Home Prices Could “Stall” for Years | October 2025 Housing Market Update

0:00The housing market is weakening, and that sounds scary, doesn't it? But a weakening housing market can actually mean better buying opportunities than we've seen in years. But to find the best deals in this kind of market, you need to understand why price growth is slowing and whether that's likely to continue or if you're buying at the bottom right now. So today I'm going to share my analysis to help you answer that question for yourself. This is the BiggerPockets October 2025 housing market update.

0:35Hey everyone, I'm Dave Meyer, head of real estate investing at BiggerPockets. Welcome to our October 2025 housing market update. In today's episode, we're going to do a deep dive on home prices because there's more happening than you'd think from just looking at those top line national price trends. Then we're going to look at inventory and we'll analyze some rent trends and see where those are pointing as we head towards 2026. And of course, like every month, I'll end this market update with my own opinions on where the market is heading next and the actionable steps investors can take right now to align their own strategies with the best opportunities available.

1:15Let's get into it. First up, we're going to do this deep dive on housing prices, and we're going to go a little bit deeper than we normally go on housing prices because there is more than meets the eye right now. People, when they're talking about home prices, they tend to look at something called nominal home prices. When you hear the word nominal, that just means not adjusted for inflation. And this is useful. There's nothing wrong with looking at prices this way. It's the price that you probably hear. It's the price that you actually write a check for when you buy something. It's the price you see on Zillow or Redfin or realtor.com.

1:52But it is not the only way that you can look at housing prices. There is another way to look at it that's called, quote unquote, real prices. And real prices are adjusted for inflation. And although it's maybe not the most intuitive thing or the thing that you hear about most, it's something you absolutely should be paying attention to right now because it really gives us insight into what's happening in the housing market, where growth is right now, and where it might go in the future. And as investors, those are critically important data points that we need to make informed decisions about our portfolios.

2:29So we're going to talk about this, and I just want everyone to remember, nominal means not inflation-adjusted. That's the price you see on paper. Real means inflation-adjusted prices, which I'll explain a little bit more in just a minute. When you look at nominal prices, those are actually still up right now. Now, depending on who you ask, if you look at the Case-Shiller, they're up about 1.2%. I think Redfin has it at 2%. Zillow has it about flat. So when you look at those nominal prices, it's still doing OK. Now, if you want to get really nerdy about it and seasonally adjust that data, you would see that nominal home prices are down about 1 % off their all-time highs, which was back in February of 2025.

3:11So given everything that's going on, housing market still doing OK. That's not exciting, exceptional growth, but we are three and a half years into a very aggressive rate tightening cycle. Affordability is pretty low right now. And so given all of that, to see nominal home prices be somewhat flat year over year, that's actually pretty good. But when you look at housing in that other way, when you look at it in inflation-adjusted real terms, the story is different. It's more different than you actually might imagine. Rather than just being a little bit off their peak, right now, prices in real terms are about 3 % below their peak, which actually happened back in 2022, 38 months ago to be exact.

3:58So if you think about it in that way, that it's been 38 months and prices have come down a little bit, I mean, 3 % correction, given how fast things grew during the pandemic is not crazy. But when you look at it in this real terms, you actually see that the housing market has already been somewhat flat for the last three years. And that's happened even as you've seen the prices on paper go up year after year after year, even though that growth rate has been slowing. And I think this distinction is really important for a couple of reasons. First and foremost, as an investor, I really care about whether my home price growth is at least beating inflation.

4:37Ideally, it is beating inflation. You don't want to make an investment in an asset that is going to appreciate lower than the pace of inflation. Because when you calculate then your quote unquote real return, it's actually negative, right? If you were to buy a property that went up 1 % nominally, and then you subtract the 3 % inflation we're at, you actually lost 2 % on your return. Now that's for an all cash purchase. Leverage kind of changes that situation, but I'm just trying to explain why this is really important because you as an investor want your property, your asset values to at least go up as quickly as inflation.

5:15And that's not happening right now with housing. The second reason this is really important is because I think real home prices help us understand where the housing market might go next and where we are in sort of a historical context. Because when you look at real home prices, it actually tells a very, very different story than nominal home prices. If I were to ask you to guess how much real home prices are up in terms of the pre-crash level, you know, 2006, how much more would you say would be? Prices have exploded since then, right? So in real inflation adjusted terms, how much is it up? Is it 50 % higher?

