March 2025 Housing Market Replace: Are Worth Declines Coming?

Dave:
Your actual property shopping for window is open. Effectively, possibly that’s proper. The housing market is softening after a number of years of supreme vendor energy. Potential worth declines is usually a boon for actual property buyers trying to negotiate, however additionally they create threat for those who purchase on the unsuitable second. So which approach is the housing market heading and how are you going to take most benefit in your individual portfolio? Right now I’m supplying you with my March, 2025 housing market replace. Hey everybody, it’s Dave head of Actual Property investing at BiggerPockets, and if you understand me, I imagine being a profitable investor is about studying and repeatedly bettering in your expertise. Issues like deal discovering, tenant screening, managing rehabs, all that stuff is tremendous vital. However you additionally want to know the broad developments which are occurring within the housing market to be able to optimize your portfolio to search out the most effective offers and to keep away from any pointless ranges of threat.
For that reason, I like to offer a abstract of what’s going on within the housing market and I additionally like to offer my private evaluation and skim on the scenario. I’ll even inform you what I’m excited about and doing with my very own portfolio. That is for March, 2025. So developments could also be totally different for those who’re watching this just a little bit additional into the long run. Now I need to simply say that I’ve been analyzing the housing marketplace for a really very long time. I’ve been an investor for 15 years. I’ve been working at BiggerPockets for 9 and proper now issues are altering just about as shortly as they ever have and that makes it extra vital than ever to know what’s occurring on your personal portfolio and attaining your monetary objectives. Alright, so let’s speak about this softening market and what it truly seems to be like within the numbers and naturally what it means to you.
Now for those who have a look at sure web sites like Redfin, you’ll see that dwelling costs are up 4% yr over yr in line with what information they’ve collected and once they seasonally alter it. Once you have a look at among the different information sources, there’s a supply known as the Case Schiller Index and that makes use of a special methodology the place it principally tracks how the value of the identical dwelling change over time. And what you see whenever you have a look at the case Schiller is it’s a lot nearer to flat. And so we’re most likely in someplace in between these two. There’s no excellent measure, however we’re most likely flat-ish housing costs possibly up just a little bit relying on what market that you simply’re taking a look at. So that’s not at all any form of correction or crash at this level. It’s additionally probably not thrilling information when it comes to appreciation, however I feel the vital factor right here is that the pattern is simply actually flat or just a little bit down.
We’re probably not seeing appreciation or worth development begin to speed up once more. And so that is simply one of many causes I’m saying that the market’s flat. Now to know if this pattern goes to proceed or if we’re going to see the market reverse in some form of approach, we to dig in just a little bit deeper, go one degree decrease to attempt to perceive why the market is considerably flat. And I at all times speak about this, however we have now to do it. We received to speak about provide and demand. That’s what dictates costs within the housing market. And so we have to see what’s happening with provide, which is simply what number of houses are on the market at any given level or how many individuals are itemizing their houses. And we received to have a look at demand. How many individuals need to purchase houses? Let’s begin with the availability facet.
There’s actually good information about this. It’s just a little bit simpler. So we’re going to speak first about one thing known as new listings. It is a measurement of how many individuals put their properties up on the market in any given month, and that’s up yr over yr. It’s up 6% in line with Redfin, which is sweet in some methods, nevertheless it’s not loopy, proper? Now we have seen actually low stock and to return to a more healthy housing market, there have to be extra properties listed on the market. And so having that go up, at the very least within the quick time period is usually seen as factor, however you must look not at simply how many individuals are itemizing their properties on the market. You even have to have a look at how lengthy these properties are staying available on the market as a result of in the event that they’re getting listed and going shortly, then costs can hold going up.
But when extra issues are getting listed this yr than final yr and so they’re simply sitting there and probably not promoting, then costs are most likely going to go flat or go down as a result of as property house owners who need to promote their property are seeing their properties simply sit there available on the market week after week or month after month, they decrease their worth or they’re keen to supply concessions. And that’s what in the end pushes costs down. And what’s occurring proper now could be that lively listings are up 10% yr over yr. And once more, that’s not loopy as a result of we have now to have a look at the historic context right here. So that you may know this, however again in 2019, lively listings had been averaging someplace round 2.3, 2.4 million. Then through the pandemic they went right down to 1.6. We truly bottomed out at 1.1 million and though they’re going again up proper now, they’re nonetheless at 1.5 million, they’ll most likely go up over the summer season and get someplace near 1.9 million.
