Is real estate fixing to crash in the East & West US?

[Cassie]

Between higher interest rates and high prices compared to income our housing market has slowed down significantly in northern Nevada. Because of the influx of Californians with cash our market has been out of sync with the wages of the locals for some time. I sold my house at a high and bought high so was aware this could happen.

However, a year later my condo was selling for 40k more. People that bought then are underwater. Luckily I don’t want to sell because I would probably lose the 15k in improvements I made. I plan to leave feet first so not a problem for me:)).

[Zamboni]

I love that graphic and I am now, for the first time, considering a move to West Virginia. The state is pretty and affordable.

[GuitarStv]

Does anyone have any data, anecdota, or guesses about who these people are?

Here in Seattle most people have not been able to buy a house for 1-2x their annual income for a LOOOOONG time now.

How we bought a 1 mill house cash?  We sold one worth over twice that in Beijing.  That one had been purchased with a down payment we got from selling a NYC apartment for more than twice what we bought it for.  I've been very lucky in the real estate market, clearly.

How did the people who bought our house from us for 1.3 mill in cash do it?  They were an older couple with solid incomes and were buying it for their daughter.

MOst people paying cash or putting large down payments into expensive housing here are either using family money (how do you know those people you mentioned didn't get an inheritance or other gift from family?) or have done very well in tech or real estate.  Maybe people are taking out million dollar mortgages at 7%, but I kind of doubt it.  At one point I was looking into a cash out refi on the last house so I could purchase a new one for myself before the divorce settled, but the carrying costs of the loan would have been at least 40-50k. Wasn't willing to take that kind of hit.

Not in the US, but here in Toronto the average price for a semi-detached house is about a million dollars, and 1.2 for a fully detached home.  Average yearly salary is just under 60k.  In the past thirty years it has been unusual to buy a house for 1 - 2x your yearly salary here.

[lhamo]

I love that graphic and I am now, for the first time, considering a move to West Virginia. The state is pretty and affordable.

There's also a lot of poverty and social dysfunction -- Appalachia was hit very hard by the opiate epidemic.  This guy's videos are interesting:

https://www.youtube.com/watch?v=p3O6bKdPLbw

My grandfather ran the YMCA in Bluefield after WW2 and my sister and I are going to visit later this spring.

[JupiterGreen]

My uneducated and anecdotal opinion. We've been looking for a house in the east and I'd say no it's not going to crash. At least not in the HCOL and VHCOL areas because a lot of these places are amazing and people actually want to live there. There are so many people lining up to buy. There are reasons why these places stay hot in real estate. Things temporally dip here and there with natural disasters, 08 financial crisis, global/national politics, unemployment, (e.g. LA will rebuild) etc. but I don't see it going down too much for too long on either coast. But of course it's just a guess and nobody really knows what's coming.

[Cassie]

A few months ago I would have said no. But now with so many federal employees losing their jobs and the ripple effect it will have on private sector jobs and the economy I think the answer is yes. They are purposely ruining the economy probably so people will lose their homes and the billionaires can buy them cheaply and turn our country into a nation of renters.

[Dicey]

A few months ago I would have said no. But now with so many federal employees losing their jobs and the ripple effect it will have on private sector jobs and the economy I think the answer is yes. They are purposely ruining the economy probably so people will lose their homes and the billionaires can buy them cheaply and turn our country into a nation of renters.

Of all the BS that I'm afraid of, that one's nowhere close to making my list.

[Zamboni]

I don't know about crash, but price declines in many (not all) states are now being predicted by nearly all real estate algorithms.

In my local area the largest private employer projects being hit hard by what is happening at the federal level . . . several hundreds of millions of dollars changes to the annual operating budget for at least the next 2 years. I WANT to buy a house now and can afford to do so. I was very seriously looking in the late Fall and the beginning of this year. But, I'm going to wait and see at this point because I don't want to light a couple of hundred thousand dollars on fire. Renting for another year will not hurt me, and I like the house I am renting well enough.

[FINate]

Real estate is trending up in my area. Hearing rumblings that we're getting another influx after the SoCal fires.