5:52Is it double? Is it triple? It is actually 10%. Housing prices are only up when you adjust for inflation 10 % from the bubble period. If you compare it to the low, you know, during the crash 2012, they're up a good amount, 60%, but still nothing close to what you see on paper. People point to home prices and say, oh my God, they have doubled. They've tripled in the last couple of decades. And that is true when you look at them nominally. But a lot of that price increase is actually just inflation. Other assets, other goods, other services have also risen at really rapid rates. And when you look at the last 19 years in inflation adjusted terms, how much have home prices grown?

6:3810%. And this is actually normal. I know a lot of people make a lot about appreciation in the housing market and say, oh, you should invest for appreciation. But actually, if you look back decades, back to the 1970s, which is what I have good data for, if you look at that, what you actually see is the average appreciation rate in the United States is about 3.5%, 3.4%, 3.5%. The average inflation rate is about 2.5%. And so when you look at appreciation in real estate, it's not actually all that much appreciation. You get about a one, one and a half percent, quote unquote, real return. The rest of it is just inflation.

7:18Now, I'm not knocking on appreciation because one of the best values, one of the most important reasons to invest in real estate is because it's a very valuable inflation hedge. And that is very important right now, in my opinion. So don't get me wrong. I'm just saying that if you want to look at home prices and how they grow compared to inflation, it's really not all that much historically speaking, which is why I always advocate on the show for investing, not just for appreciation, but for cashflow, for value-add opportunities, for amortization, for tax benefits, because appreciation might look good on paper, but when it comes to actual spending power and how much it actually improves your quality of life and contributes to financial freedom, it's not as much as people think it is.

8:02So that's why these things are important, But I also want to just explain why I'm telling you this. It's because in the next few years, I think it is very likely that we see real home prices continue to stall out. And that is true, in my opinion, even if nominal prices increase. And this is something I want the BiggerPockets community to be aware of and to think about is that even if you see prices up 1%, if inflation's at 3%, that is a negative real return. That means prices in reality are actually pretty stagnant right now. So there's a couple ways logistically this could happen. You could see nominal home prices go up a little bit like they are now and inflation run a little hot.

8:44And that means real prices will be down. Or you might actually see both. You might see nominal home prices go down. That is personally what I think is going to happen probably at least in the next six months, maybe in the next year or so, is that we'll see modest nominal price declines and we'll have inflation at two to three percent. And so real returns are probably going to be negative four to six percent. I'm just estimating right now. These are not official predictions, but, you know, something like that in the next year, we might actually see that. And this is not a reason to panic. This stuff happens in the housing market, but it is pretty important to know, right?

9:19If your real return is negative right now, you should be thinking, OK, I need to change my real estate investing strategy based on that reality. And that's something we're going to get to later in this episode is how do you adjust to this kind of market? Because you absolutely can, and some would argue should invest in this kind of market because you get great assets at good prices, but you got to adjust how you do it, right? That should be evident to everyone is that you invest differently in a correcting market like this than you do in one that's growing rapidly. Again, I just think that investing for appreciation, market appreciation, not forced appreciation, is a bad idea, in my opinion, in today's market.

9:58The best comp that we have is the 1970s. And what it shows is that during that period, when you saw real home prices accelerate a lot, it started to come down like we've seen here. And it took nearly seven years. It took six and a half years for real home prices to recover. Now, we don't know if that's going to happen again, but six and a half years is not an unreasonable timeline. line if you look at other data. During the 90s, it took about 11 years for a previous peak. So this can take a while, especially when we have really low affordability. And this is what I want everyone to remember is that even if nominal home prices grow a little bit, what you really want to look at if you're going to understand when the real big returns are going to come, when you get those outsized gains that real estate can offer you, it comes not when nominal home prices are going up.