So that they’re going up, however they’re nonetheless not at pre pandemic ranges. And that’s one of many fundamental issues as we speak concerning the housing market that it is advisable keep in mind is after we evaluate what’s occurring now to what was occurring through the pandemic, it’s not the most effective comparability actually, as a result of what occurred through the pandemic was simply so uncommon. So to say, oh my god, stock has gone up in comparison with the pandemic. In fact it did as a result of it was like in any respect time lows. I personally like to have a look at that also, however in comparison with 2019, and so we’re seeing issues come again nearer to pre pandemic ranges, however we’re not there but. And so that is the rationale why I’m saying that the market is softening. It’s again to the place it was. I’d even say it’s simply form of a normalization of the market, however as a result of we’ve gotten used to this tremendous heated market that’s very tight, there aren’t numerous issues available on the market, there are nonetheless numerous demand.
And so issues are shifting actually shortly. That’s why I’m saying it’s softening as a result of we’re simply shifting again to a extra balanced housing market. So that you undoubtedly see that within the lively listings numbers. You see that in another information which you could have a look at for this stuff like days on market, these are going again up or months of provide. These are simply different methods to measure the housing market. We don’t have to get into them right this moment, however what it is best to most likely know is that all the measures of housing market well being are simply saying that we’re getting nearer again to pre pandemic ranges of the stability between provide and demand. Now in fact, what I’ve been speaking about to this point is concerning the nationwide housing market, however there are enormous regional variations. We’re truly seeing numerous indicators that the market is form of splitting. Some markets are rising in a single course, others are going within the different course. So we’re going to interrupt down these regional variations in only a minute. However first we have now to take a fast break. And this week’s larger information is dropped at you by the Fundrise Flagship Fund, put money into personal market actual property with the Fundrise Flagship fund. Try fundrise.com/pockets to be taught extra.
Welcome again to the BiggerPockets podcast. We’re right here doing our March housing market replace. Earlier than the break, we talked about how numerous the info means that the nationwide housing market is shifting to a extra balanced market, a extra purchaser’s market, however that’s not occurring in all places within the nation. So let’s simply take a minute right here and speak about how stock adjustments are totally different in numerous areas of the nation. First issues first, what it is advisable know is that each single state within the nation is experiencing will increase in stock besides North Dakota. North Dakota is down 2%, in all places else is up. That is simply yr over yr since 2024 in February to 2025 in February. And once more, I’m recording this in early March. So the final month that we have now information for is February. The state that has the very best shift in stock over the past yr is Nevada.
We see California at 44%, Arizona at 41%. Vermont is up there, Hawaii is close to 50%. In order that’s occurring in all places the place if you wish to know regionally the place issues are occurring within the least, it’s principally within the northeast and the Midwest. So I mentioned North Dakota, that’s form of an outlier, however New York for instance, solely up 3%. New jersey’s 9%, Illinois is 9%. So it’s form of a continuation of the developments the place the most popular or the strongest housing markets, I ought to say are within the Midwest and the Northeast. A few of the weaker ones are within the mountain west and west coast and the southeast as properly. Georgia’s up 37%, Florida’s up 34%. That’s simply at a state degree. However given what I used to be saying earlier than concerning the utility and usefulness of evaluating information from this previous yr to the yr prior, it’s useful. We have to understand it as a result of it is advisable understand how the market’s altering.
However I additionally like to offer this context of how issues have modified since earlier than the pandemic as a result of that can actually give us some clues about the place costs are heading in any given market. And whenever you have a look at the info this manner, it is rather, very totally different. Keep in mind I simply mentioned that every part’s going up yr over yr as a result of it was tremendous low. However after we have a look at how February, 2025 compares to February, 2019, it’s a reasonably totally different story. Now we have sure markets the place we’re nonetheless nowhere even near the degrees of stock that we had been at in 2019. After I have a look at a state like Pennsylvania, it’s down 50%, nonetheless over 2019. Maine is down 61%. New Hampshire, 61%, Illinois, 63%, virtually all of it’s concentrated within the Northeast and the Midwest. So Wisconsin, Michigan, Virginia, all of those states are actually down. Truly Alaska’s down too.
