Sellers Do What No One Expects | Dec. 2025 Housing Market Update

0:00We have made it to the end of 2025, but the housing market continues to change and shift and confuse as it has all year. But today, we're going to make sense of it. This is our December 2025 housing market update.

0:19Hey everyone, it's Dave Meyer. I'm a housing market analyst and I've been a real estate investor for 15 years and I am the head of real estate investing here at BiggerPockets. And it's hard to believe last housing market update of the year. It has been a truly wild year in the economy and the housing market. We started with one that was rapidly cooling, rates were in the sevens, things were feeling stalled out, inventory was going up. Then fast forward to today, although it might not feel like much has changed, a lot actually has changed. I see it in the data wherever I look. We are very much in a different situation heading into 2026 as we were in 2025.

1:01And honestly, I think there's some good news here There are good opportunities starting to emerge, but of course, there are risks that need mitigating too. We're going to get into all of that, both the risks and opportunities in today's episode. First, we're going to talk about home prices. Then we'll talk about some good news, finally, on housing affordability. We'll get into a new trend that's emerging with sellers and how they are trying to wrestle back control of the housing market. And we'll end talking about underwater mortgages. And this article that I keep seeing everywhere in the news these days, I will address head on if underwater mortgages is a potential risk to the market going into next year.

1:46That's the plan for today. Let's get into it. First up, major headlines here. What's going on with prices? Everyone wants to know. Well, according to Redfin, prices are up 1.4 % year over year, that's still relatively good. We are not in any sort of crash. I would still call that a correction because prices are down in real terms. 1.4 % is a little bit flattish to me, but not bad given where we started this year. Remember when rates were at 7.25, inventory was up 30 % year over year. Everyone was saying that there was going to be a crash. I did not, just for the record. I said we would be kind of flattish and I think that's where we are.

2:26Just as a reminder though, just one year ago, appreciation rates were still at 5%, which doesn't sound like much, but that's well above the long-term average of 3.5%. It's well above where we are today. So it is important to note that we've had significant cooling in appreciation rates over the last years, but we're not talking about declines, at least on a national level yet. That said, there are major regional differences going on. According to Zillow, 105 of the top 300 regional markets are in a decline right now. So basically a third of the biggest metro markets in the country are seeing housing prices go down.

3:05And that number, the total of markets that are seeing a decline has gone up a lot. If you look back to January, it was only 31 markets. And by June, it had more than tripled up to 110. But now it's actually back down to 105. So this is treading water and staying flat. And that's really important. Obviously, the markets that are in a correction, you're going to have to take different tactics in those markets than the ones that are still doing right now. But I think the fact that the number of markets that are correcting is relatively even shows some stability to the housing market despite everything that's going on.

3:40Now, the depths of those corrections are wildly different. If you look at Punta Gorda and Cape Coral, these are kind of the poster child for the Florida crash that's going on right now. Punta Gorda down 13 % year over year. That's a lot. That's a crash in that market. Cape Coral down 10%. I think if you're losing 10 % in a single year, you could call that a crash. I wouldn't argue with you there. We even see all four, actually, of the top markets seeing declines. I guess you'd call those bottom markets are all in Florida. Punta Gorda, Cape Coral, Northport slash Sarasota, and then Naples. Those are the top four.

4:16After that, we see Kailua in Hawaii, Austin, and Texas. Then it's back to Florida. Then we got Tampa, Sebastian Vero Beach, Daytona, Port St. Lucie. So 12 of the biggest corrections in the country, 12 of the top 14 are all in Florida. So you can see that it's highly concentrated there. The other trends are in the Gulf region. So Texas and Louisiana are also seeing some of the bigger corrections. And then they're sprinkled throughout the countries as well. There's definitely markets in California. You see some markets where I live in Washington and Denver. There's definitely corrections too. But like if you're just looking for the trend, the Gulf region is where it's mostly concentrated.