10:48It comes when real home prices are going up. And in my opinion, that's probably not going to happen for at least this year and probably for a few years after that. That does not mean you cannot invest right now. I think there's very good arguments that you should invest right now because you're going to get assets at a discount, but it does impact your strategy. You need to think differently about a market where real home prices are not growing than you need to think about a market where real home prices are growing. We're going going to talk about that more later in this episode. But first, let's talk about why this is happening in the first place, because if you understand why it's happening, that's going to inform the things that you should do in your portfolio to mitigate any risk and take advantage of the opportunities that are going to come.

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15:29welcome back to the bigger pockets podcast i'm dave meyer here presenting our october 2025 housing market update before the break we talked about the difference between nominal not inflation adjusted and real inflation adjusted home prices and how they might be telling different stories right now and although nominal home prices aren't incorrect and they are important to know i really suggest investors when you're planning your portfolio think about real home prices and how they're going to change in the next couple of years, that really tells us how we should be investing over the next couple of years.

16:01But before we get into some of those tactical things, I want to just talk about why this is happening. Why are prices stalling out in real terms? And why did I say earlier that I think they're going to continue stalling out in the future? For me, the story is the same. It's the same thing I think I've been saying for three straight years now and I'm sticking with it. The housing market is just in an affordability crisis. I know people talk about the housing market and they think, oh, there's going to be this big crash. The problem with the housing market is not that prices are going to go into a free fall.

16:34The problem with the housing market is that more people cannot afford to buy homes, and that is constraining demand. And it is also constraining supply in the housing market, which is leading to this weird sluggish market with low transaction volume. And what I think is going to be sluggish or declining real home prices over the next couple of years. If you measure this, and there are ways to measure housing affordability, there's actually just a million different ways to measure them. But pretty much everyone that you look at shows that housing affordability is at its lowest level since the 1980s.

17:07The last time it was this low was in 1982 before I was actually even born. And what's actually remarkable to me is that it hasn't slowed the housing market even faster. Affordability has been this low since 2022, essentially, since mortgage rates started to go up. But we have still seen strong demand over the last couple of years. But now inventory is starting to build up. And this can happen, right? You can have a similar number of buyers from 2022 to now, but we just have more people opting to sell. That is sort of the key dynamic that's going on right now is we have more and more inventory, even though demand is staying somewhat similar.

17:47If you read the news or follow the housing market on other channels, you probably see some scary headlines out there that are saying inventory is up like crazy. And there's some truth to that. Like if you look at the best data for this, it shows that inventory is about 17 % higher than it was last year. That's a big year over year jump. You know, 17 % more homes on the market today in any given market than there were a year ago at this time. During normal times in the housing market, that would be quite alarming. But what's important to remember whenever we talk about these things is that when you talk about year over year data right now, it's just not that reliable because we've been in this very unusual market for the last couple of years.

18:28And so when you look at inventory in 2025 and compare it to 2019, the last arguably normal housing market out there, it's actually still below that. So I think that people freaking out about inventory is a little overblown because we still see it below what is a quote unquote normal level. Now, recent changes do matter. Like it does matter that it's up from last year. That is going to put downward pressure on prices. That's why we're seeing that right now. But I like to put this in sort of historical context, too, to make sure that no one's misinterpreting what's going on here and thinking that we're entering some big crash.

19:04Inventory can go up for two reasons. It can go up because there's less demand or it can go up because there's more supply. And right now what's happening in the housing market is it's going up because there's more supply with more inventory. And because new listings are going up faster than demand, that's what leads to softer markets, right? It basically means that there are more sellers than there are buyers right now. Those sellers aren't pricing things accurately. That leads to price cuts. That leads to better negotiating leverage from the buyers. And that means a softer market where prices are gradually coming down.

19:37And of course, this is on a national level. It's different in different markets. But when you look across sort of the entire spectrum of things that are going on in the housing market, you see softening in every market. Even if you are in Milwaukee or Detroit or Providence, Rhode Island, there's some of the hottest housing markets right now. They've gone from 7 % year over year growth to maybe 3 % year over year growth. So even at some markets haven't yet turned negative, this dynamic of rising inventory relative demand is happening everywhere. And that's why prices are starting to come down. Now, I want to be clear that this idea that inventory going up and prices coming down might sound scary, but it's actually an advantage to investors, right?

