98% of Housing Markets “Weaker” Than Last Year: Good News for Investors?

Dave:49 of the country’s 50 largest housing markets are showing weaker year over year price growth. Is this time to worry or is it an opportunity? Let’s take a look. Hey everyone, it’s Dave and I got a bonus episode for you today. We’re going to be publishing a couple of these quick sort of reaction style shows only on the audio podcast feed, so make sure that you’re subscribed so you catch all of our newest content. Today, I wanted to share my reaction and open a conversation in the BiggerPockets community about a pretty important topic, the widespread softening of the housing market. And when I say softening, I mean slowing, weakening whatever. I am purposely not using the word correction or the word crash because first and foremost, a crash is not happening in any big sense. In fact, prices are still up year over year, nationally and in a lot of markets.

Dave:And although some markets are correcting and have actually turned negative price-wise, many are still positive, but the characteristic that is present in almost all markets, right? As I said, 49 out of 50 are experiencing, this is what I would call softening. And for some markets softening does actually mean that prices have turned negative, but for other markets, softening just means that prices are growing up slower this year than they were at the same time last year. And the reason I’m talking about this, and the thing that I’m actually reacting to in this audio bonus is a recent report from Resi Club. They’re a great data provider. They basically showed that in March of 2024, so a year ago, data wise, I know we’re in May when I’m recording this, but data lags a month or two. So March of 20, 24, out of those 50 biggest housing markets in the country, 47 of them.

Dave:So basically all of them saw rising prices year over year price growth, and three of them saw negative growth. Fast forward to this March, March of 2025, only 34 housing markets saw positive year over year growth while 16 are negative. So keep that in mind as we’re talking about this. And the reason again that I’m using the word softening is that 34 markets are still growing, so we’re not in this widespread correction or a crash, but these markets, even if they’re still positive, they’re just growing slowly. Now regionally, of course there are a lot of differences. You probably won’t be surprised to hear that the weakest markets are in Florida, they’re in Texas, they’re in Louisiana, and they’re going to be strongest, mostly in the northeast and the Midwest in this sort of aggregate context. If we’re looking at this holistically though, according to Zillow, which is just one measure of different ways that we look at this, but Zillow has this thing called the home value index.

Dave:And if you look at it for us, home prices between March of 2023 and 2024. So this is last year’s data. It grew 4.6% this year from 24 to 25, it went up just 1.2% softer, not crashing. But what does this actually mean, right? What does this softening mean for real estate investors to different investors and to different people who have different roles in the housing market or different investors who are at different stages of their investing career. It’s going to mean different things for some people, maybe those people who already own property or who have a large portfolio or people who are approaching retirement, this could be a concern because equity growth is slowing almost everywhere and in a lot of markets it has started to reverse. And I think personally in more markets, it is going to start to reverse. That’s for some people.

Dave:Other people though may see this as a sign of some market crash that they’ve been waiting for, or maybe they’ve been listening to people who have been predicting some market crash for the last 10 or 12 years, and maybe they’re taking this as a sign that that crash is finally after missing it for many years, going to start for other people. There’s a third group too that this is going to be great. A lot of people are going to see this as a welcome relief as housing affordability could start to improve. If prices stagnate or drop wages grow, mortgage rates stabilize or fall, this could actually be good things. So there is no right answer and how you interpret this is going to really depend on your personal situation where you’re at with your investing career. I’m very curious how you all are seeing this, and I know this is an audio episode, but hit me up on Instagram.

Dave:I would love to know where you fall on this spectrum. I will just tell you where I personally fall. I fall into the third category because yes, I do have a property portfolio that I’ve been building for 15 years and a very large amount of my net worth is in residential real estate. It is definitely the biggest chunk of my wealth. I also have a lot of investments in commercial real estate, in private lending and stock market. So yeah, there is definitely a piece of me that hates seeing the value of my properties decline. I think that is very natural. Everyone mentally anchors what their portfolio value is to that peak price that they’ve seen it. And when you see at least on paper that your returns are declining or your equity value is declining, it’s not that fun. But when I step back a little bit, take a breath and don’t panic and zoom out. Take a longer term, look at this situation, and that’s what I always try and do and advocate for on the show thinking. I actually think this is kind of good and it’s to be expected and I’ll explain why after a quick break.

Dave:Welcome back to the BiggerPockets podcast. I’m here with this audio bonus giving my reaction to a recent report that showed that prices are softening in 49 out of the 50 biggest metro areas in the United States. And right before the break, I was telling you that yes, everyone should interpret this differently based on their own career and what they’re trying to accomplish, but for me, I fall into this bucket of people who believes that prices softening right now is actually sort of the best thing for my portfolio and basically just for the health of the housing market. Let me explain why we all know this, but housing is unaffordable right now. We’re actually near 40 year lows. It’s one of the most unaffordable periods for housing in US history. And this isn’t good in my opinion, for investors or homeowners or the economy as a whole.

Dave:First and foremost, it really limits cashflow because when you’re paying a high price for property, your expenses go up and rent has been relatively flat for the last couple of years. So that has really squeezed cashflow. It’s also bad for homeowners as it raises total costs of living. It undermines a lot of what I believe American culture and society is based around. People believe in home ownership in this country and it’s underpinned a lot of wealth creation for generations. And when it’s unaffordable, that is really hard and I totally appreciate that for value add investors for flippers, that it has been a good period over the last couple of years, but it just can’t go on this forever. There has to be a point where affordability gets restored, and I’m actually not one of those people who believes that affordability needs to come back to some historic average.

