U.S. Home Prices Turn Negative, Sellers Finally Give Up Ground

0:00When you look at a headline, there are two ways that you can interpret it. Sometimes it can cause a lot of fear and can cause you to avoid doing the deals and working on your business in the way that you should. Or you can look at news and data and information about the housing market and think about how you can make that work for you. Today on On The Market, we're bringing you four headlines that you can interpret either way. You can decide that this is a reason not to invest in real estate, or you can see that every kind of market has its silver lining. And if you position yourself correctly, there are amazing opportunities out there.

0:45What's up, everyone? I'm Dave Meyer. Welcome to On The Market. We got the whole gang here today, Henry, Kathy, and James joining us for a wonderful spring version of our On The Market's headlines. And I'm going to start with a story. And I don't know, I guess you can see this as positive or negative. I'm curious about your opinions. But I think after years, four years of people saying this was going to happen, housing prices, at least according to Realtor and basically according to Redfin as well, have turned negative on a national basis. It's been holding on flat for a while. I should also mention that we've had inflation adjusted prices have been negative for four straight years.

1:25But the number you see on Zillow, the nominal home price is now turning negative. So curious, are you guys seeing this in your market? And what do you make of this? I was going to say, it's kind of a tale of two markets. There's more than half the country is actually positive and doing really well. That's kind of the Midwest and probably where Henry's sitting. But the volatile markets like California and now Texas fits into that and Florida, Idaho, they have been more negative. I can tell you right now, if you ever wanted a house in Malibu, it is on sale. It is on sale. Like they're slashing. When they slash in Malibu, it's not by a few thousands, literally by millions.

2:03So come get your house. Yeah, I think that's true. We're seeing definitely a tale of two markets, actually about 50-50 for major markets, positive and negative. And none of them are super to the extremes anymore. I guess like Punta Gorda, you know, like a couple of places in Florida are kind of extreme, but they're kind of all hovering around that middle area. And I'll just say, I know a lot of people, if you own a large portfolio, this doesn't sound great. If you're flipping, it might hurt. But like, I think it's time. I think it's just time that we see prices go down a little bit. I think we've been in a correction for a while because inflation adjusted prices are down.

2:39And I think the thing that's making me most encouraged is this report from realtor.com that I'm reading here, asking prices have finally gone down. And I think that's sort of a sign that sellers are finally accepting the market we're in. Because the reason for a while prices have been flat is because people have just been waiting and waiting and waiting and days on market are going up and you're negotiating. I think we can get to a healthier housing market. If sellers just accept prices are two or 3 % lower than they were a couple of years ago. I don't care that your neighbor during COVID got 19 offers.

3:15Like we're not in COVID anymore. We're not there. Yeah. We're not there. Just lower the price by like 3 % and you can sell your house, right? Or hold it. Hold it if you don't want to take the cut. Exactly. But I think that reality is good. We all need to be on the same page. And I think we're starting to get there. You know, you said this is bad news for flippers, Dave, but I don't know that it is bad news for flippers because of the reality check that sellers are having. I'm seeing great opportunities. We're buying great deals right now with great spreads. We're underwriting conservatively. And so, So yes, bad news for flippers in that you can't go sell for the tippy top highest ARV possible anymore.

3:57But that's okay if you're buying it right. And sellers are a little more open to more reasonable offers now. Isn't part of this like the hangover from the spring market though? I feel like people jump into this real quick. I was reading the other day, it was like April 10th through the 15th is like the best time to sell a house. And I feel like this happens now every May. Last May, it was like, oh, what just happened? Because we were going really quick. And all of a sudden, well, someone made some choices overseas. And the water got put on the flames. And everything has stalled out. But I mean, I'm still seeing transactions.

4:34There's just less buyer activity. I feel like everyone needs to prepare for bad summer markets. Like, I mean, going forward, I got 10 houses I got to list in the next like three weeks. I'm not super excited. but going into this summer market, I need to be very aggressive with my price. And if I'm not hitting my ARV, that's okay, but I got to price it correctly. Cause if you price it too high, when the market starts cooling down, that's where you got to do your 400 ,000 hour price drop or your major price drops. And so it's just really, really important to put the right magic number on this thing and don't get gritty.

