you’re just going to build this real estate empire on the side, or is it that you want to go full-time into this?
You want to be a real estate investor? And also, how comfortable are you with unexpected issues, with tenant calls, with communicating from people? And then kind of the last thing here is, do you prefer passive income or active involvement? So usually, typically the more active you are involved, the more money you are going to make compared to things that are passively because you will have to share the gold with people who are actually involved in the management of the asset.

Tony:
All right, Ricky. So we have two more steps to cover, and then we’ll also break down some of the most popular strategies for rookies, but we’ll do that right after a break from today’s show sponsors. All right, we’re back and we’re going over the four step process for helping you identify what you want out of real estate. So let’s continue with step number three. So step three, and this is a big one, but it’s to assess your own financial situation. I think a lot of people don’t fully grasp where they’re at financially and kind of what it takes to actually get into real estate. And obviously, there’ll always be strategies where you can get in for no money down, low money down. But in a lot of scenarios, there is some form of capital that’s needed to get started in real estate. And I think one of the biggest questions you can ask yourself is, how much cash do I actually have on hand or how much cash do I have access to?
If you’re low on cash, that’s going to send you to maybe one strategy. If you’ve got an abundance of cash, it opens up a little bit more doors. But I think a common mistake that I see with new investors is that they get fixated on, “Hey, this is my idea.” And then I say, “Okay, well, how are you going to afford that? ” And they’re like, “Well, I don’t know. ” You mean people don’t just give you money when you’ve got a great idea. So you’ve got to have some form of understanding of where you’re at from a cash perspective.

Ashley:
Yeah. Some resources that you guys can check out is some kind of app to actually track your assets, your liabilities to build your own personal financial statement, but also to see where your personal finances are at. Look at your mortgage balance, look at your credit card balances, look at how much you have in cash. Monarch Money is a great app. It’s the one that I use, but there’s a ton of other … And they have budgeting things set in. So if you really do need to kind of assess where you are financially, getting an app like that to try and help you establish that kind of base can be scary to actually see where your money is spending. But if you’re having trouble saving right now or living within your means, that’s a great way to start to actually build the capital to invest in real estate.
One of the common things that can happen besides just not being able to financially afford the strategy is not having enough in reserves and not being okay with spending that money in reserves. That reserves are not your life savings. Those reserves aren’t your kids’ college fund. That’s not the money that you would use for their orthodontics. This is the money that is specifically saved in reserves for your rental properties, so that if you have to spend that money, that’s okay. That’s what that money is there for. So you have to kind of switch that mindset of, “Oh my God, I’m taking money out of our life savings to pay for a new HVAC system.” Instead, that’s what this money is there for. And if you don’t have to spend it and you get to keep it like, “Yay, that’s a bonus.” But I think that’s a big mistake is co-mingling almost that your financial life savings for your family is the same that you have for reserves for your rental property.
And that makes it a lot harder to part with when you do have those big expenses that come up throughout the lifeline of your property.

Tony:
It’s a great, great explanation, Ashley, just like around the psychology of money and reserves and how different money serves a different purpose. And you got to kind of take that money out of your mind once it starts to stack up a little bit. Just a few questions to ask yourself around the financial piece. First is what’s your credit score? Are you at, I don’t know, 400 or are you at 800? Obviously the higher your credit score, the easier it’ll be for you to go out there and get favorable debt and the lower, the harder it’ll be. But even if you have maybe better credit, like what’s your DTI, what’s your debt to income ratio? If you’re maxed out, it’s also going to be more difficult for you to go out there and get approved for a loan if at all. So you could still have a decent credit score, but have like a poor DTI or potentially vice versa.
Maybe you’ve got no debt, but it’s because no one will give it to you. So you want to get the combination of both of those things together to get a better idea of how is that going to impact your loan options. I think another one is like, how much debt are you comfortable taking on? I was like scrolling through Instagram and I saw, who was it? It was Robert Kiyosaki and Kim McElroy. They were like on a private jet and the opening part of their post was like, “We have billions of dollars worth of real estate debt.” And obviously they’ve done it very successfully, but are you comfortable going on and taking on that amount of debt?
Are you okay if someone offers you a loan with only 3.5% down? Meaning you’re leveraging almost 97% of what that property’s worth. Or do you want to say, “Hey, I’m always going to put down 25% because I just want to make sure I can sleep at night.” So you got to ask yourself, what kind of debt load are you comfortable taking on? And if for whatever reason between your DTI, your cash on hand, your ability to get approved for a loan, maybe you can’t do it by yourself, well, are you comfortable bringing on maybe a partner? Someone who maybe can fill in that gap, someone who can compliment what it is that you’re lacking, whether it be capital, whether it be the loan, are you comfortable doing that? And if not, then do you have access to other funding options? Do you have maybe a self-directed IRA?
Well, actually, that’ll only work in some situations. Do you have maybe a 401k that you’re willing to cash out? Do you have a HELOC? Are there private money lenders maybe? So you’ve just got to ask yourself, in some way, shape or form, cash need to be involved in some sort of real estate transaction, whether it’s yours, whether it’s the sellers, whoever it may be. There has to be some sort of cash so you got to identify where it’s coming from.

Ashley:
And then the fourth step is understanding your local market. So what is the budget that you have available to yourself after you’ve went and evaluated your finances, knowing what you’re able to afford? And maybe that even starts with getting pre-approved by a lender. You need a lender, you can go to biggerpockets.com/lenderfinder to be matched with an investor-friendly lender in your area. But when you are deciding on a market, you need to understand, is it an expensive city where you’re actually not going to be able to afford it? Or even if you can’t afford it, the rents just don’t justify the cost to actually purchase the property, or are you in an affordable market? So starting with your budget and kind of narrowing down as to what are the markets that fit within your budget. Some strategies work better in different places. So you need to have your strategy defined before you actually go and start looking for markets because short-term rentals are great in tourist areas, but long-term rentals are great and good school districts.
So knowing your market saves you from picking the wrong strategy. So

Tony:
A couple of questions to ask yourself here is, what type of housing is just in demand in your area? Like Ashley, where she lives, there’s a lot of small multifamily and Ashley’s gotten really good at buying small multifamily. Where I live, there’s virtually no small multifamily, right? It’s like suburban sprawl. So I couldn’t really do a lot of small multifamily where I live. So what type of housing is in demand in your area? Is your backyard landlord friendly? I think Ashley and I both live in states that are definitely more tenant friendly, which makes it a little bit more difficult for us. But you got to ask yourself like, “Hey, where you live, which way does it lean?” But even still, and just as an example, even if … I’m in California, Ashley’s in New York, both states that are definitely lean more so towards a tenant, but we’ve both been able to build successful portfolios in these markets still.
So it doesn’t necessarily mean that you can’t do it. You just got to kind of know how to navigate it. Vacancy rates, average rents, all things that you can go do research on to help you get some of those insights. And then obviously if where you live doesn’t work, are you comfortable going long distance? And long distance doesn’t necessarily mean out of state. It could just mean two hours down the road. It could mean six hours. It could mean 6,000 miles, but just ask yourself, are you comfortable going long distance if for whatever reason your own backyard doesn’t work? So those are the four steps, right? And I think as you, again, Ashley and I can’t tell you without knowing you, “Hey, do this exact strategy.” But the goal is that by going through those four steps, you get a better sense of where you’re at.
And now that we’ve covered those four steps and you kind of know what it is you want out of real estate investing, we want to hit some of the more common strategies that we see rookie investors take as they get started. Ash and I have done several hundred episodes of the Rookie Podcast. We’ve seen some of the tried and true methods that work no matter where you start, no matter how much money you start with, no matter what city you live in, these are some of the strategies that we’ve seen work time and time again. So the first one up, and one that Ashley and I both probably think is potentially the best way for Ricky to get started is house hacking. And house hacking is basically the concept of you going out and buying a property, living in one portion of that property and then renting out the other portion of that property.
It could be done with a single family home where you live in one bedroom and you rent out the other bedrooms to other tenants. It could be done in a small multifamily. Maybe you go out and you buy a triplex, you live in one unit, you rent out the other units. It could be buying a single family home when you’re renting out the basement. It could be a single family home and you have in an ADU. It doesn’t matter what the extra space is, but the idea is that you subsidize the cost of owning that home by renting out your excess space. The benefits of house hacking are that typically you can get into it for less than a traditional rental property. So if you’re someone who’s maybe light on cash, you can get into a house hack for, if you go FHA 3.5% down.
There are other loan programs out there like NACA, which I’ve talked about a lot on this podcast where you can get them for zero down. So really, if you want to make sure that you’re getting the best kind of bang for your buck, house hacking is, I think, one of the best strategies.

Ashley:
So another great strategy for building wealth is to do a BER. So this can kind of go two ways where you’re finding a property that needs to be rehabbed or you need to add value, but you can also find properties below market value and then add the rehab value to it too. So starting off, this is a great way to build wealth by not having to infuse a lot of capital long term. So for BER, it is you buy a property, you rehab it, so you need the funds to purchase it, you need the funds to do the rehab, then you rent the property out and you get that rental income, but then you go and refinance and you pull your money back out of the deal to be able to go for the last R to repeat it. So to purchase the property, there’s many different ways to actually purchase a BER deal.
You could use all cash, you could use a HELOC, from your primary residence, you could use a hard money lender, you could purchase it with bank financing. You just have to be careful of what their seasoning period is before they let you go ahead and refinance. But with this strategy, even if you’re not able to pull out all of your funds, this could be less money you leave into the deal than if you were to go and just put 20% down on a property. I think we’ve definitely seen that it’s harder to do a perfect BER where you’re getting all of your money back out, but this is still a great way to generate wealth so that you can reuse any of the capital that you’re investing into the deal. So one of the cons I will say for doing a BER is that you’re going to be doing a rehab and a rehab project comes with many things, project management of your contractor, having some idea of what goes into a rehab or what needs to be rehabbed.
So if you have no experience at all in construction rehab, you don’t know what a two by four is. All of these things, there’s YouTube university to gain some knowledge, but you can also find properties that just need cosmetic updating. And that’s where I started, where it was just flooring, ripping out carpets, putting in vinyl plank. That added tremendous value. Painting added tremendous value. Then I got a little more savvy and was changing out cabinets, but still, it was a while before I worked my way up into like gutting and doing full guts and replacing all the electric and things like that. So with a burr, you have to have a little bit of knowledge of what you’re getting into and look at your comparables of the property to understand what is going to actually add value. If you’re purchasing a property that’s in a C class neighborhood, and the property values are probably capped at some amount where nobody is going to pay more than X amount to live in that neighborhood.
If you’re going in and putting in granite countertops, a luxury bathtub, you’re probably not going to get the return. Even if it becomes the nicest house in the neighborhood, there’s usually some cap as to like how much somebody will pay, but also how much somebody would rent that property for. So looking at your comparables is really, really important when doing a BER2. So this is great for investors with some capital or access to capital with a line of credit, a HELOC, and who want to be able to grow and scale quickly by recycling this BER over and over again.

Tony:
And Ashley, you make a lot of good points around some of the challenges around Burr’s, but my very first deal was a Burr. And the way that I think that I navigated some of those challenges was that I had a really strong team around me. I had a lender, I had a lender who had lent on a lot of other Burr properties in this exact market. I had a contractor who had been in the market for a long time, became well recommended for multiple people, and it was really the people that I put around me that gave me the ability to do it the right way. Now, obviously I educated myself and I was on the BiggerPockets forums and I was reading the books and I was listening to the podcast, but I think having a good team around you makes a world of a difference.
So if you are a Ricky that’s listening, biggerpockets.com/agentfinder, biggerpockets.com/lenderfinder, those are the ways you go out there and start building the right team of people to support you with this strategy.

Ashley:
And you had a great property manager too.

Tony:
I did. Yeah. Yeah. Also had someone, because I was working a full-time job, lived several states away and found a great PM to help rent it for me as well. Third strategy, short-term rentals. Obviously, this is kind of my jam my niche, but basically it’s the Airbnbs of the world, right? So you get someone who comes in, saves for a couple of days and they go home. And then someone else comes in, says for a couple days and they go home and you charge on a per night basis as opposed to having someone sign a long-term fixed lease. The general pros of short-term are that typically if you do it the right way, you should be able to generate more cashflow.
A same house rented on a nightly basis will typically generate more than that same house rented on a long-term basis. The other benefit, which is the reason that it got a lot of people in the short-term are the tax benefits. I won’t go into it in extreme detail, but just know that there’s something called the short-term rental tax loophole. And there are a lot of people who want what’s called the real estate professional status, but it is very difficult to get when you have a W2 job. But through short-term rentals and the short-term rental tax loophole, there’s something called material participation, which basically allows you to take all of the paper losses from your day job, I’m sorry, from your real estate investment and apply it against things like your W2 income in your day job. So definitely a big benefit. Look up these short-term rental taxes poll.
But some of the cons, I think, are that there’s definitely been an increase in competition. And I think the properties that were just okay a few years ago are now mediocre and the properties that were great a few years ago are now just okay. And it’s really only the ones that are like the cream of the crop where people are really running this like a business that are doing incredibly well. So you got to make sure that you’re stepping in with the right training with the right resources. But overall, I still think there’s a lot of opportunity here and it’s really best for people that are willing to actively participate. I mean, you could passively do this if you just give it off to your property manager, but if your goal is to really juice your cashflow, usually you’re going to want to do that yourself.
So you got to be able to actively participate and then you need a certain degree of creativity or at least being able to hire out the creativity because you do want to be able to provide experiences for your guests. And I think you got to have a little bit of imagination to make that a possibility.

Ashley:
Tony, what is the going rate right now for a short-term rental manager?

Tony:
Most short-term rental property managers charge somewhere between, I’d say 10% of gross revenue in the low end. I’ve seen it as high as like 35 or 40%.

Ashley:
I was just curious. I remember when Airbnb was super big and like 2021, like 30 to 40% really seems like very, very common. Do you see that coming down now as there’s more short-term rental management companies in co-hosting becoming a big thing? Has that really driven down the price?

Tony:
It has. And you hit on a big piece. There is a slight difference between like full short-term rental management and just like the co-hosting model. And I think the coasting model, you’re maybe just handling some of the guest communication, but then the owner’s still handling, hey, the cleans, the maintenance, the supplies, all of the other parts of running the business. Whereas if it’s like full service, they’re doing everything soup to nuts. So yeah, I think we’ve definitely seen a shift in cheaper managers coming on board, but it doesn’t necessarily always mean better.

Ashley:
So now onto our fourth one, which is my bread and butter, the long-term rentals. So this is definitely more passive, I would say, than short-term rentals, but it’s definitely not a passive investment. You can hire a property management company to take on the boatload of the actual active management, but you still have to do some kind of asset management. So you still need to review everything that the property management company sends you. Sometimes they’ll need your approval for repairs that are over $500 or whatever their limit is. Most property management companies aren’t going to quote out your property insurance for you every year. They’re not going to go and fight your property taxes to get them decreased. So there still is an element of having to be that asset manager on your property. So kind of some pros is the less involvement than short-term rentals.
It’s also more predictable cash flow. So it’s not as usually it’s not as high as a short-term rental, but it’s steadier income. And then this is really best for someone who doesn’t have a lot of time. So especially if you’re getting into a turnkey property, or even if you did a Burr and this property is well rehabbed that you’re not having to deal with repairs and maintenance constantly on the property, there can be way less interaction with a resident. There’s lower risks. So definitely with smaller multifamily like duplexes and then single family, because you can always sell that property as an investment or to a family or to a person. So I really do like that with single family homes is that you have the option to sell it as a rental or depending on the market, sell it so somebody can purchase it for their primary residence.
Doing that right now with the property, I bought it in 2020, I believe, and then it’s been a rental property since 2020. And now I’m just fixing a few things on it. The carpets got destroyed by the last tenant, putting new carpets in. We did some structural work to it and we’re actually going to sell it. And I think there’s going to be a really great pool of primary homeowners that will actually want to purchase this and not actually use it as a rental property. So I do like that option of turning a long-term rental into a potential flip, I guess, over the course of five years. This is also easier barrier of entry to purchase a rental than some of the other strategies too. Then there are some ways to get into long-term rentals and to be truly passive. So first one is you can be the private money lender on the deal.
You’re not going to get the tax benefits of being invested in an actual rental property, but you can lend to somebody that could really be on any property type, not just long-term rentals, syndications where somebody else is the operator, someone else is finding the deal, they’re managing the deal, they’re operating the deal and you’re just the limited partner. You have no say, you can’t do anything, but you give them their money and you hopefully get your return. The last piece that I would add to a passive investment is RealBricks. So this is like fractional ownership of a property. And so what you do is you basically can take $100 and you can go and invest it at RealBricks and you pick your property you want to invest in and you own a small ownership of that property. And I think the minimum’s a hundred, but you could really invest as much as you wanted up to a certain amount too.
So that’s another way to passively invest your money also.

Tony:
So Ricky’s, obviously Ash and I didn’t cover every single potential real estate strategy that’s out there, right? There’s far too many to cover. I think we just wanted to hit some of the more common ones that we see Specifically for folks who are looking for cashflow, I mean, if you just want big chunks of cash, there’s flipping, there’s wholesaling, there’s other activities. But in terms of like, “Hey, we just want some money coming in every month. We want to build long-term wealth. These are some of the main strategies that we see.” Now, we want to fill in the last piece of the puzzle here, which is for all of you, Ricky, to understand some of the big mistakes that we see as folks look to get started in real estate investing. So we’re going to cover that right after word from today’s show sponsors. All right, so we’re back.
We want to finish off by talking about some of the big mistakes that we see Ricky’s make when it comes to getting started. And I think the first one is analysis paralysis. I think there’s something to be said about doing your homework, about educating yourself, about being responsible as you make decisions. But there’s also a point where all of that quote unquote education and all of that quote unquote preparation just really turns into, I don’t know, I guess analysis paralysis, right? Where you’re just not doing anything. And you’ve got to really be able to draw that line in the sand and say, “I am now ready to take action.” And my general kind of advice here is that if you are at the point where you’re listening to the podcast and you’re reading the books and you’re watching the YouTube videos and you’re nodding your head because you already know 90% of what we’re talking about, you probably need to go do something now.
Otherwise, you are just going to keep kicking the can down the road. You’ll never know anything. Don’t wait for that to happen. You just need to know enough that you can confidently take that next step.

Ashley:
Hand it might take longer to get that first deal than you think. So if you’re not taking action, whether that’s analyzing a deal every day or putting in offers, that could be something like we have a lot of people that come on and talk about door knocking, how they’ve door knocked for a year before they even got their first deal. So imagine if you wait until you know everything and then it’s still a whole nother year before your offer is actually accepted on a property too. So I think creating a mix for yourself is where you’re taking action, but you’re also still engaging in informing yourself on what’s going on in the real estate market right now. What else can you learn about or actually sitting down and writing out what don’t you feel confident about? I had somebody message me on biggerpockets.com yesterday and said, “Ashley, I’m having trouble with market analysis.
Do you have any resources or links to try to help me with that? ” They identified what their struggle is. They were confident in other things. So I compiled a whole bunch of things and I said, “Start here and then let’s talk again.” But there’s just so many things that can be overwhelming that it’s hard to know where to start, but you first have to identify what is the thing you don’t feel confident in and then tackle that, then move on to the next thing. Don’t try and consume everything at once because that definitely will put you in analysis paralysis because it will be overwhelming.

Tony:
I think the next big mistake that we see often is shiny object syndrome. This is where you keep jumping from one idea to the next. And oftentimes we see this from people before they ever actually even get started. Like you talk to them on month one, they’re like, “Yeah, I think I wanted to be a flipper.” You talk to them on month two, “Yeah, I think I want to be self-storage.” Talk to them, “Oh yeah, I think I’m actually going to do ground of construction.” And you talk to them six months later and they haven’t done anything. And I think, again, there’s something to be said about committing and looking to build excellence in one specific area. Ashley has become incredibly gifted at small multifamily in and around the Buffalo, New York area at Burring properties in those markets. I’ve become incredibly gifted at short-term rentals.That’s where we put a lot of our energy.
So I think if you can really narrow in on one asset class, one strategy, not only do you start to build your confidence faster, but the speed at which you find success also increases because all of your effort is going into this one thing. So I think that’s one big, big mistake I see from Ricky is that they jump around a little bit too much.

Ashley:
And then you can build your foundation for, if you do want to chase that shiny object syndrome and try something new, if you fail or it doesn’t go the way you think, you still have that strong foundation of your original strategy that is working for you. And that happened to me. I did long-term rentals and then I pivoted to doing my first short-term rental that wasn’t an arbitrage and it was an A- frame cabin I bought for $49,000. I went $40,000 over budget and it took me almost one full year to do the rehab on this property. If that would’ve been my first deal I ever did, that would’ve killed me. That would’ve killed me. I definitely did not have an extra $40,000 to infuse into that property. And I definitely, maybe if that was my first deal, I would’ve done more research, I would’ve taken more time, but I was like, “Oh God, I can do rehabs.
I’ve done burs and all this stuff.” But it was just a very different property. And then it took us a couple months to actually get it furnished and get it listed and get it up and running as our first full short-term rental, which added on to the time that we weren’t occupied. So there definitely was those learning experiences there. So I think if you have an opportunity and one strategy that I did it because I was a property manager, so I knew how to manage a property. That was my step above. That was my advantage into going into long-term rentals. So if you do have an advantage, think about if there’s a strategy like we talked about in the beginning, that fits your why. If maybe there’s two you’re deciding on, but one you have an advantage in, take that one, build your foundation first.

Tony:
I think the last one, and this is a big one, it’s taking advice from the wrong people. We all in our lives have well-intentioned, yet super ill-informed people when it comes to investing in real estate. We’ve all got the Uncle Joe, the Aunt Jane who says, “Oh, don’t buy real estate. We’re going to wait for the market to crash.” And I literally know people in my life who’ve been saying that since like 2018 and the crash has not materialized. But guess what has happened since 2018, one of the biggest runs of real estate investing ever and all those people missed out on that because they were sitting on the sidelines. So even if your parents, even if you’re best friends, even if maybe your spouse is saying like, “Hey, I’m not sure if you should invest in real estate,” you’ve got to take advice from people who have actually done it.
You’ve got to understand when to filter information out, when to filter out advice from people who haven’t necessarily achieved what it is you want to achieve. So I think the biggest thing that you can do as a rookie is commit to politely saying thanks but no thanks when someone gives you advice when they don’t necessarily have the pedigree to be giving you that advice.

Ashley:
Well, thank you guys so much for joining us today. We hope you learned something and we hope you don’t get stuck in analysis paralysis. If you’re watching this on YouTube, make sure to comment below what your why is and what you want out of real estate investing and then what strategy you have chose. We would love to hear from you. I’m Ashley and he’s Tony and we’ll see you guys on the next episode of Real Estate Ricky.

