The Housing Market Just Flipped – Sellers Panicking!

Sellers Panic as Housing Market Officially Flips Realtors have hit the panic button. Speaker 2 Prices They are slowing down quickly and in several major markets they are now lower compared with a year. Speaker 3 Ago people can't afford the mortgages, prices are too high. There's more inventory, but it's become unsustainable. Speaker 1 There's downside risk in this market. Prices can fall. What's me, guys? It's Graham here. So it finally happened for the first time since the great financial crisis, the housing market is officially flipped and sellers are beginning to panic. Like, as of now, there's an estimated 34% more homes for sale than there are offers. Sellers outnumber buyers buy a record 500,000, which is the largest imbalance on record. Or I guess in other words, this is now the very beginning of a buyer's market where sellers are forced to negotiate down, Homes are sitting on the market for longer, and then 61% of the US prices are starting to drop quite dramatically depending on where you live. That's why we need to talk about exactly what's going on, which areas you're seeing the biggest price reductions or price improvements, as Realtors like to say, what analysts believe is most likely going to happen over the next year. And then finally, what this means for you watching because there could be some very good buying opportunities coming up very soon if you know what to look for. Although before we start, as usual, if you appreciate videos like this where we just cover the facts, it would mean the world to me if you hit the like button or subscribe Yes, I know it's annoying when I ask for it, but it does sincerely help out a lot. And as a thank you for doing that, here's a picture of a squirrel. So thanks so much and also big thank you to surf Shark VPN for sponsoring this video, but more on that later. Understanding the 'Golden Handcuffs' of Frozen Inventory All right, so in terms of the housing market over the last year, this was the biggest issue keeping prices high frozen inventory. So here's the thing. Up until recently, the housing market was pretty much at a standstill with inventory and transaction volume falling to some of the lowest levels ever in history. Why? Well, if you bought a home between 2020 and 22, you're able to lock in a fixed rate 30 year mortgage under 3% or in some cases as low as 2 1/2%. Meaning any lucky buyers are essentially just getting free money to go and buy a house when you account for inflation, and this pushed up home values to insane levels. However, like you would expect, this sort of free money eventually has to go away. And beginning in 2023, the Fed was forced to raise interest rates at the fastest pace in decades, which pushed mortgages past 7%, a level we hadn't seen, by the way, since before the 2008 in the crash. In fact, homes were so unaffordable that millions of buyers waited on the sidelines for a correction to happen. But home prices never went down. How is that possible? Well, at the same time that buyers waited on the sidelines, sellers pulled back too, and anyone with a 3% mortgage decided it wouldn't be worth it to sell. So they decided not to list their home and take it off the market, resulting in a term called golden handcuffs. Of course, regionally, some markets did begin to cool off, with places like Northport and Tampa seeing inventory surge 60 to 68% year over year. But other areas kept climbing like New York City, Chicago, and Cleveland with annual gains of 68% because they still had more demand than supply. But as we're starting to see throughout 2025, the bigger concern is beginning to be stagnation. Higher Rates, Declining Demand, and Rising Inventory So here's the thing, even though median home prices are still higher year over year, the pace at which they're increasing is beginning to slow down by a lot. For example, even though we saw 15 to 20 percent gains throughout 2021, today national home prices have only increased 3 to 4%, with spring price growth having slowed down for the 11th straight month. In fact, by March of this year, national home price gains were down to nearly 0, suggesting that buyers are now getting the upper hand. Although once you start to dig a little bit deeper, you'll begin to realize that this is what we're currently up against. One, we have higher mortgage rates. As of this week, the average 30 year fixed mortgage is hovering around 7%, which is double the interest rate that people were able to lock in a few years ago and the highest sustained rates that we've seen in more than 20 years. As a result, the typical monthly payment of the median priced home is currently hovering at 2800 and $60.00, which is only $25 shy of the all time record high. Now two, we have declining demand. As of now, pending home sales are down about 1.7% from a year ago, meaning fewer homes are being sold. On top of that, about 14% to purchase agreements are getting cancelled before closing, which is the highest cancellation rate since the pandemic crash of April 2020. In fact, a recent survey found that buyers are now less worried about bidding wars and more worried about their personal finance and job security. Not to mention, there isn't that urgency to want to close on a home as fast as possible because prices are no longer raising higher and maybe the longer they wait, the better the deal they could get. And then finally, that brings us to 3 rising inventory. According to realtor.com, active listings are up 30% from a year ago. There have been 81 consecutive weeks of year over year gains and right now over a million homes are listed for sale, which is the highest level since 2019. Why? Well, they cite 4 main reasons. First, some homeowners can't afford to wait and things like job loss, divorce, or a growing family force them to