5:08Honestly, I think it works better right now. I don't sell as many properties as James Henry, as you guys do, but it seems to be working better right now to price low just to get foot traffic in. I went and looked at a deal in Seattle here yesterday. They had an open house on a Friday afternoon. I was like, no one's going to be there. There was like 25 people there because they priced it well. And I'm selling a property in Michigan right now. I deliberately went in low. We got six offers in the first weekend. It works well. And they're over asking. If you're pricing low right now, it actually seems to be a better strategy.

5:45And I think it's taken longer than I expected for people to adjust, but hopefully we're finally there. I mean, I'm doing something that I haven't done in a few years, which is the whole tail strategy for a property right now. I mean, my agent told me that they listed a property in as is condition and they got so many offers on it in a short period of time because they were listing the house at under its market value. Yes, it was distressed and yes, it needed work. But I think what you're seeing is there is a subset of people who are struggling with being able to afford a home, who have the skill set to be able to fix up the home themselves.

6:25And they're buying these opportunities because they can afford them. And then they'll just fix it themselves and live in it. And that is an option for a certain subset of buyer who can't afford what would typically be the lower end of a price point for a renovated or new property. But they can get into something that maybe needs some work if they're willing to do the work. So we're actually testing that on a property I'm putting on the market next week to see what happens. So when you're doing your whole tail, Henry, how much you're selling as is, I mean, do you get it like financeable and like clean it up and the carpets are smelly?

7:00You swap the carpets, you get like rent ready or are you truly like? Yeah, pass an FHA inspection. So when you do that, you make sure everything is financeable no matter what? Yeah, it's got to be financeable. But typically a house is going to sell on the low end here for$225 to$275. Like that's the lowest you're going to get a decent home for. And we're going to sell this one for$180. So it allows people to get into a home for a price point that is pretty unheard of. Well, I think that's as encouraging. I think it's a sign that we're getting back to reality where people are on the same page, which is a positive thing, in my opinion.

7:35Let's move on to our next story. James, what are you bringing for us? All right. So the article I brought in, because it's actually very relevant to what I got going on right now, because I've been seeing it, is it says auction.com. This is on Housing Wire. Quarter one, 2026 foreclosure auction activity is nearing pre-pandemic levels. Foreclosure and REO auction activity has moved closer to Q1 of 2020. And what this talks about is the year over year for quarter one is up 36%. But you do have to kind of look out for this because someone was asking me like, oh man, foreclosures are really rising.

8:10And actually that's down from the year before. And I always laugh at these articles though, because last year it was like they were up 60, 70%. Now we're up 30%. The year it was up 70%, I saw no deal flow from foreclosure activity. Now I'm actually starting to see quite a bit of deal flow coming my way that has foreclosure or a tax foreclosure or symptoms of distress. And I've probably seen more deals sent to me off market in the last 90 days. Actually, I would say 60 days than I've seen in the last two years. Really? and i think what it is is a lot of these foreclosures they're actually deals they're not like over leveraged properties these are homes that are beat up they were deferred for a while and they are coming our way and they are rough like the last one the price was so good but i was like i don't even know if i can buy this i just sent my trash guy out there and he quoted the trash removal of this property at 55 000 that's how much was there i've never spent that much on trash before i've bought a house for 55 000 well this one was cheap too like i was like oh this is so cheap.

9:15This is a no brainer, but I'm like, there's a lot of garbage there. And it was a half acre lot that looked like a dump. And I was like, Oh, this is actually too expensive based on the garbage at that amount. But there's too much garbage for James. That is terrible. That's gotta be unheard of. I need to see pictures of that. But you know, what I am seeing is there is a little bit of a trend and it is something like, you know, cause a lot of investors are also talking about how there's no deal flow. And it is, we're kind of in this like kind of slow market, but there's kind of stagnant to where the opportunities really aren't there.

9:45I know we bought less houses over the last 60 days than we were buying six months ago. But this is definitely something that people want to start watching in their local market, like what's going on. There's not a lot of activity going on in that market. And the deal flows are starting to come out. And the numbers are good. I will say that. Like when they're coming to me, I'm like, okay, this is actually really workable. And so we're seeing a trend. But even though it's like a shock at 36%, it's way down from the year before. And we're getting into more normalized foreclosures, but that's where it gives us that steady, steady deal flow.