[J.P. MoreGains]

At what point to people decide to move to rust belt cities like Detroit and Cleveland?

They are cities big enough to have job opportunities and corporate presence but home prices can be very affordable all over the actual cities and not the suburbs.

When people complain about housing prices they could always move there but they don't. A lot of people just want to live in San Diego or Denver and barely get by.

[Dicey]

The Desert market where our rentals are is softening a bit. On one hand, we're impacted by Canadians deciding to stay home (not that I blame them). It's too early to tell if they will be selling their sunny winter homes, but for sure the seasonal renters are taking a hard pass. OTOH, there's been an uptick of rentals by folks burned out in the LA fires. As a result, I'm getting a lot of price reduction pings. They're generally for small amounts, but I haven't seen so many in years. I have no idea what the future holds, so we're taking the Standard Mustachian Approach of keeping calm and carrying on.

[GilesMM]

At what point to people decide to move to rust belt cities like Detroit and Cleveland?

They are cities big enough to have job opportunities and corporate presence but home prices can be very affordable all over the actual cities and not the suburbs.

When people complain about housing prices they could always move there but they don't. A lot of people just want to live in San Diego or Denver and barely get by.

Have you been to Detroit?  It is a wreck.  And crime is off the charts.  Cleveland isn't far behind. There is a reason it's cheap in the rustbelt. You get what you pay for...


https://www.metrotimes.com/news/detroit-ranked-second-least-safe-city-in-the-us-37548343

[Zamboni]

Housing prices in my area have stabilized (finally) and are starting to tick down in some zip codes.

It will take many sellers a few years to realize that the trend is downward. But, motivated sellers with desirable homes & locations still can sell their homes in a weekend if they price it right.

On the downside for the local community and the housing market, the biggest employer in the area is being hit hard by the Trump admin policies. Reduction in force has been announced. The damage won't really start to play out until this summer & fall, and I guess time will tell how long that will last.

[GilesMM]

Housing prices in my area have stabilized (finally) and are starting to tick down in some zip codes.

It will take many sellers a few years to realize that the trend is downward. But, motivated sellers with desirable homes & locations still can sell their homes in a weekend if they price it right.

On the downside for the local community and the housing market, the biggest employer in the area is being hit hard by the Trump admin policies. Reduction in force has been announced. The damage won't really start to play out until this summer & fall, and I guess time will tell how long that will last.

I remember in the Bay area the market peaked in 2005 and sales began slowing in 2006.  Prices started to soften in 2007-8 but didn't bottom out until about 2012.  It takes years for effects to trickle through real estate.

[Zamboni]

In my area I think the seller wake-up will be even slower because the city just reappraised everyone's tax valuations up to the peak values from the past two years in each neighborhood. Some of my co-workers saw their property tax assessed home value double. Homeowners are up in arms about that because their property tax bills are going to be much higher this year.

But they overshot and now many properties are not actually worth the recently city-assessed value. It means people are already having to go with a list price a below their tax assessed value. This is a big departure from how it has been for many years here. I think it's going to make it even harder for realtors to explain a realistic asking price to sellers. It's going to be kind of a mess for awhile. I'm just going to hang out while my money is earning money and see how it plays out.

[Paper Chaser]

According to their recent earnings call, DR Horton, the nation's largest new home builder, is now adding some concessions in the markets where they're seeing the most inventory (Fl, TX, etc):

[Paper Chaser]

[clarkfan1979]

Below is an estimate of one primary home and 3 rentals over the past 12 months. Overall, I'm estimating +4%.

                                Spring 2024              Spring 2025

Fort Myers, FL               375                           350

Pueblo West, CO            375                           375

Fort Collins, CO             525                           550

Koloa, HI                      1.25                          1.35

[Paper Chaser]

More new homes sitting unoccupied than we've seen since 2010:


Good news: Mortgage applications are up slightly from where they've been over the last couple of years
Bad news: They're now around the same levels we saw during the darkest days of the Great Recession:


I don't know if a "crash" is coming, but it seems like the table is being set for a return to normalcy. Something like a tariff driven recession could really nudge things along in that direction.