4:56On the other end of the spectrum, no surprise here, Midwest is still seeing some of the strongest appreciation rates, but those rates are coming down. So Chicago, you see Milwaukee, you see Cleveland, you see these markets are still up, but they're now up like two or 3 % instead of last year, six or 7%. So everything, appreciation rates are slowing down all across the country. So let's move on to mortgage rates, as this is going to be a very important barometer for next year. It also tells us a lot about what's been going on this year. This has been a positive story. I know people are not happy with six and a quarter percent mortgages, but they should be because a year ago they were about 6.75.

5:36If we look at January, they peaked out at seven and a quarter. Now they're at six and a quarter. A 1 % drop in mortgage rates over the course of a year is good news. That is a positive thing for the housing market. This is one of the reasons why the market has shifted this year. Like I said, we started 2025. People were very worried about a crash because mortgage rates were 7.25, horrible affordability, inventories going up. Well, maybe it's not the banner mortgages that we saw during COVID, but the fact that rates have gone down, one full percent matters. That brings millions of people into the housing market.

6:14That improves affordability for investors and for homeowners. And so that's a really good thing. Where we go into next year, I've made my predictions about this. They will hopefully stay in the low sixes, maybe even get into the high fives. And there's some encouraging signs about that, right? If the Fed keeps cutting rates, that could put more downward pressure. If yields keep falling. The other good news, if you're into this kind of thing, is that the spread between treasury yields and mortgage rates is coming down, which is one of the things that is prop mortgage rates up. So I think there's good momentum here that mortgage rates could keep coming down a little bit, but are probably not going to be coming down in any dramatic way, unless something dramatic happens in the economy.

6:55One thing I did want to call out for real estate investors, just a piece of advice, is that refinancing is starting to get a little bit more attractive. I think when you go from seven and a quarter to six and three quarters, like people aren't really that interested. But when you lose a full percentage point, depending on the price of your house, that could be hundreds of dollars per month in cashflow that you could be generating or saving if it's your primary residence by seeing rates come down this much. And I know people might say, oh, Dave, you said rates could come down a little bit more.

7:26You could wait. But I just want to call out that just in this last year, there's some data that came out from the mortgage monitor that comes out from ICE each month, they said that 3.1 million more mortgage holders are sort of in the money for refinancing over the last couple of years because they could reduce their rates by 75 basis points. I thought that was pretty interesting. I didn't know that math before, but if you can cut your rate by three quarters of a percent, so 0.75%, that usually makes it worthwhile for most people. And so if you are holding onto mortgages right now that are in the sevens, if they got a seven in front of it, if they got an eight in front of it, because investors might have one with an eight in front of it, you may want to consider refinancing right now.

8:11You could wait a little bit, but things bounce up and down. Like it's hard to know. I actually got a message on Instagram yesterday from a guy who said that I saved him$800 a month. I guess he has an expensive mortgage. I think he lives in LA. I saved him$800 a month because I told him to refinance before the rate cut because I said that mortgage rates were going to go back up. And they did. And apparently that saved him a whole bunch of money. So I just want to point out that waiting doesn't always work. And considering refinancing might be worth it. I think it's at least worth talking to a banker if you have a mortgage with a seven or eight in front of it.

8:47Something to consider. So I think high level housing market stuff, this is relatively positive. We need affordability to improve. And so seeing relatively flat prices, in my opinion, is pretty good. I don't want to see prices crash, but I don't want to see them explode again. I want to see them stay stagnant. That's really good. And mortgage rates have come down. They're starting to come down a little bit more. I think that's a great way to end the year in 2025 and bodes well for the beginning of 2026. We need to talk more about affordability, though, because this is what everything in the housing market hinges on.

9:19and we're going to talk more about new data on affordability right after this quick break. We'll be right back. As a real estate investor, the last thing I want to do, or have time for, is play accountant, banker, and debt collector. But that's what I was doing every weekend, flipping between a bunch of apps, bank statements, and receipts, trying to sort it all out by property and figure out who's late on rent. Then I found Baselain, and it takes all of that off my plate. It's BiggerPocket's official banking platform that automatically sorts my transactions, matches receipts, and collects rent for every property.

