Homebuyer Cancellations Spike, New Price Forecast Shows Slow 2026

0:00More buyers are canceling their contracts right now, which is a little bit scary for sellers, but presents a big opportunity for buyers. Moody's Analytics just released their long-range housing price forecast, and we've got frauds on the rise in real estate that you need to keep an eye out for. This and more on today's episode of On The Market.

0:26Hey, everyone. Welcome to On The Market. I'm Dave Meyer, joined today by Kathy Fecky, Henry Washington, and James Daynard. Back together after all being together in person at BP Cono. So nice to see all of you. Kathy, I recorded last week, but I gave you credit for starting a 2 ,000-person dance party by yourself at the club the last night in Vegas. So thank you for doing that. It really ended the conference on a bang. Oh, my gosh. I had the best time ever, and I just was sad the next day when it was all over, and I missed you guys. It was good. Well, it was a great time. So it was great to see you all in person and hope to see more of the on-the-market community in person at the next BiggerPockets event, whether it's BPCon or one of these small local events that we're talking more about doing in the near future.

1:13Today, we're going through headlines. We're going to talk about buyers canceling deals. We'll talk about the long term. I'm talking 10-year forecast for the housing market, a couple of instances of fraud that investors need to look out for, and more. Let's jump into it. James, start us off. What do you got for us? All right. My news article, cancellation rates hits record high. In 2025, 56 ,000 US purchase agreements were canceled, which are 15.1 % of the homes that were under contract. So people are bailing off of their deals. And the rate before in 2024 was at 14.3%. So we're really only up 1%.

1:56But we are seeing as someone that's in the market doing a lot of deals right now, there is a ton of deals getting canceled. And I think this is really important for all investors right now as they go to sell anything to take the time and make sure that your deal doesn't fall apart. When you have a market that is very low transactional, right? Like 2008, we had the same thing going on. Not a lot of transactions. And if we could hook that magical buyer, it was essential that we got them to the closed table. What the article really talks about is buyers aren't emotionally connected to these properties.

2:31One example was the home buyer's diamond ring fell in her toilet and flushed down during her inspection period. And that was just too much for her to handle. And she couldn't buy it. Just can't buy the house. It just shows you the mindset of where we're at right now. Everyone's all pins and needles. But doesn't that kind of make sense that like buyers have like gone back and now they don't need to be bidding like crazy. And they're just going back to having a normal level of optionality. Totally. Yeah, that's exactly what I was thinking. Like, this is what happens when there's more inventory, right?

3:03Yeah. Also, like from when they put it under contract to when they're about to close, like 10 more houses came on the market in their price point. And they start looking at those two, even though they're under contract. So like, yeah, if the wind blows the wrong way, they're like, well, I'll just go buy this other one. That's exactly what I was thinking is it's a buyer's market and people are not familiar with what this means. Sellers in particular, and maybe some agents don't understand that in the old days, meaning a few years ago, you couldn't even do inspections, right? And a lot of people ended up buying homes that needed a lot of work that they didn't know about because they were so frantic to get into the market.

3:42And that's always a dangerous situation. I couldn't believe that there were sellers saying no inspections, best offer, cash only. But that's what happens in a seller's market because there's not enough inventory. When there's too much inventory, then all of a sudden the buyer has the power. That's the bottom line. Hey, this house isn't good enough. I'm going to go get the one that's better. And I do want to point out, I don't actually think it's a buyer's market right now. I think it's just we're getting back to normal on market times. There's lower transactions. There's just less people looking.

4:13And that's why I also think there's a lot of transactions flipping too. One theory I have is it's the window shoppers that have been looking for two years. and because real estate people really have to do their jobs now. Before it was like, James, I'm a broker. And do you want to buy a house? This is going to be great. Let's go get you one. We're just going to throw mud at the wall until we get you one, right? Now those bodies aren't there anymore. And real brokers are going, I have to work the leads of people I've been talking to for years. But they're also the window shoppers who are the most nervous.