Dave:I actually think there’s a better chance that we are in a new era where homes remain less affordable than they were in the nineties or the eighties or anything like that. But right now it’s just so unaffordable that I do think we have to have some reversion to the mean. And the way that you get some reversion back to affordability, it can come in three different ways. You can have slower price growth or declining prices. That’s one way based on prices. The second thing is wage growth. If people start earning more money, that is another way where affordability improves if you are holding prices equal. And then the third way is that mortgage rates start to come down. And I’ve actually been saying this God for two or three years now, but I think the way that we get to more affordability is some combination of these three things.

Dave:I don’t think we’re going to have a crash, but I do think prices could soften. I’ve said it a couple times this year. I think we might see some modest corrections, nominal home prices. We’re seeing corrections in real home prices, which is inflation adjusted home prices. And I think that’s going to continue. So I think this is sort of an important part. I don’t necessarily think prices need to come down, but they do need to stagnate a little bit to improve affordability. That will give us time for wages to go up and for mortgage rates to come down slowly, I think they were going to. So that’s why I think this is kind of a good thing because the other ways we get affordability back is a crash. That’s not a good thing. We can get it by runaway wage growth, but that’s probably not going to happen.

Dave:Or we can get it by rapidly declining mortgage rates, which some people think is going to happen. I think it’s unlikely, at least in the near term, and the only real way you get rapidly declining mortgage rates is something terrible is going on in the economy. The last two times that happened was the great recession, and I don’t think anyone wants those things to happen again. And so to me, the best case scenario for the housing market is we have this sort of slow return to affordability. I know it’s not what everyone wants. People want it fixed right now. That’s just how people are, but that’s not going to happen. Instead, we need to have sort of stagnating price appreciation. We need wages to keep growing and we need mortgage rates to come down generally. And so I see this sort of as one of the steps for that to happen.

Dave:This is kind of what I’ve been saying for years is I think what happened and so makes sense to me that this is happening. So that’s one reason I personally believe that this is good. I’m trying to build a portfolio for the long run, and I want the housing market to be healthy for the lifetime of my investing career. The second reason I think this is generally a good thing is that lower prices means less competition and it means that there can be better deals, right? This is just true. The way that prices come down is that there are more sellers than buyers. That’s just how economics works, right? Supply and demand. There’s more supply than demand. More people want to sell their home than people want to buy their home. And so how do those sellers compete for the limited pool of buyers they negotiate and they lower prices.

Dave:And so this just means that in this type of market, there’s a reason we call it a buyer’s market. When we have this kind of situation, we as investors are able to find better deals, we’ll be able to find more motivated sellers, we’re able to negotiate, and this presents an opportunity to buy great long-term assets and a discounted price. And this is kind of a cornerstone of the upside era that I’ve been talking about. If you are a believer in an upside investor like I am, lower prices right now are necessarily a bad thing. Of course, you do not want to buy a bad deal. You want to find great intrinsic value, and you have to be comfortable with the idea that prices might be stagnant for a year or two. But if you’re like me and you’re in it for the long run, prices are going to go back up.

Dave:That has always happened in the United States, and I still think those things are true. And so lower prices, less competition could be good in the short run. So that’s the second thing. Like I said, first thing is an improvement in affordability. The second thing is less competition and better deals. And then the third thing of why I think this is not bad, I don’t think this is necessarily a reason. It’s good, but it’s not bad, is that if you own property and prices are going down, it is what is called a paper loss. That basically means, yeah, sure on paper, if you’re looking up your estimate and calculating your net worth, maybe your equity has gone down and your portfolio has gone down, but you hadn’t realized that gain, you didn’t sell your property. And so it’s not like you’ve lost actual money. It’s what again, it’s called a paper loss because kind of just this hypothetical mode.

Dave:And again, I think that is worth it. If you’re in building mode or in growth mode in your investing career, you cannot always have great growth and good prices and low competition all at once. There’s going to be trade-offs. And I think if you’re in building mode, the temporary situation where we’re going to have lower prices for a lot of investors, not everyone, but probably for most investors, that can be a good thing. And to endure some paper losses in the short term to get those better prices, to me at this stage of my career is worth it. And again, I want to caveat all this by saying these types of markets are riskier. Absolutely. When prices are going down, they are riskier, but they do present these opportunities if you have the ability to find great deals. So what does this mean? What am I doing personally?

Dave:I think better deals are coming and I’m already starting to see some, there was a property I was looking at in January, still sitting on the market, still trying to negotiate that price down. But you’re starting to see people take your calls. You’re starting to see more price drops on the segment that I personally target, which is small. That’s been super inflated over the last couple of years, and it’s starting to weaken a little bit. And to me, that’s a good opportunity to buy at a better rent to price ratio and to get better value and potential for future equity growth than I’ve seen in the last couple of years. And because I am seeing these better deals, I am actually starting to raise some cash. I’m starting to think about how I can put myself in a position to buy either more small multifamilies or single families, but also potentially some multifamily as well.

Dave:Probably not this year, maybe at the end of this year or next year. But that’s sort of what I’m thinking. And to do that, I’m actually almost certainly, I’m going to decide in the next day or two, but I think I’m going to put one of my properties on the market to raise some cash so that I can go out and buy more deals. And the property I’m probably going to sell, it’s not a bad one, but I just kind of think the appreciation has sort of run its course and it’s going to stagnate, like I said, and the cash flow is okay. It’s not special. It’s solid, but it’s not amazing. And I want to basically reposition to a, that is going to be lower priced and will grow in value once that market pendulum swings back in the other direction, which it is inevitably going to do. So that’s how I see all this, what I’m planning to do, but what do you think? Is this a good thing for investors or should we all be collectively worried? Hit me up on Instagram or share your thoughts on the BiggerPockets forums. I think it would be a great conversation for all of us to have. Thank you all so much for listening to this bonus episode of the BiggerPockets podcast. I’m Dave Meyer. I’ll see you next time.