9:55My tax prep is done and my weekends are mine again. Plus, I'm saving a ton of money on banking fees and apps that I don't need anymore. Get a$100 bonus when you sign up today at baselane.com slash BP. Vacation is expensive. Your empty place doesn't have to be. If you're heading out of town and your home is sitting empty, You could list your space on Airbnb while you're away and turn those unused nights into extra income. And with Airbnb's co-host network, getting started is more straightforward than most people think. You can hire a vetted local co-host with hosting experience who could create your listing, manage reservations, handle guest communications, and even provide on-site support for guests during their stay.

10:39So while you're away spending money, your space could be working in the background, bringing in extra cash. Find a co-host at airbnb.com slash host. If you've ever run rentals, you know this feeling. Your maintenance guy quits, two turnovers hit at once, tenants are texting you at midnight, and suddenly you're the plumber, the leasing agent, and the bookkeeper. Total chaos. That's when I think, this is not my job. This is a job for Indeed Sponsored Jobs. Because hoping the right person randomly finds your job post, that isn't a strategy. With Indeed Sponsored Jobs, you can actually target people with the exact skills you need.

11:14Property managers, techs, bookkeepers, people who can jump in fast and fix problems. And here's the thing. People are finding quality hires on Indeed right now. In just the minute I've been talking to you, companies like yours made 27 hires on Indeed, according to Indeed data worldwide. That's real momentum. Spend less time searching and more time actually interviewing candidates who check all your boxes. That means less stress, less time, but more results. When you need the right person to cut through the chaos, this is a job for Indeed-sponsored jobs. Listeners of this show will get a$75 Indeed-sponsored job credit to help get your job the premium status it deserves at Indeed.com slash podcast.

11:55Just go to Indeed.com slash podcast right now and support our show by saying you heard about Indeed on this podcast. Indeed.com slash podcast. Terms and conditions apply. This isn't your job. It's a job for Indeed-sponsored jobs. Everyone loves talking about big returns, but here's the problem. Returns don't tell you how efficient your investment actually is. Because once taxes hit, that great deal can look pretty average. That's why a lot of experienced investors focus on multifamily, not just for cash flow, but for the tax advantages. Depreciation can help offset income while the property is still produce it.

12:35BAM Capital builds its strategy on that reality, focusing on active asset management and tax-aware structuring to help accredited investors navigate complex markets. If you're exploring passive real estate, understanding this tax-efficient framework is a great place to start your due diligence. Learn more at biggerpockets.com slash BAM. Only for accredited investors, past performance is not indicative of future results. The rise of the tech-savvy investor is here. You don't need a huge team or tons of overhead to manage rental properties. Just the right tools. So I want to tell you about how I use RentReady to get ahead.

13:09For landlords who treat their time like capital and recognize the cost of sweat equity, this tool gives you everything you need to scale. Rent collection, tenant screening, maintenance accounting, so that you're organized come tax season and you can run numbers in preparation for future deals and more. All in one platform via a mobile app or desktop. Modern landlords don't just own property. They optimize it. RentReady will keep you organized, running leaner, and ready to grow. Start with RentReady. Visit rentready.com slash biggerpockets. That's rent-r-e-d-i dot com slash biggerpockets. And use code BP2025 to get RentReady's six-month plan for a dollar.

13:49Welcome back to the BiggerPockets podcast. I'm Dave Meyer here giving our December housing market update for 2025. Before the break, we talked about flat home prices, declining mortgage rates. What those two things mean though, when you take those two things in aggregate, they give us what I think is the most encouraging sign that we have seen in the housing market for a year, maybe more, maybe three years. Home affordability has hit its best level in two and a half years. That's as of September, last time we have data for this, but this is fantastic news for the housing market. And it is driven by the two things that we talked about before, the break, rates are easing and prices are pulling back.

14:32Now, I know I said that prices are up 1.4%, but when it comes to affordability, what you need to measure is how do prices compare to inflation. And if they're up 1.4 % year over year, but inflation's at 3%, they've actually gone down in inflation-adjusted terms. And that means that it is more affordable for people, right? Their wages are going up relative to the price of a home, that makes housing more affordable. If you combine that with falling mortgage rates, we are getting improved affordability. This is great news. This is something I think is worthy of celebrating. Now, it is not the best affordability we have ever seen.

