Dave:
Home sales in the US just hit a record low. This isn’t a soft patch. It’s not a seasonal dip. This is serious. Pending sales just fell to the lowest level ever recorded by Redfin and NAR. And this isn’t just happening in one or two metros. They fell in every single one of the 50 biggest metros in the country. And here’s the thing, this might be the new normal. Everyone’s sitting around waiting for mortgage rate relief to kick the market back into gear, but that might not happen soon. You might be waiting a while for that. And for that reason, I think it might be a very cold winter for the housing market. So today on On the Market, we’re going deep on the winter housing market. Why sales are falling off a cliff, why inventory is rising for the wrong reasons, where rates are heading next year, and what it all means for your investing strategy going into 2027.
This is On the Market. Let’s get to it.
Everyone, welcome to On the Market. I’m Dave Meyer, real estate investor, housing analyst, chief investment officer at BiggerPockets. We are now entering that time of year when the market usually just slows down. Kids are back in school, the weather turns, buyers take a break, and this is totally normal. But what I’m seeing in the data right now isn’t just a seasonal slowdown. I think there is something more going on here. The big headline that you need to know is that demand in the housing market has really started to fall. And this is a change from recent years. Despite what people say on social media about no one wanting to buy, that’s actually not true. Demand has actually been pretty steady the last few years. Sure, it is lower than it was in COVID, but it’s actually been pretty steady. And as of earlier this year, before the war in Iran started, demand was actually starting to go up.
But now we are seeing it turn in the other direction and this could really change dynamics in the housing market. Two months ago, I made a prediction about what was going to happen about the market and it looks to be coming true. So I kind of want to share with you all that prediction. If you didn’t see it, I made it on social media, but I’ll share with you because I am starting to see this market take shape in a way that actually makes sense to me. And I want to share with you what I think is coming next. But before we get into this episode, I want to share with you something pretty fun that we’re doing at BiggerPockets. We are doing our first ever workshop on scaling up. We are taking two full days in person with some of the biggest experts in the industry to help investors who maybe have a couple of units, maybe you’re doing well, but you want to take that next step.
You see the great stall, this period that we’re in right now as a great buying opportunity to set up your portfolio for years to come and you want to figure out the strategy that’s going to get you there. That is exactly what we’re doing at this two-day live event in Phoenix, Arizona. It’s happening this December 5th through 7th. We have amazing speaker lineup. We have myself, Kathy Fecke, James Danner, who you know from the show. We also have Devon Kinard and we have a couple other speakers that we haven’t even announced yet, but these are some of the best speakers in the whole country. And it’s not just going to be lectures, people speaking at you. This is going to be super hands on. You’re going to have a whole strategy template that you’re going to be filling out. So you’re going to walk away with a specific action plan for 2027 and beyond.
We just launched tickets a couple days ago, so grab yours today. We actually, we’re only selling a hundred seats. So if you want to go, go get your tickets right away. They’re going to sell out. Go to biggerpockets.com/conferences to learn more. All right, with that, let’s get into today’s episode of On the Market. And I’m going to start by giving you my take. Over the late summer when bond yields started to rise, I said publicly on social media, I made a prediction, people were going crazy saying all these insane things. I made a prediction about what I actually think is going to happen in the housing market. No hype, no fear mongering. And I said four things were going to happen. The first one is that transaction volume, the number of homes that are sold in any given month or year would fall because we’d have lower demand.
Number two is that new listings, the amount of people who choose to put their home on the market, that would go down. That’s a really important thing. I said that would go down, that less people would choose to sell. The third thing is that inventory would rise because even though new listings are down, homes that are listed sit idle and the total number of properties for sale, which is inventory, that would go up. And then number four is that prices would turn negative nominally within the next year. Nominally just means not inflation adjusted. The headline number I think will turn negative. Those were my four predictions. Transaction volume down, new listings down, inventory up, prices down. Let’s see how I’m doing because we’re getting a lot of data now just starting the last couple of weeks since interest rates went up. Over the summer, that data is not as relevant because rates, they’re in six and a half, but now we’re at seven and a half.
That’s a totally different affordability climate that we’re in right now. We’re starting to get the data and we can see if this prediction is right. First, we’re going to just look at the first prediction, which was about pending sales falling. And this one unfortunately is correct. I don’t want to be right about this, but this is the big scary number. This is the reason I’m making this episode is because we just got data that showed that pending sales, again, number of homes that go under contract or transact, depending on who you ask, went down 14% in just a single month. And pending sales is a really important metric here because it tells us two things. First, it tells us that transactions are going down. We don’t have our total home sales numbers, but pending sales, things that go under contract is a lead indicator for that.