10:18Yeah, I mean, I'm not surprised by this. Like foreclosures going up, reverting back to where they were pre-pandemic, that was just gonna happen. Like that's just, that's going to happen. I wouldn't even be surprised if they went above that. Like if you read the average state of American consumer, people are stretched. Like it could go up, like we're seeing it go up in FHA. We're still a very, very, very long way away from where we were in like 2008. So like I'm personally not seeing anything that suggests we're heading there. But James, do you think this is like a sign of distress and more to come?

10:49Or is this just sort of backlog from the last couple of years starting to hit the market? Right now, I feel like it's a backlog that's coming through. But I do think that this is going to spike again. I mean, affordability, I don't know how people even are making some of their payments on these houses with how much things are costing. And things are really expensive. So I'm surprised it's actually down so much year over year. I would have thought it would have stayed par and flush. But the good thing about that for investors and for sellers that do want to sell their property that may be in foreclosure, you don't have to look through a thousand deals to find that one.

11:25There's actually just decent deal flow coming out where people are like, yeah, you know, I got to get rid of this. Almost every one of them that are being sent to me are all vacant too. They're not owner occupied properties. I think this is probably just pretty normal. The amount of foreclosures that we're seeing, just kind of a return to normal. But I do think we're going to start seeing more foreclosures for the same reason we're starting to see investors make shifts. So, you know, a lot of investors who bought properties in 2023 to late 2024 are either in situations where they're looking to get rid of those properties or they're looking to have to throw a lot of capital at them to get them to produce the numbers because of the rates and all the expenses that were so high.

12:07But I think we're also going to see a lot of those single family home buyers who bought homes at those times either try to figure out ways to refinance to get their rates down or you might see some of those homes. And I'm thinking on the lower end of the affordability spectrum. So for those like first time home buyers, they were buying the home that they could barely afford at a, you know, 8 % interest rate, 9 % interest rate. I did read some articles in my research that said that there was a spike in refinance applications. I bet there's a lot of those people looking to refinance. And if they can't refinance or if they're just in a situation where now they can't afford that home because it's just a little more expensive than they thought.

12:50Maybe their taxes went up. Maybe their insurance has gone up. If you were barely affording that home when you applied for that loan back in early 2023 and 2024, then it's probably less affordable now as things are tightening up and maybe income hasn't increased like you want to. So I think you're going to start to see some of those come back if they're not able to refinance. That's what I was looking at before the show is REOs are up a lot from bank owned sales. And so like the transactions on those, like it, you know, in 2024, it went up 1.4%, 2025, 1.3 to 1.4. And then Q1 of 2026, we're up 1.6%.

13:30And I have noticed that there's a lot more REOs for sale on market. And there, those are the ones I feel like there must be a lot of deed and lose going on because I'm not seeing them go to the sale. but we're seeing a little the cleaner houses the bank owns are just kind of cleaning up and it is actually beating up the flippers resale market uh when people are going to sell in some of these more affordable markets the reos are rolling out and people are buying those so james what do what do people do if they want to take advantage of some of these deals like how do people do that well first thing is you want to research your local laws and your state laws like how do you approach this but the good thing about foreclosure data it's really easy to get now back when i was knocking doors, it was hard to get.

14:13Now you can get it anywhere. And you can get it from your title companies, there's third party providers. And what you want to do is you want to target foreclosures or anything, when you're targeting off market is look at the tax assessed value and what they owe on it. And that allows you to shrink your list down. You know, if someone owes 200 grand, you know, you want that property to be worth at least 275. So you can pull a percentage of debt versus the tax assessed value, pull that list. And then it's all about drip marketing. So you're basically saying that they need to, that has to be worth enough so you can pay off the bank, right?

14:50And still have a cushion to make some money, right? Yeah. And even better give the homeowner money, right? Because it's like when there's equity, it makes it a lot easier transaction because the seller can move on, get a second start on life, but then you're also working smart. And so you want to look at your local market and, And for us, it's always been 75 % of the tax assessed value or lower. That note amount has to equal that, or there's no point in us chasing it. That's great advice. Thank you. I appreciate that. All right. Well, we got to take a quick break, but we have two more headlines for you right after this.