15:17It is far from it. We just in the last year, we're near are 40 year lows. So we're probably at 38 year lows for affordability. This is not like we should be celebrating because all of a sudden housing is affordable. We should be celebrating because you got to start somewhere. The trend was moving in the opposite direction for so long. Housing was getting less and less and less affordable. That's not good. It's got to bottom out, right? And start moving in the right direction. And fortunately, I think that's the direction we're heading. So that is good, right? We are seeing that across the board.

15:50If prices stay flat or ish, decline a little bit, like I think they will next year, mortgage rates come down a little bit. That's the affordability movement that we need. This is the whole premise of the great stall that I've been talking about for months or years now is that this is the most likely path for the housing market. And it does seem that it is true, at least as of now. So I think that's a good thing. Just to build on this a little bit more, actually, out of the 100 largest markets in the United States right now, 12 of them, primarily in the Midwest, have now returned to long-run average for affordability.

16:25I know that doesn't sound like a lot, 12%. It really isn't a lot. But given where we've been over the last couple of years, where every market has been unaffordable, the fact that there are any markets in the US that are getting close to historic levels of affordability, again, is good news to me. I know we have a long way to go, but baby steps, and we're taking some baby steps getting there. Now that we've talked about affordability, let's call it our main story for today on this housing market update is about the behavior of sellers in the housing market. This is really important to inventory because the story of this year in 2025, and really, honestly, for 2022, 23, and 24 has all been about what is happening with housing inventory.

17:07It is so important. It is the most important metric for really trying to understand where the market is today and where it might be going in the next couple of months. Because when inventory is high, prices face downward pressure. They might be flat. They might go down a little bit. But you have that downward pressure weighing on housing prices because there are more sellers than buyers. When the opposite is true, when inventory is low, prices have upward pressure, right? There are more buyers than sellers. They tend to bid up the prices. And so prices tend to go up. and that's how inventory influences the market.

17:40Now, during the pandemic was an extreme example, an example of super low inventory. But when we started 2025, we were starting to see that story unravel where we were seeing really high inventory growth rates. Now, inventory wasn't high in some historical context, but the growth rate was up. Like we saw in January, February, March, 25 % year over year, meaning that in January of 2025, there was 20, 25, 30 % in some markets more homes for sale than there was in January 2024. That matters. That's a big number. I'd like to call out that we on the BiggerPockets podcast, we're not panicking and saying that the market was going to crash like everyone else was saying, but it puts downward pressure on pricing.

18:26And it's something that is really important to watch. Because if you listen to the crash bros, the people who are calling for a whole crash in the housing market, they were saying, Oh my God, look, inventory was up 25 % year over year. Next month, it's going to be 40. Next month, it's going to get 50 or 60. And yes, that of course is feasible. But did that happen? No. If you fast forward to today, we are not seeing accelerating inventory. We are not seeing inventory spiral out of control month over month over month. Actually, we are seeing the opposite. it. If you fast forward today and look at the numbers for October of 2025, the most recent data we have for inventory, it's not up more than 25 % year over year.

19:11It's not gone up beyond where it was in January, February, March. The opposite has happened. In fact, right now in October, inventory was up just 4 % year over year. So the growth rate in inventory has not exploded. It's actually contracted. And not only is the growth rate slowed down, but we are still below pre-pandemic levels of inventory. If you look at what Redfin shows us, we are about 200 ,000 homes short in inventory of where we were in October of 2019. So this is under control. This is a crucial thing for everyone to understand about the housing market because it's one of the reasons why I think we're going to see roughly flat pricing next year, maybe a little down nationally.

19:58And it's one of the reasons why I'm not super concerned about huge drops in the market right now. But let's just take a minute and talk about where inventory might go, because there's different ways that inventory changes, right? One way inventory drops is that demand picks up, right? If there's the same amount of homes for sale, but more people want to buy them, we'll have less inventory because those homes that are for sale are going to move quicker. The other way that inventory can drop is that new listings go down. That's basically the number of people who choose to sell their property. That can actually go down.

