What We’re Buying During This Housing Correction

0:00Henry Washington:Hey everyone, I hope you all had a great Thanksgiving and you found a new property off your Black Friday wishlist. Today, for the BiggerPockets podcast, we are bringing you an episode from our sister podcast, On the Market. You've probably heard me saying for the last several months that we're in a housing market correction. It's not a crash, but it's a different market than we've experienced for the previous few years. And to share some insights about that on this On the Market episode, I talked to Henry Washington and Kathy Feke about how they're still buying real estate and still making money right now, even if the investing formula is not as easy as it was back in 2021.

0:37Henry Washington:I hope this episode helps you think of the current housing market as an opportunity instead of just some big risk. And my conversation with Kathy and Henry will provide you with some inspiration as you plan for 2026. We'll be back with a new episode on Monday. Here's me, Kathy, and Henry on On the Market, originally published October 23rd. Last week, I spent an entire episode laying out that I think we are in a market correction. We're not in a crash, but we're in a period where home prices may go down. They may stay stagnant. And I hope that was a helpful conversation for Everett to just have realistic expectations for what to expect over the next couple of years.

1:17Henry Washington:So today, we're going to shift that conversation from just data and background towards what you can actually do about it. In today's episode, I'm joined by Kathy Fecky and Henry Washington to pressure test the frameworks and the data that I presented last week. I'd obviously love their opinion, compare notes on what they're seeing in their own analysis of the market, and turn the playbook into practical steps. During this episode, we're going to talk about trends that we're seeing in each of our own markets, how we're adjusting our own investing strategy, and frameworks that you can all apply to your portfolios to make profitable decisions during this market correction.

1:57Henry Washington:You're listening to On The Market. Let's get into it.

2:05All right. Well, I am assuming you guys don't listen to the On The Market episodes when you're not on it. I won't take offense. Last week, I did a solo episode just sort of laying out what I believe to be the reality of the situation is that we're in a market correction. Basically, the gist of it is that home prices are up one or two percent in real terms. But if you look at inflation adjusted terms, prices have been pretty flat or a little bit down for almost three years now. And I actually think that's going to get a little bit more pronounced in the next year or so. I think the market is really slowing down and we might see nominal non-inflation adjusted home prices go down one or 2%, more in certain marks.

2:49We're seeing Florida, Texas, they're already down more than that. But on a national level, a couple percentage points. Do you agree? Do you think that's crazy? Do you think we're going to see something totally different? Kathy, let's start with you. I'm so glad because I am the A student on today's episode because I did listen to that show.

3:05Brandon Turner:Oh, look at you. Henry, did you? I listened to half the episode. Yes, 100%. Yeah, so as I was listening, you know, my thoughts were, yes, it's a correction. And my first thought was, if you're in it for the long game, when I buy property, I'm thinking, you know, long, long, long, long, long term. So it's just part of it. It's a softening. But if you are in the rental business, you don't care because you're not selling. All you care about is our rents going down. That's your income. So where are we there? It depends on your market. Some markets, rents have softened. But if you're still collecting rent, you're in good shape.

3:47Yep, absolutely. I totally agree. And we'll get into some of that about what you should be looking for. But Henry, you seeing a correction as well?

3:55Brandon Turner:Yeah, I think we're seeing a correction. Now, again, my market has some insulation, I think, compared to a lot of other markets. But we are absolutely seeing a slowdown. We just hit four months of inventory on the market. And that is about what we need to be considered a balanced market. But because we're so used to listing something and it's selling fairly quickly, even though we're in a very balanced, normal market, it feels like we're not. It feels like we're in a situation that's more dire than that because things are moving slower than we're accustomed to. But if you zoom out, I got in this business in 2017.

4:38Brandon Turner:It was pretty normal to list a property and it sit for 30 to 60 days and you only get a couple of offers and you have to do some concessions and then maybe you sell that property for a profit. We were buying properties and getting a 6%, 6.5 % interest rate as a rental property. This all feels like it did pre-pandemic, but the pandemic went so crazy and people made so much money that now what used to be normal feels uncomfortable. I kind of feel like the problem with real estate right now is not the market, it's expectations. It's just that people are thinking that real estate is supposed to be the way it was during the pandemic.