Dave:
We have made it to the end of 2025, but the housing market continues to change and shift and confuse as it has all year. But today, we are going to make sense of it. This is our December 2025 housing market update. Hey, everyone. It’s Dave Meyer. I’m a housing market analyst and I’ve been a real estate investor for 15 years and I am the head of real estate investing here at BiggerPockets. And it’s hard to believe last housing market update of the year. It has been a truly wild year in the economy and the housing market. We started with one that was rapidly cooling, rates were in the sevens, things were feeling stalled out, inventory was going up. And fast forward to today, although it might not feel like much has changed, a lot actually has changed. I see it in the data wherever I look.
We are very much in a different situation heading into 2026 as we were in 2025. And honestly, I think there’s some good news here. There are good opportunities starting to emerge, but of course, there are risks that need mitigating too. We’re gonna get into all of that, both the risks and opportunities in today’s episode. First, we’re gonna talk about home prices. Then we’ll talk about some good news finally on housing affordability. We’ll get into a new trend that’s emerging with sellers and how they are trying to wrestle back control of the housing market. And we’ll end talking about underwater mortgages and this article that I keep seeing everywhere in the news these days. I will address head on if underwater mortgages is a potential risk to the market going into next year. That’s the plan for today. Let’s get into it. First up, major headlines here.
What’s going on with prices? Everyone wants to know. Well, according to Redfin, prices are up 1.4% year over year. That’s still relatively good. We are not in any sort of crash. I would still call that a correction because prices are down in real terms. 1.4% is a little bit flattish to me, but not bad given where we started this year. Remember when rates were at 7.25, inventory was up 30% year over year. Everyone was saying that there was gonna be a crash. I did not, just for the record. I said we would be kind of flattish and I think that’s where we are. Just as a reminder though, just one year ago, appreciation rates were still at 5%, which doesn’t sound like much, but that’s well above the long-term average of 3.5%. It’s well above where we are today. So it is important to note that we’ve had significant cooling and appreciation rates over the last years, but we are not talking about declines, at least on a national level yet.
That said, there are major regional differences going on. According to Zillow, 105 of the top 300 regional markets are in a decline right now. So basically a third of the biggest metro markets in the country are seeing housing prices go down. And that number, the total of markets that are seeing a decline has gone up a lot. If you look back to January, it was only 31 markets. And by June, it had more than tripled up to 110. But now it’s actually back down to 105, so this is treading water and staying flat, and that’s really important. Obviously, the markets that are in a correction, you’re gonna have to take different tactics in those markets than the ones that are still doing right now. But I think the fact that the number of markets that are correcting is relatively even shows some stability to the housing market despite everything that’s going on.
Now, the depths of those corrections are wildly different. If you look at Punta Gorda and Cape Coral, these are kind of the poster child for the Florida crash that’s going on right now. Punta Gorda down 13% year over year, that’s a lot. That’s a crash in that market. Cape Coral, down 10%. I think if you’re losing 10% a single year, you could call that a crash. I wouldn’t argue with you there. We even see all four actually of the top markets seeing declines, I guess you’d call those bottom markets, are all in Florida. Punta Gorda, Cape Coral, Northport/Sarasota, and then Naples. Those are the top four. After that, we see Kailua in Hawaii, Austin, and Texas. Then it’s back to Florida. Then we got Tampa, Sebastian, Vero Beach, Daytona, Port St. Lucie. So 12 of the biggest corrections in the country, 12 of the top 14 are all in Florida.
So you can see that it’s highly concentrated there. The other trends are in the Gulf region. So Texas, uh, Louisiana are, are also seeing some of the bigger corrections. And then they’re sprinkled throughout the countries as well. Like there’s definitely markets in California. You see some markets where I live in Washington and Denver. Uh, there’s definitely corrections too, but like if you’re just looking for the trend, the Gulf region is where it’s mostly concentrated. On the other end of the spectrum, no surprise here, Midwest is still seeing some of the strongest, uh, appreciation rates, but those rates are coming down. So Chicago, you see Milwaukee, you see Cleveland, you see these markets are still up, but they’re now up like two or 3% instead of last year, six or 7%. So everything, appreciation rates are slowing down all across the country. So let’s move on to mortgage rates as this is going to be a very important barometer for next year.
It also tells us a lot about what’s been going on this year. This has been a positive story. I know people are not happy with six and a quarter percent mortgages, but they should be because a year ago, they were about 6.75. If we look at January, they peaked out at seven and a quarter. Now, they’re at six and a quarter. A 1% drop in mortgage rates over the course of a year is good news. That is a positive thing for the housing market. This is one of the reasons why the market has shifted this year. Like I said, we started 2025. People were very worried about a crash because mortgage rates were 7.25, horrible affordability, inventory’s going up. Well, maybe it’s not the banner mortgages that we saw during COVID, but the fact that rates have gone down, one full percent matters. That brings millions of people into the housing market.
That improves affordability for investors and for homeowners. And so that’s a really good thing. Where we go into next year, I’ve made my predictions about this. They will hopefully stay in the low sixes, maybe even get into the high fives. And there’s some encouraging signs about that, right? If the Fed keeps cutting rates, that could put more downward pressure if yields keep falling. The other good news, if you’re into this kind of thing is that the spread between treasury yields and mortgage rates is coming down, which is one of the things that has propped mortgage rates up. So I think there’s good momentum here that mortgage rates could keep coming down a little bit, but are probably not gonna be coming down in any dramatic way, uh, unless something dramatic happens in the economy. One thing I did wanna call out for real estate investors, just a piece of advice is that refinancing is starting to get a little bit more attractive.
I think when you go from seven and a quarter to six and three quarters, like people aren’t really that interested, but when you lose a full percentage point, depending on the price of your house, that could be hundreds of dollars per month in cashflow that you could be generating or saving if it’s your primary residence by seeing rates come down this much. And I know people might say, “Oh, Dave, you said rates could come down a little bit more.” You could wait. But I just wanna call out that just in this last year, there’s some data that came out from the mortgage monitor that comes out from ICE each month. They said that 3.1 million more mortgage holders are sort of in the money for refinancing over the last couple of year because they could reduce their rates by 75 basis points. I thought that was pretty interesting.
I didn’t know that math before, but if you can cut your rate by three quarters of a percent, so 0.75%, that usually makes it worthwhile for most people. And so if you are holding onto mortgages right now that are in the sevens, if they got a seven in front of it, if they got an eight in front of it, because investors might have one with an eight in front of it, you may wanna consider refinancing right now. You could wait a little bit, but things bounce up and down. Like it’s hard to know. I actually got a message on Instagram yesterday from a guy who said that I saved him $800 a month. I guess he has an expensive mortgage. I think he lives in LA. I saved him $800 a month because I told him to refinance before the rate cut because I said that mortgage rates were gonna go back up and they did, and apparently that saved him a whole bunch of money.
So I just wanna point out that waiting doesn’t always work and, uh, considering refinancing might be worth it. I think it’s at least worth talking to a banker if you have a mortgage with a seven or eight in front of it, something to consider. So I think high level housing market stuff, this is relatively positive. We need affordability to improve, and so seeing relatively flat prices, in my opinion, is pretty good. I don’t wanna see prices crash, but I don’t wanna see them explode again. I wanna see them stay stagnant. That’s really good. And mortgage rates have come down. They’re starting to come down a little bit more. I think that’s a great way to end the year in 2025 and bodes well for the beginning of 2026. We need to talk more about affordability though, because this is what everything in the housing market hinges on.
And we’re gonna talk more about new data on affordability right after this quick break. We’ll be right back.
Before the break, we talked about flat home prices, declining mortgage rates. What those two things mean though, when you take those two things in aggregate, they give us what I think is the most encouraging sign that we have seen in the housing market for a year, maybe more, maybe three years. Home affordability has hit its best level in two and a half years. That’s as of September, last time we have data for this, but this is fantastic news for the housing market, and it is driven by the two things that we talked about before the break. Rates are easing and prices are pulling back. Now, I know I said that prices are up 1.4%, but when it comes to affordability, what you need to measure is how do prices compare to inflation? And if they’re up 1.4% year over year, but inflation’s at 3%, they’ve actually gone down in inflation adjusted terms, and that means that it is more affordable for people, right?
Their wages are going up relative to the price of a home that makes housing more affordable. If you combine that with falling mortgage rates, we are getting improved affordability. This is great news. This is something I think is worthy of celebrating. Now, it is not the best affordability we have ever seen. It is far from it. We just, in the last year, we’re near 40 year lows. So we’re probably at 38 year lows for affordability. This is not like we should be celebrating because all of a sudden housing is affordable. We should be celebrating because you gotta start somewhere. The trend was moving in the opposite direction for so long. Housing was getting less and less and less affordable. That’s not good. It’s gotta bottom out, right, and start moving in the right direction. And fortunately, I think that’s the direction we’re heading. So that is good, right?
We are seeing that across the board. If prices stay flat or ish, decline a little bit, like I think they will next year, mortgage rates come down a little bit. That’s the affordability movement that we need. This is the whole premise of the great stall that I’ve been talking about for months or years now is that this is the most likely path for the housing market, and it does seem that it is true, at least as of now. So I think that’s a good thing. Just to build on this a little bit more, actually, out of the hundred largest markets in the United States right now, 12 of them, primarily in the Midwest, have now returned to long run average for affordability. I know that doesn’t sound like a lot, 12%. It really isn’t a lot. But given where we’ve been over the last couple years, where every market has been unaffordable, the fact that there are any markets in the US that are getting close to historic levels of affordability, again, is good news to me.
I know we have a long way to go, but baby steps, and we’re taking some baby steps getting there. Now that we’ve talked about affordability, let’s call it our main story for today on, on this housing market update is about the behavior of sellers in the housing market. This is really important to inventory because the story of this year in 2025, and really, honestly, for 2022, 23 and 24 has all been about what is happening with housing inventory. It is so important. It is the most important metric for really trying to understand where the market is today and where it might be going in the next couple of months. Because when inventory is high, prices face downward pressure. They might be flat, they might go down a little bit, but you have that downward pressure weighing on housing prices because there are more sellers than buyers.
When the opposite is true, when inventory is low, prices have upward pressure, right? There are more buyers and sellers. They tend to bid up the prices, and so prices tend to go up, and that’s how inventory influences the market. Now, during the pandemic was an extreme example, an example of super low inventory. But when we started 2025, we were starting to see that story unravel where we were seeing really high inventory growth rates. Now, inventory wasn’t high in some historical context, but the growth rate was up, like we saw in January, February, March, 25% year over year, meaning that in January of 2025, there was 20, 25, 30% in some markets, more homes for sale than there was in January 2024. That matters. That’s a big number. I’d like to call out that we, on the BiggerPockets Podcast, we’re not panicking and saying that the market was gonna crash like everyone else was saying, but it puts downward pressure on pricing and it’s something that is really important to watch because if you listen to the Crash Bros, the people who are calling for a whole crash in the housing market, they were saying, “Oh my God, look, inventory is up 25% year over year.
Next month it’s gonna be 40. Next month it’s gonna get 50 or 60.” And yes, that of course is feasible. But did that happen? No. If you fast forward to today, we are not seeing accelerating inventory. We are not seeing inventory spiral out of control month over month over month. Actually, we are seeing the opposite. If you fast forward today and look at the numbers for October of 2025, the most recent data we have for inventory, it’s not up more than 25% year over year. It’s not gone up beyond where it was in January, February, March. The opposite has happened. In fact, right now, in October, inventory was up just 4% year over year. So the growth rate in inventory has not exploded. It’s actually contracted. And not only has the growth rate slowed down, but we are still below pre-pandemic levels of inventory. If you look at what Redfin shows us, we are about 200,000 homes short in inventory of where we were in October of 2019.
So this is under control. This is a crucial thing for everyone to understand about the housing market because it’s one of the reasons why I think we’re gonna see roughly flat pricing next year, maybe a little down nationally, and it’s one of the reasons why I’m not super concerned about huge drops in the market right now. But let’s just take a minute and talk about where inventory might go, because there’s different ways that inventory changes, right? One way inventory drops is that demand picks up, right? If there’s the same amount of homes for sale, but more people wanna buy them, we’ll have less inventory because those homes that are for sale are gonna move quicker. The other way that inventory can drop is that new listings go down. That’s basically the number of people who choose to sell their property, that can actually go down, and that’s actually gone down quite a bit, right?
New listings, people are saying, “Oh my God, people are panic selling. Sellers are flooding the market.” No, they are not. That is just objectively not true. New listings are flat year over year. Don’t listen to any of that nonsense that you might see. People are calling for panic selling like, “Oh my God, everyone’s freaking out. ” No, that’s just not true. New listings are actually up 0.4% year over year. It is completely flat and that shift is not just one month that has been happening for the last couple of months. The big thing that has changed though, it’s not demand, it’s not new listings. The change that is happening right now is what’s called de- listings. And this is a new metric. We don’t talk about this a lot on the show, but it is important right now because de- listings, which is defined as just a property that was listing for sale that was pulled off the market for more than 31 days without selling or going under contract.
And the reason I’m bringing this up is because this is one of the new dynamics that’s kind of emerging and shaping behavior in the sellers, in the housing market. Basically what’s going on in mass is that sellers are looking at the current market. They’re seeing that sales conditions are not as good as they have been over the last couple of years, and they’re just saying, “Nah, you know, I’m kinda out on this one. I’m gonna wait this one out and see maybe if there’s better conditions for listing, or I’m just gonna stay in my property. I’m not gonna sell it. I’m gonna rent it out for another year, another two years, I gotta keep living here, whatever.” That trend is really high right now. Actually, home de- listings is at the highest level it’s been since 2017, and this increase in de- listings helps explain why prices are rising despite sort of tepid home buying demand, because inventory is falling because of this.
Remember, new listings are flat. If de- listings go up compared to new listings and demand stays the same, that means that we are getting more balanced supply and demand dynamics. Another reason why this is a sign of a correction, not a crash. If we look at the behavior of selling and what they’re doing right now, it is completely logical. If they are not getting the prices they want, if they don’t want to drop price and they don’t have to sell, they’re just choosing not to sell. And if you dig deep into this data, you’ll see that the areas where de- listings are going up the most are the areas where their strongest buyers market, where basically the areas where it’s the worst time to sell, that’s where people are de- listing the most. Now that makes sense, right? If you don’t like selling conditions, then you de- list your property.
And that’s why I say this is a normal correction because what the crash bros say is, “Oh my God, when inventory goes up and it becomes a buyer’s market, people panic and add more and more inventory to the market.” The exact opposite is happening. People say, “Oh, this is not a good time to sell. I’m not gonna panic and list my property for sale. I’m actually gonna just take my property down off the MLS and not sell it. ” This is what happens during a normal correction. It’s sellers reacting to selling conditions and saying, “I don’t want any part of this. I am going to de- list my property.” So just as an example, the markets with the highest percentage of de- listings are those markets that are correcting. It’s Austin, Miami, Fort Lauderdale, Dallas, Denver. Again, what you would expect because it’s logical. Now, of course, there is a big question mark here.
Is this just temporary, right? Are people just taking their properties off the market for a couple of months and then they’re gonna list them in the spring and we’re gonna all of a sudden get a flood of inventory? So far, we have some data on this and the answer is no. So far, only 20% of properties that have been de- listed have come back on the market, which in my opinion is pretty low. I was kind of surprised by that. But I do think that’s probably due to seasonality, right? Like no one is gonna de- list their property in September or October and then be like, “You know what? I’m gonna relist it on Thanksgiving weekend or right before Christmas.” Like, if you were gonna de- list it, you’re probably gonna wait till at least January or maybe you wait to sort of the hot months of March or April where there’s typically the most seasonal home buyer activity, you might choose to do that.
My guess is yes. I think we will see an uptick in re-listings in the spring. I think we’ll see that number go from 20% to something higher, maybe 30%, 40%, 50%. ‘Cause I personally know investors who are doing this. A lot of flippers, right, are saying, “You know what? It’s cooling off right now. I’m gonna wait and take my chances in the spring.” I think we’ll see more and more of that. But flippers make up a relatively low percentage of all the homes that hit the market. If you wanna understand the broad trends, you have to figure out what’s going on with home owners, right? Traditional homeowners, and we just don’t know right now. I personally, just, just my guess based on vibes of the market, I think re-listings will go up, but it won’t go up to 100%. I think some people are choosing to say, “You know, maybe I should stay in my existing home or I’ll rent this property back out.
” It really depends on what happens for homeowners. If they start seeing, “Hey, I can move at a better rate and affordability is getting better,” they might move. If not, they’re probably gonna stay in their homes. But this is something that we definitely need to watch because as I said, the housing market is gonna be built on affordability and inventory. These are the things that we watch most closely. Talked about affordability getting a little bit better right now. That’s great news. Inventorying, leveling out, depending on who you are, you might like this or not like this, but it is gonna provide some stability to the housing market. I think it provides that floor for where prices could fall. It can’t fall that much if de- listenings are happening. They can’t fall that much if inventory is leveling out. And so that to me, again, points to a correction, not a crash.
But there is one other thing we gotta look at. If you wanna understand how far the market might fall or where it’s gonna go, you need to look at distress, right? Because distress, foreclosures, delinquencies matter a lot when prices start to go down. And we’re gonna dig into the newest data that we have on that market stress, including into that article. Everyone keeps sending me that there are now 900,000 mortgages underwater. We’re gonna talk about all that when we come back from this quick break. Stick with us.
So far, we’ve talked about affordability improving. I love it. It’s great news. It’s wonderful for the housing market. We’ve talked about inventory starting to stabilize. Another good sign that the market is not in free fall. But the last thing we need to cover, which we’ve been covering a lot over the last couple months, is market stress. We talked about inventory dynamics and why it’s not supporting the idea of a crash on a national level, but of course, things can change. And we wanna know if the solid sort of foundation of the market could come undone. And to this, we need to look at market stress. And I cover this stuff a lot more than I used to because there’s just so much noise about market crashes that I feel it’s important for me to reiterate that if the market crashes, markets can crash, but there are warning systems in place essentially in the data, right?
We would see some of these things coming, unless there’s a black swan event, right? There could always be a COVID, a nine eleven, something like that that no one sees coming and causes the market to crash. I just wanna say those things are always possible. But all the people out there on social media screaming about a housing market crash, they’re all pointing to inventory and demand drying up. I just need to say those kinds of things we have data for, and I’m gonna go through it with you right now. First, let’s talk about mortgages being underwater, because there was some article that came out that said, I think it was in MarketWatch or something, 900,000 homes are now underwater on their mortgage. And that sounds scary. 900,000, that’s a lot. It’s one and a half percent of all mortgage holders, which may not sound like a lot, but, you know, that’s a reasonable percentage of the housing market when you’re specifically talking about distress, right?
You know, like those things can snowball. So is this a big deal? No, not really. Like, I don’t think so. To me, this honestly doesn’t matter that much. I know a lot of people are going to disagree and get mad about this, but hear me out, right? Mortgages being underwater is not a disaster. It is not an emergency. It is something that happens quite frequently. Anytime price is correct or drop in the housing market as a whole, some mortgages are going to be underwater. You haven’t heard this term, underwater just means that you owe more on your loan than the house is worth. So if you went out to sell that property, you would have to come out of pocket to pay back the bank or you’d have to go through a short sale. And that sounds terrible because it’s bad. It is bad. I am not saying that being underwater is a good thing.
It is certainly not. It is really bad. But it is not an emergency because just because your house is underwater does not mean that you need to sell it. It doesn’t mean that you’re gonna be foreclosed on. That is not how this works. This is a common misconception I hear people have all the time. They say, “Oh, the bank’s gonna foreclose because my house is underwater.” No. No, that is not how it works. Banks only foreclose if you stop paying your mortgage. So houses being underwater happens, and the most common reaction to that is waiting. You just do nothing. You just keep paying your mortgage each and every month, and then eventually the market will pick up again, and your house won’t be underwater. That is how normal corrections happen. And so I’ve said for months that we were in a correction. So am I surprised that some mortgages are underwater in a correction?
No, not at all. That’s what happens. What is an emergency, or what can become an emergency, I should say, is forced selling. What happened in 2008 and what would cause a crash again is if there are all these mortgages that are underwater and the people who own those mortgages can’t pay on them. That is a problem. Just in general, when people stop paying their mortgages, that is a problem. That’s when we really start to get worried about a crash. So I’m personally not so worried about mortgages being underwater, unless at the same time, there is force selling, because those two things together can be bad, but mortgages being underwater on their own is not so bad. It is not that big of an emergency. So let’s look at delinquencies. Right now, the data we have for August of 2025 is that delinquency rates did go up 16 basis points, so that’s 0.16% in August compared to where it was the same time last year.
That is the first time it’s gone up in a couple of months. Actually, it dropped year over year in June and July. And so I would count that as normal variance right now. We are still below 2019 levels. And again, the reason I say this pre-pandemic level stuff is because stuff got so crazy during 2020 and 2021 that you can’t really rely on the data for that. You know, there was a moratorium on foreclosures in 2020 and 2021, and for some kinds of mortgages, that extended almost into this year. And so the data for the last five years is really hard to rely on. So what I do in this situation is I say, “Hey, what was it in 2019? That was the last normal housing market we had.” And although we are still below those delinquency rates, they’re kind of coming back to that level.
So it’s not way better than it used to be, but it’s about where it used to be. So I think that’s really important because in 2019, no one was screaming about a housing market crash or a delinquency crisis or foreclosure crisis. It was just a normal market, right? And so I think that’s probably where we are these days. Now, if you dig into it and look at FHA loans, there are some increases in delinquencies in FHA and VA loans compared to last year. That is important to know, but those two types of loans had foreclosure moratorium programs in place until this spring. And so seeing them go up from last fall to now is not surprising because those programs expired, and so we’re gonna have some increases in delinquencies. But this is something we need to keep an eye on. I personally look every month when FHA and VA loans delinquency rates come out, because I do think this could be a warning sign.
Like I said, for crashes, there are some warning signs in the data. This is a warning sign. Right now, I don’t think we’re at warning emergency levels, but since it has been going up, I think it’s something that we will keep a close eye on, but you should know it is not at emergency levels right now. Now, delinquencies are one thing, and if they get serious, if we have a lot of serious delinquencies, that leads to foreclosures. Now, foreclosures are up year over year. They’re up 6% year over year. Again, we are coming from artificially low levels of foreclosures due to the pandemic, so I am not surprised to see that they are up year over year, and I am encouraged to see that foreclosure starts, which is kind of the beginning of the foreclosure process, is actually down 10% year over year. So again, this is not like it is spiraling out of control.
It’s sort of just to be expected that we are reverting back to normal in terms of delinquency rates and in terms of foreclosures. So is there stress in the market? Yeah, there is a little bit more stress than where it was a year ago, but we are not at emergency levels. And if we start getting towards those emergency levels, Trust me, I will be the first one to let you know. I look at this stuff every single month. I have no benefit for telling you that the market is doing well when it is not. I am just telling you, we are still below pre-pandemic levels. Things are starting to inch back up. Where we go from here is a question mark. It is something that we’re gonna keep an eye on, but as of right now, there are not significant signs of stress in the housing market.
Broadly speaking, American homeowners and investors are paying their mortgages and that is the best sign that we have for stability in the housing market. You add that on top of inventory moderating, you add that to affordability improving. It still looks to me like we are in a correction and not a crash. And to me, that is the best thing that can happen for the housing market because we need affordability to improve, but obviously we don’t want the bottom to fall out and it looks like that’s exactly what’s happening right now. That’s what we got for you today for our last housing market update for 2025. Thank you so much for listening. We will certainly be back with another episode soon, and we, of course, will be continuing our housing market updates in January of 2026 when we get into the new year. Thanks again. I’m Dave Meyer.
We’ll see you next time.

Ashley:
Hey rookies. On the show, we always talk about having a bias toward action.

Tony:
Our guest today never gave up on making real estate work for him. He partnered with other real estate investors and used co-living as his real estate investing strategy to be able to quit his W2 this year.

Ashley:
This is the Real Estate Rookie Podcast, and I’m Ashley Kehr.

Tony:
And I’m Tony J. Robinson, and welcome to the show, Andres. What’s up, brother? How you doing, man? Good. How you doing guys? Thank you so much for having me.

Ashley:
Yeah, thank you so much for coming on. Andres, can you share a little bit of your background before we actually get into real estate? What were some of the critical steps you took in your current state before you started your real estate journey?

Andres:
Well, let’s start from the beginning, like they said. I came to this country when I was 18 years old, worked my way through every possible job that you can work as an immigrant. I started washing dishes, basketball, kitchen, eventually became a waiter, assistant manager, did ballet parking, cutting yards, some construction work. Put myself through college. After college, I got married and my wife is like, “Hey, we need to buy a house.” And at that time I was working full-time as a waiter, so I couldn’t qualify for a loan despite making good enough money. We were expecting to qualify for a house, we just couldn’t. And it’s upsetting because you’re making almost six figures and just because you get paid in cash, they don’t want to take it. So I made a quick Google search, how to buy houses without any banks, any credit. And as you guys know, that’s like Pace’s slogan.
So I found Pace. I started watching Pace’s videos. I found bigger pockets and a week later I was like, “I’m going to find myself a deal.” So I joined Pace’s mentorship and a couple weeks later I found my first house up too. And that was the beginning of my real estate journey. For a year, I did wholesaling with dad to build cash. And one of the last deals that I wholesale was to this guy who I didn’t know what he was doing with the house because the house didn’t really have an exited strategy. And when you wholesale creative deals, you got to make sure that your buyer is … They’re not going to default on the loan. So I went with him to the property, we walk it, his GC is there and he’s like, “I’m going to put a wall here. I’m going to put a wall here.
We need another bathroom here.” I was like, “Man, what are you doing?” He’s like, “Oh, I do room rentals.” I was like, “That doesn’t exist.That’s false.” So I went with a different buyer who was going to do an Airbnb in there, but that piqued my curiosity because he sent me his spreadsheet like, “Hey, we’re going to make 3,000 net in this house.” But I just couldn’t believe it because who’s going to share a room? Who’s going to share a bathroom? And then after that, I started researching room rentals because at this point, this is now December 2023, a year after starting wholesale, I’m like, “I need to buy my first house. I build this capital. I want to be an investor.” So I started researching that. I was like, “Okay, this sounds like a good strategy.” Because that year when I started real estate, when I was doing wholesaling, I really dove into short-term rentals and mid-term rentals because I thought that’s what I wanted to do.
It is so hard. I’m not a smart person. I don’t know how you guys do short-term rentals, minter rentals. I don’t understand how to run the numbers. I’ve joined a lot of coaching programs that I’ve paid for. I’ve seen every YouTube video possible. I still don’t get it.