move, even if it means giving up a low mortgage rate. Second, most homeowners have a ton of equities, so even if the market softens, they're still making a substantial profit. Third, there's the belief that we could be near a top or that prices might begin to fall, so some sellers want to cash out now before more things get even worse. Especially when Redfin believes that we could see a 1% dip by the end of the year and four investors might see higher returns elsewhere given the increased value of their equity. So it just financially makes sense to sell and move their money somewhere else. This is why the typical home is now on the market for an average of 50 days compared to just 33 days back in 2021. And only 28% of homes are selling above list price, which is down significantly from over 50% just a few years ago. This means that prices on average are now selling below their list price with 31 out of of the largest 50 metros now being called the buyers market. The most extreme example of this could be found in Miami where there's 3 sellers for everyone buyer. This is also the case throughout other major markets like Phoenix, Dallas, Orlando, Tampa, and Los Angeles where new construction and seller eagerness is adding to a lot more supply. Although in terms of the hardest hit market where there are 83% more listings than there are buyers, you're going to want to hear this because it's absolutely shocking. Safeguarding Your Data and Online Privacy Although before we go into that, I'm going to be honest, it's truly astonishing the lengths people go through to protect their investments. I'm talking about setting up LLCS, creating complex passwords to protect their accounts, or getting home or auto insurance for Peace of Mind. Yet most people fail to invest anytime whatsoever into safeguarding something that's arguably more impactful and more likely to be compromised their data. Episode Break In fact, one of the easiest ways that you could protect yourself is by using AVPN like our sponsor Surfshark. Surfshark VPN helps keep everything you do online secure and anonymous, whether that be researching financials, logging into bank accounts, or just try not to get tracked with every website you visit. They're able to do this by encrypting your online data to help secure your personal information, mask your IP address, and help prevent hackers from identifying your city, county, and download history. Or basically, AVPN works by swapping the real location of your device with a new one, giving you the ability to virtually travel anywhere around the globe. On top of that, Surf Shark's Clean Web feature also blocks ads, trackers, malware, and phishing attempts, allowing you to surf the web safely. Plus, they don't track, store, or monitor what you do online, so there's no connection or activity logs whatsoever, and you could rest assured that your activity is private. Personally, I use AVPN anytime I travel, anytime I connect to random Wi-Fi networks, or anytime I'd like to change locations to watch streaming shows that are only available in select countries. This makes it easy to pick a destination, browse the Internet safely, and keep the information private that I work so hard to keep. Honestly, the way I see it, there's no reason not to use AVPN anytime you're on the Internet, which is practically all the time. So get started today at surfshark.com/graham and use the code Graham at checkout to get an extra four months for free. They also have a risk free 30 day guarantee, so there's no risk to try it out. The link is down below in the description. Thank you so much. And now let's get back to the video. Why Condominiums Are the Hardest Hit Market Segment All right, now in terms of the hardest hit segment to the entire housing market where prices are absolutely collapsing, look no further than condominiums. As of right now, the market has shifted strongly in favor of buyers, with 83% more listings than there are offers. Although as a word of caution, this doesn't necessarily mean it's a good deal to buy. As Redfin just reported, a surplus of condo owners are now trying to sell because of rising HOA fees and insurance costs, especially in markets like Florida. On top of that, condo sale prices are barely up .4% year over year, compared to 1 1/2% for single family homes, and this trend is expected to continue into the near future. Like, here's the thing, even though condos generally sell for a lower price and seem on paper to be a better deal, over the last few decades they've lacked the appreciation of single family homes. And when you zoom out, it's pretty clear why. 1, you have rising HOA fees. In this case, Trulia found that between 2005 and 2015, HOA fees rose 32.4%, compared to just 15.1% for the median US home. Older buildings also require more maintenance, and higher insurance charges are passed on to the condo owner, resulting in much higher monthly overhead. And two, when the market falls, condo prices fall even further. Or in other words, more people buy them because they tend to be cheaper in expensive housing markets, but more people sell them because they're located in larger cities. On top of that, lenders also consider condos to be riskier, so banks have imposed stricter requirements on condo mortgages for unforeseen issues. This also leads to three increased restrictions with the condominium. Homeowners associations might limit how you use the property, whether or not you could rent it out, or what you could do with it, which severely limits the upside and the potential buyer pool. And four, single family homes consistently have more demand and therefore become more stable, even though they tend to cost more. Most of them don't have a monthly HOA fee. You own the land and can add square footage or for the most part, do whatever you want within zoning