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17:50Welcome back to On the Market. I'm here with Henry, Kathy and James going over the most recent headlines that are making news and capturing our attention. So far, we've talked about home prices turning negative, including sellers lowering their asking prices. Finally, foreclosures approaching pre-pandemic levels. Kathy, what do you have for us? Well, this is breaking news. It's HUD and USDA rescind the rule tying new homes to 2021 energy code. So basically, the U.S. Department of HUD is rescinding the 2024 Federal Housing Administration Energy Efficiency Building Code requirement. You couldn't get an FHA or a HUD loan if the new home didn't meet these requirements.

18:35But you still have to meet requirements. It doesn't mean that regulation is just disappearing and you can just build anything and it doesn't have to be energy efficient. These were just extra. It was enforcing the national energy efficiency standard would have added about 20 to 31 ,000 additional fees. Whoa, 20 to 30 ,000? Yeah. Oh my God. Yeah, an additional cost, which is just not sustainable. So that has been rolled back and that's good for builders. That will get builders to feel more confident about going in and people being able to finance. I mean, that's got to be what, like 10, 20 % of a budget for a new build, right?

19:19Yeah, there's already fees of up to$100 ,000 on average to build. And this added on to that with this new rule that was passed in 2024. So do we think this means builders are going to build more supply now? Well, it just is going to make it a little less expensive for them to build. And the biggest concern is if they didn't do it, they wouldn't get the financing. You know, so they had to. So the article goes on to say it doesn't make a huge difference because new homes are still unaffordable. You know, so you subtract$20 ,000 to$30 ,000. It's not going to help a lot of people. It will help some people.

19:55All right. But this is nationally, right, Kathy? Yes. Yeah. So I guess, I mean, depending on the price point, that could be meaningful. You know, some new homes in Midwest, Texas, like they're$250 ,000. You take$20 ,000 off that, like that's a meaningful savings. That's true. I don't know. Like obviously it takes a while. I assume it's not retroactive. So like this will take a while for it to work its way through the system. Like this is new underwriting for the builders. But I don't know. Maybe I'm just grasping at anything that will help improve affordability. but it sounds like it could help a little bit.

20:33Obviously, it's not a very big part of the market, but it could help a little bit. Yeah, yeah. The article was a little bit negative in terms of it will be a slow trickle of difference, but still the right direction. And again, it was the 2021 International Energy Conservation Code. So it was in 2021, but enforced in 2024. So builders haven't been as affected because it's fairly recent. But like recent trends showing construction is going down, right? Yeah. Like, yeah. So we're seeing less building. I don't know. Maybe it's enough to get them back in. But I feel like builders are mostly reading the macro environment more than any individual policy like this.

21:15That's just my sense of it. I mean, anything helps, right? Anything helps. If you're building 100 or 1 ,000 homes, that's a lot of money. That's a big difference. Right. That's true. That does matter. Yeah, because the big expenses on that code is going to be like your insulation. right? That's when you have to go from like standard bat to rigid, it can two to three X your installation cost. But the one thing I'm wondering, I'm like, does it really matter in most cities though? Cause the cities also require a certain building code on what that's right. And so like, I'm, I was just listening to this.

21:47I'm like, well, every city I work in is still going to enforce the code. So it doesn't really matter. Like it's a, but this could be like more affordable markets. But like, I mean, I got a city right now that's putting me into this code on a house that we're not even taking drywall off the wall. So I'm like, what is going on? Like, it's so weird. Well, I think the difference in this is that FHA will now finance if it doesn't meet the IECC code, the International Energy Conservative Code. They couldn't finance before. Now they can. But you're right. A local city planner may still require it. So it might not actually lower the cost for the builder, but at least you might have more demand, right?

22:25Because more people can qualify to buy the home. Yes. Yeah. That's good. Yeah. I mean, that's good, too. All right. Well, maybe it's something. I'd love to see the bill that the Senate and House has passed to help bring on more supply to actually get signed into law. But that is stalled like everything in our government. So maybe but maybe things will start moving in the right direction. All right. Well, we got to take one more quick break. We'll be right back with one more story, stick with us. Finding a strong rental property usually takes time, research, and calculated risk. Lennar Investor Marketplace helps simplify all of that.

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