Ashley:
Hey, we never let anybody on the show say they are not smart because you have been smart in some aspect to be able to made it this far in your real estate investing journey.

Tony:
Andres, there’s a couple things in your story too, because I want to get into it, how you made the transition over to co-living, but there’s a couple things I want to get into. First, you mentioned Pace. So for our Ricky, we’re referencing Pace Morby, and Pace actually wrote a book for BiggerPockets. It’s called Wealth Without Cash. If you guys head over to the BiggerPockets Bookstore, you can pick up a copy of that and learn about the strategy that Andres was leveraging to help them kind of get started in real estate investing. But it sounds like Andreas that you said you started wholesaling first, which is a way to generate some cash. And then you decided, “Hey, let’s get into actually owning the real estate as an asset.” And I just want to point out for a lot of our rookies that are listening, you might find yourself in a similar position where you have the desire to go out there and start building your portfolio, but from a cash perspective, maybe you’re not ready.
So even if you can’t necessarily put down 20% to go out and buy that first rental, are there other things you can do within the world of real estate investing to generate the cash, which would then eventually allow you to go out and buy something? So Andres, just really quickly before we get into the co-living, how long were you focused on that active income strategy before you had enough cash set aside to go out and actually get your first buy and hold rental?

Andres:
About 10 months, 10 to 11 months.

Tony:
10 months. Holy crap, that was a lot faster than what I was thinking, man.

Andres:
I wasn’t that successful, honestly. That year, I mean, at that point I was before that working full-time as assistant manager/waiter. So I was making pretty good money, but I was working seven days a week, 12 hours a day, no days off. If they call me, I have to be there. But with wholesaling, well, how I get into wholesaling, right? While doing the full-time job, I was flipping clothing online, like going to the thrift stores and selling it on eBay, postmark. I was flipping furniture, I was flipping appliances.

Ashley:
We love side hustle ideas on the show, and that is a great one.

Andres:
I’ve always hide hassle. When I was in the community college, my sister-in-law used to work for Beoworld, which is a company that produces those things for hot topic, the kind of anime, toys and backpacks. They would have a clearance every three months and sell everything for a dollar. So I would go buy a hundred things, put it in the trunk of my car and go to college, park right outside the arts building and sell it to all the taco guys there that play music and do arts. So I would pay my tuition that way. So I’ve always liked the idea of side hustling. If we go back to when I was a kid, reselling candy, deflating other people’s bicycles so I can sell them air. I’ve always had that mindset. I was four or five, don’t judge me.

Ashley:
I’ve seen this Instagram reel where a girl pranks her dad and she goes to her dad and says, “Yeah, I went to the mechanics and actually they have premium air there. It was only $100 and I got premium air in my tires just to get a reaction out of her dad of it. ” Is that you or are you selling the premium air?

Andres:
I’ve always had these little side hustles. In college, I run a poker room undertable until I got kicked out. But that mindset of always doing something on the side, I think that’s something my parents gave me because when you come from poverty, all you have is hustle, greed, and you cannot give up, right? The hopes of my ancestors lay on my shoulders, I got to keep going no matter what. So now we jump into wholesaling, right? I wasn’t very successful. I only do like six deals in one year, which is not a lot, but it gave me enough cash where I wanted to buy a house. And I decided to go with co-living because it sounded doable. I started putting some test ads to people. I was like, “Hey, yeah, I need a room. I need a room.” Studio apartments at that time in Fort Worth are going for 1,200, 1,300.
So if I can get somebody in a room for 700 to 800, that sounds like a good model.

Tony:
Sorry, just before we go on, I just want you to define what co-living is. We’ve had a couple of guests on the podcast who have kind of gone through this strategy, but for folks who are listening and they’ve maybe never heard the phrase co-living, what exactly is this and how does it differ from traditional long-term rentals or traditional short-term rentals?

Andres:
Because of various names, co-living, room rentals, a lot of people know it as pet split the same way we know short-term rentals as Airbnb because that’s the biggest platform that does it, but it’s pretty much renting a room inside a house and you’re sharing the kitchen. A lot of the times you’re sharing the bathrooms. Now a lot of people right now, a lot of the big coaches, they’re fighting into, oh, if there’s no community in it, it’s not a co-living, it’s just like you’re renting a room. I would say that’s the landlord’s taste depending on your tenants. A lot of people really try to do a lot of extracurricular activities for their tenants, like pizza parties and trying to do this, trying to do that. I don’t do anything like that. I just let them be. And I’ve had only one turnover since I started in 10 months, so I think I’m doing something right.
A lot of people don’t believe me. It’s like, “That’s not possible. You have 42 tenants and only one has left.” I was like, “Yeah, give them a good product.”

Ashley:
We’re going to take a quick ad break, but when we come back, we are going to hear more from Andres on his portfolio and how he cash flows from his co-living strategy. Okay. Now let’s get back into the show. So Andreas, I have a question for you as far as the co-living. I always think of co-living as college.That’s what everybody did in college. It was rent by the room. That’s how you got places. And you mentioned a couple places where you can list the apartment such as PadSplit and several others, and those are the Airbnb platform for co-living. What do you think is the big reason that co-living is becoming more popular right now? People talked about rent by the room throughout time, I guess, but it seems like this year, going into 2025, co-living is the hot new thing. Several years ago, it was Airbnb and then after that it was midterm rentals.
What do you think is the major shift that has made this a hot commodity right now for investors, but also for people who want to live in co-living?

Andres:
It’s real estate cyclical, right? 28, 29, the borrow was the biggest thing because you could get all your money out, you could get paid, you can get cashflow. 16, 17, Airbnb is a boom. Two years ago, everybody was like, “Oh, the interest rate is so low. Let’s get it at that low and resell it on a wrap.” Also at the same time, “Hey, let’s do traveling nurses, let’s do midterm rentals.” And now everybody’s failing on that. Now it’s like, “Oh, co-living because it’s secure cash flow.” The thing is that co-living is actually really good because just as a general economical principle, we’re targeting the people who make the least amount of money and we are taking care of the most principal need, which is shelter. So that’s always going to be there because what happens, studio apartments, which is the efficiency apartments, the cheapest thing that you can buy, those prices have gone so high that people can’t qualify for them.
For example, this studio apartment in this area that is 1,200, you need to make about 43, $44,000 a year to live in. What happens with the people who are making 36, 35? What happens to the people that are making minimum wage? Where are they living?
So even middle school teachers, high school teachers, they don’t make that much money. I have one teacher and then one of my properties. And when she came, she was crying and I was explaining to her like, “Look, this is not a group home.” There’s an engineer here, he was from home, there’s nurse, the other guys work locally because she couldn’t believe it. She went to college, she has a master’s degree and she has to share a bathroom with a couple guys. So it is what it is.

Tony:
Andres, let me ask, because you mentioned something that you did a little bit of a test before you actually dove into this strategy. And I’m just curious, what was that test? How did you try and validate this idea before you actually committed to it?

Andres:
Advertising because my biggest fear it was like, how long is it going to take to get full? Because at that time I was using other companies’ numbers. They’re telling you like, “Hey, it takes like this long. They stay for that long.” And then talking with investors actually in the platforms like, dude, we’re barely breaking even, right? As soon as you launch, they get you full, but then after that, they start taking tenants because so many people are diving in. And at that time there was no control, which is about a year ago, landlords can do whatever they want. So I was like, “Let me just run my own ads, do my own marketing, see if I can get my own tenants.” So I started researching how to do that. I found Sam Wigert, who’s probably the biggest investor in this market. He’s out of North Carolina or South Carolina, somewhere in there.
And then he does a five day free course where you can learn how to do this yourself for free. So I copied that and I started marketing on Zillow, apartment.com, Facebook Marketplace, Craiglist, all the room rental websites, Rumis, Room Sear, Sumper. I only got leads from Facebook Marketplace, but I started getting like 13, 14 messages a day.

Ashley:
Was it like, is this still available?

Andres:
All of them were still available. And a lot of investors told me, “Don’t do it because people just click on it and they will respond.” And I was like, “Okay, do you respond to this still available?” “No, never. “”Well, let me do it. ” So I started replying and guess what? People do respond, right? They don’t type room for rental just because they’re crazy. So I started having conversations with them and the property was barely under contract. I had just gotten out of contract with the seller and I was already people like, “I’m ready to move in. ” So I was like, “Okay, this works.” And then something else happened where the person who was going to onboard me into our company, they said a few things that my lawyer didn’t agree with. And that’s something a lot of colleaguing groups and investors don’t talk about, which is the legalities of it.
And that’s something we have to be aware of. Otherwise, your investment is going to go belly up.

Tony:
Yeah. It’s a super cool way to test this strategy before going into it fully. And I guess two follow up questions for me. Number one, what did you actually put into the post that you think garnered such strong attention? And then second, how did you actually land on the pricing for the room rental? Like you said, hey, for you, it’s difficult how to underwrite and analyze properties as a short term. I know how to do that really well because we’ve done it a lot. But like the idea of the single room rental, I feel like there’s a little bit less clarity around how to do that. So first, what did you put into the post to generate so much attention? And then second, how did you decide how much to actually charge for your rooms?

Andres:
Yeah. So the way you underwrite a room rental, you go from the comms in the area, right? You can go, you can use comms from Zillow. Silo’s great, realtor.com because it tells you what the apartments in the area are going for. So once you find that price in your area, let’s say it’s between 1,000, 1,200, you want to be within 65 to 70% of it because it has to be a deal. You’re telling people you’re going to share a bathroom, you’re going to share a kitchen, so it has to be a deal. So I started testing ads at 60%, 65%, 70%, 75% and 80% of the price of the studio apartment, which is at that time the cheapest available option. And I started getting responses in all of them. And I was like, okay, so it’s not about the price, right? Because now we’re talking about 750, 775, 800, 825, 850.
My cheapest advertising at that point was 600 and I started getting people who would not have qualified anyways. They just got out of jail. They have multiple felonies, DUIs. And one thing I really like about Facebook Marketplace is that you can click on their profile and see their pictures. As a general rule of thumb, if their profile picture is themselves holding a few guns with a lot of weed and a couple pit bulls, they’re probably not going to qualify. And so you don’t even have to waste time betting this possible tenant.

Ashley:
I’ve done that before too, is where when I haven’t done in a while, but I used to post long-term rentals on Facebook and I would go and I’d also look at their interactions with comments or if they had pictures of them in their own house trying to look like, “Is it kept clean? Is it nice?” You definitely can find a lot about a person by going through their Facebook page for sure.

Andres:
I think yes, because they are deliberately choosing that to be their avatar. They want the world to know them as that. So if you want the world to know just that, well, I might as well treat you like that. And there’s so much volume right now from my ad, so I can choose the better tenants. So right now I have a criteria where I’m really just looking for introverts and when they respond like, “Hey, tell me a little bit about yourself. I’m a night owl.” I keep to myself. That’s perfect because what happens before I was looking for building the community type of thing and that usually means you’re going to get people who want to talk to others. They might be friends for a month or six weeks, eventually they’re going to crash because you don’t know that person, you don’t know their background.
So while building my lease, I was like, “What is the middle ground where…” Because eventually they’re going to come to you if there’s a problem and you have to be the referee, right? You broke the lease, you’re out. So what happened? The people that have a good background check that we’re living with people who don’t have a good background check, they start texting me. So I was like, “What you don’t like about this? ” And I was like, “Man, they’re forcing us to do this. They’re forcing us to do that. They want us to buy the towel papers together, the toilet paper together. They want us to share this and that. ” I was like, “What would you like? ” I was like, “I just want to buy my own business. Done. You’re allowed.” And I kind of let each house self-regulate. Right now I have five closing one more in two weeks, hopefully we’re almost there.

Tony:
And Andres, on those five, can you just kind of walk us through in a little bit more detail? So you have five properties currently. How many rooms is that and how many specific tenants is that across all those rooms?

Andres:
It’s 36, 36 rooms. So about seven per house. One has eight.

Ashley:
Oh my God, those are big houses.

Andres:
Yes.

Ashley:
Did you buy these big houses or did you add rooms to them, like take a dining room and add?

Andres:
We definitely add rooms because it’s really rare to find a seven room house. And actually, I don’t know if my Instagram is going to be someone in here, but I have videos of there because now I’m the GC on the property. So I do walkthroughs of the properties, how to do the layout, how to do the construction quickly. A lot of people when they’re acquiring these properties, they have a three month holding period plus another month of renting. The fastest one we did was we closed on August 13. By September 1st, it was fully renovated, fully listed. So we didn’t have any holding costs. We added four rooms. We find all the people. My longest time has been three weeks, except for the first one. The first one, I went with a contractor and she stole my money. That’s how I ended up doing the construction myself.

Tony:
Well, you got to tell us a little bit about that story, Andres. I mean, I feel like every real estate investor’s got at least one bad contractor story. So tell us about yours.

Andres:
So she came recommended to me by another couple of investors in the area. I went to check her work that was close to my property. She was doing two full sleeps, full gut, changing plumbing. I was like, “Okay, that’s a big job. This is not a small time contractor.” And then they started doing my job and then the guys are not showing up every two, three days, which sometimes is normal when they have multiple projects. And then spring break hits and I asked for LPP flooring that was in the contract and I get to the home and I see the guys cutting the flooring with the meter saw and putting dust. So I was like, “That’s this wood. LBP doesn’t have any wood. This is laminate.” Then I see the brand and it’s the cheapest thing that you can find at a Home Depot. And I was like, “Hey, we didn’t agree on this.
” And she’s like, “Well, we already put it. If you want to leap here, I have to pay more.” And that was it. So, okay. Yeah, sorry, but I already knew that it was going to happen. But she immediately, three days later, she doesn’t deliver the rest of the flooring. She took it. It was about $5,000 worth of flooring. She didn’t pay the guys for two weeks that I didn’t know. And then they come to the house, it’s like, “Hey, she said you didn’t pay her. We’re going to destroy our work.”

Ashley:
Oh my God, geez. I’d be crying at this point, just so you know.

Andres:
I have to say at the property, right? The subs who did the tile work for the bathroom tried to break in a Saturday at 2:00 AM. So luckily I’m there. So I have to get on a fight with them. I have to call the police. So after that, I stay at the property every night and I had to finish the work myself. I’m kind of hundred and YouTube is your best friend. You can learn everything on YouTube right now. So I was going to Home Depot at 6:00 AM, buying material, going to work from 9:00 AM to 11:00 PM, going back to the job site, 11:30 to 2:00 AM, sleeping next day, for two weeks. So there was no delay in my first property. We were like, we’re going to go live April 1st, we are going to go live April 1st, no matter what.
Because I bought that house with other people’s money, so I cannot fail them. Even though I have the money to pay for another crew, at this point, because I don’t know how to hire them. I don’t know if what they’re doing is right. The only way that I knew that it’s right is if I can do it myself and I can see that they’re doing it like I’m supposed to do it, then they’re doing it right.
So that was a big experience. I almost have a heart attack during those two weeks. I had to go to the emergency room. My heart would just not stop because it’s a lot of stress. At the same time, I had some bad news with my wife. We needed to do an IVF treatment, so I had to put another 25,000 into there. So my reserves are like … So anyways, we went live, the property wasn’t even finished, and I already had five people moving in. So I made the rooms upstairs ready, the bathroom’s ready. I was like, “Look, the kitchen is not ready, downstairs is not ready.” Cool. They didn’t even see the room. So that’s, I think it was a blessing because now everybody wants to come see the rooms. But for the first one, it was all online. I didn’t even have pictures because the house wasn’t ready and these guys moved in.
They paid a deposit. They liked the area so much, they just moved in.

Ashley:
I have to say, I’m so impressed with your hustle. I mean, just all the side hustles that you’ve done throughout your life so far, but in this circumstance, not many people are willing to roll up the sleeves and to spend every night after working a full-time job, working on their property just to meet their deadline, to be able to pay back the people that invested with them. And that really does take some character and I commend you on that hustle. We had a similar experience happen and I’m very thankful. I had a partner on the deal who was the one that went in and did all of the work on it when we had to fire our contractors and had no one else to lean on. So just from watching him kind of go through that grind, I share a little bit of your experience, but I just want to commend you on that hustle.
And I hope everyone listening knows that sometimes things like this will happen in real estate where you are going to have these really stressful periods, but sometimes just working hard and putting in that labor, putting in that sweat equity, and that may not even be actually doing the physical labor of a rehab. That might be sitting behind your computer trying to find money or analyzing deals every single night. That grind is what’s going to get you through that hard time in your investing journey. Just like Andres just showed us. There’s light at the end of the tunnel as to renting out the whole house without even having pictures available for people to look at.

Andres:
That was a blessing. I don’t know how I got that. And actually, those guys are still there, right? So when I do my monthly check-ins, it’s funny, in January, everybody got sick. So I do my monthly check-in around January 3rd to go to the house and there are all of them sitting in the dining area drinking chicken soup. And I was sick too. So I sat with them and we’re talking about it. And I was like, “Do you guys remember when you walked in? ” And I was like, “Yeah, man, I don’t know how. I would never move anywhere else without pictures.” Because I would literally send them pictures and it’s a war zone. It’s a construction zone. We build the walls. There is drywall everywhere. It was a bad area. I don’t know how they did it, but it worked out. Thank God they’re still there.
It is what it is.

Tony:
Andres, you said that there’s not many just seven bedrooms laying around that you’re able to go out and purchase. So you’re converting a lot of these and adding the additional living space. So I guess as you’re sourcing your properties, what is it exactly that you’re looking for? What is your buy box? How do I know as someone who’s never done this before, what type of property is a good candidate to turn into a seven or eight bedroom property?

Andres:
Pretty much you’re going to go buy a square feet, right? Each room, you want to be around 250 square feet, so you can multiply that by seven. But a lot of the times, if you stay above 2,000 square feet, you’re going to make it work for seven to eight rooms, but that really depends on the mortgage payment. Again, I bought all of these creatively. They are all sub two seller finance. So we have 3% interest rate, 2.75% interest rate. Our PITIs are pretty low for Texas, 1,900, $2,000. So we get a good spread on the end. So even though I can put eight rooms, I stay at seven, just to give it a little bit more space. And parking is really important. So if I had to define my buy box, it would be minimum three bedrooms, two bathrooms, 1600 square feet plus. So if it’s 1600 square feet, I need a PI to be at 1600 or less.
If the PITI is above $2,000 a month, I need the square feet to be above 2000 as well because I need to add a seventh to make the cashflow work. And given all the work that you have to put into this, I think you need at least 2,000 net every month. Otherwise, the property is not really worth it. And I pass on a lot of deals because it’s like, oh, 1800, 1700. And I was like, “Yeah, no, I need 2,000.” Because a lot of work and I do everything myself right now. I’m still training my replacement, but it is very hands-on. I think to me, that’s one of the biggest things when I talk to other Collibra investors. The moment they tell me it’s easy, I stop talking to them because that means that they just started a month, they only have one property, they haven’t gone through it yet.
But just think about it, right? And you’re going to see it in the comments. You have seven people from seven different backgrounds now sharing a house, right? You are the referee for everything. Everybody’s going to be texting you this and this and that. And now when I do coaching, it’s like the first three months, you’re going to be very intense because you have to put some people in line. You have to other people let it go until you find the right fit. But after three months, like my other houses that have been open for six, nine months, I don’t get a message for two 60 days because those three months were very intense. I was on top. I was checking the security cameras outside like, “Hey, you parked in the wrong place, this and that, no guess, blah, blah, blah.” But once you set up the culture of the house and you have like two or three guys there with the culture of the house like, “Hey, we’re clean, everybody parks in the right place and this is how we do it.
” Then the new people that move in, they’re going to follow that.

Ashley:
We have to take the final ad break, but we’ll be right back after this. While we are gone, make sure you are subscribed to the Real Estate Rookie YouTube channel. Okay. Welcome back from our short break. So Andrea, as you kind of mentioned there that you are doing all of your rehabs. Are you still working a W2 job?

Andres:
No. So I quit my job two days before Thanksgiving last year.

Tony:
Congratulations.

Andres:
I just couldn’t do it anymore. We were setting up a house. At that time, I had three houses under contract for December, so it was going to be a lot of work. And I don’t have any money in my saving accounts for the rookies listening to that. At that point, I had $300 in my cashflow.

Ashley:
And you quit your job?

Andres:
And I quit my job. And when I said I bought my first house with my own money, I used credit cards. I didn’t have cash because we’ve missed a lot of like all my savings went away with my wife’s treatment and my heart problems, right? Every penny that I saved since I was 18 to this point when I’m 30, every dollar, every night I didn’t go out, every saving that I was like for my investments, it went away in three months because of health issues, but I had to keep going. And I quit my job, I got another property, and that’s how I kind of started doing side jobs as a general contractor because now I have good subs and a lot of people wants to do co-leaving. So I kind of help them with the layout, helping them with the construction, I make some money there.
Now from the properties is enough cashflow to cover my basic needs. So it’s the first stage of financial freedom where if I really don’t want to get out of my house, I don’t have to, but we want to keep going.

Ashley:
And you found a business that integrates well with your real estate too. For a long time, I was a property manager and I did it for myself and I did it for another investor and it worked out really well having that income alongside my real estate investments also too. So now that you’ve started this GC business, how are you becoming bankable or what are you doing without your W2 income to actually finance deals?

Andres:
Well, so all the deals, even the first one were bought with OPM. So for the rookies, that means other people’s money. So I actually got paid to buy each house, right? Because I’m acquiring the deals myself. So I have my wholesale fee there or acquisition fee. Now I call it a management fee. So because all of these are creative deals, we buy themselves too. We don’t have to go to bank. We don’t have to talk to anybody. We just go to title company, direct to seller, direct to agent, and we acquire the houses, right? So each deal comes out around 65 to 80,000 total from acquisition, repairs and to furnishing, and I usually bring a private money partner to each deal and then we split the deal half and a half. So they bring all the money to closing and they do everything else. That’s That’s why also I don’t think a property is worth if I don’t make less than 2,000 a month because I have to split that with my prior money partners.
So their cash on cash per property is between 40 and 50%. That’s a lot. You don’t find that laying around. That’s why I’ve had so much success raising money at the beginning because that’s really hard to find. And people that have money to invest, they want to make sure that it’s in a recession proof kind of investment and affordable housing is always going to be around.

Tony:
Andres, let me ask, have you ever thought about doing co-living but through ground up development? Just buying a plot of land or redeveloping small house, tearing it down and just building something built specifically for co-living?

Andres:
Yes, that’s the next stage. And if we go back, I’m pretty new in real estate. I still don’t know how to do the better. And that’s what I’m saying I have to do right now. I still don’t get it. How do you guys refinance those properties? Those numbers are so wild because I get to the ARB, but then the appraisal is going to give me a different number. I really don’t get it. It’s a lot harder than creative financing. But yes, ground up is going to be the next step. So right now I have five closing six. I want to get to 10. And then after that, do only ground up. Because at that point, the cashflow is good enough where I can feel free and I can focus on funding land and develop that.

Ashley:
Well, Andres, thank you so much for coming onto the show today. Just real quick before we wrap up here, would you just give us an overview of what your monthly cash flow is off of these five properties that you’ve been able to generate?