20:19This is one of the advantages that will be in the market going forward. Now, of course, I'm bringing this up because it's important that everyone knows that prices are probably going down. This is important information for a real estate investor. And I know it sounds scary, but it really depends on your mentality about it. Because if you're looking to buy great assets at great prices, price declines are actually an opportunity to buy if you adjust your mindset to take a long-term view of the housing market and think about how do I position myself in the market so that I have great assets when that real home price appreciation actually comes around.

20:57Remember, that's what really builds a ton of wealth in real estate investing is these periods of time that you can't predict perfectly, but there's been many of them over the last several decades where real home price growth really accelerates. You need to be in the market when that happens. And because you can't time that perfectly, the important thing is how do you find great assets that are going to really have a lot of upside when that real home price grows? And so if you think about it this way and look at the market right now, you say, I have an opportunity to buy assets at lower prices than I've been able to over the last couple of years.

21:35Maybe that means I'll be able to get a higher quality asset that's going to grow even faster when that real home price appreciation actually happens. So I'm sharing this because it's important that everyone knows this, but I don't want you all to see this as strictly negative. It is neither positive or negative. Every kind of market has its pros and cons. Con, yes, there is risk in any market that has declining prices. Pro, it means that if you're in this for the long term, you're going to be able to buy better assets than you have been for at least the last five years at better prices. That's a significant benefit that you shouldn't forget about.

22:09We're going to get more into some of those tactics in just a second, but I wanted to share one more data set before we do, which is about rents. We haven't actually talked about this in our housing market updates recently, but as a landlord, as a long-term investor myself, it's something super important that we should be updating everyone on. So here we go. There are tons of ways to measure rents. There's tons of different methodology. It's actually not as simple as you might think. So I'm actually going to combine a bunch of different data sets. But basically what you see, if you look at all of them combined is similar to the home prices is a slowing growth.

22:46For some markets, that means it might still be positive. For some markets, that might be negative. But almost every market in the country, the rate at which rent is growing is declining. Every data set I've seen shows that rents nationally are somewhere between 4 % positive and negative 1%. And during a normal year, 4 % positive would be a pretty good year. But this is way down from the pandemic. When we saw it in some markets, we saw 10, 20. I think in some markets hit 30 % year over year rent growth during certain in years. And so this is just a really big shift. Now, you can break down rent growth into a couple of different categories, and you should based on what you're investing in.

23:26But most of the weakness in rent or the weaker segment, I should say, in rents right now comes from multifamily. And that is because during the pandemic, times were very good and a ton of multifamily construction started. and that's still coming online. Buildings that were permitted during 2021, 2022, some of them take two or three years to build. And so we are still in a historic level of deliveries on multifamily. Deliveries is just a term that means, you know, the market is, the unit is getting put on the market for rent. And we have been in this sort of historically high peak of deliveries for about the last year or so.

24:06And it is starting to wind down, which is good. something we need to pay attention to that could help rent. But that, to me, is the main reason why rent is slowing down. The other reason it's slowing down is probably because the economy as well. We are not officially in a recession. I don't think we're in a recession right now, but there are a lot of signs, whether you call it a recession or not, that the average American consumer is constrained right now. We see that 50 percent of spending in the United States is coming from the wealthiest 20 % of people. For the other 80 % of people, you're seeing higher delinquencies on different forms of debt.

24:43You're seeing lower consumer confidence. You are seeing lower wage growth. There's all sorts of nerdy economic data stuff that points that the average American consumer is constrained. And when that happens, there is less household formation. We're really getting into the weeds right now, but this is important. Basically, when people feel constrained financially, they don't go out and rent a new apartment. As a simple example, if you're living with a roommate and you're feeling insecure about your job or the economy, or you're worried about inflation, you two may not choose to go get one bedrooms each.

25:16You might choose to be roommates for one more year because that's more cost effective. And I know that's just a small example, but if you actually think about that in aggregate, whether it's roommates or families, people deciding to move out of their parents' house, whatever it is, when there's less household formation, that means there's less demand for rental units. When there is less demand for rental units, particularly during a time when there is historically high supply, that's going to push down rents. And it is mostly concentrated in the multifamily market, but it's also in the single family market too.