[reeshau]

Those are steps toward a balanced market, but it is dwarfed by the lack of existing homes for sale.  New homes have historically been 10% of market volume.  Since the pandemic and interest higher rates, they have been 30%.  There is not enough homebuilding capacity to fully make up for the lack of existing homes.

[ChpBstrd]

More new homes sitting unoccupied than we've seen since 2010:


Good news: Mortgage applications are up slightly from where they've been over the last couple of years
Bad news: They're now around the same levels we saw during the darkest days of the Great Recession:


I don't know if a "crash" is coming, but it seems like the table is being set for a return to normalcy. Something like a tariff driven recession could really nudge things along in that direction.

To me, these data points tell a story of housing inventory that is not generating revenue or serving as someone's home, and that is being held rather than sold. Reasons might be:

• A collapse of buyer demand has made it take longer to sell the few homes left in the market
• Investors are carrying the costs of empty homes in the hopes of appreciation
• Home sellers are generally well off enough to wait, rather than cutting prices
• People who own multiple homes are keeping their options open (i.e. downsize to rental property in case of job loss, retire to vacation home in case of stock market boom)
• There are more rental units than renters, so landlords are experiencing longer periods of vacancy
• The "housing shortage" media narrative is false, builders have overbuilt, and a crash may be coming

#1 and #3 are contradicted by a lower Housing Inventory: Median Days on Market number than we experienced in recent years.

#6 is contradicted by relatively low housing starts:


What narrative(s) do you see in the data?

[Paper Chaser]

Those are steps toward a balanced market, but it is dwarfed by the lack of existing homes for sale.  New homes have historically been 10% of market volume.  Since the pandemic and interest higher rates, they have been 30%.  There is not enough homebuilding capacity to fully make up for the lack of existing homes.

You're right that existing home sales are low, but we currently have:
- New homes sitting unoccupied
- New home builders making concessions and reducing their margins
- More and more listed homes seeing price cuts before selling

Those signs don't indicate a market with frothy demand that cannot be satiated by new home construction. It's a market that's slowing down. In many locations, supply is increasing and not coincidentally prices are starting to drop.

When new homes make up a larger than normal percentage of the market, and they're seeing price drops/concessions, that can drop comps even faster for existing homes. DR Horton can drop prices 3-5% in an instant on their new builds, and that might be a much larger percentage of a given market's listings than normal.

[Paper Chaser]

More new homes sitting unoccupied than we've seen since 2010:

Good news: Mortgage applications are up slightly from where they've been over the last couple of years
Bad news: They're now around the same levels we saw during the darkest days of the Great Recession:

I don't know if a "crash" is coming, but it seems like the table is being set for a return to normalcy. Something like a tariff driven recession could really nudge things along in that direction.

To me, these data points tell a story of housing inventory that is not generating revenue or serving as someone's home, and that is being held rather than sold. Reasons might be:

• A collapse of buyer demand has made it take longer to sell the few homes left in the market
• Investors are carrying the costs of empty homes in the hopes of appreciation
• Home sellers are generally well off enough to wait, rather than cutting prices
• People who own multiple homes are keeping their options open (i.e. downsize to rental property in case of job loss, retire to vacation home in case of stock market boom)
• There are more rental units than renters, so landlords are experiencing longer periods of vacancy
• The "housing shortage" media narrative is false, builders have overbuilt, and a crash may be coming

#1 and #3 are contradicted by a lower Housing Inventory: Median Days on Market number than we experienced in recent years.

#6 is contradicted by relatively low housing starts:


What narrative(s) do you see in the data?

Days on market is very seasonal. The peaks on the chart are always Jan. And the valleys are always May/June. So rather than looking at the noisy peaks and valleys of each year you need to zoom out a bit. If you made a 'line of best fit' for the Days On Market chart it would be "V" shaped. DoM declined until 2022 when prices peaked, and DoM has been gradually climbing back since then. We're approaching more normal values now.
I watch my local market pretty closely, and desirable homes that are priced fairly are still being snatched up in the first week they're listed. But there are also several properties with overly optimistic sellers asking for 2022 prices, and those sit for months waiting for somebody to take the bait.