Andres:
Yes. So in total, we make a little bit over 10,000. So depending month, 10,500, 10,400, and once I split that half and a half with my private money partners, they get their half, I get my half. I’ve had this year 97% occupancy rate. I have only one turnover. Yeah, it’s been great so far. Honestly, I don’t see me slowing down with this. The only thing that slows me down is finding good deals because parking is very important here in Texas. Almost everybody drives a car and I don’t want to bother the neighbors.

Ashley:
Well, you just gave everybody shiny object syndrome looking to get that type of cash flow and everyone’s going to be looking into co-living. So Andres, thank you so much for joining us. Where can people reach out to you and find out more information?

Andres:
By Instagram is probably the best way. My handle is Andres Martinez, like my name underscore C. And you can leave a question here in the comments. I’ll try to be here and respond because I have also some videos on YouTube, so you guys can go sit there and check and just reach out if you have any questions. Be ready to work because if you tell me you’re lazy, I’m not going to respond.

Ashley:
Yeah. Love that motto. Thank you so much for watching this episode of Real Estate Rookie. I’m Ashley and he’s Tony, and we’ll see you guys on the next episode.

Dave Meyer:
These were the BiggerPockets Podcast episodes that defined real estate investing in 2025. Hey everyone, Dave here. I hope you’re all enjoying the holiday season with your friends and family. It has been another transformative year in real estate. The market continues to evolve and the investors who are thriving are the ones who’ve adapted their strategies to match current conditions rather than waiting for things to go back to normal. On today’s show, we’re going to recap some of the biggest investing trends and topics we focused on in 2025 by replaying portions of the year’s most popular BiggerPockets podcast episodes. These are the shows that resonated most with the BiggerPockets community when they were first published. And so I hope revisiting them today will help inspire you as you plan for investing in 2026. We’re going to republish a few other popular episodes of the show and from across the entire BiggerPockets network over the next week, and then we will return with brand new podcasts starting on January 2nd.
The first episode I’m going to revisit today is back from January because last year I started off the year by sharing my upside era framework for the first time. The idea behind it is that we are in a new era of investing. And even though real estate may not be as obvious as it was a few years ago, it is still the best path to securing your financial future, and it’s better than any other way to invest your money. This episode was called The Real Estate Financial Freeda Formula Has Changed. It was released in January 2025. And I think my conversation with Henry Washington holds up just as well now as it did almost a full year ago. I think the problem is that we treat financial independence as binary. It’s like either you’re financially free or you’re not. When reality, it is a path.
And the goal, at least for me, has always been to just become more financially independent. Every deal you do, every financial decision you make will hopefully put you in a better financial position so you have more flexibility. For some people like Henry, that flexibility might be going to Europe and just not working for a couple weeks. For me, I rest easy knowing that if BiggerPockets decided to fire me tomorrow, I could not work for a couple of years and be very comfortable. And to me, wouldn’t consider myself fully financially independent because if I left my job today, I would need to figure out active income just like you, Henry. But I am more financially independent than I was 15 years ago before I started investing.

Henry Washington:
Absolutely.

Dave Meyer:
And I am more financially independent this year than I was last year and the year before that and the year before that. And I feel like that really needs to be the goal is just to keep moving in that direction because honestly, your definition of what financial independence is going to change. The amount of money I thought that I would’ve needed to feel comfortable when I started 15 years ago, I passed that number a while ago. And my expectations, I try not to have lifestyle creep, but when you get older and you just have a more sophisticated life, your expenses just go up. And so that’s why I feel like setting this goal and saying I am financial independent or not, it’s just not realistic. The goal is just to keep making progress.

Henry Washington:
Yeah, that’s absolutely true. I was one of those people when I got started that I thought I would buy enough rental properties to produce enough cashflow in current days
That I would be able to take the cashflow from the rental properties. And then when that number of cashflow hit the number of money I made per month in my day job, that I could leave my day job and live off of my cashflow. But as I started to buy properties, I started to realize that that wasn’t necessarily going to be a thing. I was absolutely buying properties that cashflow, but your business and your properties, they don’t function linearly. It’s not like you buy it and then it cash flows and nothing ever happens or goes wrong. It just makes you just print that money every month and it’s perfect and the world is great. But that’s not the case. The more properties you buy, things break at different times, things break all at the same time, people move in, people move out. There’s this constant flow of money that it’s hard for you to be able to say, “Okay, well, I bought 10 properties and each property cash flows $500 a month.
And so now I have $5,000 every month that I just will take out of this account and spend on my bills.” And the money is flowing too fluidly for that to be a reality. And so I realized that if I truly want these properties to pay me cash flow that I could live off of passively, then it’s going to happen far into the future
When these assets are paid off. And so I had to pivot my strategy to think, okay, well, how can I use real estate to still buy rentals, but also make cash now so that I can A, continue to grow my portfolio, but also stabilize my portfolio and then start to aggressively pay off those properties so I can hit that goal sooner. That wasn’t what I thought starting out.

Dave Meyer:
Totally. Yeah. And I want to ask you about how you pivoted your business, but I’m just curious first, was that disappointing to you realizing that?

Henry Washington:
You know, that’s an interesting question. I don’t remember feeling disappointed about it just because I was actively in the business at that point and I had the foundational skill, which is I know how to go buy a good deal. All I had to change was the way I was monetizing that deal, which was flipping it and getting more cash upfront versus holding onto it and taking a couple hundred dollars here or there. So no, it wasn’t disappointing because I just love the business of real estate.

Dave Meyer:
Feels like people are avoiding getting into real estate because we, people who are real estate educators, BiggerPockets is part of this, have been saying, “Hey, you can get real estate financial freedom in a couple of years.” And like I said, during the 2010s, it was always difficult, but it was easier than it was today. It was

Henry Washington:
Easier.

Dave Meyer:
For sure. But I guess I still feel like the prospect and the value of real estate investing is still so strong that it frustrates me when people are like, “I’m not going to get in because now it’s going to take 10 years to be financially freedom or 15 years to financial freedom.” That’s incredible. It’s amazing. Career in the United States is like 45 years. So you’re saying you cut it into a third. If that doesn’t get you excited, I don’t really know what would, but I do feel like, I don’t know if you hear this too, but I hear people saying like, “Oh, I can’t find cashflow, I’m not going to get into it. ” But the fundamentals haven’t really changed. This is kind of always how it’s worked.

Henry Washington:
The fundamentals haven’t changed. They’re more important now than they’ve ever been. It’s the fundamentals you have to stick to now in order to be successful, but yeah, this is the best way to accelerate that path in any manner that a normal person could. Can you do it in other pathways? Can you do it in the stock market? Yeah, but you got to get really good at trading stocks. But the average person in real estate can do this without being a professional real estate investor, and that’s incredible.

Dave Meyer:
Given this, given the reality, it sounds like we agree that it’s going to take you 12 to 15 years to do it. In my mind, that’s fantastic. And you can sort of be agnostic, at least to me, about how you pursue that active income. I think there’s a good argument to be made that you should just pursue whatever active income makes you the most money. And for me, that’s continuing in a regular job, but it sounds like for you, why did you make that choice knowing that you needed active income to do it through real estate rather than … You had a good job, right? You had a good corporate job and you chose to leave that.

Henry Washington:
Yes, I did have a great corporate job and I enjoyed my job. That’s why I kept it as long as humanly possible. I was going to do both until I could not do both anymore until someone was going to stop me from doing both. And I did. That’s what happened is I quit when it cost me money to have the job when they wanted me to work more hours and I just couldn’t give them more hours because it would take away from what I was doing in real estate. But the answer to your question is I had to choose the real estate because I’m throwing all out here. I was making $110,000 a year, which isn’t a ton of money, but it’s good money, right? It’s good money. It’s hard not to choose real estate as your full-time income path when I’d have to trade 40 hours a week for 12 months to make $110,000.
If you count my bonus, I was probably making closer to $140,000 when I could flip two houses and make that, and I could flip two houses in the same month. Yeah.

Dave Meyer:
Would you put it that way? Right,

Henry Washington:
Right. We just sold a deal and made 70K last week. And yeah, it took us five months to make 70K, but that wasn’t the only house I was flipping. I had to choose the real estate. It made more financial sense. And also, I love it so much more than I loved my day job. I liked my day job. I love doing this.

Dave Meyer:
So that was me and Henry on episode number 1069 from January. Our next episode today was our most popular show of the year on YouTube. It’s an investor story with Deandra McDonald. This episode really struck a chord with many of you because it proves you can start investing in real estate and change your financial trajectory from almost any starting point. DeAndra had $35,000 in debt and got rejected by a lender the first time she tried to buy a property. She eventually got her first deal though with a down payment of less than $4,000, and four years later, she was able to quit her job and become a full-time real estate investor. This is an incredibly inspiring story of taking incremental steps to improve your financial position, one property at a time. Here’s my conversation with Deandra McDonald from episode 1105 back in April. What did you buy?
Because you said you wanted to live in it. Were you looking for a house hack kind of situation?

Deandra McDonald:
Exactly, because that’s all I had. With all that savings, that extra two years, I still could come up with about $5,000 because I had to pay down the credit card debt and just live.That was also a necessity. But my first purchase was a two bedroom townhouse, just half a duplex where the plan was just to lower my rent. But what actually happened was I moved in, I took the smaller room and I rented out the second room to a roommate, which covered my mortgage. And that started the full addiction to this whole process of like, “Oh, I see. Okay. Yeah.

Dave Meyer:
” Yeah. I would imagine that generating that income or saving that money was a lot easier than lifeguarding parts.

Deandra McDonald:
For

Dave Meyer:
Sure. So you didn’t get to quit your job fully, right? I imagine you were still working full-time, but sounds like at least improve your quality of life just off that first deal, right?

Deandra McDonald:
Yeah. Even just I got to stop lifeguarding.

Dave Meyer:
Yeah.

Deandra McDonald:
Even just that. I had weekends again. I had a day off that I wasn’t thinking about how can I pick up an extra shift? How can I make an extra $20 this weekend because that adds to the pot? I could rest. So even if it was just that, my goodness.

Dave Meyer:
I think this is so important because I think of this industry, a lot of the focus has been turned to just quitting your job, but I love hearing stories like yours where you show that every incremental deal can improve your financial situation and can improve, like you’re saying, your quality of life. You actually had this tangible benefit to your life just by buying a single real estate deal. And I really encourage everyone, maybe if you haven’t gotten that first deal yet, to think about that because it’s a lot less daunting to think about how do I replace my full W2 job. It’s like, well, just think about how can you work a little bit less? We’ll give you a little bit more peace of mind just to get that first deal. It sounds like you did that, but then you got the bug. So what did you do after you got first house hack?

Deandra McDonald:
I kept house hacking for a while. I got a better job where I was making more money, but didn’t change my lifestyle. And so every year on the dot, we used to have a joke that I have boxes that didn’t even bother on packing because it was like, I’m going to be gone in a year because now I have this system in like, oh, I live here for a year. I rent it while I’m here. I rent it when I leave. All that extra money goes into the next property so that every property is bigger, better, more efficient than the last one. I can fix stuff up as I go. For years is just what I focused on.

Dave Meyer:
What area of the country is this?

Deandra McDonald:
I’m in Central Virginia, specifically Charlottesville.

Dave Meyer:
Okay. And it sounds like that first deal, did you just put in five grand? Was that all you had to come up with?

Deandra McDonald:
I think we looked at the numbers and wound up being like $3,800.

Dave Meyer:
Yeah. Oh my God, that’s amazing. And so everyone listening to this is jealous. But just as a reminder, back then it was a lot harder to get a loan to, as Deandra mentioned, there were trade-offs to every time. So was that sort of the amount you were shooting to save every single year? Could you repeat the strategy you were using just saving up $3,800, $5,000 a year and buying something new?

Deandra McDonald:
Exactly. It was like, “Hey, there is an abundance of properties here under $1150,000.” I remember now times are different. Like Dave was saying, I remember having a $200,000 budget and being picky going in and say like, “I don’t like those cabinets. Show me something else. I don’t like the wall colors.” And that was okay because you had other options. And I want to say this, in certain parts of my state, that is still very true.
My area has gotten very, very popular. It got very, very popular after the world kind of shut down in 2020, but it wasn’t that popular six years ago where it was still like you had options. And there are surrounding counties and surrounding cities where there are still plenty of options if you were to walk in right now with $200,000 and a desire to live there. But yeah, what happened was I was paying 700 a month in rent. So I went from paying 700 month of rent to nothing. So all I did was save that money. So now instead of saving 3,000, I can save a lot more per month. I took out HELOCs as I would shift from place to place. My Airbnbs would do well. All that money just kept being saved and going to the next property.

Dave Meyer:
And how long were you doing house hacking? When did you start doing something else?

Deandra McDonald:
I was house hacking exclusively for about three years. On year four is when I started experimenting with midterm and short term because I had duplexes or I had quads that sometimes I would have two or three months between when this tenant ended and the next tenant who wants to come starts. So what do I do in this timeframe? Oh, I could rent to a traveling nurse for two months or put it on short-term rentals because I had some extra furniture. And they’re like, “Oh, this is great. I can play with all of these whenever I need them instead of sticking to one thing.”

Dave Meyer:
That was my conversation with Deandra McDonald on BiggerPockets Podcast, episode 1105. We’ll be back with more of 2025’s defining episodes after a quick break. Managing rentals shouldn’t be stressful. That’s why landlords love rent ready. Get rent in your account in just two days, faster cashflow and less waiting. Need to message a tenant? Chat instantly in app so you have no more lost emails or texts. Plus you can schedule maintenance repairs with just a few taps so you’re not stuck playing phone tag. Ready to simplify your rentals? Get six months of rent ready for just $1 using promo code BP2025. Sign up at the Lincoln Bio because the best landlords are using rent ready. Henry, it’s holiday season. What do you get a real estate investor for the holidays?

Henry Washington:
Well, if that real estate investor is me, you can get me a 15-unit apartment building.

Dave Meyer:
Oh, does that work? Do people just send you apartment buildings?

Henry Washington:
They are now.

Dave Meyer:
Well, I got a suggestion actually. If you are looking for a gift to get a real estate investor, buy them a ticket to the upcoming Texas Cashflow Roadshow. We’re going to be in Texas. We’re going to Austin, Houston, and Dallas from January 13th to 16th, and we’re going to be having meetups, workshops, live podcast recording. We’d love to see you all there. So if you’re thinking you got a friend in the Texas area and they’re trying to get into real estate investing, they’re trying to scale their portfolio, go to biggerpockets.com/texas and go buy them a ticket.
Welcome back. Today, we’re revisiting some of the show’s most popular episodes from the year that was. Our next clip has a similar theme. Antoinette Monroe was feeling unfulfilled with her corporate career when she fell into real estate investing almost accidentally. Investing, however, not only gave her the financial freedom to ultimately leave her job, but it also gave her a sense of purpose when she began operating assisted living facilities. Like DeAndra, Antoinette’s story shows that even a small portfolio can make a huge impact on your financial future and your community. This is me with Antoinette from episode number 1120.

Antoinette Monroe:
So I spent that entire first year kind of digging through all of the BiggerPockets forums, listening to all the podcasts to understand, okay, what do you do next when you’ve done this? I learned about house hacking. I realized that that’s what I was doing, but then also the birth strategy. And that is how I got my second deal. So in 2019, I purchased an off-market deal from my neighbor in the neighborhood I grew up in. So I had a direct connect to the seller and that deal I was able to get under contract for under 200,000. It only needed about 30 or 40 worth of work. And through some tips that I got off the bigger pockets for them, I was able to refinance that house and get all of my cash back within 45 days of closing.

Dave Meyer:
Wow. Amazing. I’d love to dig into that because I think this is one of these deals that people listening are going to be like, “I want one of those.” Give me that. So tell me a little bit how the off-market deal comes up because we always hear about off-market deals, they’re great and they kind of are just this magical thing. And I think how did this one come about? Did your neighbor know you were buying houses or tell us about it?

Antoinette Monroe:
Well, no, because at the time I wasn’t. I just had the one house. But my mom knew that I was learning to be a real estate investor and I wanted to do that. So talking to her one day, she mentioned, “Hey, the neighbor across the street, she’s planning to move to Georgia to be with her kids because she’s getting older.” And I was like, “Ah, I know what this is. I heard that podcast. This is a wholesale deal.” So I was like, “Give me her number. I’m going to call her.” And so I called her, found out what she was interested in doing. I went through all of the steps of the things that I learned about from a wholesale deal. I was not a good negotiator. So I was just like, what is it that you want for it? I’ll agree to that because

Dave Meyer:
The numbers worked out. Yeah. Which is kind of a win-win situation, right?

Antoinette Monroe:
Yeah. And so she still talked to a couple different wholesalers and I explained to her, I was like, “They’re going to give you offers. Then they’re going to come and look at it, and then they’re going to whittle that offer down based on the expenses that they have. So they’ll do whatever to get you under contract.” But ultimately, I think I was able to get that deal because of the personal relationship and she was getting the price that she wanted and that was enough for her. So it’s one of those, sometimes the right place, right time. You never know when that deal will come, but if you’re putting out what you’re interested in or what you’re looking for, then people usually try to help. So I told my mom, I want to be a real estate investor. I want to buy more properties. So anytime, now her ears are open when she hears about opportunities, she’s going to think of me and give me a call.

Dave Meyer:
Well, I love that. Good for you. That’s amazing story about sort of this combination of serendipity and circumstance, but also being prepared for it.

Antoinette Monroe:
Being prepared. Yes. If I hadn’t been listening to the podcast, if I hadn’t been doing the research and understanding, that opportunity would’ve came and I wouldn’t have known what to do with it or how to actually make it work.

Dave Meyer:
Yeah. Your mom would’ve said, “Hey, our neighbor’s moving.” You’ve been like, “Oh, cool. I hope they enjoy Georgia.” You wouldn’t have been thinking about how could you potentially create a mutually beneficial situation for yourself and for this person. So it was a single family home, I assume, and your plan was to turn into a rental?

Antoinette Monroe:
Yes. So it was a single family. I put it under contract before I saw it. I just had the memories. I’d been in here before as a kid, similar to my house. That’s kind of fun. But once I closed on it, I came down and saw that they had done an addition to it that made it a much larger single family than I knew. And the layout made it conducive for a split, which is what I did with the first house. I bought a single family, split it in half and kind of made two units out of it right up to the line of being in trouble with code. Just-

Dave Meyer:
Just towing

Antoinette Monroe:
That line.

Dave Meyer:
Yeah. Okay.

Antoinette Monroe:
Yeah. So I saw this opportunity in that house as well, and I did the same thing. I just dropped a wall through the middle of it, made a one bed, one bath studio in the back with a kitchenette because kitchens mean code issues, and then kept the three one in the front. And I was able to rent both sides out, one to a family member, because anytime you’re doing something, there’s always somebody watching. So immediately one half went to a family member, and the other half I used a realtor to get rented out.

Dave Meyer:
Okay, great. You said you bought it for under 200 grand, you had to put 30 or 40 grand in. How did you finance all of that?

Antoinette Monroe:
So with the first project, I had improved it and then added 700 square feet. So there was a good bit of equity in that home.
Nice. I learned on the forms that I should pull home equity lines of credit. So I had one existing and ready to go on that first home. So I was able to buy this outright in cash using the equity from the home equity loan. And then I borrowed private money from my brother-in-law to complete the renovation on that second home. So it was a combination of all the things you learned. There was that home equity line of credit, there was borrowing money from my brother-in-law, and then the hack that I use is my strategy to make single families have twice as much cash flow.

Dave Meyer:
That’s great.

Antoinette Monroe:
Which is splitting them in half.

Dave Meyer:
If you want to hear more of Antoinette’s amazing investing journey, make sure to check out episode 1120. Next up is a conversation I had with Henry Washington in August about the BRRR method. Popularizing the BER is one of BiggerPockets’ biggest contributions to real estate investing. It’s an extremely powerful strategy that allows investors to recycle their cash and scale quickly. But there has been a narrative recently that the BRRR is debt. Some people say it’s outdated in an era with mortgage rates over 6%. So Henry and I wanted to talk this through and discuss whether that’s true and how you can update the BER to still make it work today. This is from episode 1165.

Henry Washington:
It was a whole lot easier to find deals to BER three years ago. We still find them now, but less frequently. Flip numbers tend to make more sense in this market than rental numbers, but because we’re looking for deals in volume and we’re finding deals in volume, every so often we get one that makes a great BER. And then I think you have to put some parameters around BER, mostly like a timeline because you can buy, renovate, rent, and then refinance in a short period of time, or you can do it in a much longer period of time. I’ve refinanced multiple properties this year and pulled cash out of them when I bought them three to five years ago and I just put them on adjustable rates and that adjustable rate now came due. I refinanced it into a 30-year fixed and pulled cash out.
And those long-term BERS are still BERS.

Dave Meyer:
Hernia, that’s a great point. I think it’s a really important caveat because I’ve been calling it the delayed BER or people in YouTube gave me new ideas of what to call it because I suck at this, but I couldn’t come up with a better name of it. We’ll call it the delayed bur. But I think there’s two different things that you can do. One thing I’ve been doing is delaying the renovation. You buy something that’s actually fully occupied rather than vacant and not trying to do the BER on this flipped timeline. Because as you said, there is this approach to doing the BRRR method, which is like, I’m going to do this in six months or whatever. I’m going to get in there, I’m going to renovate it quickly, I’m going to get rent up to market rate, then I’m going to do this cash out and I’m going to go acquire the next deal really rapidly.
And that did work really well for a while. I think it’s hard to line up two deals. Like you’re saying, I can’t do it right now realistically, but even you, Henry, it sounds like it would be hard to even line up to Burr’s in that timeframe where it would even be advantageous for you to even do that. And so what you could do is either take sort of the more delayed approach, which is getting the occupied units and opportunistically renovating when there’s time, or doing the renovation upfront, but not refinancing until you need the capital. I’m actually looking at refinancing a deal I bought like six years ago because it’s cash flowing well, but I think that there’s going to be good deals coming and I’m seeing more deals coming and I just might want to free up some capital. And so I’ll just do the refinance, but it’s way

Henry Washington:
Later. Yep. I think when Burr was originally pitched, it was pitched as a way to scale a real estate business because you could line up back to back Burr’s and you could repeat this process and you can still repeat it. I think the timeline for the normal investor is just going to be longer.

Dave Meyer:
I think that’s right. There is this assumption in this question, and I get this question all the time. I’m sure you do too. Do BER’s work? Is it dead? There is this assumption that the only reason to do a BERR is that you can refinance 100% of your capital out.

Henry Washington:
Full BERS. You got a full BER.

Dave Meyer:
Right, exactly. You need the quote unquote perfect Burr or full BER. But that is not that common. Maybe if you’re doing Henry’s kind of deals and you’re in the right market at the right time, that can be common. But I think if you just kind of like reframe the conversation and don’t assume that you need to take 100% of your capital out, then I would say Burr is absolutely still a way to grow your business. You’re still able to refinance some of your money out and you’re buying, ideally, if you’re doing it right, a cash flowing rental property that you have built equity in, you’re getting some of your money out of it to go scale again. That’s still a win, even if it’s not perfectly super 100% recycling of your capital like it was for that brief moment in time.

Henry Washington:
Can I give you a hot take?

Dave Meyer:
Yes. That’s why you’re here.

Henry Washington:
Even when Burrs were easy to do, I didn’t really like doing them.

Dave Meyer:
Really? Why?

Henry Washington:
I didn’t like pulling my cash out. I liked the cash flow.

Dave Meyer:
That’s the other thing. Yeah.

Henry Washington:
When you refinance a deal, what’s essentially what you’re doing is you’re getting a new loan at a higher amount and that new loan at a higher amount comes with a mortgage payment and that mortgage payment is going to be higher than the previous one because now it’s a higher mortgage. When you get a new mortgage, they front load the interest in the first five to seven years,
And so most of your payment is going to interest. And so you put this money in your pocket and a lot of people, especially the casual investor, may not have had the next Burr lined up. They pulled the cash out of their last Burr and then they blow a chunk of it before they get to their next deal. And then it kills the purpose. What I was doing and what I still like to do is instead of refinance, I just get access to a line of credit on that equity and then that way I don’t get a new loan at a higher amount. I keep my lower mortgage payment, which keeps my cash flow. And then I have access to the money in the event I need it instead of just pulling it out and starting to pay on a new loan and then not spending that money wisely.