regulations. And there aren't the same drawbacks that you would have with condos, leading to more appreciation long term. This is why some condo markets have been completely collapsing, with Florida beginning to fall rather quickly. So what does this practically mean for you? Real Home Prices Falling in Key US Cities Now This all depends on where you're looking, but let's talk about the hardest hit markets on a large scale. Nationally, median home prices are up just 1.9% from a year ago, which once you factor in 2.3% inflation, means that real home prices have actually started to fall. In terms of where this is most evident, we have Oakland, CA down 4.9%, Dallas, TX down 4 1/2%, Jacksonville, FL down 3%, Austin, TX down 2 1/2%, Seattle, WA down 1 1/2%, and Denver, Co down 1%. Even though these are not major real estate price drops to the point where people are calling for a real estate collapse, do keep in mind that prices are down much more significantly from their peak in 2022. For instance, Austin, TX is down more than 21%, Oakland is down over 19%, followed by New Orleans, San Francisco, and Washington. In each of these markets, buyers can now get double digit discounts from where prices were just three years ago. Even when you look at nationalpricesrealtor.com found that the median asking price was up only .2 percent year over year in late May, effectively flat, suggesting that sellers aren't trying to push up prices anymore, but merely just attract a buyer. In addition to that, there's another area that's seen some rather aggressive price action lately, and that would be home builders. See, because developers purposely build these homes to sell, they have more margin to play with. And so as a way to keep their prices higher, they'll use some of their profits to buy down the buyer's mortgage rate, effectively letting them pay more for a lower monthly price. Or if that sounds confusing, and imagine it like this, instead of a builder discounting the price of their home from 650 to $600,000, which would lower the market value of every other home they sell, they could simply use that 50,000 to buy down the interest rate from 7% to 5%, allowing the builder to sell at $650,000 while lowering the buyer's payments in the process. How to Navigate the Current Buyer's Market Although in terms of what this means for you, no matter where you live, here is what you came for. From my perspective, if you're in the market for a home, this might be the first time since 2019 where you you could afford to be selective, you could choose to negotiate, or you could walk away from a deal without worrying that the market's just going to be racing higher. Like, remember the days where you had to pay cash over asking, waive contingencies, and name your first born child after the seller? Well, that's not really happening anymore. But home affordability is still an issue, and if you buy something, you are still paying a historically high price, all things considered. And for everybody else who's simply watching home prices out of curiosity, honestly, you're not going to feel much of an impact. And any headline decreases in price, you're going to be moderate at best. So no, we're not going to be seeing a 10 to 20% real estate collapse anytime soon outside of a few localized markets. Instead, we might see a more flatlining of prices or really moderate gains if anything. That's why I believe if you need to buy a home, buy something that fits your budget on a fixed rate loan that you could comfortably afford on a home that you intend on keeping for at least 7 to 10 years, assuming you can't rent an identical home for significantly. Graham's Top Strategy: Building an Extra Unit Now in terms of what I'm doing, look, I've been involved in real estate full time since 2008 and I look at every single day for good opportunities. But the only no brainer option that I have come to these days is simply building out an extra unit on a property that you already own. For example, I bought this duplex in 2018 and I found developer to expand my unused garage into a 2 bedroom unit for about $200,000. All of a sudden now I'm going to be able to make an extra $2200 a month for a property that I already own, which works out to be about a 10 to 12% return for no extra work other than what I'm already doing. To me, this is one of the biggest opportunities for anyone looking to increase their cash flow and I'm surprised more people aren't doing it. I'm currently a few months into the project and this was pretty much the cheapest way that I was able to buy myself. Essentially A2 bedroom house in Los Angeles for $200,000. It's pretty crazy. Episode Break If you're interested in doing something similar, by the way, and you have a property in California, I was able to negotiate with the company Realm to get you $1000 off. They're who I've gone through to get this project done. They basically go and get you multiple bids from different contractors who they work closely with, and then they negotiate them on your behalf to get you the best possible price while also making sure that they stick on budget. Like I said, I literally wouldn't have done this without them, especially because I live out of state. So everything so far has been flawless. So if you're interested in that and you want $1000 off, the link is down below in the description. Anticipating Softer Sales Prices and Flatlining Growth Anyway, besides that opportunity, I tend to believe that we're going to see sales prices soften over the next few years, which is probably something healthy for the entire economy. Although definitely let me know what you think down below in the comments. As always, I will do my best to read and reply to as many of you as I can. And hey, if I missed anything, feel free to let me know down below. Thank you so much and until next time.