5:18And don't get me wrong, I think the market is, there's a lot of challenges with the market right now in most places. Like we're not all magically in Henry's Northwest Arkansas bubble, but I think in most places there are challenges. But I think the biggest challenge is people are thinking that they could make easy money in this industry because there was a period where you could make easy money. But that is the exception to the rule, not the normal thing that happens in real estate. So I think that's sort of why I wanted to have this conversation is just normalizing, one, the fact that these things happen and that corrections are a normal part of the economic cycle.

5:56And two, that it's normal to invest in this part of the cycle, Or at least I think so. Yeah, it is. Yeah, that's what I wanted to say. It's like when you say people are thinking, I think what you mean is newer investors. And those newer investors are learning, they're growing up. Basically, they're becoming experienced investors because experienced investors aren't thinking that. They're thinking, finally, finally, there's a correction where I could get me some good buys out there and I don't have the competition. We've been waiting for this moment. So you all just growing up, it's part of that.

6:32I was comparing it to the marriage. You had your first little fight and then you get through it. And then things are better, right? Yeah, you learned how to get through the fight.

6:43Brandon Turner:You know, I compare it to something you said in that solo episode. What you said was there is a cycle to market conditions. And so the experienced investors are kind of excited for a period like this because, a we know how to make money through a correction right it's just a matter of adjusting what you're willing to buy and adjusting how much risk you're willing to take on given the more risky environment but you can still be profitable but we know on the other side of this correction if we've bought during the correction that we're gonna see a lot of equity and appreciation and growth uh on the other side of it and so it's exciting for people who have that experience because now We're like, we can buy good deals now.

7:29Brandon Turner:We'll make money. We won't make 2022 flip prices if we're flipping a house, but we'll make a decent profit. But if we hold on to things, and even if they're breaking even now, we'll be able to sell those and or get increased rents later or leverage the increased equity that we're going to get. Like, I'm excited because let's get through the rough part so we can get to the good stuff again. Totally. One of the things you said in the show, Dave, was affordability. something has to give. If things become unaffordable, and that's probably the most important metric to ever look at when ever buying, can people afford what you've got?

8:07And if what you've got is something you're trying to sell, you're flipping it, and people can't afford it, you're in trouble. If you're trying to rent it and people can't afford it, you're in trouble. It's always that. And so when interest rates are low, that creates incredible affordability, obviously. And then prices go up. And then when prices go up, and then rates go up at the same time, which is what we've seen, affordability is out the window. So something breaks. And whatever that is, everybody's been waiting for the interest rate to break, like, please be at that. If we could just get that to come down, then everything will be fine.

8:41But because that hasn't happened, something else is going to break, and that's pricing. And so that's what we're seeing. it has to happen it's what we have been waiting for it's why we just started our multi-family fund it's breaking and and you can only get great deals when there's a bit of a crisis right that's how it works amen that's what we're seeing and it not it's not as much of a crisis in the single family world people aren't as much in a hurry to sell they don't have to in most cases and when i say they that's a lumping a lot of people into one category there are obviously people in crisis because we are seeing the foreclosure rate creep up, but nothing out of hand, nothing abnormal, but more people are in that struggle bus.

9:24And again, that means deals. I hate saying that. It's like, I don't want to be a shark and take advantage of people in a difficult situation, but it's during distress that you get the deals, right? Yeah. It's just, it's adapting and taking what the market is giving you. It's not like you are putting those people in distress and they're going to put those properties on the market. And listen, I'm not trying to make real estate investors sound like angels, but a lot of what happens in a normal correction is investors set the floor for how things can fall. Because a lot of times what happens is normal homebuyers get spooked by a correcting market.

10:03We saw this in 2008. That was a crash, not a correction. That was a real crash. And homeowners, no one wanted to touch real estate. And actually, if you look at a lot of studies of what happened back then, the academic studies credit institutional investors getting into the single family space with setting a bottom for that market and allowing prices to bottom and then coming back in. And so I think you're right, Kathy, like investors do play an important part of getting the market back to a normal level because a lot of those distressed sellers aren't going to be able to find homeowner buyers, especially when those homeowner buyers have more options right now and could buy stabilized properties at a discounted rate.