I'd say the home starts chart just shows that builders are slowing down. They have to sell new homes to survive, but they do have some flexibility in the number of homes that they have to sell to get by. It's a cyclical industry, and they "make hay while the sun shines" during busy times so they can get through the leaner times. From 2020-2022 they were selling everything they could build. Low rates incentivized buyers to splurge even as prices rose, and investors could buy or build homes in sunny places to use as investment properties. Everybody wanted to own Short Term Rentals. With higher prices coupled to now higher mortgage rates, a lot of that has cooled off and builders are scaling back.

I think it really comes down to affordability. The buyer pool of people willing and able to pay high prices at high interest rates is finite. Any time an item isn't transacting as frequently, and is seeing some form of price cut it's due to a lack of demand. At least at a given price. Price discovery means they'll reduce prices to find the point where buyers are willing/able to sign up for 30 years of payments again.

[GilesMM]

"The pace of home sales was the slowest for the month of March since 2009, during the depths of the global financial crisis"  https://www.marketwatch.com/story/housing-market-stalls-as-homeowners-struggle-to-sell-e8680067


Buyers are spooked by the current economic uncertainty: https://www.marketwatch.com/story/spooked-house-hunters-are-dropping-out-of-the-real-estate-market-as-they-confront-economic-uncertainty-on-many-fronts-bb62c23b?mod=article_inline

[ChpBstrd]

I suspect an increase in unemployment will shake out the homeowners who bought after 2022 and have 6%+ mortgages at post-pandemic prices. These are the people spending >40% of their income on housing and are often house-poor.

[GilesMM]

I suspect an increase in unemployment will shake out the homeowners who bought after 2022 and have 6%+ mortgages at post-pandemic prices. These are the people spending >40% of their income on housing and are often house-poor.

So far unemployment rates are holding steady with new jobs offsetting government cuts.  But it's early.

[Paper Chaser]

Depending on the data set, we've either exceeded, or soon will exceed early 2020 inventory levels:

[Paper Chaser]

[GilesMM]

Depending on the data set, we've either exceeded, or soon will exceed early 2020 inventory levels:

Cool.  But 2020 was not a normal year.  2017-2019 look normal and I don't see the 2025 line cross those (despite what the text says).  I wonder why the volumes from the two graphs vary so much - they appear to differ by more than 100,000 homes.

[Paper Chaser]

The buyers disappeared in late 2021/early 2022, which is exactly when mortgage rates started to rise:

[GilesMM]

As we all know, real estate trends are fairly local. Zillow has broken down the market by city and it's interesting.  VHCOL areas are still hot while others are cooling, especially Austin and the Gulf/Florida coast.






https://www.fastcompany.com/91343006/housing-market-sellers-or-buyers-market-zillow-analysis-for-250-metros

[FINate]

As we all know, real estate trends are fairly local. Zillow has broken down the market by city and it's interesting.  VHCOL areas are still hot while others are cooling, especially Austin and the Gulf/Florida coast.






https://www.fastcompany.com/91343006/housing-market-sellers-or-buyers-market-zillow-analysis-for-250-metros

It's not as simple as VHCOL vs everyone else.

The 10 hottest markets:

Rochester, NY: 169
Buffalo, NY: 126
Charleston, WV: 107
Syracuse, NY: 105
Hartford, CT: 97
Albany, NY: 97
Manchester, NH: 93
Anchorage, AK: 86
Boston, MA: 85
Lansing, MI: 85

Some of these are VHCOL, but many aren't.

The 10 coolest markets:

Jackson, TN: 23
Macon, GA: 25
Gulfport, MS: 26
Brownsville, TX: 27
Naples, FL: 27
Cape Coral, FL: 30
Daphne, AL: 30
Panama City, FL: 30
Punta Gorda, FL: 31
Beaumont, TX: 33

Yes, a lot of these are in FL and Gulf states... I wonder if hurricane risk and resulting insurance costs contribute to this?