That’s form of the one one which’s on the market apart from North Dakota. Once more, these are form of essentially the most considerably down, however even all through the remainder of the nation, most states are nonetheless down in comparison with pre pandemic ranges. If we have a look at the Carolinas, California, Nevada, Washington, Oregon, all of them are nonetheless down. So that’s form of the large image factor that it is best to remember is that though stock is returning, most states are nonetheless down in comparison with pre pandemic. So that they’re nonetheless not again to what can be thought-about a traditional market. There are 4 states, nonetheless which are above pre pandemic ranges. The primary with essentially the most stock development above pre pandemic ranges is Texas. It’s 15% above the place it was in 2019. Then comes Florida with 9% above Colorado at 7%, and Tennessee truly with 2% as properly. So once more, the regional variations actually matter, and I’m speaking about states.
I can’t get into each particular person metro space on the podcast, it’s simply an excessive amount of to do. However what my advice for all of you is to have a look at these two issues on your particular person market as a result of even inside Texas which has rising stock, there are particular markets and there are particular neighborhoods the place stock remains to be down. Or for those who have a look at Pennsylvania, which has 50% declines in stock, I’m positive there are nonetheless neighborhoods in areas the place stock is growing. So I actually suggest you have a look at two issues in your market. Go and evaluate stock ranges proper now in February of 2025 to the place it was final yr, see how a lot that’s rising after which evaluate it to 2019 and also you’ll get a way of how shortly the market is shifting from that basically sturdy sellers market. That was form of common for years again to what can be a extra regular form of stability form of market.
So what does this all imply? The stuff I mentioned and the analysis it is best to most likely be doing by yourself as properly. Any market the place stock goes up quickly has the largest probabilities of worth development slowing. And in some markets that imply it’d go from 10% appreciation to five% appreciation. In some markets that may imply six to 2. Some markets it’d imply going from flat to adverse. And so it actually relies on the size of the stock adjustments and what’s happening in your specific market. However as an entire, simply going again, zooming again out to the nationwide degree, I do suppose that given stock is rising and demand hasn’t picked again up, at the very least within the final couple of months, we’re going to see additional softening. And that is a kind of explanation why I’ve mentioned repeatedly that I do suppose costs shall be possibly modestly up this yr or someplace close to flat, particularly whenever you evaluate these issues to inflation, they is perhaps just a little bit adverse primarily based on the info that we’re seeing right here right this moment.
Now once more, that’s not going to occur in each market and what which means for actual property buyers is just not as apparent as you suppose. Declining costs aren’t essentially a foul factor. Lots of people, I’d say possibly even most buyers suppose that’s truly factor. So we’ll speak extra about what a softening market means, however we form of have to deal with one different huge factor earlier than we get into what it is best to do subsequent, which is in fact mortgage charges. Mortgage charges have been within the information rather a lot and as of this recording, they’ve dropped down to six.64% for a 30 yr repair, which is down practically 0.6% from the place they had been. They’d shot up all the best way to 7.25%. They’ve come down rather a lot and that’s typically excellent news for actual property buyers. However in fact the rationale that is occurring is as a result of there may be unhealthy financial information.
So we have now to dig into this just a little bit and form of unpack what’s occurring and what this implies. So why have charges fallen a lot over the past couple of weeks? We’ve talked about this in different episodes, you possibly can go hear about it in additional element, however we’ve seen a bunch of soppy financial information. The very first thing was we had low shopper sentiment. We truly had the largest month over month drop in 4 years. It’s not like that is going loopy, it’s decrease than it was over the previous couple of months, nevertheless it’s just about in keeping with the place it’s been from 2022 to 2025. However after the election, shopper confidence had been rising and that has reversed itself over the past couple of weeks, and that decline in shopper confidence worries buyers. And so we’ve seen some weak spot within the gentle market. I’ll get to that in a second.
