Housing Demand Grows as 10 Major Cities See Price Drops

0:00Housing demand is up, but prices are dropping. Mortgage rates have been a little bit better, but layoffs are all around us. The upside down economy that we've been in for years is rolling on, but we're here to help you make sense of it.

0:19Hey everyone, welcome to On The Market. I'm Dave Meyer, joined by James Daynard, Kathy Ficke, and Henry Washington today to talk about the latest news and try and instill some sense, some narrative that makes sense about what's going on. Kathy, I think I'm going to call on you first because you got an uplifting story here about the housing market and the economy. Share it with us. Yes, everybody could use a little good news. So this is an article from Housing Wire. It is housing demand now reflects a positive trend. And this is written by Logan Motoshami, who I know we all follow. He tracks weekly data.

0:56And what he says in this article is so much of the data that we see in headlines is dated. It's two to three months old, especially the Case-Shiller Index that gets headline news, and people are talking about something that was three months ago, and we're not in that market now. So his weekly tracker is super helpful. It's more volatile because week to week, if there's a holiday or something, you're going to see skewed numbers. But still, There is a lot of important information. Highly recommend it. The one I want to focus on is the section of this article that's housing inventory, because the headlines are talking about all this inventory.

1:32We're constantly talking about it being a buyer's market and the shift and so forth. But that is dated news. And what is more current is that the housing inventory data showed 33 % year-over-year growth earlier in the year. And that's the story people are talking about. But now it's down to 16 % year-over-year growth. So what we've seen in the last few months is, obviously, mortgage rates have come down a bit. And we've talked about this for a long time, that as soon as mortgage rates come down, there's a whole bunch of people that can enter the market. It doesn't make it more affordable for everybody, but it makes it more affordable to some people who were just on the edge.

2:13And given the massive number of millennials out there in that house buying era in the mid-30s, give them a little leeway and they'll take it, right? So that's what we're seeing. And we're just going into a season where there's less inventory anyway, because it's the holidays. You don't really want to show your house during Thanksgiving or Christmas. So inventory levels tend to go down anyway. and because mortgage rates are lower, Logan was kind of worried like, dang it, I liked the higher inventory. This is better and healthier for the housing market. And now we're kind of going back to less inventory.

2:50Well, I'm so glad you brought this story here, Kathy, because it is probably one of the most misunderstood parts of the housing market right now is you see this on social media all the time. There's no buyers. No one's buying homes. That's not what's happening. Actually, We see that home sales is up a tiny bit year over year. But when you look at mortgage purchase applications, it's up year over year from this time last year. And it's because rates have gone down. And I know it doesn't feel like rates have come down that much, but they were at 7.2 in January. And now they're at 6.2. Like, that matters.

3:25One full percent of money matters. That's hundreds of dollars a month. So people are noticing that and coming back into the market. The reason sales prices are dragging is because of inventory. But as Kathy pointed out, we're getting that correcting kind of vibe where people are realizing it's a bad time to sell. So they're not selling. And so that's why we're probably in a normal sort of correction. But that is not because there's no one buying. People are still buying homes at the same rate they have the last few years. It's just a little bit different vibe. Like you said, it's increased a little bit.

3:58I think it was$4.02 million or something sales volume. which is up, it was under 4 million before. So yeah, just it's different per market. And that's where people are like, in my market, my stuff's not selling. I mean, I just talked to someone who said he's had his flip on the market somewhere on the East Coast and for a long time and it's not selling. So that would just tell me it's not priced right. All right. Yeah, it just feels draggy in a lot of markets. And I think we're gonna talk about that. But I do think that's encouraging. And what we've seen so much in the last two or three years is that demand is way more interest rate sensitive than it is during normal times.

4:38For most normal eras, interest rates fluctuate by 0.25%. It doesn't really change anything, or 0.5%. It doesn't change anything. Now people are like, oh, I'm going to jump in this week. There's inventory. Rates are down. Last week it was 6.1%. Like if you jumped in, that's the best rate we've seen in years. You know, and there's better inventory. You have better negotiating leverage. This is the buyer's market. It's not great for sellers, but buyers are, I think, going to start coming out of the woodwork because there's going to be better opportunities to buy. You know, one thing that does drive me bonkers is when people start talking about trends and it's been two to three months.