Austin, TX is somewhere in the middle as a neutral market.

In any case, there are also some footnotes from linked article worth highlighting:

In ResiClub’s view, Zillow is slightly overstating Northeast and Midwest tightness. While there are still some relatively competitive pockets in those regions, Zillow’s model appears to exaggerate the strength of seller conditions. In the real world, many of these markets feel more neutral or only slightly tilted toward sellers—not full-blown “strong sellers markets” as the model suggests.

Zillow also appears to be overstating seller strength on the West Coast. Conditions on the West Coast have clearly softened over the past year, and Zillow’s model doesn’t fully reflect that shift.

I don't follow RE in the Northeast of Midwest so cannot comment on this, but what I'm seeing on the West Coast lines up. A lot of stuff just isn't selling, even with modest price drops, and inventory is building. I think we'll see some larger price decreases as we get into summer and sellers feel the pressure to close before the seasonal slowdown. I think there will be some good deals for buyers in the late fall/early winter as properties languish.

[JupiterGreen]

As we all know, real estate trends are fairly local. Zillow has broken down the market by city and it's interesting.  VHCOL areas are still hot while others are cooling, especially Austin and the Gulf/Florida coast.






https://www.fastcompany.com/91343006/housing-market-sellers-or-buyers-market-zillow-analysis-for-250-metros

It's not as simple as VHCOL vs everyone else.

The 10 hottest markets:

Rochester, NY: 169
Buffalo, NY: 126
Charleston, WV: 107
Syracuse, NY: 105
Hartford, CT: 97
Albany, NY: 97
Manchester, NH: 93
Anchorage, AK: 86
Boston, MA: 85
Lansing, MI: 85

Some of these are VHCOL, but many aren't.

The 10 coolest markets:

Jackson, TN: 23
Macon, GA: 25
Gulfport, MS: 26
Brownsville, TX: 27
Naples, FL: 27
Cape Coral, FL: 30
Daphne, AL: 30
Panama City, FL: 30
Punta Gorda, FL: 31
Beaumont, TX: 33

Yes, a lot of these are in FL and Gulf states... I wonder if hurricane risk and resulting insurance costs contribute to this?

Austin, TX is somewhere in the middle as a neutral market.

In any case, there are also some footnotes from linked article worth highlighting:

In ResiClub’s view, Zillow is slightly overstating Northeast and Midwest tightness. While there are still some relatively competitive pockets in those regions, Zillow’s model appears to exaggerate the strength of seller conditions. In the real world, many of these markets feel more neutral or only slightly tilted toward sellers—not full-blown “strong sellers markets” as the model suggests.

Zillow also appears to be overstating seller strength on the West Coast. Conditions on the West Coast have clearly softened over the past year, and Zillow’s model doesn’t fully reflect that shift.

I don't follow RE in the Northeast of Midwest so cannot comment on this, but what I'm seeing on the West Coast lines up. A lot of stuff just isn't selling, even with modest price drops, and inventory is building. I think we'll see some larger price decreases as we get into summer and sellers feel the pressure to close before the seasonal slowdown. I think there will be some good deals for buyers in the late fall/early winter as properties languish.

I've mentioned this on these forums before, but the seller's market locations also happen to line up with climate change "safe zones". I think CA RE is partially cooling because of the insurance piece, not so in the other hot seller's market areas. Though flooding on the coast will be costly those people will just move inland in the same state, they are not moving to TX, or GA, or SD. My partner and I are partially climate change "refugees", it was a part of our decision to GTFO and into a red area (on the map you shared, not politically speaking), we will never move from here unless by some other outside force. Anecdotally I've also noticed political "refugees" moving to these areas, as some states infringe upon health care for women and various LGTQI+ issues. These are fairly new issues that impact people day to day and may not follow a past pattern so the models might look different than in the past. But I'm not an expert on the subject, I just know it was a consideration for our move and others we know.