4:44And they're the ones that will flip off a lot more. And I think the biggest thing for investors right now, debt is expensive. It is way more expensive than it was three years ago. It takes longer to sell your properties now. You know, I personally offer performance of deals we bought. We're at least 25 % longer in debt costs because of the times. We cannot lose that buyer. And so where I see a lot of it is just investors don't want to spend any more money because they're worrying about their payment and all these other things. But you cannot lose that buyer. So make sure you get your pre-inspections.

5:15That was going to be my question, which was like, what is your process to make sure you hold on to that buyer? And I was going to ask you about pre-inspections because I haven't done them. I think I've done it once. Like, what's that process look like for you? You know, we're very rigorous in our punch out. And we got this way in 2008. And, you know, so we have a three-step process. First thing is project manager or myself, if I'm on the project, we meet the contractor, we go through and we blue tape everything. Then our listing broker, because they have a different set of eyes, the ones that are going out and getting ready to get it listed, they go through and they blue tape it themselves as well.

5:50So we have two sets of blue tapes going on. And then we always have a pre inspection come through a third party to look for any other sorts of issues with the house. Some investors don't want that because they say, hey, I don't want to know about it because I don't have to disclose it. I'm the opposite. I want to know about everything. That way we can go through that list and tell the buyers up front if we're not going to do something. And what we did complete, you know, and what I will say is when that buyer gets in contract, their inspector is going to find a completely different list. That's the way this goes.

6:22But what it does is it shows that potential buyer that we care. Do you actually share the pre-inspection with the buyer? We do. We are proactive. We go take photos of what we completed. We show invoices. And then one thing that we've also worked into our process is we pay the money to have that same inspector go sign off on everything because our team was doing it. But then it's like, no, no, we want a third party to do it. And again, it's not about the items. It's just showing that, you know, like flippers have a bad name too. They want to get things done, get it done as cheap as possible, don't care.

6:55But it shows that potential buyer that we care about the product that we're selling. And that goes a really long way. You know, we sell a lot of houses. They're taking longer to sell, but we don't lose many in contract. And so take the time because if you lose that first buyer, you're going to sell for less and it's going to take longer. That's very good advice, I think, for anyone who's experienced this. I agree with you. It doesn't necessarily seem like we're fully in a buyer's market because prices aren't even dropping that much. It's just that everything's taking longer. I think people are really choosing to sit back and be as picky as they possibly could.

7:30It feels like for a couple of years, it was the equivalent of Black Friday Target. People were just sprinting into the housing market and just grabbing whatever they could and just like checking out really quickly. And now we've like gone back to a normal shopping experience, which you're saying and pointing out has some implications for sellers. But as a buyer, this is a much better situation, I think, than we've seen in years. Like the flip side of these challenging selling conditions is that acquisitions are getting much, much easier. I've gotten more phone calls from agents and people in the last like two months than I have in a long time with people offering actually good deals.

8:11And for me as an investor, it feels good. Like people are competing for your money again instead of you like having to like go out and find opportunities and beg people to take your money for their deals. Yeah, no, it's like that here too. Like my agent always keeps us up to date on inventory in our market. He told me we just hit four months of inventory on the market, which puts us at a neutral market. So technically here in Northwest Arkansas, not a buyer's market yet, not a seller's market yet. We're hovering right in the middle, but it looks like we're moving towards a buyer's market if inventory continues to rise.

8:45So you need to be able to track those things because all this does is help you adjust your underwriting. If you're going to get more deals across your desk, like Dave's saying, you better know how to evaluate them. I was literally having a conversation with a wholesaler right before this podcast. And he was asking me, can I raise my offer by five grand? It's just five grand. Can you go up five grand? And I kept telling him, no, I was like, this is where I need to be. I am just not willing to go above even a little bit on my numbers because I need that margin for holding costs. That margin is a big deal right now.

9:19And so even five grand, five grand is like two months of holding costs. That could be the difference between making money, breaking even, or losing money if the deal sits too long. So no, I can't go up on my numbers. So you really have to pay attention and evaluate your deals and underwrite appropriately. Yeah, and be proactive. That's the key right now. Like have multiple different ways that you can take down a deal with different types of financing. Usually, like when we ran our performance, it was like, okay, how long is the construction going to take? That's more what we were worried about.