5:17Yeah. Like, it's like, what trend is that? Like, that's a blip. Because what I do know is at the beginning of the year, we were red hot that first quarter, lots of buyers. and it wasn't even just things were selling. There was just a lot of showings going on. We had some tariff news come out, market froze up. And now rates, like Dave just said, is like nearly half point, three quarters point lower, right? So like, it's not just all rates. It's also just, I think, just a mental fear thing. But, you know, I feel like inventory is going down because people are kind of in this panic because they're like, I'm going to miss the moat.

5:50I'm going to throw my house up for sale. And then they're canceling too, quite a bit. And there's a lot of canceling inventory coming off. but it's just a slow, thick in the mud grind market right now. But I mean, it just, for me, it's not trended until it goes past. Like, like we have to see what, if we go into first quarter in 2026 and it's slow, then that's a trend to me. But I feel like with the seasonals and the three months of information, like they just kind of got to ride the waves and to quit panicking because we don't know what we don't know. Yeah. I just, I feel like what I hear a lot and I see in the notes of, of these shows that we do.

6:25It's people saying, oh, well, you know, you're giving bad advice and we're in a bubble and there's going to be a housing crash. And the thinking is always, well, prices are so high, it must be a bubble. And that's not the right thinking. It makes sense because in 2008, prices were high and then they crashed. But that didn't have to do with high prices. It had to do with mortgage rates adjusting. And they were on short-term rates. all of a sudden their payment doubled in many cases and they couldn't afford the payment. If that didn't happen, we wouldn't have had the crash. So we don't have that right now.

6:59We have high home prices, similar kind of issue, but most people who own those homes are on fixed rates. Most people, the majority are in fixed rates. So they're not having any of that price pressure in most cases. Of course, multifamily commercial loans, different story. They did see their payments double, but that's the difference. It's not a bubble just because prices are high And that's what so many people are stuck thinking. All right. Well, thank you for sharing this one, Kathy. I think this is a really important context for everyone, especially when we go into these correcting markets, people start to panic.

7:32But if you really understand, you know, markets and prices, they're dependent on both supply and demand. And for a real crash, you need to see demand deteriorate. You need to supply to explode. That's when a crash happens. We're not seeing either of those happen. We're seeing demand, relatively stable. supply has increased, but it's already starting to level off. And so these are indicators that, although we don't know for sure, much more likely that we're in a correction than in a crash, like we've been saying for a long time. But the data does really bear that out. Let's move on to our next story, which I'm going to share, because I think it's kind of related here.

8:07Because I know a lot of people who are saying, I'll get into the market when we get mortgage rates down to 5 % or 5.5%. And actually, Zillow, John Burns Real Estate, They've done all this research that shows like when will the market like really get back to normal levels of volume, which is like five and a quarter million instead of four million. And they say five to five and a half percent. So the question in real estate has often been, when are we getting there? How are we getting to five percent? And Bank of America just put out a study saying they've understand they think there is a path to a five percent mortgage rate, but it's not pretty.

8:43This is not a good looking thing right here. Yeah. They said the path to 5 % mortgage rates is if the Fed does mortgage-backed securities quantitative easing. And I'm going to be honest, I feel pretty validated about this because I have been saying this for a while. The only way we're getting down that low is quantitative easing. If you're not familiar with quantitative easing, it's basically when the Federal Reserve buys mortgage-backed securities or buy government bonds, which is, for all practical purposes, printing money. They take money out of thin air and they buy mortgage securities and they buy bonds.

9:18And this has been an important part, especially after the financial crisis of stabilizing the market. Like they've done this to good effect in the past. I think most people in retrospect would say they probably did a little too much of it following the COVID downturn, which contributed a lot to the unaffordable levels that we have in housing right now and inflation. And so I agree with this. I think it's going to be really hard for mortgage rates to get to 5 % unless they do this. I guess my thinking is the probability of this happening to me is going up. I'm curious what you guys think. But if the labor market deteriorates and President Trump has stated many times that he wants mortgage rates to come down, that's a tool after he almost certainly will replace Jerome Powell in May of 2026.

10:06It might be a tool he can influence. And I think the likelihood of this is going up, which can mean more mortgage rates, but also comes with a host of other trade-offs. So curious if you guys think this is even in the realm of possibility. It already is. The Fed has already said they're going to stop their quantitative tightening, which is selling off the stuff that they already bought. They already did this. This is why rates were so low. It's called financial engineering. It is funny money. It is not great for the population because the Fed goes in debt over this, which is basically us who has to pay it back.