Edit: Just to clarify we were not "political refugees" but climate change did have something to do with our relocation timeline and overall decision. I think the economy (where there are jobs) is a huge part of this, as well as the inability to get insurance. My anecdotal observation is that I have met several people with kids (maybe this is important?) who are moving (or seeking to move) to the place I am now because they believe it is a safer place for their children (their words, not mine). Don't know how widespread that is. I have not seen any numbers on this. But as I said, I believe a number of things are at play here.

Also listing prices are up over 10% from last year in my current state smack in one of the red dots on the map (6/3/25). Might not last, but that's where it is now.

[ChpBstrd]

Anecdotally I've also noticed political "refugees" moving to these areas, as some states infringe upon health care for women and various LGTQI+ issues. These are fairly new issues that impact people day to day and may not follow a past pattern so the models might look different than in the past. But I'm not an expert on the subject, I just know it was a consideration for our move and others we know.

The red dots on the map do align well with areas with high concentrations of Democrats.

Possible interpretations:

• Republican leaning areas are adding supply faster due to regulatory / zoning differences, or have more room to sprawl.
• Democrats are still trying to migrate away from the consequences of national politics, piling into the last remaining "blue" enclaves.

[roomtempmayo]

Anecdotally I've also noticed political "refugees" moving to these areas, as some states infringe upon health care for women and various LGTQI+ issues. These are fairly new issues that impact people day to day and may not follow a past pattern so the models might look different than in the past. But I'm not an expert on the subject, I just know it was a consideration for our move and others we know.

The red dots on the map do align well with areas with high concentrations of Democrats.

Possible interpretations:

• Republican leaning areas are adding supply faster due to regulatory / zoning differences, or have more room to sprawl.
• Democrats are still trying to migrate away from the consequences of national politics, piling into the last remaining "blue" enclaves.

Or/and, some number of people moved to FL, TX, and the southeast more broadly to escape Covid restrictions.  Now that those restrictions are gone, blue states look more attractive, as do big metros with RTO mandates.

[LightStache]

Anecdotally I've also noticed political "refugees" moving to these areas, as some states infringe upon health care for women and various LGTQI+ issues. These are fairly new issues that impact people day to day and may not follow a past pattern so the models might look different than in the past. But I'm not an expert on the subject, I just know it was a consideration for our move and others we know.

The red dots on the map do align well with areas with high concentrations of Democrats.

Possible interpretations:

• Republican leaning areas are adding supply faster due to regulatory / zoning differences, or have more room to sprawl.
• Democrats are still trying to migrate away from the consequences of national politics, piling into the last remaining "blue" enclaves.

Or/and, some number of people moved to FL, TX, and the southeast more broadly to escape Covid restrictions.  Now that those restrictions are gone, blue states look more attractive, as do big metros with RTO mandates.

Right, there's simply a lot more economy in those red dots.

[Paper Chaser]

Climate change fallout, politics, taxes, etc are all contributors, but I think it primarily comes down to supply and demand. The places that are still "hot" tend to be places that didn't rush to build a lot of housing in recent years for whatever reason. Cities in the NE are pretty much built out at this point. They can't sprawl much, and building "up" to increase density gets costly to the point that it's no longer easy money. So, supply remains low, and prices are more stable.

Places like Austin, the Sunbelt, FL, etc all built as much as they could because they were seeing crazy demand, and it was relatively cheap to build out/sprawl. But it seems they either overproduced, or the forecasts were wrong and now supply has increased and prices have decreased. I don't know that the bubble popped, but it does seem to be deflating.

[SilentC]

https://youtu.be/THN9Di3MbXY?si=WzIer7JC491ETnfB

Thought this was the best clip I have seen in mainstream media about the situation, Lance Lambert on Fox Business News.  I was kind of surprised, given it is Fox, they didn’t talk about how big and beautiful and amazing the housing market is right now.

I can’t believe the weekly torrent of inventory in our central CO market.  Each week in our area of interest four or five houses list, there are four or five price cuts on old listings and maybe one home goes under contract.  The inventory just keeps building, and prime selling season is over July 4th weekend because no one wants to close and move after school starts.  It seems like prices have fallen mid single digits since fall 2024 on the latest closed comps and the outlook gets worse each week.