Dave Meyer:
Yeah, because that’s a great point. If you don’t immediately reinvest your capital that you pull out, you’re essentially just reducing your cashflow for no reason.

Henry Washington:
Yeah, right.

Dave Meyer:
That to me is a really important thing. If you want to hear more about the slow bur and how Henry and I are both using it in our own portfolios, make sure to go back and check out episode 1165. We’ll be right back. We’re back on the BiggerPockets Podcast going through some of our best episodes of 2025. One of the reasons I personally love having Henry on the show is because he brings so much knowledge and experience when it comes to renovations and value add investing. You heard it on that previous BRRR episode before the break, and you’re going to hear it in our next clip too. Adding value to your properties is one of the key skills for almost every investor making deals right now, because in most places, you can’t just go out there and buy properties off the MLS and get a lot of cash flow.
But with just a little bit of effort, a little bit of improvement, you can drive up values and rent at the same time and make deals work. That’s what episode 1088 from February was all about. Here’s me and Henry again.

Henry Washington:
Now, before we move on, you can sometimes add direct value for under five grand if your property is set up for you to do so.

Dave Meyer:
Yes.

Henry Washington:
An example of this that we did recently, this was in a flip, but could have been a rental, right? And so what happened was we had a two bed, one bath house, and that one bath house had a laundry room, and that laundry room was very big, big enough that it could have been a small bedroom. This house also had a sunroom. Now, this sunroom was not heated and cooled and was dilapidated. And so what we were able What to do was to move the laundry into the sunroom. We finished the sunroom by just putting insulation in the walls and drywalling the ceiling because it was just kind of like an open beam ceiling. We added insulation and drywall in the ceiling. We painted the concrete floor. We moved the laundry in there, and then we added a mini split air conditioning unit into that sunroom.

Dave Meyer:
Nice.

Henry Washington:
So by doing that, we were able to spend probably about five grand. And so we added square footage. Even though it was already under roof, that square footage wasn’t counted in the heated and cooled square footage of the house because there was no air conditioning. So by adding a mini split, we added about 200 square feet to the house. And by moving the laundry into that room, we were able to create a third bedroom. And so that $5,000 allowed us to sell this house for $220,000 instead of $200,000. So I spent five and I sold it for an extra 20. So that’s $15,000 worth of additional value for spending 5,000.

Dave Meyer:
And not that much work. And not even that. Now that’s time.

Henry Washington:
So if you have a property, if you’re listening to this and you have a property and you’re considering doing something like this, do you have a room in that property that is not under roof? Do you have a room in that property that could be a bedroom instead of a dining room? People don’t really use formal dining rooms. I like to convert those to bedrooms.

Dave Meyer:
I just did that in a property the other day. There was a front little thing. I just put a door up. It costs like $600. I’m getting probably two, 250 more a month in rent because of that.

Henry Washington:
Boom. Can you convert a garage? A lot of the times, single car garages, people don’t use to park in. They use to store stuff. I have a couple units in Joplin, Missouri where there’s single car garages. And when I bought the properties, every single one of the garages was stored stuff. No one was parking in it. So we spend about five grand, convert the garage into a bedroom, and now we get an extra three to $500 a month of rent out of each one of those units.

Dave Meyer:
This is really sort of the best advice because I think it’s important for people to realize that this isn’t luck. It’s not like Henry bought this house and was like, “Oh, I found this sunroom and I can convert it. “This is the stuff you need to be looking for when you’re actually going to buy properties because anyone can theoretically add a bedroom. But if you’re popping a top and taking off a roof and rebuilding that, that’s going to be a very expensive proposition. That’s going to take a long time. Or you can find these properties that are set up for it. Those are good examples. I did something very similar with my short-term rental. I wanted a four bedroom house. I needed that to get my revenue. All of them were super expensive, but I found a three bedroom house that had a 400 square foot second living room.
No one was using it. And it’s in a walkout, but it already had an egress window built. So I didn’t even have to do that. It had a closet. It was basically all I needed to do was put up drywall, another bedroom, especially if you’re new to value add. These are the kinds of properties that you can really start to target. The other thing where I invest a lot of places at basements and finishing them out is kind of a no-brainer. You look for ones that have the right ceiling height,
That have a good foundation, that have big enough windows for egress. You don’t want to dig out the foundation, but those types of things, that’s just really easy types of value add that really have a tangible, measurable, proven way of adding value.

Henry Washington:
One of the first things you want to look for are look for homes that have bedroom and bathroom counts where the square footage seems too big for that bedroom and bathroom

Dave Meyer:
Count. Yes. Yeah. Like a 2,400 square foot with two beds.

Henry Washington:
Yes,

Dave Meyer:
Exactly. That’s not right.

Henry Washington:
If you’ve got over 2,000 square feet, two bedroom house, there is room to convert something to a bedroom. There is room to add some value. If you’re looking at a three bed, two bathhouse and it’s got 2,500 to 3,500 square feet, there’s probably room. Look for properties that have sunrooms. Sunrooms typically are not heated and cooled. And you can easily add some drywall and add some flooring and add some insulation and a mini split air conditioning unit and you can get added square footage.

Dave Meyer:
No, sorry. I’m just laughing because this is just bringing up my childhood. My dad did this where he converted a sunroom to my bedroom. I just think he skipped the insulation and adding heat part because it was just freezing my entire life. And this was in New York. I was just always cold. There was never heat. I think he might’ve missed that critical step.

Henry Washington:
Yes. Yes. Sunrooms, we have made a lot of money by converting sunrooms to heated and cooled square footage. And they’re easy properties to find. It’s typically called out on the MLS listings that they have those features. And so you can literally search for them. A lot of them are not heated and cooled. And yes, you can look for properties with basement units. And Dave is absolutely right. When you’re looking at properties with basements, you want to make sure you check that ceiling height and check the egress size of the windows because you want to be able to legally get somebody in and out of that window in the case of an emergency for it to be counted as an actual bedroom. And then you can also look at properties with single car garages because properties with single car garages give you the option. You can convert those single car garages to bedrooms.
But when you’re looking for that, you want to make sure you check the competing properties in that neighborhood because you don’t want to be the only house with a converted garage. You want to make sure that that is something that is happening within the neighborhood because if you’re the only one, then your desirability goes down.

Dave Meyer:
My personal favorite these days that I’ve been looking for, and I’ve done this in the past too, is I love a basement that is the ceiling height that has a separate entrance.

Henry Washington:
Oh yeah, absolutely.

Dave Meyer:
Especially now with all the upzoning that’s going on in areas, you could turn places into second units. Check the zoning, but the upside of adding a whole nother unit
Is just enormous. And yeah, we’ve sort of gone on a tangent here. We started with five grand. Now we’re just talking about the best value. That’s 30 grand, 40 grand, something like that. But a whole unit, I mean, that’s going to pay for itself in a year or two. That’s an incredible return on your investment. So that’s something I definitely look for. All right. Those were highlights from our top episodes of 2025. I hope you all enjoyed revisiting these great episodes as much as I did. I hope you are all enjoying the holiday season as well with your friends and family. We will be back in the new year with brand new episodes starting on January 2nd. I’ll see you then.

Ashley:
Welcome back to another episode of Real Estate Rookie. I’m Ashley Kehr. We are heading into the final stretch of the year. The gifts are piling up under the tree, and while everyone else is winding down for the holidays, we are teaming you up for what could be one of the most important market conversations of the next few years. But before we do that, I want to thank the rookie audience for another wonderful year together. To all the guests that have taken the time to share their story, successes, and lessons learned, the rookies listening wouldn’t be where they are today without you. I am so inspired all the time by the action taken by you all, the honesty, the vulnerability, and the community. I can’t wait to see what 2026 brings us all. Today’s rerun is from the podcast On The Market. This episode features Redfin’s head of economics research, and she talks about the housing market having a full reset in 2026.
Not a flashy overnight change, but the start of a long, steady ship that could finally bring buyers the affordability and normalcy they have been waiting for. In this episode, Chen walks us through 11 predictions her team believes will define the next cycle. We break down what could happen with mortgage rates, home prices, rents, refinancing opportunities, and overall transaction volume. We even talk about how AI might soon become a matchmaker for American home buyers. And if you are an investor or landlord, pay attention. Hidden inside these predictions is one trend that could directly impact your cashflow in a very good way as we head into 2026. Settle in, grab a holiday cookie and enjoy this timely rerun as we look ahead as to what could be the beginning of a new chapter in the housing market.

Tony:
2026 is shaping up to be the start of what Redfin calls the Great Housing Reset. A long, slow period where affordability improves and the market normalizes, not a quick flip or a recession. I’m Dave Meyer, and today I’m joined by Redfin’s head of economic research, Chenzao, to unpack their new annual predictions report. We’ll dive into each of their 11 predictions and walk through the headline calls from rate cuts to sales inching up, rents reaccelerating, and which markets are likely to heat up or cool down. This is On The Market. Let’s get into it. Jen, welcome back to On The Market. Thanks so much for joining us again.

Chen:
Thanks so much for having me, Dave.

Tony:
This is one of our favorite shows of the year hearing what Redfin has for predictions. So maybe just start by telling us sort of like big headline, what are you seeing? What’s the big top level narrative about the market in 26?

Chen:
I’d say the headline is that we see the housing market taking a bit of a turn. I think it’s already starting a little bit this year, but we think is going to continue next year. And it’s going to be a bit of a longer, what we’re calling a reset of the housing market where we think affordability will start to slowly change. And affordability really has been the big challenge for the housing market, as we all know, but there’s no silver bullet, there’s no magical fix. It’s going to take a while, and we think next year is the start of better affordability for home buyers.

Tony:
That is music to my ears. I think I saw something you all put out that affordability was the best it’s been in two or three years, just in the second half of 2025. So it seems like that trend is already emerging.

Chen:
Yes. I think we’re starting to see the beginnings of that trend in the second half of 2025. So namely, the two important factors are mortgage rates and home prices. So we know that mortgage rates have come down a little bit. We expect them to stay lower. We can get into more of that. And then home prices, we know the home prices are not growing as fast as they were.This has to do with the shift from a seller’s market to a buyer’s market. And we can talk about how we expect that to continue for the next few years and what the underlying forces are.

Tony:
All right, great. Well, I tend to agree with the overall sort of thesis here. I think you guys called it the housing reset. I’ve called it sort of the great stall where I think prices just kind of stay stagnant for a while, but let’s get into the specific predictions that you all have. So what is the first one?

Chen:
The first one is about mortgage rates. So right now, mortgage rates are in the low sixes, 6.2, 6.3%. We think they’re staying here. I think another way of putting this is that we don’t expect mortgage rates to get into the fives, not for any sustained period of time. We know that mortgage rates fluctuate. Sometimes you get a little bounced down, but I don’t think it’ll stay there. We also don’t really expect mortgage rates to get back up to 7% either. I think the important thing they’re here to focus on is, of course, always the Fed and what they’re thinking about. And they’re always balancing this dual mandate that they have. So is it preventing high inflation, just trying to keep inflation low and steady, and also trying to keep unemployment from going up. So right now, the economy is in a very delicate balance. We know that the higher tariff rates have slowed economic growth.
They also threaten to increase inflation, even though we haven’t seen as much of that so far. But that means that the Fed has a really unique challenge on its hands. So even for the meeting that’s happening next Wednesday, it’s a bit of an open question. What are they going to be doing going forward? But because they’re in this delicate balance, there’s not much room for them to cut a lot, but we also don’t think they’re going to be hiking. So that means we’re sort of stuck here with where mortgage rates are. And then the other thing you have to keep in mind is that there’s this big transition happening next year with the Fed. The president will be nominating a new chair of the Federal Reserve. The chair is only one of 12 votes on the FOMC. So contrary to some of the stuff that you see in the press, the chair of the Federal Reserve does not set interest rate policy.
He or she is one person on that committee, but it is a very important person. And that transition is something that we also have to keep really close tabs on.

Tony:
Got it. Okay. So not expecting a lot of movement either way. It does seem kind of stuck. We have these dual, I guess you would call threats to the economy right now where inflation has been … We don’t have a lot of inflation data for the last couple of months, but inflation prior to the government shutdown had been ticking up a little bit and job losses, it seems like every print tells us a different story. So it’s just really hard to understand what’s going on there. And until we get clear line of sight on one of those things and which one is really going to be the bigger issue or which one gets cleared up first, I agree with you that it’s not going to move much. I’m curious, just the last couple days, the Fed stopped quantitative tightening. Do you think there’s any chance that the Fed does something more dramatic next year to impact mortgage rates, like maybe quantitative easing or something like that?

Chen:
I don’t think so. I think that the communications that we’ve gotten from the Fed is pretty clear on this, that they want to pivot away from mortgage-backed securities and pivot towards a portfolio of treasury securities. And this idea that’s been floated a few times, I’ve seen some op-eds about it saying, “Hey, look, higher mortgage rates is really killing the housing industry. Can we do something for housing? Maybe that means the Fed buys MBS.” It’s really hard to imagine that they would choose to do something like that when you still have so much lingering inflation risk from higher tariff rates because you have to remember that housing is still the largest component of course CPI or PCE, whichever your favorite measure is. And so if you were to stoke the housing market right now, what you would see is that home prices would just shoot up.
And they really just, after all the stars and PTSD from the last few years with high inflation, I just can’t imagine that they would really choose to do that. And Chair Powell has been asked about this a few times in his press conferences, and he has said each time very consistently, “The problem in the housing market is that there needs to be more supply.” And we all know this very well. We say it all the time. That’s a very hard problem to solve. And put another way, I think, another way to look at it is in the housing market, what we need is for prices to come down. We’re in a new economic era now after the pandemic where rates are just going to be sitting higher. I often like to talk about this in terms of people’s metabolisms. As you age, your metabolism changes.
You need to change what you eat, and it’s a little bit like that for the housing market. So we actually do need to just see lower home prices. That’s the right way to get the housing market back to a healthy state.

Tony:
I agree with you there. So do you think that’s going to happen? Maybe I’m skipping ahead on your predictions, but do you think that will happen that we’ll see home prices decline?

Chen:
We’re already starting to see it this year. So we started the year with home prices increasing about 5% year over year. We’re down to about two, three-ish percent, depending on exactly how you want to measure it, what specific metrics you want to look at. So it’s come down a lot, and it came down a lot because the change of home buyers to home sellers has changed. So Redfin has this proprietary metric that we put out that we call active buyers and sellers. So sellers is really easy. It’s just amount of inventory in the market. The number of buyers is something that we impute from some of our proprietary data where if we can see how many homes are selling and we know how long it takes people to find homes and how long it takes to sell homes, we can put all that together in a model and say, “This implies that there are this many buyers in the housing market actively looking right now.” And what we saw was that that gap got really large in the spring of this year.
There was about 37% more home sellers than home buyers across the country, and most housing markets were tipping from being seller’s markets to being buyers markets. So that ratio of sellers to buyers has a very close relationship to home price growth with a lead of about six months or so. So what we’re seeing is that that shift has led to home price depreciation really slowing down. And it’s hard to imagine as we continue to follow this metric and that gap continues to be historically large, that it’s hard to imagine that home price growth will accelerate again. And then especially if you layer on top of that, what we see happening with demographics. So we know that immigration into this country has were more or less halted. We also know that the underlying demographics of the country means that there’s going to be smaller populations going forward, that it’s really hard to imagine that home prices will actually be appreciating that rapidly in the near or medium term.
But on the other hand, it’s also difficult to imagine that home prices will really be falling dramatically because as we all know, people don’t have to sell their homes. You can choose to rent it out, you can choose to continue to live in it. And we actually put out a report, I believe it was last week, looking at de- listings, and we saw that the fraction of homes that are being de- listed in 2025 was about 5.5%. That was up from about 4.8% last year, which doesn’t sound like a huge increase, but that fraction has been very constant, like below 5% for the last eight to 10 years. So that means that that increase is actually meaningful. It doesn’t sound like a huge amount, but it’s a pretty meaningful increase. And what we saw was that the homes that are being de- listed are people who bought more recently.
They don’t want to sell where buyers are willing to pay right now. So buyers and sellers are just sort of far apart. And so as long as home sellers aren’t willing to go where buyers need them to go, it’s actually very hard for prices to also fall.

Tony:
Yeah. I actually, we did a whole show on that report about de- listings because I think it’s super interesting. And to me, it just reflects that sellers are responding appropriately to the market because I think a lot of the crash narratives that you hear about are there’s going to be panic selling or there’s going to be this sort of downward spiral of increasing inventory, but what you’re seeing is a normal reaction. People don’t want to sell at a loss, and they don’t have to. There’s no forced selling going on, so they’re just choosing not to sell. I think it’s personally, I’m curious to see if they come back on in the spring, because I have a lot of friends who are house flippers, a lot of them are pulling them off and we’ll do it in the spring. But I think that to me is a sign that you’re correct that it’s going to be sort of a boring year price-wise for the housing market.

Chen:
Yeah. I mean, we’re going to continue to publish this de- listings data pretty regularly, and we will also be publishing who is de- listing and are they relisting the home? So we should see that in the spring if they are coming back on the market. It is boring, I guess in some sense to say, look, home prices are going to maybe increasing 1% or 2%, something very low. But it’s actually a meaningful change for buyers because what that means is that home prices are growing slower than wages. And that is what buyers actually need. They need time for wages to catch up to where home prices are. Because home prices are not going to be falling, this is the only mechanism that we have in order to get to this place where we need to go where homes are more affordable for people where their incomes actually are.
And that’s what we think will be happening next year.

Tony:
So that is your second prediction, right, for next year?

Chen:
Yes. Essentially that home prices are going to be growing slower than wages. And this is the step that you need for affordability. But importantly, this kind of progress is very slow. So it might not even be very noticeable to a lot of buyers after the first year. We don’t expect affordability to all of a sudden jump back to where it was before the pandemic. It’s going to be a slow process, maybe five to six years. It might take a while for buyers to actually notice, “Hey, affordability has gotten better.”

Tony:
That makes sense. And just for everyone who is listening, we’ve been talking about this on the show recently, but what Chen is talking about also reflects the difference between nominal and real home prices because Chen said prices might go up one to 2%. That’s the price you see on Redfin if you were going to go look. But when you actually compare that increase to inflation to wages, they’re actually negative. And I know that sounds negative to some people, but that means affordability is improving. That’s how we’re actually getting affordability. And right now it’s baby steps towards affordability, but we can get back towards meaningful improvements in affordability over time. If real home prices stay kind of flat and wages keep growing, that’s a normal way that we get affordability back into the housing market. All right. So we’ve gone through our first two predictions from you, which was first about mortgage rates dipping into the low sixes, but staying there.
Prediction two, home buying affordability will improve as wages grow faster than prices. What’s the third one?

Chen:
The third one is about sales. So we think that sales will inch up just slightly next year. So we’re thinking about existing home sales very specifically. It’s been about 4.1 million. It’s going to be 4.1 million again this year-ish. Next year, we’re forecasting 4.2 million. It’s not a lot. Historically, it’s very, very low actually. It’s only up about 3% from where we think we will end this year. I think that the increased affordability means you just get a little bit more activity in the market, but by and large, what we’re describing with buyers and sellers really just being at the stalemate means that you’re not going to get this huge pickup in the housing market next year.

Tony:
I hope you’re wrong about this, but I agree with you. I just think for this whole industry, it would be great if we had more sales volume. It just feels like it’s been so sluggish and slow. And for anyone who’s a lender, an agent, it’s been a tough slog. And hopefully though, at least this is a sign in the right direction. It’s got to bottom out at some point. And maybe this means that we’re moving towards better home sales volume, maybe not in 2026, a little bit better, but maybe in the years after that, we’ll start getting towards a more normal level of sales volume. Chen, what is the fourth prediction Redfin has this year?

Chen:
It’s about rents. So as we all know, rents have been really flat to slightly declining for a number of years now. We think that next year, rents will start to tick up just a little bit, probably towards the back half of the year. We know that multifamily construction has really slowed. There’s also increased demand from people not buying a home for renting. So the combination of those two things means that we probably just get the smallest uptick in rents. It might mean that you were talking about this difference between nominal and real price growth. Right now, rents are falling on a real basis once you adjust for inflation. By some metrics, they’re actually falling on a nominal basis. We think we might get to somewhere where it’s flat on a real basis. So rents are keeping up with inflation in other words.

Tony:
And that’s based on mostly just the supply glut that we’ve sort of been in from multifamily dissipating.

Chen:
Exactly. I think that’s the main motivation here, but we also think that this continued affordability challenge, that just doesn’t take a long time to work through on the purchase side means you just get higher demand still. We also know that the economy has gotten a lot weaker. The labor market’s weaker. We’re sort of on the edge of a recession, probably won’t fall into a recession, but that will keep enough people renting rather than buying.

Tony:
That’s interesting because I noticed the same thing. I saw some stat that the unemployment rate for people under 25 is like 9% right now. These kinds of numbers that I don’t know if we go into a recession or not, but it made me wonder if it will weigh on household formation because I think you’re right, we’ll have a higher percentage of people renting, but for rental demand to keep up, we need household growth, but I’m curious if you have any thoughts on that, if that’s going to slow down or where that will go.

Chen:
We do think that the slower economic growth will weigh on household formation a little bit, but the economy, there’s a lot of headlines right now about the negative jobs data that we’re seeing. The government shutdown means that we just haven’t gotten great official jobs data, so we still need to wait for that. And the reality of the labor market is that it has slowed down a lot, but it’s still staying afloat and the economy is still staying afloat. So that makes me think that we won’t get a huge impact yet on household formation, but housing costs remain high. So we do think there are going to be some impacts on things like household formation and also on things like people deciding to start a family. So our fifth prediction is that affordability means people have more roommates, we say fewer babies, meaning that maybe you want to get into a bigger home before you start to have kids, but you’re finding that to be really challenging.
So you’re going to delay that for a little while. And as I was saying before, we do think housing affordability will improve, but it’s going to take a number of years. So that will weigh on some of these factors for families.

Tony:
Got it. Okay. I mean, that makes sense to me. I do think people are stretched and it’s going to be hard for people to go out and form a new household. Just for everyone knows, household formation, it’s a little bit different than population growth. It’s basically measuring the total demand for housing units. So for example, if two roommates are living together, then they each decide to go out and get their own apartment. Doesn’t change the population of a city or the country, but that adds one more household and that adds one more unit of demand. That could happen when a young person moves out of their parents’ house or if two people split up and they decide to have two homes. So that’s what we’re talking about. And that’s just an ongoing question I have, particularly as it relates to rents. So we actually, we got a twofer on that one.
We did prediction four and five at the same time. So what is prediction six?

Chen:
Prediction six is about policy. So housing affordability has become the paramount issue in policy. I think for what we saw in the last election cycle is that it is the decisive issue actually, or it will be in a lot of elections. And I think both parties know this and candidates who are running for office also know this. So our prediction is that there will be a lot of serious proposals brought forward. It is, as is always the case in policy, some of them will be useful and some of them may not be that useful at the end of the day. We know that in order to really address housing affordability, you have to build more supply, but that is really, really hard to do because it’s controlled by thousands of local jurisdictions. A good portion of the population has a vested interest in not allowing there to be more supply.
So this is a very tricky problem to solve and it’s going to require really innovative policy solutions because quite frankly, no one’s really solved this problem. And it’s been a problem for a long time. We know that the country is short, many millions of housing units, but across the country when you’re looking at election results, you can see that this really is the main issue that’s on the minds of voters.

Tony:
Well, I hope you’re right. I do hope that we start to see some sensible policies here. I was getting interviewed the other day and I was saying, I feel like the real hard thing here is that policies that actually help are not really well aligned with the election cycles in the United States because adding supply takes years. We could start now and it could take three years, it could take five years, it takes seven years. And politicians, both sides of the aisle, they’re trying to get reelected every two years or every four years. And so oftentimes I think what frustrates me is the solutions that get the most traction are the short-term ones that might maybe make a dent in the short run, but aren’t really kind of going after the supply issue. I’m curious if you have any thoughts on what’s some good policies or any examples of policies that could actually help here?
Because I totally agree this is a huge problem for the country and needs to be fixed.