9:45And then it's like, all right, 60 days to close, plus two months. now i'm throwing plus four on because it's just you got to bring in that extra time and i also have to look at the the returns differently but going back to the article you have to be proactive because like you know a lot of the buyers are walking because they get their inspection and they throw these crazy numbers at the cost you're like wait you want me to pay it give you a hundred thousand dollar credit because my hot water tank is 12 years old and my room it only has five years left and you want a gold toilet. I got you. But there's also other things you guys right now, like with the government shutdown, there's different types of loan products that are at risk.

10:23And you got flood insurance, you got FHA. We have a mortgage broker on every one of our listings has pre-qualified that listing for rate buy downs, different types of financing options. And so that way when the buyer goes, oh, the loan I was going to get, it's just not working out right. I'm going to wait this out for a while until this settles down. Why? What if we can get you a better loan where your rate's lower, right? And these are ways that you can keep your deal together. Punch it out. Make sure that you provide that buyer the resources because unfortunately, you guys, a lot of times their broker does not.

10:56And so we like to do their broker's job by giving them other options so they don't walk from the deal. All I could say is that But the way I define a buyer's market or a seller's market is in a buyer's market, the buyer has more power. In a seller's market, the seller has more power. So to me, having several subdivisions in different cities around the country, and also just being on the buyer's side as well, on the sell side, it's been very slow. But those are new homes, and they are harder to sell because they're more expensive. But on the buy side with our single family rental fund, it is totally time to negotiate.

11:34So it works great on the buy side these days for us. And on the sell side is definitely harder. It's just a perfect example of how every market has its tradeoffs. Sometimes it's better for sellers. Sometimes it's better for buyers. Sometimes it's harder to find deals and there's more competition, but you get tons of appreciation. Sometimes appreciation is slower, but it's easier to find deals. The whole point of being an investor, the whole game is to adapt your strategy and your tactics to what's going on. That's why we have this podcast. So good job listening to this. But what we've talked about so far in today's episode is just what's going on short term in the housing market.

12:08But I want to turn our conversation to the long term prospects of the housing market because there was a new study that just came out showing where housing prices are heading by 2035. We're going to get into that right after this break. 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.

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14:40Welcome back to On the Market. I'm Dave Meyer here with James, Kathy, and Henry talking the latest headlines. Before the break, we talked about how more buyers are canceling, and that does have some potential implications for the short-term direction of the housing market. We're seeing things flatten out. A lot of markets are turning negative. I personally think more are going to turn negative over the next couple of years, but we're in real estate investing for the long term. It is not about what's happening in the next six months or year or two years. At least for me, I am in this industry because I believe in housing over the long run.

15:13And I saw an article this last week where Moody's Analytics came out with their forecast for where housing prices are going to be through 2035. This is a very reputable company. They put out a lot of detailed information about the housing market. And what they're showing is that they think by the end of 2035, prices are going to be up. Anyone have any guess? 10 years? I'm going 11.5%. 25%. 20 %? Kathy, almost dead on, 23.5%. I mean, technically, I was the closest without going over, so price is right, I would have won. Bob Barker's not here, though. But both of you were very close. So what they're expecting is that prices will go up 23 % over the next 10 years.

16:03Now, I have some thoughts about this, but what are your reactions to that, 23 % over the next 10 years? Anyone have any feelings about that? It's only like 2 % a year. Yeah, that's very normal. That's right. That's super just normal. And kind of like you said in your keynote, Dave, just like not overwhelmingly exciting, kind of boring, but the kind of market I like. I'll take two to three percent any day. I love it. Yeah. That's how I feel about it. You're boring. You need some anxiety in your life. This is how I underwrite deals at two to three percent. That's what I expect. That's what I want.

16:32I just don't want negative two percent. That's all. Exactly. Well, what they're forecasting is in the next two years, they think that's going to be a little bit more painful. They're saying in 2026, nominal home prices are going to go up just a half a percent. 2027, 1.3%. And then from there, going back to normal levels of appreciation, 2 % to 3 % basically every year for the eight years after that. Now, I understand if you got into the industry in the last five years, you're probably like, that sounds terrible. But if you look at the last 60 years, the average appreciation rate in the United States is 3.4%.