10:45But it is what they do behind the scenes. And, you know, it's great for those who own assets. Like, it's great for homeowners. That's why we keep seeing housing go up and up and up from all this financial engineering and funny money and cheap money and just creating out of thin air. When you've got an asset that's real, that becomes more valuable simply because it takes more money to buy it. So great for real estate, I suppose, not great for the economy. I'm always looking for where the juice is. And for some reason, I have a feeling next year all these things are going to get pushed through and they're going to pump some juice in the economy for the elections.

11:26And like I feel like we're kind of in the mud right now and then we're going to take off. And then I don't know what's going to happen after that. I think in the short term, it could have a very positive effect for real estate investors in the long term. It's probably not a good thing. It's not probably. It's not a good thing. We're going to keep devaluing the dollar. And then I'm going to be really wishing I listened to Dave about buying gold and Bitcoin. My gold portfolio is crushing right now. Oh, man, me too. My fear portfolio is working. My fear portfolio is on fire right now. that's why I think like even right now I'm contemplating pulling some houses off the market because it's just slow.

12:06There's a lot of fear, a lot of weird things going on and then just drop them in the hot spot because real estate is about timing. And honestly, I do think next year there's going to be some juice pumped in this economy. And that's when you're going to want to dispo off anything you don't want anymore. Yeah, that's a good perspective. I've been considering doing the same thing because of the slowdown here and going into the holidays. Although the fed did drop rates again, and I know that's probably not going to affect interest rates. like people think it is, but I don't really care what actually happens.

12:33I care what people think is going to happen. People think that the Fed dropped rates and that it's going to be a better time. And so hopefully that injects some buyer activity. So I'm going to give it another 30 days and see what happens. I've got one house in particular that I'm considering holding off on selling. The rest I think are going to do just fine. I got five. I believe you. you know what comes down to the sweet spot of the market because things are moving but yeah if you're outside that sweet spot it makes more sense to pull it off and put it back on i'll just say i i agree with you what you all said especially kathy like i think short term it could help real estate i think long term this introduces some really significant issues first and foremost it will just make housing unaffordable again like this will make it affordable for a minute and then it will get unaffordable as soon as they stop mortgage-backed securities, which they'll have to do at some point because inflation will get out of control.

13:29The other thing that I think will compound that, and I've been trying to say this for the last three to six months, I've gotten increasingly concerned that long-term interest rates are going up, long-term mortgage rates, not a year or two or three years, but five to 10 years, we might be in 8 % to 9 % mortgage rate territory. I don't even know. buying mortgage-backed security and new monetary supply, that in itself could do it. But considering that we have such a high national debt, the temptation to keep printing money is going to be pretty high to devalue the dollar to pay off that debt. And bond investors don't like that.

14:05And if bond investors don't like it, they're going to demand a higher interest rate that's going to push up mortgage rates. And so one of the reasons I've been saying a lot and for my own portfolio really been focusing on fixed rate debt and not trying to buy anything with variable rate debt. I'm actually spending a lot of time looking at new deals recently. There's better and better stuff out there, but I'm just trying to lock things in because I don't want that adjustable rate, even if there's a good commercial deal right now. I've been looking at fixed rate commercial debt, even though you pay a higher rate on it, because I don't trust that in five years when I have to refi or seven years when I have to refi, that rates are going to be lower.

14:41I think you have to hedge and assume that they might be higher. So this is something, perhaps the biggest thing to watch next year. Honestly, I think this would be an enormous shift in the housing market and would change my personal strategy a lot if this started to happen. So something I just kind of want to bring up and share with everyone and we'll keep an eye on it. All right, we got to take a break. But when we come back, we have more stories about buying opportunities in different markets across the country and the impacts of some of those high profile layoffs that you've probably been seeing in the news.

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18:22Welcome back to On the Market. I'm here with Henry, Kathy and James talking about the latest news. We've talked about housing demand, how it's up, the potential for quantitative easing. Now, Henry, you've got some more housing news for us. What is it? Absolutely. So I wanted to talk a little bit about housing prices and when they will drop. So there is a sentiment that people think housing prices are going to drop. And the reality is in some markets, prices have come down a little bit. And so I wanted to talk about this article from Yahoo Finance called When Will Housing Prices Drop? Costs have already decreased in some major metro areas.