The opposite factor that we’ve seen is an uptick in unemployment claims. There are many methods to measure unemployment. That is one I prefer to measure as a result of it principally seems to be on the variety of layoffs. And so we’ve seen layoffs begin to tick up. Once more, nothing loopy, however these are simply small issues that begin to spook the market, proper? And what we’re speaking about after we speak about mortgage charges is basically how bond buyers and inventory buyers are reacting to all this information. And proper now, given the extent of uncertainty on this planet, given the extent of uncertainty within the markets, persons are very delicate. They’re reacting fairly dramatically backwards and forwards to all of the information that they’re getting. And so little adjustments in unemployment claims, little adjustments in shopper sentiment are most likely impacting markets greater than they might if this was 10 years in the past in the midst of only a regular financial cycle.
So that’s two issues which are occurring. And so there’s truly one factor that has occurred over the past simply two weeks that I feel has additional spooked buyers, not tariffs. These are form of apparent. That’s undoubtedly one thing that’s been weighing on folks’s thoughts. However one thing that I feel received misplaced within the shuffle over the previous couple of weeks is that there’s this instrument known as the GDP Now instrument. It’s put out by the Atlanta Fed, and it principally predicts the place gross home product goes to go for the present quarter that we’re in. When you don’t know what GDP is gross home product, it’s principally the full measurement of financial output and it’s tremendous vital, proper? If the economic system is rising, that’s typically factor for the US. If the economic system contracts, which means folks’s high quality of life spending energy is usually taking place.
And anyway, what occurred was the Atlanta Fed instrument, which has confirmed to be very correct traditionally, has modified its prediction. Simply two weeks in the past it was predicting 2% development for GDP, which isn’t nice. It’s not like a tremendous quarter, nevertheless it’s not unhealthy. It’s form of similar to a traditional form of quarter. It principally plummeted and the estimate now went to about adverse 2.5% and has held there for 3 consecutive weeks. And so now they’re predicting that GDP is definitely going to say no right here within the first quarter of 2025, and that’s tremendous important for all the explanations that I simply talked about. So between softer shopper sentiment and uptick in unemployment claims, softer GDP projections, uncertainty round tariffs, this has simply principally spooked buyers and it has led to a big inventory market selloff. We’ve seen the NASDAQ was down 10% at sure factors, which is correction territory.
That’s a big decline. We’re principally seeing your entire increase within the inventory market that we noticed after the Trump election erased we’re again to principally the place we had been earlier than the election. And what occurs for actual property buyers for mortgages is when folks unload their inventory market, sometimes what they do is that they take their cash and so they put it in bonds. And I’m not speaking about me. If I offered off a few of my inventory, I most likely wouldn’t go do that, however we’re speaking concerning the huge cash movers. Individuals who handle pension plans or hedge funds, they should put that cash someplace. And so once they take it out of inventory market, they sometimes put it into bonds as a result of they’re seen as secure once they’re spooked about what’s occurring within the inventory market or the economic system as an entire, they take the cash, they put it in bonds, and that will increase demand for bonds as a result of everybody desires them.
And that pushes down yields, proper? If lots of people need to lend cash to the federal government, the federal government can borrow that cash at a decrease rates of interest. That’s yields coming down. And since yields and mortgage charges are virtually completely correlated, that can take mortgage charges down with them. And so that’s the reason mortgage charges have come down. In fact, nobody is aware of for positive what will occur, however I’ll provide you with at the very least my opinion and what I’m excited about and doing with my very own portfolio. However first, we have now to take a fast break. We’ll be proper again. When you’re wanting to get began in actual property investing, a sensible first step is to accomplice with an investor pleasant monetary planner who will help you get your own home so as and make sure you’re arrange for monetary success from the get go to biggerpockets.com/tax finder to get matched with a tax skilled or monetary planner in your space.
Welcome again to the BiggerPockets podcast. We’re right here doing our March housing market replace and the place we left off, I used to be going to attempt to make sense of this complete scenario and share with you what I feel this all means. Now, all the info, every part that I’ve shared with you, the long run and course of the housing market to me is actually about financial sentiment. And that principally simply sucks as a result of it’s onerous to foretell, proper? I’m sorry, however I do know different influencers, creators, they’re going to inform you definitively what’s going to occur, however they’re deceptive. I’m an analyst and the one factor I can inform you with certainty is that proper now issues are notably unsure and that’s a very powerful factor to recollect. It’s okay on your investing thesis or speculation to be that it’s unsure. It’s higher to confess that than to behave on a false interpretation or false certainty since you don’t actually know.