17:094%. And what's often lost in the conversation about quote unquote appreciation on housing is a lot of appreciation is just inflation. Housing historically has marginally been better than the rate of inflation. And that's not a bad thing because one, if you're using leverage, you actually do better than inflation. And two, inflation sucks. So using real estate as an inflation hedge is actually a really valuable thing. But I just want people to understand this because I think this age of investing purely for appreciation is coming to a halt. Now, there are certainly pockets of the country and places where you can still do that.

17:51But in normal times in the real estate market, you can't just count on appreciation to grow wealth in any old average market in the United States, in any old average neighborhood. So you need to do one of two things. You need to get really good at identifying markets if you want to do that appreciation play. Or you need to go back to fundamentals of real estate investing, which is buying great assets at great prices, renovating them, fixing them up, making them better, and then operating them well. All that I'm saying here is that you just need to do normal things as a real estate investor. But I really just want to make sure people know, because I see this on social media all the time, invest for appreciation, invest for appreciation.

18:30You can do that if you're very good at identifying the places where it will grow faster than this, because there will be places, of course, that will grow faster than this. But you cannot count on this in a lot of areas, even the ones that are growing quickly right now. I invest in the Midwest because I like it because it's affordable and there's cash flow. But I am not counting on this appreciation that we've seen in Milwaukee at 11 % for the last two years. That's not going to continue. You should know that and you shouldn't count on that. And if it happens to happen, great. But please do not count on that.

19:03We are not in that era anymore. Well, let me tell you, James, I'm speaking to James, that it's not as boring as it sounds because Dave and I and Henry wouldn't be so excited if it were seriously that boring. So if you have a buy and hold property and you, let's just say$100 ,000 property, you put 20 % down, that's$20 ,000. Let's just say the property goes up 2 % in one year. That's$2 ,000. You put$20 ,000 in. So you made$2 ,000 on a$20 ,000 down payment in one year. We're not talking about cash flow. You got to add the cash flow in there, the tax benefits, the loan pay down. But if we only look at appreciation, that's a 10 % return.

19:47So it's not 2%. And that's where people get confused. They think, ah, you know, if you paid all cash, you're making 2%. And that's why owning real estate in slow growth markets with all cash is not the best return. It's probably the worst return because then you've got expenses and stuff. But if you have leveraged, that is where you make your money. And that's why, like Dave, I like the Midwest. I like the South. I like affordable places because I could still find homes in the$100 ,000,$200 ,000 range and make these kinds of numbers work. So anyway, that's why i'm i'm a fangirl of two percent man i love i love boring real estate it's the best it's the best it's predictable it's worked for so long you know james like just go jump off a cliff every like six months and you'll get your dopamine dump and then buy some boring real estate are we having an intervention right now is this is this a deal junkie intervention but in all honesty i think what we've seen over the last few years is like we saw this crazy seller's market.

20:51Now we're moving. It's not a crazy buyer's market, but transaction volume in the housing market is so slow right now. It is 20, 30 % below. To me, when I look at this and I do think prices need to, at least in real terms, need to come down a little bit. We need more affordability in the housing market. If we can get it more affordable and prices just grow at one to 3 % every year, we're going to get back to that boring old predictable housing market where you're not worrying about how days on market are changing every single week or, you know, these things will just be much more predictable. They'll move a little bit slower.

21:27And to me, predictable equals profitable. Like if you know what's going to happen, you can adjust your strategy to make money from it and to build a business around it. It's the lack of certainty that's difficult to navigate in whether the market's booming or slowing down. It's the uncertainty that's the trouble, not necessarily whether you're in one kind of market or another. I will say, I don't think it's boring. I think there's actually a lot of opportunity in that model right now, especially since dirt is low. People don't want to buy dirt. So you can get rentals on some really good land right now.

21:57And if you put that 20 % down, that's how you really enhance that value. But slow and steady, it wins the race. All right. Well, this is a great conversation and just something for everyone to keep in mind. Again, it is not something that you can't navigate, but it's something you need to adapt into your strategy. We do have to take one more quick break, but when we come back, we have some stories that are a little bit concerning about fraud. To me, this is the real risk in real estate right now, more than anything going on in the market, is fraud is on the rise and we're going to bring some of it to your attention to make sure that you can navigate around it and make sure you avoid it in your business.

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