19:02And I thought I would like to have a little fun with you guys. So we're going to have you guys guess. You all get to pick two cities that you think are on the top 10 list for housing prices dropping. And you can't pick Austin because I know you're all going to say that. And what's the time period since last year? This is price decrease since September 24. All right. So the article is essentially saying that the typical home for sale spent 62 days on the market in September 2025. And that's a week longer than it took a year ago at this time. It also talks about, according to the U.S. Census Bureau, that the median home price in Q2 of 2025 was$411 ,000.

19:41And it's down from$423 ,000 at the beginning of the year. And so it is showing that the median price has come down. And it's also saying that the national housing inventory is lower than before the pandemic. And it's unlikely that we'll see a huge jump in listings until mortgage rates fall a little more. It's just telling us all the things that we've kind of talked about earlier on the episode. We've kind of debunked some of these things. But there are markets where housing prices have fallen. and I know that there's a lot of people interested in where those markets might be because this could be a place where there's some opportunity to buy because a lot of these cities are big cities and they're not going to stay in decline forever so we've talked about it with cities like Austin like if you want to invest in Austin this may be a time to get in because yes prices are down we know it's a city where people want to live and so I expect that markets like this rebound so So knowing where these cities are, if you either invest in these cities or are interested in investing in these cities could provide you some opportunity to get in while prices are low so you can monetize if and when values go back up.

20:50So with that being said, Dave, give me two cities. Okay. I'm just trying to think. I got to think that they're in California, Florida, Texas, or Louisiana. Those are like my big states for them. Okay. Okay. I know Cape Coral is like big, but I don't think it's going to be on this list because it's too small of a city. So my first thought was San Francisco or San Jose. Okay. Like that whole Bay Area. Okay. Then I think James lives in one of them. Phoenix is my other guess. And I think Nashville were like three of them I had up there. I would have said Austin, but those are my other ones. James, give me two cities.

21:30Ooh, two cities. You know what? I'm going with the ones I do live in because I'm feeling it the most. Dave might live in one of them too right now. I know. If we're going year over year. Yeah. Because last September was hot in Seattle for sure. I think the median home price jumped like from like 840 to 880 during that time. Wow. So I'm going Seattle and Phoenix, the two places I have most my money in right now. This is for personal experience. All right. Kathy, what are your two? Seattle and San Francisco. Seattle and San Francisco. All right. Drum roll, please. The winner is Dave Meyer. He nailed both cities.

22:11He got San Jose, specifically said San Jose, and Phoenix. That's not doing well. Wow. But San Jose was six on the list. Phoenix is number seven. Number one is San Diego with a 5%, 4.9 % price decrease since last year, September 24. Ooh, fire opportunity. Number two, Miami, Florida, 4.8%. Yeah, that tracks. Number three, Kathy, I thought for sure you were going to go hometown. Los Angeles, 4.8 % decrease. I did not know that. Number four, Austin. Number five, New York City, New York, New Jersey. Really? Yeah. I didn't know that. 4.7%. San Jose, 4.6%. Phoenix, 4%. Dallas, Fort Worth, 3.3%. Boston, 3.3%.

22:57Austin? Boston, 3.3%. And number 10 is Sacramento, California with 3%. Okay. All right. Well, that was fun. We should do more trivia. Absolutely. So if you want to deal in a market that may be emerging, you might want to check out some of these places and see if you can snag yourself something. I feel like Austin has had zero rebounds since the rates have spiked. Like it's the only one that hasn't gone like this. It just keeps just kind of going like this. Yeah. Even if you look at like the California markets, they've kind of been up and down the last few years. It's like sort of random. Florida has been sort of consistently down, but those are leveling out.

23:33Austin is just getting hammered. All right. We got to take one more quick break. But when we come back, we're going to have more uplifting news about layoffs. That was a joke. It's not uplifting, but we will talk about layoffs when we come back. Stay with us. If you own a short term rental, here's something worth knowing. Not all landlord policies are built for your type of property. And with holiday bookings, chilly weather, and higher guest turnover, having the right coverage is more important than ever. Steadily offers insurance designed specifically for short-term rentals, covering property damage, liability, lost rental income, and even unexpected issues like bedbugs.

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