10:46And so I just think you're entirely right that different people play different roles. And it's, you know, I'm not wishing for anyone to lose their shirt. I certainly hope no one gets into distress, but that is sometimes part of this. But as you also said, it's not even going to be a big part of this, I don't think, in this correction. You know, you look at distress levels, you know, delinquency levels, like you said, it's just not that high, which makes it to me seem like it's, yeah, we're probably going to have declining real home prices for a couple, I think maybe a couple of years even. But to me, that's at least predictable, right?

11:19That's, as an investor, the only thing I want is something that I can predict and can understand and is somewhat stable because it's the really big swings that really are worrisome to me or create a lot of uncertainty. If we see a period of time where home places stay flat, I can invest around that. Can't you?

11:39Brandon Turner:Absolutely. I mean, that's what you want, right? Exactly. We haven't had predictability in a long time, right? And so predictability, there's comfort in predictability because you can make more long-term decisions, or I guess you should say you can make more midterm decisions because in the long-term, real estate's going to go up in value, right? If you zoom out long enough, but it's the short to midterm, that can be a little more volatile. And so it can help you have a more well-rounded investing approach where you buy some deals that are going to make you money in the short term, you buy some deals that are going to make you money in the midterm, and you buy some deals that you're going to hold and keep forever and create that true passive generational wealth.

12:19You can be a more well-rounded investor when there is predictability.

12:25Henry Washington:All right, we got to take a quick break, but more with me, Kathy and Henry, right after this. 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 onsite support for guests during their stay.

12:59Henry Washington:So 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. Do you ever notice how every passive investment somehow turns into a very active lifestyle? Active spreadsheets, active phone calls, active stress. Here's a better question. What if you could buy brand new construction homes, 10 % below market value, in the best markets across the country without making real estate your second job? That's exactly what Rent to Retirement does. They're a full-service, turnkey investment company handling everything for you.

13:32Henry Washington:In some cases, investors get 50 % to 75 % of their down payment back at closing, plus interest rates as low as 3.75%. They've partnered with BiggerPockets for over a decade, helping thousands invest smarter. If you want to do the same, visit biggerpockets.com slash retirement to learn more. Most deals don't fall apart because of the numbers. They fall apart because of the financing. You find a property that cash flows. The deal makes sense. But then the lender looks at your personal income, your tax returns, your debt to income ratio, and suddenly the deal doesn't qualify. That's the disconnect.

14:09Henry Washington:Because as investors, we're not buying based on our W-2. We're buying based on the asset. That's why Host Financial offers DSCR loans designed for real estate investors, where qualification is based primarily on the property's income, not your personal finances. So no W-2s, no tax returns, and no DTI requirements. And with loan-to-value options up to 80 or even 85 % on eligible deals, you can keep more capital available as you grow. If you're buying rentals, refinancing, or scaling your portfolio, go to hostfinancial.com. That's H-O-S-T financial.com and see what you qualify for. Everyone loves talking about big returns, but here's the problem.

14:55Henry Washington: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 cashflow, but for the tax advantages. Depreciation can help offset income while the property is still producing. BAM 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.

15:32Henry Washington:Learn more at biggerpockets.com slash BAM. Only for accredited investors, past performance is not indicative of future results. This week's bigger news is brought to you by the Fundrise Flagship Fund. Invest in private market real estate with the Fundrise Flagship Fund. Check out Fundrise.com slash pockets to learn more.

15:54Henry Washington:Welcome back to On the Market. I'm here with Kathy and Henry talking about how we're adjusting our own investing strategies during the market correction. Let's jump back in. I like what you said there because I set my own goals. I have long-term goals, what I'm trying to get to, financial freedom. That's like a 10, 15-year goal for me. And then I have a three-year goal and then a one-year goal. And I find the three years the hardest right now. It's really hard to figure out where we're going to be three years from now, or it has been. But I actually think it's getting more clear personally that we're going to be in this correction.

16:27Rates are not going to come down very much. Prices are going to be pretty flat. There's always these black swan events. Things could happen if Trump shakes up the Fed. if we have a massive job loss recession. You know, of course those things could change that. But as of right now, it just seems like we're going to get back to pretty flat and boring. And I can plan around that. You called it in your amazing keynote at BP Con, Dave. I loved it. Thank you. Yeah. And you gave these four different scenarios of what could happen. But you also gave this example of in, what was it, 2010 or when did you do that?