Chen:
To me, I think there are local jurisdictions that have made some progress by making it easier, taking away red tape, maybe introducing ADUs or manufactured housing, all these different types of innovation to try to add some supply. It’s not a silver bullet and it’s not enough supply, although we shouldn’t discount that there is some progress being made. I think in order for there to be a consolidated federal push, the difficulty is that the federal government is involved in the housing market mostly on the financing side. It’s not on the supply side. But the federal government has a lot of sticks and carrots that it can use when talking to local jurisdictions because local governments get a lot of funding from the federal government. I think if there was a way to use these carrots and sticks and ties and funding to outcomes in local jurisdictions, that could be a really promising solution.
I don’t know that this has been tried very much in a sort of meaningful way, but that would be something to explore. Most of the proposals that get put forward are on the demand side. And as we all know, that’s not actually what is helpful. We just have to address what is actually happening on the supply side.

Tony:
Yeah, that makes a lot of sense because just as an example, demand side policies, if you subsidize buyers or you lower mortgage rates or to figure out some way to help people buy, that can be helpful for a minute, but then it just pushes the price of homes up and you still have the same long-term structural affordability challenges, right?

Chen:
Exactly. It makes the problem actually worse in the long run. It’s very myopic and it’s really honestly the last thing that we need. I often do, when I’m thinking about housing policy and the affordability issue, we have to take our medicine. You can’t have your cake and eat it at the same time. At some point, you have to take your medicine. And I think that’s the really hard part because no one really does because most people who own homes, the majority of their wealth is in their home.

Tony:
So it’s hard. Yeah, I get that. People want more affordability without making their home go down in value. That is a tricky thing to pull off. I’ve said this on the show a few times. I like your saying, take your medicine. We’re in an unhealthy place in the housing market, and to get back to health, there’s going to be some pain somewhere. You don’t get a magic redo. And so I personally think the slow, you guys are calling the great reset or call the great stall, I think that’s kind of a good balance personally. If we can add more supply gradually, if wages can go up, this is a tolerable way for affordability to get restored without the bottom falling out of the market and homeowners losing a ton of equity and wealth. And so I’m encouraged by some of the market dynamics, but I do think the policy thing is still the missing piece.
There’s no coherent policy from anyone. I’m not blaming one party or the other. There is no coherent policy from anyone about how we’re going to do better.

Chen:
Yeah. And it’s an incredibly tricky problem to solve.

Tony:
All right, let’s move on to our seventh prediction. What do you got?

Chen:
So our sum of the prediction is that more people will refi and remodel. So when we think about refi, I think we’re thinking about it in two different ways. One is simply that over the last few years, actually a lot of people have bought homes at really high mortgage rates. So right now about 20% of people who have a mortgage have a rate above 6%. So as rates fall into that below sixes, you actually have a healthy number of people who will be in the money for a refi. So we do expect that refi volume will increase about 30% next year. Oh, wow. So it’s off a very small base, so we have to remember that. But that is meaningful because 6.3% mortgage rates sounds pretty high. But if you remember that we were at 6.8%, then 6.8%, then I think this year was 6.6% probably average for the year.
We’re coming down very, very slowly and it’s enough of a change that you will have people who are going to be in the money for a refi. The other is just that, as we all know, a lot of people have a lot of equity in their homes, but they’re also still stuck. They can’t afford to move on to a bigger house. So a lot of them probably will start to, if they haven’t already, tap into that home equity. I think renovation will continue to be a hot topic where people are going to be trying to make the space that they have work for them.

Tony:
Let’s keep moving. Chen, what is prediction number eight?

Chen:
So prediction number eight is about different regions of the country. So we think that the markets that are going to be hot in 2026 are really a lot of these suburbs around New York City that right now are some of our strongest markets. Also, some of the metros in the Midwest, which are among the more affordable places. On the flip side, we think that the places that we’re really seeing that are among our weaker markets in the Sunbelt in Florida and Texas, these are going to continue to be the weaker markets in 2026. So there is this back to office return to office trend that is just continuing to happen. It is, I think, going to be more of a trend in a weaker housing market because employers just have more of the upper hand. Right now, people who are looking for jobs are having a really difficult time finding jobs.
So when they say three days is now four days, four days is now five days, or you just have to … I think there’s going to be more of that happening, but still some people will remain hybrid. So not everyone’s going to be looking to move to Manhattan, but a lot of people are going to be looking to move to Long Island and New Jersey or Westchester. And so these are the markets that are sellers markets, even though most of the country is made up of buyer’s markets at this point.

Tony:
And how do you see the spread here? Over the last couple years, we’ve seen dramatic differences. If you looked at 24, 25, there are markets like Milwaukee were up seven, 8%, there’s Austin down 78%. That was a pretty big spread between the top and bottom performing markets. Do you see that consolidating a little bit?

Chen:
Yes. I mean, there are places, especially in Florida and Texas, these are your weakest markets right now. When you compare them to what’s happening on Long Island, they’re worlds apart right now. But what we’re continuing to see in places like Florida and Texas is that a lot of these metros have 100, 150, sometimes 200% more sellers than there are buyers.

Tony:
Oh my

Chen:
God. And as I was saying, that metric tends to be forward-looking by about six months. So that means that probably over the next six months to a year, if we continue to see this spread between buyers and sellers being so big, these markets are going to continue to be pretty weak.

Tony:
And what about the hotter markets? Is this modest growth, two, 3%, or something higher than

Chen:
That? It feels like these markets, if anything, are actually heating up a little bit. Not a ton. Demand is kind of slow in general.That’s an overarching thing everywhere, but it’s still, relatively speaking, they seem to be heating up. And a lot of these markets like Boston or Long Island around New York City, these are places where you’re still maintaining a healthy distance where there’s more buyers than sellers. And so that feels like it’s something to sustain the price growth that we’re seeing.

Tony:
Well, this will be an interesting one to watch because the market is … We talk on the show all the time about the national market, but clearly as Chen just pointed out, we have very different markets. And as an investor or homeowner, you need to be looking at what’s going on in your individual market to formulate your strategy. All right, let’s go to our ninth prediction. We’re flying through these. Which one’s that, Jen?

Chen:
It’s about climate migration. So we think that this is going to be more of a local story than a cross-metro story in 2026. So we know that with climate change, that this has become more on the minds of buyers. So people are paying attention to climate data when they see it on real estate portals. We know that insurance has become a real issue when it comes to affordability in the housing market. But when buyers are thinking about where to live, they have so many different issues that they have to contend with. They think about where’s your family? Where are the jobs? So instead of saying people aren’t going to be living in Florida, maybe they need to be in Florida for some other reason. They might be thinking about, I need to live in this part of the city rather than this other part of the city, which might be more prone to disaster risk.
So I think that feels, I think, more realistic for home buyers who have to contend with a number of different factors when they’re thinking about where to buy a house.

Tony:
How do you measure that? How do you know people are … If you see someone move within a city, how do you know it’s because of climate risk?

Chen:
I think one really good way to do this, and it’s hard to have all the data in place in order to really do this analysis well, is to look at insurance costs because really when talking about climate risk, it’s manifested through insurance costs. So I think if you were able to look at insurance costs and then tie that to housing market activity, and we have a pretty good measure of demand in the housing market right now through our buyers and sellers metric, that could help you to see this relationship clearly even within a broader metro area, I think.

Tony:
And I’m curious, you said you see this happening just in 2026. Do you think there is potential for cross-metro migration in the future or do you not have that information?

Chen:
I think if you’re thinking further out when you’re thinking about disaster risk or insurance costs, this is, I think, one lingering big risk for the housing market. It’s a little bit hard to know exactly where it goes many, many years from now though. I think it really depends on what we actually see happening in insurance markets, what mortgage companies decide to do in terms of thinking about the risks and who’s owning the risk for the properties that are mortgaged and have this disaster risk. So it’s a little bit harder to see, but certainly I think it wouldn’t be out of the question for there to be a cross-metro migration.

Tony:
Thank you. All right, we have two more predictions to go. What’s number 10?

Chen:
So number 10 is really about the industry. We think that with so many MLSs out there, the National Association of Realtors is going to just take a little bit of a step back, let the MLSs set more of their own rules. This is something that’s really already starting to happen. So it’s more of a continuation prediction than a change. And NAR is really going to, for its part, actually spend more time on advocacy instead.

Tony:
Oh, okay. Interesting. Do you think it’s just given a lot of challenges NAR has faced in the last couple years, they kind of have to pick and choose where they’re going to spend their energy?

Chen:
Yes, I think so. I think it makes sense as a continuation of the turmoil in the industry that we’ve seen over these last few years.

Tony:
I think that makes sense, just being a casual observer of how much … Yeah, like you said, there’s been a lot of turmoil in the industry. So that brings us to our last prediction, number 11. What do you got?

Chen:
Well, number 11 is about everyone’s favorite topic, AI. Can’t

Tony:
Escape AI, right? Yes, got to talk. I can’t go through a podcast without talking about AI.

Chen:
Of course. Yeah. So 11 to prediction is that AI will become a real estate matchmaker. We’re already starting to see this. AI is infiltrating basically every aspect of our lives. We think that AI is really increasingly going to help people decide where to live, which homes to buy. It’s just going to start to play a bigger role. Redfin has conversational search now on our website. We’ve seen that a lot of the users who are using it are really happy with the results because it means that instead of going through the search filters, you can have a conversation and describe what you want in your home search. And that’s very appealing to a lot of people. People are also going to use AI to just do research and look into which cities or which towns have the characteristics that our family is looking for. So this is still technology that’s very much in its early stages, even though it seems like it’s dominating the news all the time.
But over the next few years, it’s hard to imagine that AI wouldn’t play a much bigger role in real estate search.

Tony:
I think so too. I think the search part really makes a lot of sense. That seems right up AI, Zali. I’ve seen some predictions that people are saying they’re going to help negotiations or coordinate transactions. What do you think about that side of things?

Chen:
That feels like if that happens, it has to be further down the road. Because when you bring AI into a role like that, I think there’s also a bit of a trust issue where people … When you’re thinking about what is the difference between AI and a human, most humans will probably say, “Well, I trust another human more than I trust AI.” Like I was saying, the technology is still in its early days. There’s so much for us to learn about it right now. So the search component feels like the obvious place where it can really make a positive change right now, but a few years down the road, who knows?

Tony:
I agree with you. Long-term, probably going to disrupt everything. But right now, I think a lot of people are sort of saying AI can do things that can’t yet, at least not in a reliable way. But I think search, research, gathering data, those kinds of things it is already pretty good at. And so this makes a lot of sense to me. All right. Well, thank you so much, Chen, for being here. This is a lot of fun. It’s always fun talking through these predictions and seeing how they play out through the rest of the year. Thank you for being here and for all the amazing research you and your team at Redfin put out. We are always talking about your work here on On the Market.

Chen:
Well, thanks so much. It’s always fun coming on here, so thank you for having us.

Tony:
Absolutely. And thank you all so much for listening to this episode of On The Market. We’ll see you next time. I

Dave:
2026 is almost here and that means we are still in the swing of prediction season and we got good predictions for you here today. I’m Dave Meyer joined by Kathy Fettke and Henry Washington. And today we’re sharing our boldest predictions and our hottest takes for 2026. We’ve each brought our own ideas about what could surprise investors in the year ahead, what might finally break, and where the biggest opportunities could emerge. Buckle up, this is On the Market. Let’s jump in. Henry, how’s it going, man? How are you?

Henry:
Fantastic. Good to see you. Good to be here.

Dave:
You got some bold ideas for us today?

Henry:
I don’t know how bold it is, but I got one for you.

Dave:
You got some takes. Okay. What about you, Kathy? Anything spicy for us?

Kathy:
Oh, I think so. Yep. Opportunity.

Dave:
Okay.

Kathy:
Yep.

Dave:
All right. Well, let’s just jump into this. We don’t want to get too spicy too fast. So I think Henry, we’re going to start with you. Maybe you can warm us up.

Kathy:
I’m spicier than Henry.

Dave:
You said yours was spicy, so Henry said his is just mild. Okay.

Henry:
Yeah, it’s mild toss. Mild in the sense that I think people have thought about it or maybe even thought that 2025 would be the year that this happened, and to some degree it did. But I think in 2026, there’s a real possibility that we’re going to see a mass exit of Airbnb properties, especially from the mom and pop hosts who are barely breaking even right now. I literally, this morning, sent two addresses to my realtor to say, “Hey, what could I get for these two properties right now?” And there’s a couple of reasons I think this. One is because of what’s happening in the market. We’ve got another interest rate quarter point drop, which helps with affordability. We’re starting to see slight upticks in buyers entering the market. I am personally seeing more showings pop up on listings I’ve had on the market for a couple of months over the last week to two weeks,
Which is unusual for the winter market right before Christmas. Typically, you’re not seeing a spike in showings, but I think that people are starting to feel like, “Hey, maybe there’s some opportunity out there.” We’re starting to see inventory go down in some markets where it was typically trending up. And I think if interest rates come down anymore, that’s just going to allow for some people to enter the market. But what I think is that these people who are holding on to these Airbnb assets that are breaking even or maybe losing a little bit of money each month, they didn’t sell in 2025 because it just wasn’t a good time to do it. Or maybe they tried to sell and they couldn’t transact because they have to sell these properties for a decent amount of money. Typically, a lot of these operators paid a lot of money for these properties expecting them to produce a certain amount of revenue and they’re just not performing.
And with 2025 not being the best time for a lot of these people to sell, I think they’re going to try to capitalize on a few more eyeballs, a little bit lower interest rate and the opportunity and the possibility of being able to get out. Maybe they’ll take a little bit of a loss, maybe they’ll break even, but I think you’re going to see a lot more Airbnbs convert into listings and people getting out while they have an opportunity to get out in 2026.

Dave:
Well, first of all, Henry, I feel attacked, okay? I actually agree wholeheartedly with you on this. I bought a short-term rental in 2018. The price has more than doubled. So my equity, I think, is 3X, maybe more. It’s been amazing, but the cashflow is really drying up. It’s harder and harder to get bookings. And I bought this place because I kind of wanted to use it and I just use it less and less.
And I’m thinking about all the work I put into it. I’m like, should I just get out now and take the money and do something else because I see opportunity in other parts of the market? But then I’m like, “This is the cheapest I’ll ever get a ski house for, so maybe I shouldn’t sell this and I should just sit on it. ” But I definitely agree with you. I think there’s going to be more and more people getting out of this market because this is obviously not a blanket statement, but it’s just not a good time to be a short-term rental investor right now. I’m sorry it’s not.

Henry:
I’m going to put a caveat on that because I totally agree with you. I think it’s not a good time to be a casual short-term rental investor.
I think if you are a professional short-term rental investor and you are studying markets and you are studying travel data and you are understanding what markets have certain regulations, and if this is truly what you do and you are excellent at providing experiences and researching what types of amenities you need, if you are that type of Airbnb operator, it’s probably not a bad time because there’s properties for sale. Sure. There’s people who are just casual who are looking to get out. Like myself, I would call myself a casual Airbnb investor. All of my short-term rental properties were bought because they have another exit and the short-term rental was icing on the cake. Professional short-term rental operators are typically only buying with one exit in mine and they’re operating professionally. So I think you’re going to see that a lot of the casual investors see an opportunity to sell that property and get close to what they want and get out of the game.
And you also have to think about it. There’s a lot of Airbnb investors who are like me, who are just real estate investors as a whole at heart and they can see an opportunity like you, for example.
You’ve got a couple hundred grand in equity, I got a breakeven or a property that’s losing me a little bit of money. I can deploy that couple hundred grand right now because they are buying opportunities on the market right now. You can buy cashflow again right now. You can buy great flips with great margins right now. Multifamily, there’s opportunities. And so I think you got a mix of people who are going to sell and redeploy. You got a mix of people who are just looking to get out because they got in thinking they’d make a fortune and found out it’s a whole lot harder than it is. And 2026 market conditions I think are going to make people feel like they might be able to sell it and either turn a small profit or just get out and break even.

Dave:
What do you think this means for the markets where there’s a high concentration of short-term rentals?

Henry:
I think the markets where there’s a high concentration of short-term rentals that were historically vacation rental markets are going to be fine because they have regulations or lack of regulations around short-term rentals because that’s what the economy calls for. I think of places like Hot Springs, Arkansas. That place was a vacation rental metropolis before Airbnb. If people start selling their Airbnbs, they’re going to be fine. But in markets like, you can see places like Joshua Tree where Airbnb investors are just getting out in droves and that is hurting the market because there’s less places for people to stay. So it just really depends on the market.

Kathy:
I’ve seen a little bit of a different take on this because you have so many CPAs teaching the tax loophole with Airbnbs, with the bonus depreciation. That’s

Dave:
A good

Kathy:
Point. I just spoke at a CPA event where there was hundreds of people there. And the number one method for saving taxes was to go buy an Airbnb. So I think a lot of those people, doctors, dentists, high income earners who need that tax break are running out and doing it and may not be even as concerned about the cash flow from it. They just want that huge tax break. So the people who are trying to get out may just have an opportunity to sell to somebody who wants in.

Dave:
Sounds

Henry:
Like a perfect storm.

Kathy:
Yep.

Dave:
Yeah. I’m curious about that. I think there’s still obviously opportunities. Sometimes with my own, I’m like, maybe I should just wait this out because people are going to all sell and then I’ll just still be there. I’ll be like, I keep thinking about selling this property, but the ski resort it’s near just announced it was doing like a massive renovation. They’re building a gondola to the town for the first time. It’s getting like 20% bigger. I think it’s going to be the second biggest resort in Colorado. I’m like, maybe I should just hold onto it.

Kathy:
I think it should hold. Unless it has a ton of deferred maintenance, then I would hold it with that kind of news.

Dave:
No, it’s in great shape.

Kathy:
And you have a low interest rate on it, right?

Dave:
Yeah, like under three, I

Kathy:
Think. Yeah. You actually have to keep that.

Dave:
Yeah, I know. I know. And I want to go use it. So I think we’re going to keep it.

Kathy:
Yeah.

Dave:
All right. I like this bold prediction, Henry. I don’t think it’s that bold. I do think it’s going to start playing out though because people have been talking about this and I think it does create risk, but also I think opportunity for sure for good deals, especially in places where we talked a lot mostly about vacation rental places, but if people are in a normal city, maybe they bought a place with an ADU thinking they were going to Airbnb it, now they want to get rid of it, that’s a duplex.That’s a good place that you could buy and rent out. Or midterm rental one, long-term rental the other. There’s going to be maybe some more interesting inventory coming on the market, which is always a good opportunity. All right, we got to take a quick break, but we’ll be back with Kathy’s spicier prediction right after this.
Welcome back to On the Market. I’m here with Henry and Kathy giving our bold predictions for 2026. We heard Henry’s about short-term rentals coming on the market, flooding the market perhaps. Kathy, what is your spicy prediction?

Kathy:
I think there is going to be a scramble to buy property and land in the newly designated opportunity zones.
You’re not going to know where those places are right away. You’ll definitely know by the middle of next year. In the process, I can just tell you from my experience, one of our realtors that we work with in St. Petersburg, Florida drove me around opportunity zones in St. Petersburg years ago, right when they announced it, right before they were announcing it. And these were rough areas. I was like, “I don’t think I’ve got the stomach for this. ” I was afraid to get out of my car, let’s just put it that way. But the lots were like 20 grand and I should have just trusted them and bought a bunch. Well, it was within months. Those lots were worth 100, 150 because that’s what Opportunity Zones can do. So we’ve got now with the one big beautiful bill that opportunity zones are permanent now and the governors are going, I think it’s the governors are going to be designating new opportunity zones and they’re going to be doing it every 10 years.
And the next time that they announce it, it has to be by I think the end of June of 2026. Yeah,

Dave:
That’s right.

Kathy:
But some governors are already letting people know and the cat’s out of the bag in some areas. So getting in front of that and on top of that, it’s going to be a little bit stricter because last time around some opportunity zones were not in impoverished areas at all. I don’t know how that happened, but this time it’s a little bit stricter. So you have to have, again, the stomach for it. These are not going to be nice areas generally, but in this case, it was just lots. We just buy the lots and sit on it. You don’t even necessarily have to have an opportunity zone fund or be looking for the tax benefits. If you just buy the property in an area that’s designated opportunity zone, then you’ve got these big funds who may want what you own. So lots of opportunity there and an opportunity to improve these areas where they’re designated for a reason.
Housing is needed, affordable housing, so you can kind of make a difference in those areas while you’re making some money.

Dave:
I like this one. I had not been really thinking about this. I’ll be honest, I kind of forgot that they were coming out with the new opportunity zones. I think it’s July 1st or whatever is the deadline. But maybe Kathy, can you explain to everyone what an opportunity zone is?

Kathy:
I’ll do my best, but it’s complicated and it’s changed a little bit. But with the first round is basically like a 1031, but different than a 1031. So if you sold a property and you had, let’s say, a $500,000 capital gain on that, you could 1031 exchange it, but you would have to buy the property within 45 days. There’s all these limitations and it has to be the same price. And with the opportunity zone that all changed where you could sell a property, have that $500,000 gain and maybe just put the $500,000 gain into the opportunity zone. You wouldn’t have to put the whole thing in. Like if you sold the house for a million dollars, the gain is 500, you had originally paid 500. With the 1031, you have to do the whole million with the opportunity zone. You could just take that 500,000 and invest it.
But the difference, the big difference is that you eventually have to pay your capital gain. If you bought a property in an opportunity zone with that $500,000 gain, you will then in the future still have to pay your tax on that. But the property that you bought with that $500,000, you wouldn’t have to pay any gain on that. Again, talk to your CPA. It is complicated. That’s why a lot of people just don’t do it because it’s complicated and you also had to have a fund. It couldn’t be. You just went out and bought it. You have to have an opportunity zone fund and file it that way. But like I said, you don’t have to do all that. If you just buy the property in an opportunity zone area, you know that lots of money is going to be pouring into that area. And if you buy right where development is expected, then you could really see an upside just holding it.

Dave:
Awesome. Yeah. I mean, it does seem like an amazing opportunity. From my understanding, it’s basically a long-term thing. You need to put money in.

Kathy:
Yes.

Dave:
And then if you invest it over … I think last time there was different tiers. It was like if you kept it in for a certain amount of time, you got to defer a certain amount of taxes. I think if you went the full 10 years, you got to defer 100% of your capital gains- On the

Kathy:
New property.

Dave:
… on the new property. Yeah. Yeah. So there’s all sorts of really interesting things here and I would be interested to see how much the previous opportunity zone spurred property value growth, but I’m imagining in ones that were done right, that there probably are really good growth and this will be interesting and hopefully a good way to spur investment into communities that need it. So I think this is a good one. I like this prediction.

Kathy:
I

Dave:
Assume you’ll be looking, Kathy.

Kathy:
Yeah. Yeah. As you know, that’s part of our business model is having boots on the street all over the country. So the teams that we work with will be on top of it. We actually are working with a team in Fort Worth that’s building an opportunity zone there. Oh,

Dave:
Cool.

Kathy:
Yeah, we’ll be paying attention, but again, this all happens next year, so it’s really a next year thing. All

Dave:
Right. Well, this is a great thing to keep an eye out for. I’m sure there’s going to be a lot of news because yeah, they’re designated by each state, the governor office and each state does it. So as these governors come out with this stuff, there’s going to be really interesting opportunities for everyone to keep an eye on. I like this one. Thank you for reminding me and everyone about this one, Kathy. All right, we got to take a quick break, but I will give you my bold prediction when we come back. Stick with us.
Welcome back to On the Market. I’m here with Kathy and Henry giving our bold predictions for 2026. So far, Henry made his about Airbnbs or short-term rentals specifically. Kathy shared hers about a potential land rush once opportunity zones are announced. I’m going to go a little bit outside of housing and I am going to just stick with my bread and butter and talk about economics. I think we are going to enter what I call the common person recession, the CPR. Kathy and Henry, I don’t know if you listened to this episode, but I literally spent hours of my life defining with new data a metric for an actual recession because you might know about this, but I think the current definition of recession, which doesn’t really exist, and the word recession means absolutely nothing. I think it’s completely nonsense and completely nonsensical. So I spent a lot of time trying to think about what is an actual recession?
What actually matters to Americans? And I came up with two things that need to be true to not be in a recession. Real wages need to be going up, meaning the average American spending power has to be increasing and unemployment can’t really be going up at a fast rate. I use something called the SOM rule that doesn’t really matter. As of right now, we are not in a normal person recession. Real wages are up, unemployment rate is relatively low. My bold prediction next year is that we are going to tip into the normal person recession. I think that real wages are going to turn negative as inflation goes higher than wage growth because AI, because a bad labor market, because inflation has gone up four or five months in a row. And even though I do think it will probably peak next year, it’s not going to come down that quickly.
And so I am not feeling very optimistic about the conditions, the economy for average Americans. And I don’t know if that means the National Bureau of Economic Research will decide to call this a recession because they get to choose that completely subjectively. But on the one I made up and I made a whole episode about this a couple weeks ago, if anyone wants to listen to this, I think we are going into a normal person recession, a common person recession because things are not good out there for the average American. And I think we need to just acknowledge that even though the stock market is great, things for the average American is not great. And I think that’s going to spill over into real estate if I had to guess.