20:32And that's actually gone down quite a bit, right? New listings, people are saying, oh my God, people are panic selling. Sellers are flooding the market. No, they are not. That is just objectively not true. New listings are flat year over year. Don't listen to any of that nonsense that you might see. People are calling for panic selling. Oh my God, everyone's freaking out. No, that's just not true. New listings are actually up 0.4 % year over year. It is completely flat. And that shift is not just one month. That has been happening for the last couple of months. The big thing that has changed, though, it's not demand.

21:08It's not new listings. The change that is happening right now is what's called D listings. And this is a new metric. We don't talk about this a lot on the show, but it is important right now because D listings, which is defined as just a property that was listing for sale that was pulled off the market for more than 31 days without selling or going under contract. And the reason I'm bringing this up is because this is one of the new dynamics that's kind of emerging and shaping behavior in the seller, in the housing market. Basically what's going on in mass is that sellers are looking at the current market.

21:42They're seeing that sales conditions are not as good as they've been over the last couple of years. And they're just saying, nah, you know, I'm kind of out on this one. I'm going to wait this one out and see maybe if there's better conditions for listing, or I'm just going to stay in my property. I'm not going to sell it. I'm going to rent it out for another year, another two years. I'm going to keep living here, whatever. That trend is really high right now. Actually, home D listings is at the highest level it's been since 2017. And this increase in delistings helps explain why prices are rising despite sort of tepid home buying demand because inventory is falling because of this.

22:22Remember, new listings are flat. If delistings go up compared to new listings and demand stays the same, that means that we are getting more balanced supply and demand dynamics. Another reason why this is a sign of a correction, not a crash. If we look at the behavior of selling and what they're doing right now, it is completely logical. If they are not getting the prices they want, if they don't want to drop price and they don't have to sell, they're just choosing not to sell. And if you dig deep into this data, you'll see that the areas where D listings are going up the most are the areas where they're strongest buyers market, where basically the areas where it's the worst time to sell.

23:03That's where people are D listing the most. Now that makes sense, right? If you don't like selling conditions, then you delist your property. And that's why I say this is a normal correction because what the crash bros say is, oh my God, when inventory goes up and it becomes a buyer's market, people panic and add more and more inventory to the market. The exact opposite is happening. People say, oh, this is not a good time to sell. I'm not going to panic and list my property for sale. I'm actually going to just take my property down off the MLS and not sell it. This is what happens during a normal correction.

23:37It's sellers reacting to selling conditions and saying, I don't want any part of this. I am going to delist my property. So just as an example, the markets with the highest percentage of delistings are those markets that are correcting. It's Austin, Miami, Fort Lauderdale, Dallas, Denver. Again, what you would expect because it's logical. Now, of course, there is a big question mark here. Is this just temporary, right? Are people just taking their properties off the market for a couple of months and then they're going to list them in the spring and we're going to all of a sudden get a flood of inventory?

24:11So far, we have some data on this and the answer is no. So far, only 20 % of properties that have been delisted have come back on the market, which in my opinion is pretty low. I was kind of surprised by that. But I do think that's probably due to seasonality, right? Like no one is going to delist their property in September, October, and then be like, you know what? I'm going to relist it on Thanksgiving weekend or right before Christmas. Like if you were going to delist it, you're probably going to wait till at least January, or maybe you wait to sort of the hot months of March or April, where there's typically the most seasonal home buyer activity.

24:45You might choose to do that. My guess is yes. I think we will see an uptick in real listings in the spring. I think we'll see that number go from 20 % to something higher, maybe 30%, 40%, 50%. Because I personally know investors who are doing this. A lot of flippers, right, are saying, you know what? It's cooling off right now. I'm going to wait and take my chances in the spring. I think we'll see more and more of that. But flippers make up a relatively low percentage of all the homes that hit the market. If you want to understand the broad trends, you have to figure out what's going on with homeowners, right?