17:022010. It was like my first deal. Yeah. It was scary. People, everyone's like, oh, I wish I could have bought in 2010. But if you were there in 2010, it was terrifying. The world was falling apart. We didn't know if we'd be the United States of America. We were stocking food. And so to go out and buy real estate took a lot of nerve. But you did it. And you didn't know if prices were going to continue to go down. And in fact, they did. But you bought that fourplex based on fundamentals, like wherever the market goes, it doesn't matter. This fits what I'm trying to do. Over time, it's going to work out.

17:34It turns out prices went down for a few years. You weren't selling, didn't matter. And then, whoa, prices took off. And unbeknownst to you, you made a crap ton of money. Yes, that's right. Exactly. Yeah. There's obviously a lot of difference in 2008, right? You know, prices are not going to get that cheap again. I think that might be a once in a lifetime kind of thing for the value that we got. But I don't know if you guys follow Bill McBride. He's a housing analyst. But he put together this chart that just shows real housing prices, which is inflation-adjusted housing prices over the long term in the US.

18:09And what it shows is that the housing prices in terms of beating inflation, it's actually like, you know, you have like seven years of flat and then it kind of goes up. And then you have seven years of flat and then you have these periods of amazing returns. And this actually goes back in time. In the 90s, it was pretty flat. Then you had the bubble. Obviously, that wasn't great. You know, we saw actually for many years after the crash, it was flat. Then it went up. We're three years into flat again. I don't know when it's going to go up again, right? I don't know when real home prices are going to go up.

18:41But I want to get into the market so that I don't miss it. Because if you miss that, then you're waiting another seven years, right? Yes. And so my whole game right now is like, how do I find deals that make money today? There are deals that make money today. But I don't care if my prices go up or down 2 % next year, because what I'm in it for is that next bump. I'm waiting. I'm just going to buy stuff. And then if it's two years from now, it's four years from now, it's five years now. Sure, I'd love it to come sooner, but I don't really care. I'm just like trying to buy things that make money now and then get in for that next bump.

19:14And even if the next bump is 10 years from now, I'm still making money now. So it's fine. That to me is like the psychology I'm approaching this with. How have you sort of, Henry, changed your mindset given where we are right now?

19:29Brandon Turner:Yeah, it is all about having multiple exit strategies for deals, and one being short term and one being more midterm or long term. And if you can buy things that have multiple exit strategies, then that allows you to stay profitable. I'll give you an example. We just closed on a house. We paid$102 ,000. It's a four bedroom, three bathroom, but it's not in a neighborhood where it's gonna sell for$400 ,000 for a home being that size. The ARV on this property is somewhere around$270 ,000. Okay, now I bought it as a flip, right? The goal is to spend about$50 ,000 to$70 ,000 on the renovation and then sell that property for$250 ,000 to$270 ,000.

20:15Brandon Turner:Now there's some caveats. There's some problems with the neighbors in this area that could affect my sale price. So there's some problems that could cause me not to sell this property for what I'm hoping to sell this property for. But at the end of the day, I bought a property worth$270 ,000 for$100 ,000. Yeah. Who cares what the market's doing? Who cares? Who cares? If I try to sell it and I don't get what I want, I can throw a tenant in it and I I can rent it for$1 ,800 to$2 ,000 a month. And it'll cash flow at that price. And I can just make money as a rental and I can keep it as a rental for a long time or I can keep it as a rental until the market tells me it's a better time to sell it and I can make my profitability later.

21:02Brandon Turner:So I can make cash flow now, sell later. I can make cash flow forever. I can not make any cash flow and sell it for a profit. Even if I have to sell it for$230 ,000, I'll still make money, right? Like it's about finding deals that make sense with multiple exit strategies. And then you can choose how you're going to make money on it. The way to mitigate the risk is you've got to pay the appropriate price to weather the storm. That's just fundamentals, right? Like this is what we're talking about, right? It's just like, yeah. It's just called real estate investing. Yes. I know. But I think it's important for people to remember that buying quality assets at a good price in a good location is just still the game.

21:48Like that is – it's just it, right? It's like whether you're flipping or rental or short-term rental, whatever it is, that still works. The price you're willing to pay has changed. Yes. Because there is more risk and you have to be more disciplined about what you're willing to pay. If you were buying in 2022, if you overpaid by 10 grand, like who cared? It didn't matter. Now it matters. So pay less.