However right here’s how I’m personally seeing this. It appears to me that financial pessimism is gaining steam and folks may have totally different opinions about what’s going to occur sooner or later. I’m taking a look at information, I’m taking a look at developments, and that is what the info reveals. It reveals that investor confidence is down, the inventory market is popping, the housing market is beginning to soften, and does that imply we’re going to a recession? I don’t know. I feel it’s far too early to say that the GDP now factor is only one estimate, however I’m simply telling you that the change from the place we had been in January to the place the info was in February is fairly important. There was numerous financial optimism in December and January that has shifted in February and it’d shift again, however proper now it does really feel like financial pessimism is gaining steam.
And for me, there are a pair issues to remove from this. The very first thing that has been coming to my thoughts just lately is that if we enter in a recession, and once more, that may be a huge if, however one thing I’ve been excited about is may this form as much as be what’s kind a traditional financial cycle the place actual property is the quote first in first out, for those who haven’t heard of this, there’s this sample that has existed in numerous recessions up to now the place issues are going off nice, we’re in an enlargement, companies are booming, the inventory market’s going up, every part is nice, persons are taking out debt. At a sure level, the economic system begins to overheat and that results in inflation. At that time, the Federal Reserve raises rates of interest, proper? Sound acquainted? That is what’s been happening. And when the Federal Reserve raises rates of interest, it impacts actual property first.
And I’m not saying this simply because this can be a actual property podcast, however actual property is simply principally essentially the most leveraged asset class. And really as we’ve seen over the past a number of a long time, it’s develop into actually form of by itself in how leveraged it’s, which principally means it makes use of essentially the most debt. And positive folks take out debt to finance buildings and manufacturing and expansions for companies, however actual property is actually extremely leveraged. And so that you see actual property bear the brunt of a recession truly at the beginning else. And for those who’re on this trade, you’ve been most likely saying this and screaming that we’re in an actual property recession for the final two or three years, transaction quantity has been down, costs have been largely flat, proper? We’ve form of been in an actual property recession for some time. However what’s been superb is that different elements of the American economic system has remained resilient regardless of these larger rates of interest.
And for one purpose or one other, possibly that resilience is cracking proper now and it’s reverting again to what we’d’ve anticipated that the remainder of the economic system is beginning to really feel among the ache of upper rates of interest. In order that’s form of the traditional begin of a recession, proper? Actual property comes first after which the remainder of the economic system comes second. However then what occurs when the remainder of the economic system begins to decelerate? Effectively, the Federal Reserve desires to stimulate the economic system. They’re not as afraid of inflation, in order that they decrease rates of interest, and that provides a stimulus first to actual property, proper? As a result of it’s a leveraged asset class. In order these charges begin to come down, it kickstarts financial exercise, notably in the actual property part, and that may truly assist lead your entire economic system out of a recession. And actual property is sufficiently big.
It’s a sufficiently big a part of our economic system to each assist convey the economic system right into a recession. And out of it, it’s estimated to be about 16% of GDP. That’s enormous for anyone trade. Now, for those who’re pondering that’s not what occurred in 2008, that’s undoubtedly true. It’s form of the exception to this sample, and we don’t know what’s going to occur. However the perception amongst most economists is it didn’t occur in 2008 as a result of in contrast to this present time in 2008, housing was the issue. That’s what created the recession within the first place. Whereas proper now, housing is just not the issue. Housing, numerous the basics are essentially sound. What’s happening with housing is known as a response to rates of interest. And so what I see rising is probably this primary in first out scenario. That’s most likely what I feel is the more than likely situation as we’re taking a look at it right this moment.
I feel there are two different issues which are attainable that I’ll simply point out, however I feel they’re much less seemingly. So the second factor that may occur is possibly that is only a blip in financial information and there’s truly going to be sturdy development and folks regain their confidence, during which case we’ll most likely see mortgage charges return up just a little bit. I don’t know in the event that they’re going to return as much as 7.25, however they’ll most likely return up once more. Through which case, I feel the housing market will proceed on its present softening trajectory. Once more, I don’t suppose which means a crash. It most likely means corrections in sure markets the place different markets are going to continue to grow. However I feel we’ll proceed on the pattern that we’ve been on for the final couple of months. So that may be a second chance. It’s not that unlikely, it simply doesn’t look like the more than likely situation.