Kathy:
I mean, I guess what I should hope for is that we’re seeing rates coming down and anytime there’s rate cuts like that, that’s money is cheaper to borrow and it tends to stimulate the economy. So that would be the little bit of hope that I would be leaning on that and QT, the quantitative tightening is over. And so that to me tells me more stimulus is coming. And if that’s the case, perhaps it will spread out into the economy. That’s my hope.That’s what I’m going to be thinking and praying about. And I don’t know, doing like an economy dance, not a rain dance, an economy dance. I hope

Dave:
You’re right too.

Henry:
Yes. Affordability is a problem, but I think it’s really a problem for the young college graduate, the people just starting out because the average American has probably been working for some period of time, may have some savings, may have had a different job or two, could possibly afford a house where rates are coming down. But when you’re just starting out, I mean, wages aren’t that much different in terms of starting out salaries now than they were when I got out of college and affordability is drastically different. I just don’t know how young professionals get into home ownership, especially if they’re going to work in some of these cities where these companies that they want to work for are located. They’re just more expensive places to own real estate. It’s not like you’re going to work for a major corporation in the middle of Kentucky somewhere.
The affordability is just that young professional, I can’t see how they’re not coming out of college in a recession.

Dave:
Yeah. I mean, the last month we have data for the unemployment rate for people 16 to 24, this is people who are looking for work. Unemployment rate, 10.4%. Wow. That’s a lot. Wow. That is very high.
And I think this is happening all over the economy. There’s so many things happening where wages are stagnating, where job openings are lower, where people are struggling. And I want to be clear, this is not a political thing. I think this is the accumulation of five years of inflation. We’ve had inflation for a really long time and people are just stretched. People can withstand it for a couple of years, but it’s been five years. And even though we’re not back at the … We’re at 3% inflation roughly right now. We’re not at 9%, thank God. But we’re not going to have deflation. I’m sorry, but I know people say, when are prices going down? They’re never going down. I can just tell you that maybe asset prices will go down. Stock market might get cheaper. Real estate might get cheaper in certain places. Goods and services are not going to get cheaper in aggregate.
It’s really never happened. It’s not even good. You don’t even want that to happen. What we need is disinflation, which is for the pace of inflation to go down, but that’s not even happening right now. The last four months in a row, it’s gone back up and people are just stretched thin. And I think American economy has been remarkably robust. People have continued to spend. Businesses have continued to spend, but I think the rubber has to hit the road at some point, and I think it’s going to happen in 2026.

Kathy:
Yeah. I think there’s a lot of confusion when people hear, okay, inflation’s not at 9%, it’s down at 3%. There’s this thought that prices went down at that rate and no, no, it’s the growth of inflation. So I’ve said this before. It’s like one year you gain nine pounds, the next year you only gain eight pounds, and the next year you only gain five, and now you’re at three. You’re not back at your original weight. You’ve gone up. And so people are like, prices are still high. Well, yes, they are because they’re still up that 9% plus 5% plus whatever it was. And the only thing that’s going to help is wages going up and prices kind of stabilizing. And after a few years of wages have gone up enough, then people will be back in an affordable place. But we’re still paying the price of the massive inflation from right after COVID and during COVID, which I believe is from, again, massive stimulus, massive stimulus thrown into the economy.
And now we’re kind of turning back into more stimulus. So that’s why I’m hoping it turns into not inflation, but hopefully more jobs. We’ll see. We’ll see.

Dave:
In my opinion though, the problem is even jobs, like the unemployment rate is low. It’s that wages are not keeping up.

Kathy:
And

Dave:
This has gone … I mean, I did another on the market about this the other day. Since 1984, in 40 years, real wages have gone up 12%. That is so embarrassing for our country. It is so ridiculous that the average American’s quality of life has only gone up by 12% in 40 years. It’s crazy. Actually, one of the bright spots about the economy over the last few years is real wages are up right now. I want to be clear, they’re up. That means people’s incomes are growing faster than inflation right now. That’s great.

Kathy:
Yeah.

Dave:
It’s what I think will change though, because I just think with AI and the labor market, people are losing their bargaining power in the labor market and with inflation staying high, those lines are going to cross. This is how I think I’m imagining a short in my head and those lines are going to cross. It’s basically that we are going to start to see wage growth go down. And again, I’m sure there are policy implications to all this, but I think a lot of it is like when you have a technology as disruptive as AI, it just creates a little bit of chaos. And I think that’s what we’re going to see. People are hesitant to hire right now. They’re hiring at lower wages. When the unemployment rate starts to go up, which I expect it will, people will accept lower wages for jobs, and that’s going to, I think, put us a little bit backwards.
And I don’t know if we call this a real recession, but I have to imagine the average American’s going to start cutting back on spending. And I think this spills into real estate a little bit. I’m not trying to be super dramatic here, but if you think about what Henry just said about young people, are they going to go move in with a significant other or are they going to still have four roommates? Are you going to live with your parents for as long as possible? It’s one of the reasons I don’t think rent is going to grow as much next year, and I don’t think we’re going to have a lot of household formation because I just don’t think people are in a position to take financial risk right now. Personally, I wouldn’t. If you were young and you were trying to find a job in an AI world, I don’t know if I’d take a financial risk.
And I think that is going to become increasingly common.

Henry:
Yeah. I think it’ll be interesting to watch how the long-term effect on real estate will be because we are so accustomed to people following the American dream, go to school, get a job, buy a house, or go to school, get a job and pay rent. But now people are struggling to do either. And so what does that look like in the long term and how does that impact investors like us? When I was doing some research for a different presentation, one of the two of the metrics we saw were that since 2019, home price growth is about 43%. I need to double check that, but-

Dave:
It sounds right.

Henry:
Income growth during that same period, since 2019, 7%.

Dave:
It’s crazy. It’s insane. And it’s not just housing. I think that’s the thing is we always think about housing, but just ordinary expenses have gotten crazy. I don’t know about you guys. I am in a fortunate financial position, but I’m in shock every time I go to the store. I still am in shock every time I go. It’s crazy. There are obviously things going on with the government, but there are also just structural, cyclical things going on in the economy as well that lead to this. And so I think it’s going to be tough. Kathy, I hope you’re right. Maybe there’s going to be some stimulus. Actually, I’m not sure if I want stimulus. I’m not going to say that. But maybe rate cuts will create more hiring. But do you guys really think the reason the job market’s slow is because the federal funds rate was at 3.75 instead of 3.5 because I sure don’t.
I don’t really think that’s going to change anything. I think there’s uncertainty and AI. There’s these combination of things that I think are going to slow down the labor market in a way that the Fed might not have the tools to fix.

Henry:
Yeah. I have no solve for that. I got nothing for this. I hope you’re wrong.

Dave:
Yes. I hope I’m wrong too.

Henry:
Hope and a prayer is all I got for you guys.

Dave:
Yeah. You know my favorite thing about investing is always wanting to be wrong, but that is my bold prediction. We got to come up with that. We can’t leave on that note. You guys got any fun predictions for 2026? Who’s going to win the Super Bowl?

Kathy:
My astrologist says 2026 is a year of great wealth, so let’s just go with that.

Dave:
Focus on that. I like that. All right. Astrologist is making a bold ticket.

Kathy:
Yes. And when I say my, I mean some lady I listen to on YouTube. So she must be right.

Henry:
My bank account’s in retro grade. I don’t know what that means for astrology.

Dave:
Okay. I have a real prediction that’s more optimistic. I think more first time investors will land their first deal in 2026 than in 2025 or 2024. I think the buying conditions are going to get better.

Kathy:
I agree.

Dave:
And I think more people are going to get started as real estate investors, and that’s pretty exciting. That is fun. That’s a good thing that we can go out on.

Henry:
I agree.

Kathy:
Absolutely.

Dave:
Okay, good. And if I’m right about the whole recession thing, mortgage rates could come down. So that could actually help people more a little bit as well. All right. Well, this was a lot of fun. Thank you guys so much. Sorry I was depressing at the end there, but I do want to give my honest opinion about things. I think that’s the whole point of the show is not to always have rose-tinted glasses, but to share what we actually think is going on. But Kathy, thanks so much for being here.

Henry:
Thank you.

Dave:
Henry, thanks for joining us.

Henry:
Absolutely.

Dave:
And thank you all so much for listening to this episode of On The Market. We’ll see you next time.

Foreclosure activity doesn’t move in a straight line. It comes in waves. Some months bring a surge of new filings, reflecting fresh financial pressure on homeowners. Others—like November 2025—signal a cooling period in early-stage filings, even though deeper in the foreclosure pipeline, auctions and REOs continue to rise.

For real estate investors, the “Foreclosure Starts” stage—also known as the first public filing—remains one of the most important signals. It offers the earliest insight into where distress is beginning to surface, and where motivated seller activity may soon emerge.

This month’s numbers show a national pullback in new filings, but the story becomes far more nuanced when we look at individual states—and even more revealing when we drill into counties where new stress pockets are forming. Whether you invest locally or analyze markets nationally, understanding where Starts are rising or falling is essential for anticipating future pre-foreclosure opportunities, auction volume, and eventual REO inventory.

National Foreclosure Starts Decline, but Year-Over-Year Trend Remains Elevated

According to the latest data from ATTOM, November 2025 recorded 23,239 Foreclosure Starts nationwide, down 7.65% month over month, but still 16.80% higher year over year than November 2024.

The monthly decline indicates a short-term slowdown in new filings after a busy October. However, the year-over-year increase confirms distress levels remain structurally higher than last year.

The bigger picture? Even with seasonal and monthly fluctuations, early-stage foreclosure activity is trending upward nationally—which means investors should pay attention to how these patterns shift across specific regions.

State-Level Highlights: Five Key Markets to Watch

Foreclosure dynamics vary dramatically across states. Here’s how the five focus states performed in November.

Florida

• 2,819 starts
• -31.84% MoM
• +15.63% YoY

Florida saw the sharpest month-over-month decline of any major foreclosure state. After a significant rise in October, November brought a reset. Still, the year-over-year increase signals long-term upward pressure.

California

• 2,090 starts
• -22.16% MoM
• +6.65% YoY

California cooled both monthly and annually. High insurance premiums and affordability challenges remain stressors, but filings this month loosened compared to earlier in 2025.

Ohio

• 854 starts
• -21.58% MoM
• +7.83% YoY

Ohio experienced a meaningful monthly drop, but the annual increase points to a gradual return to pre-pandemic foreclosure patterns.

North Carolina

• 525 starts
• -17.58% MoM
• +14.13% YoY

North Carolina remains one of the fastest-growing foreclosure states year over year, despite a quieter November. The long-term trend remains elevated.

Texas

• 2,612 starts
• -15.28% MoM
• +2.75% YoY

Texas continues its pattern of elevated but stable foreclosure activity. With a fast nonjudicial foreclosure process, starts here often flow to auction more quickly than in judicial states.

If you would like to see more data from other states, check out our foreclosure reports here.

County-Level Insights: Where Distress Is Rising Beneath the Surface

November’s headline numbers show cooling across the board—but the county-level data reveals the real story: Several key counties experienced meaningful spikes in early-stage filings, even as state totals declined.

These localized increases matter because county-level trends often predict where deals will emerge before they appear at auction or as REOs. 

Here are the most notable county-level shifts.

Florida: Hidden pockets of new distress

Even with a steep drop at the state level, several counties showed growing stress signals.

• Hillsborough County (Tampa) posted a noticeable increase in early-stage filings, bucking the state trend.
• Orange County (Orlando) saw a mild but meaningful uptick in Defaults and Lis Pendens.
• Miami-Dade and Broward cooled significantly, pulling the state average downward.

Investor insight

The Gulf Coast and Central Florida remain areas where early distress may reaccelerate in early 2026.

California: Inland Empire stirs again

While statewide Starts fell, a few counties moved in the opposite direction.

• Riverside County recorded a noticeable stabilization in filings, suggesting pressure hasn’t eased.
• San Bernardino County saw early-stage increases specifically tied to investor-owned rentals.
• Los Angeles County was mixed—some ZIP codes cooled, others heated up.

Investor insight

The Inland Empire once again acts as California’s foreclosure bellwether. Keep watching Riverside and San Bernardino for clues about 2026 inventory.

Ohio: Cleveland quieting, Columbus heating up

Ohio’s monthly decline hides county-level divergence.

• Franklin County (Columbus) posted a meaningful MoM increase—one of the state’s few.
• Cuyahoga County (Cleveland) saw a clear drop in Starts after a busy October.
• Hamilton County (Cincinnati) held steady, showing neither surge nor collapse.

Investor insight

Columbus stands out as one of the few Midwestern metros with rising early-stage filings this month.

North Carolina: Charlotte and Raleigh are still driving volume

Despite a statewide MoM decline:

• Mecklenburg County (Charlotte) showed a modest but significant jump in Starts.
• Wake County (Raleigh) also saw new filings rise above October’s pace.
• Cumberland County (Fayetteville) cooled sharply.

Investor insight

North Carolina continues to show long-term upward pressure, driven by its major metros.

Texas: Surprising county-level surge despite statewide declines

Texas saw several standout county-level increases even as statewide Starts fell.

• Harris County (Houston) showed one of the largest MoM increases in the entire state.
• Dallas County posted a modest rise.
• Tarrant County (Fort Worth) remained elevated despite the statewide drop.

Investor insight

Texas’ local markets move quickly—investors monitoring county-level filings gain a real-time advantage before auction calendars fill.

How Investors Can Use Foreclosure Start Data to Build Opportunity

Tracking Foreclosure Starts empowers investors in three major ways.

1. Identifying pre-foreclosure opportunities early

Investors who connect with owners before a Notice of Sale is issued often have:

• More time for negotiation.
• More flexible deal structures.
• The potential for deeper discounts.

Higher Starts in specific neighborhoods can signal where seller outreach may be most effective.

2. Predicting auction volume months in advance

A rise in Starts typically translates into increased Notice of Sale activity 60 to 120 days later.

Investors planning to attend courthouse auctions or purchase trustee-sale properties benefit from anticipating where volume will appear next.

3. Understanding future REO supply: Starts – Notice of Sale – REO

This pipeline is predictable. When Starts rise today, REOs rise months later—especially in fast-moving states like Texas.

Investors buying with a Self-Directed IRA or Solo 401(k) benefit from the slower pace of the pre-foreclosure window. It provides time to coordinate:

• Non-recourse financing.
• Title work.
• Property inspections.
• Investment partner structures.
• Long-term buy-and-hold planning.

Foreclosure Start data is a strategic early-warning system for long-term opportunity.

Take Control of Your Investment Strategy

Foreclosure trends are becoming more local, data-driven, and predictable. Investors who understand where early distress is emerging—and why—put themselves in the best possible position to act when the right deal appears.

If you want to explore how to use a retirement account to invest in real estate—such as a Self-Directed IRA or Solo 401(k)—you can learn more at Equity Trust Company.

Equity Trust Company is a directed custodian and does not provide tax, legal, or investment advice. Any information communicated by Equity Trust is for educational purposes only, and should not be construed as tax, legal, or investment advice. Whenever making an investment decision, please consult with your tax attorney or financial professional.

BiggerPockets/PassivePockets is not affiliated in any way with Equity Trust Company or any of Equity’s family of companies. Opinions or ideas expressed by BiggerPockets/PassivePockets are not necessarily those of Equity Trust Company, nor do they reflect their views or endorsement. The information provided by Equity Trust Company is for educational purposes only. Equity Trust Company, and their affiliates, representatives, and officers, do not provide legal or tax advice. Investing involves risk, including possible loss of principal. Please consult your tax and legal advisors before making investment decisions. Equity Trust and BiggerPockets/PassivePockets may receive referral fees for any services performed as a result of being referred opportunities.

Dave:
We have made it to the end of 2025, but the housing market continues to change and shift and confuse as it has all year. But today we are going to make sense of it. This is our December 2025 housing market update. Hey everyone. It’s Dave Meyer. I’m a housing market analyst and I’ve been a real estate investor for 15 years and I am the head of real estate investing here at BiggerPockets. And it’s hard to believe last housing market update of the year. It has been a truly wild year in the economy and the housing market. We started with one that was rapidly cooling. Rates were in the sevens. Things were feeling stalled out. Inventory was going up. And fast forward to today, although it might not feel like much has changed, a lot actually has changed. I see it in the data wherever I look.
We are very much in a different situation heading into 2026 as we were in 2025. And honestly, I think there’s some good news here. There are good opportunities starting to emerge, but of course there are risks that need mitigating too. We’re going to get into all of that, both the risks and opportunities in today’s episode. First, we’re going to talk about home prices. Then we’ll talk about some good news. Finally, on housing affordability. We’ll get into a new trend that’s emerging with sellers and how they are trying to wrestle back control of the housing market. And we’ll end talking about underwater mortgages and this article that I keep seeing everywhere in the news these days. I will address head on if underwater mortgages is a potential risk to the market going into next year. That’s the plan for today. Let’s get into it. First up, major headlines here.
What’s going on with prices? Everyone wants to know. Well, according to Redfin, prices are up 1.4% year over year. That’s still relatively good. We are not in any sort of crash. I would still call that a correction because prices are down in real terms. 1.4% is a little bit flattish to me, but not bad given where we started this year. Remember when rates were at 7.25, inventory was up 30% year over year. Everyone was saying that there was going to be a crash. I did not. Just for the record, I said we would be kind of flattish and I think that’s where we are. Just as a reminder though, just one year ago, appreciation rates were still at 5%, which doesn’t sound like much, but that’s well above the long-term average of 3.5%. It’s well above where we are today. So it is important to note that we’ve had significant cooling in appreciation rates over the last years, but we are not talking about declines, at least on a national level yet.
That said, there are major regional differences going on. According to Zillow, 105 of the top 300 regional markets are in a decline right now. So basically a third of the biggest metro markets in the country are seeing housing prices go down. And that number, the total of markets that are seeing a decline has gone up a lot. If you look back to January, it was only 31 markets. And by June, it had more than tripled up to 110, but now it’s actually back down to 105. So this is treading water and staying flat, and that’s really important. Obviously, the markets that are in a correction, you’re going to have to take different tactics in those markets than the ones that are still doing right now. But I think the fact that the number of markets that are correcting is relatively even shows some stability to the housing market despite everything that’s going on.
Now, the depths of those corrections are wildly different. If you look at Punta Gorda and Cape Coral, these are kind of the poster child for the Florida crash that’s going on right now. Punta Gorda down 13% year over year, that’s a lot. That’s a crash in that market. Cape Coral, down 10%. I think if you’re losing 10% a single year, you could call that a crash. I wouldn’t argue with you there. We even see all four actually of the top markets seeing declines, I guess you’d call those bottom markets, are all in Florida. Punta Gorda, Cape Coral, Northport/Sarasota, and then Naples. Those are the top four. After that, we see Kailua in Hawaii, Austin, and Texas. Then it’s back to Florida. Then we got Tampa, Sebastian, Vero Beach, Daytona, Port St. Lucie. So 12 of the biggest corrections in the country, 12 of the top 14 are all in Florida.
So you can see that it’s highly concentrated there. The other trends are in the Gulf region. So Texas, Louisiana are also seeing some of the bigger corrections. And then they’re sprinkled throughout the countries as well. There’s definitely markets in California. You see some markets where I live in Washington and Denver. There’s definitely corrections too, but if you’re just looking for the trends, the Gulf region is where it’s mostly concentrated. On the other end of the spectrum, no surprise here, Midwest is still seeing some of the strongest appreciation rates, but those rates are coming down. So Chicago, you see Milwaukee, you see Cleveland, you see these markets are still up, but they’re now up like two or 3% instead of last year, six or 7%. So everything, appreciation rates are slowing down all across the country. So let’s move on to mortgage rates as this is going to be a very important barometer for next year.
It also tells us a lot about what’s been going on this year. This has been a positive story. I know people are not happy with six and a quarter percent mortgages, but they should be because a year ago they were about 6.75. If we look at January, they peaked out at seven and a quarter. Now they’re at six and a quarter. A 1% drop in mortgage rates over the course of a year is good news. That is a positive thing for the housing market. This is one of the reasons why the market has shifted this year. Like I said, we started 2025. People were very worried about a crash because mortgage rates were 7.25, horrible affordability. Inventory is going up. Well, maybe it’s not the banner mortgages that we saw during COVID, but the fact that rates have gone down, one full percent matters. That brings millions of people into the housing market.
That improves affordability for investors and for homeowners. And so that’s a really good thing. Where we go into next year, I’ve made my predictions about this. They will hopefully stay in the low sixes, maybe even get into the high fives. And there’s some encouraging signs about that, right? If the Fed keeps cutting rates, that could put more downward pressure if yields keep falling. The other good news, if you’re into this kind of thing is that the spread between treasury yields and mortgage rates is coming down, which is one of the things that has propped mortgage rates up. So I think there’s good momentum here that mortgage rates could keep coming down a little bit, but are probably not going to be coming down in any dramatic way, unless something dramatic happens in the economy. One thing I did want to call out for real estate investors, just a piece of advice is that refinancing is starting to get a little bit more attractive.
I think when you go from seven and a quarter to six and three quarters, people aren’t really that interested. But when you lose a full percentage point, depending on the price of your house, that could be hundreds of dollars per month in cashflow that you could be generating or saving if it’s your primary residence by seeing rates come down this much. And I know people might say, “Oh, Dave, you said rates could come down a little bit more.” You could wait, but I just want to call out that just in this last year, there’s some data that came out from the mortgage monitor that comes out from ICE each month. They said that 3.1 million more mortgage holders are sort of in the money for refinancing over the last couple of year because they could reduce their rates by 75 basis points. I thought that was pretty interesting.
I didn’t know that math before, but if you can cut your rate by three quarters of a percent, so 0.75%, that usually makes it worthwhile for most people. And so if you are holding onto mortgages right now that are in the sevens, if they got a seven in front of it, if they got an eight in front of it, because investors might have one with an eight in front of it, you may want to consider refinancing right now. You could wait a little bit, but things bounce up and down. It’s hard to know. I actually got a message on Instagram yesterday from a guy who said that I saved him $800 a month. I guess he has an expensive mortgage. I think he lives in LA. I saved him $800 a month because I told him to refinance before the rate cut because I said that mortgage rates were going to go back up and they did.
And apparently that saved him a whole bunch of money. So I just want to point out that waiting doesn’t always work and considering refinancing might be worth it. I think it’s at least worth talking to a banker if you have a mortgage with a seven or eight in front of it, something to consider. So I think high level housing market stuff, this is relatively positive. We need affordability to improve. And so seeing relatively flat prices, in my opinion, is pretty good. I don’t want to see prices crash, but I don’t want to see them explode again. I want to see them stay stagnant. That’s really good. And mortgage rates have come down. They’re starting to come down a little bit more. I think that’s a great way to end the year in 2025 and bodes well for the beginning of 2026. We need to talk more about affordability though, because this is what everything in the housing market hinges on.
And we’re going to talk more about new data on affordability right after this quick break. We’ll be right back. As a real estate investor, the last thing I want to do or have time for is play accountant, banker, and debt collector. But that’s what I was doing every weekend, flipping between a bunch of apps, bank statements, and receipts, trying to sort it all out by property and figure out who’s late on rent. Then I found Baselane and it takes all of that off my plate. It’s BiggerPockets official banking platform that automatically sorts my transactions, matches receipts, and collects rent for every property. My tax prep is done and my weekends are mine again. Plus, I’m saving a ton of money on banking fees and apps that I don’t need anymore. Get a $100 bonus when you sign up today at baselane.com/bp.
Welcome back to the BiggerPockets Podcast. I’m Dave Meyer here giving our December housing market update for 2025. Before the break, we talked about flat home prices, declining mortgage rates. What those two things mean though, when you take those two things in aggregate, they give us what I think is the most encouraging sign that we have seen in the housing market for a year, maybe more, maybe three years. Home affordability has hit its best level in two and a half years. That’s as of September, last time we have data for this, but this is fantastic news for the housing market and it is driven by the two things that we talked about before the break. Rates are easing and prices are pulling back. Now, I know I said that prices are up 1.4%, but when it comes to affordability, what you need to measure is how do prices compare to inflation?
And if they’re up 1.4% year over year, but inflation’s at 3%, they’ve actually gone down in inflation adjusted terms. And that means that it is more affordable for people, right? Their wages are going up relative to the price of a home that makes housing more affordable. If you combine that with falling mortgage rates, we are getting improved affordability. This is great news. This is something I think is worthy of celebrating. Now, it is not the best affordability we have ever seen. It is far from it. We just in the last year, we’re near 40 year lows. So we’re probably at 38 year lows for affordability. This is not like we should be celebrating because all of a sudden housing is affordable. We should be celebrating because you got to start somewhere. The trend was moving in the opposite direction for so long. Housing was getting less and less and less affordable.
That’s not good. It’s got to bottom out and start moving in the right direction. And fortunately, I think that’s the direction we’re heading. So that is good, right? We are seeing that across the board. If prices stay flat orish, decline a little bit like I think they will next year, mortgage rates come down a little bit. That’s the affordability movement that we need. This is the whole premise of the great stall that I’ve been talking about for months or years now is that this is the most likely path for the housing market. And it does seem that it is true, at least as of now. So I think that’s a good thing. Just to build on this a little bit more, actually out of the hundred largest markets in the United States right now, 12 of them, primarily in the Midwest, have now returned to long run average for affordability.
I know that doesn’t sound like a lot, 12%. It really isn’t a lot. But given where we’ve been over the last couple years where every market has been unaffordable, the fact that there are any markets in the US that are getting close to historic levels of affordability, again, is good news to me. I know we have a long way to go, but baby steps and we’re taking some baby steps getting there. Now that we’ve talked about affordability, let’s call it our main story for today on this housing market update is about the behavior of sellers in the housing market. This is really important to inventory because the story of this year in 2025, and really honestly for 2022, 23 and 24 has all been about what is happening with housing inventory. It is so important. It is the most important metric for really trying to understand where the market is today and where it might be going in the next couple of months.
Because when inventory is high, prices face downward pressure. They might be flat, they might go down a little bit, but you have that downward pressure weighing on housing prices because there are more sellers than buyers. When the opposite is true, when inventory is low, prices have upward pressure. There are more buyers and sellers. They tend to bid up the prices and so prices tend to go up and that’s how inventory influences the market. Now, during the pandemic was an extreme example, an example of super low inventory. But when we started 2025, we were starting to see that story unravel where we were seeing really high inventory growth rates. Now inventory wasn’t high in some historical context, but the growth rate was up. Like we saw in January, February, March, 25% year over year, meaning that in January of 2025, there was 20, 25, 30% in some markets, more homes for sale than there was in January 2024.
That matters. That’s a big number. I’d like to call out that we, on the BiggerPockets Podcast, we’re not panicking and saying that the market was going to crash like everyone else was saying, but it puts downward pressure on pricing and it’s something that is really important to watch because if you listen to the Crash Bros, the people who are calling for a whole crash in the housing market, they were saying, “Oh my God, look, inventory is up 25% year over year. Next month it’s going to be 40. Next month it’s going to get 50 or 60.” And yes, that of course is feasible. But did that happen? No. If you fast forward to today, we are not seeing accelerating inventory. We are not seeing inventory spiral out of control month over month over month. Actually, we are seeing the opposite. If you fast forward today and look at the numbers for October of 2025, the most recent data we have for inventory, it’s not up more than 25% year over year.
It’s not gone up beyond where it was in January, February, March. The opposite has happened. In fact, right now in October, inventory was up just 4% year over year. So the growth rate in inventory has not exploded. It’s actually contracted and not only has the growth rate slowed down, but we are still below pre-pandemic levels of inventory. If you look at what Redfin shows us, we are about 200,000 homes short in inventory of where we were in October of 2019. So this is under control. This is a crucial thing for everyone to understand about the housing market because it’s one of the reasons why I think we’re going to see roughly flat pricing next year, maybe a little down nationally. And it’s one of the reasons why I’m not super concerned about huge drops in the market right now. But let’s just take a minute and talk about where inventory might go because there’s different ways that inventory changes, right?
One way inventory drops is that demand picks up, right? If there’s the same amount of homes for sale, but more people want to buy them, we’ll have less inventory because those homes that are for sale are going to move quicker. The other way that inventory can drop is that new listings go down. That’s basically the number of people who choose to sell their property that can actually go down. And that’s actually gone down quite a bit, right? New listings, people are saying, “Oh my God, people are panic selling. Sellers are flooding the market.” No, they are not. That is just objectively not true. New listings are flat year over year. Don’t listen to any of that nonsense that you might see. People are calling for panic selling like, “Oh my God, everyone’s freaking out. ” No, that’s just not true. New listings are actually up 0.4% year over year.
It is completely flat and that shift is not just one month that has been happening for the last couple of months. The big thing that has changed though, it’s not demand, it’s not new listings. The change that is happening right now is what’s called delistings. And this is a new metric. We don’t talk about this a lot on the show, but it is important right now because delistings, which is defined as just a property that was listing for sale that was pulled off the market for more than 31 days without selling or going under contract. And the reason I’m bringing this up is because this is one of the new dynamics that’s kind of emerging and shaping behavior in the housing market. Basically what’s going on in mass is that sellers are looking at the current market. They’re seeing that sales conditions are not as good as they’ve been over the last couple of years.
And they’re just saying, “Nah, I’m kind of out on this one. I’m going to wait this one out and see maybe if there’s better conditions for listing or I’m just going to stay in my property. I’m not going to sell it. I’m going to rent it out for another year, another two years. I got to keep living here, whatever.” That trend is really high right now. Actually, home delistings is at the highest level it’s been since 2017. And this increase in delistings helps explain why prices are rising despite sort of tepid home buying demand, because inventory is falling because of this. Remember, new listings are flat. If de- listings go up compared to new listings and demand stays the same, that means that we are getting more balanced supply and demand dynamics. Another reason why this is a sign of a correction, not a crash.
If we look at the behavior of selling and what they’re doing right now, it is completely logical. If they are not getting the prices they want, if they don’t want to drop price and they don’t have to sell, they’re just choosing not to sell. And if you dig deep into this data, you’ll see that the areas where de- listings are going up the most are the areas where their strongest buyers market, where basically the areas where it’s the worst time to sell, that’s where people are de- listing the most. Now that makes sense, right? If you don’t like selling conditions, then you de- list your property. And that’s why I say this is a normal correction because what the crash bros say is, oh my God, when inventory goes up and it becomes a buyer’s market, people panic and add more and more inventory to the market.
The exact opposite is happening. People say, “Oh, this is not a good time to sell. I’m not going to panic and list my property for sale. I’m actually going to just take my property down off the MLS and not sell it. ” This is what happens during a normal correction. It’s sellers reacting to selling conditions and saying, “I don’t want any part of this. I am going to de- list my property.” So just as an example, the markets with the highest percentage of de- listings are those markets that are correcting. It’s Austin, Miami, Fort Lauderdale, Dallas, Denver. Again, what you would expect because it’s logical. Now, of course, there is a big question mark here. Is this just temporary? Are people just taking their properties off the market for a couple of months and then they’re going to list them in the spring and we’re going to all of a sudden get a flood of inventory?
So far, we have some data on this and the answer is no. So far, only 20% of properties that have been de- listed have come back on the market, which in my opinion is pretty low. I was kind of surprised by that. But I do think that’s probably due to seasonality, right? No one is going to de- list their property in September, October, and then be like, “You know what? I’m going to re-list it on Thanksgiving weekend or right before Christmas.” If you are going to de- list it, you’re probably going to wait till at least January or maybe you wait to sort of the hot months of March or April where there’s typically the most seasonal home buyer activity, you might choose to do that. My guess is yes. I think we will see an uptick in real listings in the spring. I think we’ll see that number go from 20% to something higher, maybe 30%, 40%, 50%, because I personally know investors who are doing this.
A lot of flippers are saying, “You know what? It’s cooling off right now. I’m going to wait and take my chances in the spring.” I think we’ll see more and more of that, but flippers make up a relatively low percentage of all the homes that hit the market. If you want to understand the broad trends, you have to figure out what’s going on with home owners, traditional homeowners. And we just don’t know right now. I personally, just my guess based on vibes of the market, I think relistings will go up, but it won’t go up to 100%. I think some people are choosing to say, “Maybe I should stay in my existing home or I’ll rent this property back out. ” It really depends on what happens for homeowners. If they start seeing, “Hey, I can move at a better rate and affordability is getting better,” they might move.
If not, they’re probably going to stay in their homes. But this is something that we definitely need to watch because as I said, the housing market is going to be built on affordability and inventory. These are the things that we watch most closely. Talked about affordability getting a little bit better right now. That’s great news. Inventorying, leveling out, depending on who you are, you might like this or not like this, but it is going to provide some stability to the housing market. I think it provides that floor for where prices could fall. It can’t fall that much if de- listenings are happening. They can’t fall that much if inventory is leveling out. And so that to me, again, points to a correction, not a crash. But there is one other thing we got to look at. If you want to understand how far the market might fall or where it’s going to go, you need to look at distress because distress, foreclosures, delinquencies matter a lot when prices start to go down.
And we’re going to dig into the newest data that we have on that market stress, including into that article. Everyone keeps sending me that there are now 900,000 mortgages underwater. We’re going to talk about all that when we come back from this quick break. Stick with us. Henry, it’s holiday season. What do you get a real estate investor for the holidays? Well, if that real estate investor is me, you can get me a 15-unit apartment building. Oh, does that work? Do people just send you apartment buildings? They are now. Well, I got a suggestion actually. If you are looking for a gift to get a real estate investor, buy them a ticket to the upcoming Texas Cashflow Roadshow. We’re going to be in Texas. We’re going to Austin, Houston, and Dallas from January 13th to 16th, and we’re going to be having meetups, workshops, live podcast recording.
We’d love to see you all there. So if you’re thinking you got a friend in the Texas area and they’re trying to get into real estate investing, they’re trying to scale their portfolio, go to biggerpockets.com/texas and go buy them a ticket.
Welcome back to the BiggerPockets Podcast. I’m Dave Meyer, giving our December 2025 housing market update. So far, we’ve talked about affordability improving. I love it. It’s great news. It’s wonderful for the housing market. We’ve talked about inventory starting to stabilize. Another good sign that the market is not in free fall. But the last thing we need to cover, which we’ve been covering a lot over the last couple of months, is market stress because we talked about inventory dynamics and why it’s not supporting the idea of a crash on a national level, but of course things can change. And we want to know if the solid sort of foundation of the market could come undone. And to this, we need to look at market stress. And I cover this stuff a lot more than I used to because there’s just so much noise about market crashes that I feel it’s important for me to reiterate that if the market crashes, markets can crash, but there are warning systems in place essentially in the data.
We would see some of these things coming, unless there’s a black swan event, right? There could always be a COVID, a nine eleven, something like that that no one sees coming and causes the market to crash. I just want to say those things are always possible, but all the people out there on social media screaming about a housing market crash, they’re all pointing to inventory and demand drying up. I just need to say those kinds of things we have data for, and I’m going to go through it with you right now. First, let’s talk about mortgages being underwater, because there was some article that came out that said, I think it was in MarketWatch or something, 900,000 homes are now underwater on their mortgage. And that sounds scary. 900,000, that’s a lot. It’s one and a half percent of all mortgage holders, which may not sound like a lot, but that’s a reasonable percentage of the housing market when you’re specifically talking about distress, right?
Those things can snowball. So is this a big deal? No, not really. I don’t think so. To me, this honestly doesn’t matter that much. I know a lot of people are going to disagree and get mad about this, but hear me out, right? Mortgages being underwater is not a disaster. It is not an emergency. It is something that happens quite frequently. Anytime prices correct or drop in the housing market as a whole, some mortgages are going to be underwater. You haven’t heard this term, underwater just means that you owe more on your loan than the house is worth. So if you went out to sell that property, you would have to come out of pocket to pay back the bank or you’d have to go through a short sale. And that sounds terrible because it’s bad. It is bad. I’m not saying that being underwater is a good thing.
It is certainly not. It is really bad. But it is not an emergency because just because your house is underwater does not mean that you need to sell it. It doesn’t mean that you’re going to be foreclosed on. That is not how this works. This is a common misconception I hear people have all the time. They say, “Oh, the bank’s going to foreclose because my house is underwater.” No, no, that is not how it works. Banks only foreclose if you stop paying your mortgage. So houses being underwater happens and the most common reaction to that is waiting. You just do nothing. You just keep paying your mortgage each and every month, and then eventually the market will pick up again and your house won’t be underwater. That is how normal corrections happen. And so I’ve said for months that we were in a correction. So am I surprised that some mortgages are underwater in a correction?
No, not at all. That’s what happens. What is an emergency or what can become an emergency, I should say, is forced selling. What happened in 2008 and what would cause a crash again is if there are all these mortgages that are underwater and the people who own those mortgages can’t pay on them. That is a problem. Just in general, when people stop paying their mortgages, that is a problem. That’s when we really start to get worried about a crash. So I’m personally not so worried about mortgages being underwater unless at the same time there is force selling because those two things together can be bad, but mortgages being underwater on their own is not so bad. It is not that big of an emergency. So let’s look at delinquencies. Right now, the data we have for August of 2025 is that delinquency rates did go up 16 basis points.
So that’s 0.16% in August compared to where it was the same time last year. That is the first time it’s gone up in a couple of months. Actually, it dropped year over year in June and July. And so I would count that as normal variance right now. We are still below 2019 levels. And again, the reason I say this pre-pandemic level stuff is because stuff got so crazy during 2020 and 2021 that you can’t really rely on the data for that. There was a moratorium on foreclosures in 2020 and 2021, and for some kinds of mortgages, that extended almost into this year. And so the data for the last five years is really hard to rely on. So what I do in this situation is I say, “Hey, what was it in 2019? That was the last normal housing market we had.” And although we are still below those delinquency rates, they’re kind of coming back to that level.
So it’s not way better than it used to be, but it’s about where it used to be. So I think that’s really important because in 2019, no one was screaming about a housing market crash or a delinquency crisis or foreclosure crisis. It was just a normal market. And so I think that’s probably where we are these days. Now, if you dig into it and look at FHA loans, there are some increases in delinquencies in FHA and VA loans compared to last year. That is important to know, but those two types of loans had foreclosure moratorium programs in place until this spring. And so seeing them go up from last fall to now is not surprising because those programs expired. And so we’re going to have some increases in delinquencies. But this is something we need to keep an eye on. I personally look every month when FHA and VA loans delinquency rates come out because I do think this could be a warning sign.
Like I said, for crashes, there are some warning signs in the data. This is a warning sign. Right now, I don’t think we’re at warning emergency levels, but since it has been going up, I think it’s something that we will keep a close eye on, but you should know it is not at emergency levels right now. Now, delinquencies are one thing, and if they get serious, if we have a lot of serious delinquencies, that leads to foreclosures. Now, foreclosures are up year over year. They’re up 6% year over year. Again, we are coming from artificially low levels of foreclosures due to the pandemic. So I am not surprised to see that they are up year over year. And I am encouraged to see that foreclosure starts, which is kind of the beginning of the foreclosure process, is actually down 10% year over year. So again, this is not like it is spiraling out of control.
It’s sort of just to be expected that we are reverting back to normal in terms of delinquency rates and in terms of foreclosures. So is there stress in the market? Yeah, there is a little bit more stress than where it was a year ago, but we are not at emergency levels. And if we start getting towards those emergency levels, trust me, I will be the first one to let you know. I look at this stuff every single month. I have no benefit for telling you that the market is doing well when it is not. I am just telling you, we are still below pre-pandemic levels. Things are starting to inch back up. Where we go from here is a question mark. It is something that we’re going to keep an eye on. But as of right now, there are not significant signs of stress in the housing market.
Broadly speaking, American homeowners and investors are paying their mortgages and that is the best sign that we have for stability in the housing market. You add that on top of inventory moderating, you add that to affordability improving. It still looks to me like we are in a correction and not a crash. And to me, that is the best thing that can happen for the housing market because we need affordability to improve, but obviously we don’t want the bottom to fall out and it looks like that’s exactly what’s happening right now. That’s what we got for you today for our last housing market update for 2025. Thank you so much for listening. We will certainly be back with another episode soon. And we, of course, will be continuing our housing market updates in January of 2026 when we get into the new year. Thanks again. I’m Dave Meyer.
We’ll see you next time.

This article is presented by Express Capital Financing

Before I bought my first property, I thought understanding a “market” meant understanding a city. If Phoenix was booming, I assumed the whole metro was booming. If Cleveland cash flowed, I figured anywhere within 20 minutes of downtown must be a good deal. And if Nashville was full of cranes and construction, then every submarket had to be a winner.

It took precisely one disappointing deal for me to realize how far off that thinking was.

Real estate does not behave like one big organism, moving in one direction at once. It doesn’t reward every neighborhood equally. And it absolutely does not care what city-level headlines say. Once you really start studying successful investors (or the lenders who fund them), you begin to see that the difference between a profitable deal and a painful one is often just a few streets, a school boundary, or a subtle shift in local demand.

What seasoned investors understand, and what most beginners miss, is that real estate is hyperlocal. Not just neighborhood-by-neighborhood, but often block-by-block. And once you see how local the game truly is, you finally understand why the same city can produce both incredible deals and terrible ones at the same time.

I’ve spoken with thousands of investors over the years and watched them learn this lesson in different ways. Some discover it when they find out their flip sat on the market 87 days while an identical house one mile over sold in a bidding war. Others learn it when a rental that looked great on a spreadsheet ends up in a pocket with high turnover and weak tenant wages. And still others figure it out the easy way, usually because a lender, like the team at Express Capital Financing, stepped in and explained what the numbers were really saying.

The pattern is always the same: Investors don’t fail because they chose the wrong strategy. They fail because they used the right approach in the wrong market.

Why Knowledge Is Power: Understanding Real Estate Markets

Years ago, I watched two investors buy similar single-family homes in the same metro, only six miles apart. Both were fixers, needed about $40,000 in work, and were purchased the same month.

Investor A bought in an emerging neighborhood where renovated homes were selling in under 10 days. Families were moving in, retail was expanding, crime was trending down, and local school ratings had improved for three consecutive years. Investor A’s flip sold above asking within 72 hours.

Investor B bought in a pocket that looked similar on paper, but the retail buyers weren’t actually moving into that specific corridor. It was wedged between two major roads, the schools were struggling, and renovated homes simply didn’t command much of a premium. The flip sat on the market for nearly three months—and eventually sold at a loss.

Same city, renovation, contractor, and timeline—entirely different outcomes.

That was the moment I stopped thinking about “cities” and started thinking about “micro-markets.”

The Personality of Your Market

Every area falls into one of three general personalities. Knowing which one you’re operating in determines everything: your financing, renovation style, hold period, exit strategy, and even your risk tolerance.

1. Appreciation markets

These are the high-growth areas fueled by corporate relocations, population booms, and steady economic expansion. Cities like Denver, Nashville, Austin, Raleigh, and Salt Lake City live in this category. Prices tend to climb faster than rents, inventory stays tight, and competition is fierce.

These markets reward patience and value-add projects. You don’t buy for cash flow here; you buy for equity, long-term appreciation, and the ability to force value through renovation. But you also have to be a disciplined underwriter, because mistakes get expensive fast.

2. Cash flow markets

These are the reliable, steady, cash-on-cash performers. Think the Midwest, Rust Belt, and many Southern metros. You can still buy under $150,000, cash flow from day one, and find motivated sellers and wide spreads.

These markets reward long-term buy-and-hold investors who understand tenant profiles, wage growth, and the real cost of maintaining older homes. Appreciation exists, but it’s typically slow and predictable rather than dramatic.

3. Hybrid markets

These are the sweet-spot cities where investors get both cash flow and appreciation: Tampa, Charlotte, Greenville, Oklahoma City, and parts of Phoenix. They aren’t as volatile as high-flying appreciation markets, but they still offer long-term upside and decent cash flow.

Hybrids are some of the best places to BRRRR because deals still exist, demand is steady, and rental growth continues year after year. Investors who understand construction costs and market ceilings do incredibly well here.

Learning to Read the Neighborhood

If you want to understand a market the way experienced lenders do, you have to stop looking at big data and start focusing on clues.

Days on market

Nothing communicates demand more clearly than DOM. A neighborhood where homes go under contract in two weeks behaves differently from one where houses sit for 90 days.

Renovated vs. unrenovated spread

In some pockets, you can buy an unrenovated house for $190,000 and sell a renovated one for $220,000. That’s barely enough spread to justify the work. 

In others, you can buy an outdated home at $160,000 and sell a renovated home at $280,000. That’s where serious flips happen.

Price-to-rent ratio

Strong rental corridors often fall below 16 on this ratio. Appreciation corridors typically sit above 20. Hybrid markets bounce in the middle.

School zones

A single school rating change can swing ARV by $50,000-$150,000. This is one of the most consistent patterns lenders see.

Crime concentration

Not crime citywide; crime within a three-street radius. Investors, ignore this at your own risk.

Local wages

Your spreadsheet does not determine your rent; it’s defined by what your tenants earn. If your ideal rent is 30% higher than what the median wage supports, the numbers will not play out the way you want.

What If Market Conditions Shift?

Real estate markets are fluid. Interest rates rise, population trends shift, inventory swings back and forth, and buyer psychology changes unexpectedly. 

Smart investors adapt, like so:

• When interest rates rise: Buyer urgency drops, inventory builds, and negotiation power returns to the investor. BRRRR opportunities often expand here.
• When inventory spikes: This is prime time for value-add investors. More choices mean better pricing and less competition.
• When rents surge: Buy-and-hold deals become more attractive, even in pricier metros.
• When prices flatten: Your renovation plan (and ability to improve a property without overbuilding) becomes your competitive advantage.

The Process That Simplifies Every Market

The most experienced investors follow a predictable pattern when evaluating a new market:

• First, determine the market personality: cash flow, appreciation, or hybrid.
• Then study how retail buyers behave: DOM, finished comps, and price ceilings tell the truth.
• Then study renter behavior: actual wages, rent trends, vacancy, and local job stability.
• Then look for distressed inventory and spreads that allow value creation.
• Finally, choose the strategy that fits the neighborhood; not the strategy you prefer.

And remember, you’ll lose if you:

• Force a flip strategy into a cash flow neighborhood
• Try to BRRRR in an area with no spreads
• Buy rentals where wages don’t support rent growth

But when the strategy and market align, you unlock the real power of real estate: repeatable, scalable, durable returns.

Why Your Lender May Know Your Market Better Than Anyone

Here’s something most new investors don’t realize: Your lender sees more deals than your agent, contractor, mentor, and spreadsheet combined. They see which ARVs hold, which collapse, which overpay, which deals fail inspection, which neighborhoods produce strong exits, and which consistently burn new investors.

Express Capital Financing works with these patterns daily. They know how to structure financing that reflects real neighborhood behavior, not theory. They know how to help an investor avoid paying too much for a flip, or borrowing too little for a BRRRR, or walking straight into a market mismatch they could’ve avoided.

I’ve heard countless stories where investors avoided massive losses simply because a lender pointed out a weak comp or an inflated ARV ceiling. Sometimes the deal that falls through is the one that saves you.

The Simple Truth

You don’t need to understand every market in America, follow national headlines, or chase trends across states. What you need is a deep understanding of the small piece of ground you’re investing in. Because when you understand your market at the neighborhood level, everything becomes clearer:

• How much to offer
• How much to renovate
• How to finance
• How to price
• How to scale

Most investors fail not because real estate is risky, but because they never actually learned how to read the market.

Once you do, you’re playing a completely different game. And when you’re ready to fund the deal the right way, Express Capital Financing is prepared to help.