After which the third one, I don’t suppose that is so seemingly proper now, however truly whenever you have a look at among the information, there’s a little little bit of threat proper now of what’s often called stagflation. And once more, I don’t suppose that is what’s occurring simply but, however I simply need to name it out as a result of it’s attainable. Stagflation is when the economic system slows down, however inflation goes up. That is principally the worst case situation for the economic system, however we have now seen inflation go up just a little bit then it’s form of flat, so it’s not tremendous regarding simply but. However there’s a world the place inflation goes again up as a result of tariffs. And the GDP now instrument is right and GDP declines, during which case we’d have a extremely troublesome financial scenario the place the economic system is contracting, however inflation goes up, and that’s principally the worst case situation.
Spending energy goes down, however wages aren’t going up, the inventory market goes down. And so though that’s attainable, I wouldn’t fear about that simply but. It’s simply one thing that I wished to say that we’ll keep watch over within the subsequent couple of months. In order we do these updates each single month, I’ll replace you and allow you to know if that’s a priority. There may be some information developments that counsel it’s attainable, however I feel we’re nonetheless a far approach off from concluding that that’s occurring. So let’s simply return to what I feel is the more than likely situation, which is form of this primary in first out scenario with actual property. Does that imply that it’s probably time to purchase actual property, proper? As a result of don’t get me unsuitable, when markets are softening like they’re, that comes with threat.
There may be additional threat that costs are going to say no. And I’ve mentioned it earlier than, however there may be numerous rubbish on the market. There’s numerous unhealthy offers, overpriced stuff on the market, and issues may worsen earlier than they get higher. However there may be additionally a case that in at the very least some and possibly many regional markets {that a} shopping for window could emerge. Take into consideration the situations that we’d have over the subsequent couple of months. Extra stock coming available on the market results in worth softness, which supplies you negotiating leverage, proper? As a result of if you understand that costs are gentle and so they is perhaps declining extra, that’s one thing that you need to be utilizing in your bid technique. And whenever you’re providing on properties, attempt to purchase beneath asking worth or what you suppose the market may backside out at. So that provides you negotiating leverage. Keep in mind I mentioned softening it sounds scary, however that really means we’re in a purchaser’s market.
Consumers have the ability. In order that’s one good factor you may not need to purchase even in a purchaser’s market, for those who suppose that that purchaser’ss market’s going to proceed for a very long time and we’re going to have this form of protracted interval of costs taking place. However keep in mind that costs have been largely flat or rising modestly over simply the final couple of years. And so we’ve seen this for some time. And if the present financial temper is right and that we’re going to see a contracting economic system, that implies that charges may keep as little as they’re now and so they may go down just a little bit extra. And if that situation occurs, that would convey demand again into the housing market. Individuals usually suppose that if the economic system is doing poorly and there’s a recession that causes decrease housing demand, however that’s not at all times the case.
Housing demand is sort of at all times tied to affordability. And so sure, for those who don’t have a job, you’re not going to be going on the market and shopping for a house. However for individuals who really feel safe of their jobs, this may truly result in higher housing affordability. If the market softens and charges go down, which means extra persons are going to have the ability to afford extra houses. That drives up demand and will truly reignite worth appreciation within the housing market. That’s not what occurred in 2008, keep in mind, that’s an outlier. However that is what usually occurs. So it’s one thing I’ll be conserving a detailed eye out for, and I like to recommend you do too. Personally, I’ve been on the lookout for offers. I’m at all times on the lookout for offers. I haven’t discovered something to this point but this yr. I’ve supplied on some, haven’t been capable of make it work, however I’m possibly unusually optimistic concerning the potential for deal stream over the subsequent couple of months and within the second half of this yr.
I feel that proper now, we’ve been speaking rather a lot this yr about this potential for upside. And whereas there may be threat, don’t get me unsuitable, there may be threat in these sorts of markets. That upside is there and may even truly be rising all through 2025 as a result of if charges do come down and you’ve got the chance to barter higher costs on homes, that would set the stage for actually good upside and future development. In order that’s how I’m seeing it. I’d love for those who’re watching this on YouTube to tell us how you’re decoding this housing market and what selections you’re making about your individual portfolio. Thanks all a lot for listening to this episode of the BiggerPockets podcast. I hope this housing market replace was helpful to you. We’ll see you subsequent time.