So we know that the market is already going to be slow and it was already slow before this happened. Just for some context, annualized home sales right now are at about four million. Normal in the housing market is about five and a quarter million. So we’re well below that. In COVID, it shot up to six and a half million. So that’s why it feels so slow. Well, because it’s below COVID and because it’s below normal, we’re at a very, very slow and stagnant housing market. Now we’re seeing that drop double digits in a single month. Now it might recover, but this is concerning, especially anyone who works in the industry. If you’re an agent, if you’re a loan officer, I’m sorry, this really stinks in already a difficult time and I don’t know if it’s going to change, but this stinks. The second thing is that it just tells us about home buyer sentiment.
It tells us that fewer people want to buy homes. This is what you look at pending sales for is you say, how many people are actually going to the closing table and signing or putting something under contract unless people want to do that. So we know that demand is falling and it makes sense because affordability is lower. And so you would expect demand to fall off, but it’s below the point where it was two years ago when mortgage rates were this high or higher, right? They were seven and a half. They hit 8% a couple of years ago and demand didn’t fall this much. Now it is falling. And I mentioned this at the top of the show, but just wanted to call out that pending sales declined all across the country. I looked at all 50 of the most populous cities in the country and they fell two weeks in a row in all the places.
So we are seeing that no matter what you look at, you can look at the Redfin data, you can look at the NAR data, it is not good. In fact, if you look at the NAR data, one of the scary things here is that if you look at the NAR data, which goes back to 2001, and it’s their lowest pending sales of the whole data series. So yeah, even lower than the great financial crisis, 2007, 2008 had higher pending sales than what we’re seeing right now. And if you’re curious, places that are getting the hit the hardest are places like Seattle where I live, I’m seeing this absolutely. It’s down almost 30%. San Diego is down 25%. Atlanta 24, Denver 21, Las Vegas 21. So it’s happening all across the country, but really bad in certain markets. Now, if you’re wondering why this is happening, there’s two reasons and you could probably answer the first one for yourself.
If you listen to the show, you probably know by now that the answer is affordability. It’s just less affordable to buy a home because mortgage rates have shot up this year and particularly in the last couple of months. But just for some context, in just the last year alone, the average payment on a mortgage went up over 10%. That is really significant to a buyer’s budget. Just since September of 2025 to now, we’ve had high rates for a while, but just in the last year it’s gone up 10%. So no wonder people are leaving the market. That has to be one of the reasons. But the other reason, maybe even the bigger reason, I don’t know, but another major reason here is psychological, at least in my opinion. I think there are a couple things going on here. First and foremost, people are tired. I think a lot of people have been waiting for prices to come down, waiting for rates to come down.
They’ve just been wanting to find something that’s affordable. Now they’re seeing rates go up again and it just kind of feels like we’ve seen this story before. We’re tired. Maybe we’re just going to rent or we’re going to sit it out for a while or maybe we’re just going to stop looking for the next year. I don’t know, but I think that’s a major reason. The second thing is I think people are finally giving up on the date the rate, marry the house idea. And I am personally glad about that. You’ve probably heard me rail against that advice for years now. I think it’s terrible advice. No one knows which way interest rates were going. I said this back in 2023, that it was bad advice because interest rates could keep going up or they could stay really high and people made fun of me and said I was crazy, but you know what?
Look at where we are right now. Mortgage rates are higher than they were in 2023. They’re at 7.5%, and I think people are not buying it anymore. They’re not buying homes thinking, “Oh, I’ll just refinance in a year or two because now we’ve had four years of higher rates. They’re going in the wrong direction and there’s no end in sight to this.” Well, there might be. We’re going to talk about that in a minute, mortgage rates. But I think people are just saying, “You know what? I’m not doing that anymore. I’m not going to pretend that I can refinance for sure.” And I think that’s a good reason, but it’s going to pull demand out of the market because people are going to wait until rates come down to a tolerable level and rates come down to a level that buyers feel comfortable with for the next 30 years potentially.
So that’s what’s going on with pending sales. So if you’re keeping scoring my prediction, nailed this one, this one was easy. When prices go up like this, pending sales usually go down, doesn’t usually happen, but this one was pretty easy to see. And yeah, pending sales are down. And I think this is probably the number one thing to watch in the next two months, I would say, is pending sales. If they keep going down, it’s going to get rough for real estate, both in terms of transaction volume, and I think it’s going to translate to price declines. Not a crash again, but I think we’re going to see it’s going to be tough to sell a home. Keep an eye on pending sales because to me, this is a huge story in the housing market right now. Hopefully you understand why it’s such a big story and what it can mean for the housing market in general.
So talked about pending sales. Let’s talk about my other predictions where what’s going to happen with new listings, inventory and prices. We’re going to grade my predictions, but we got to take a quick break. We’ll be right back.
Welcome back to On the Market. I’m Dave Meyer. We’re talking about the winter housing market. I made predictions over the late summer about what I think was going to happen once the bond market started going crazy. And I said, first pending sales were going to go down and they have. I also said inventory is going to go up, but the critical, the hot take here, the one that I think a lot of people are actually getting wrong, I said that new listings were going to go down. Let’s see how we’re doing. Well, inventory, the one that I think is the easier prediction is up. If you look at active listings year over year according to realtor.com, according to everyone, is up. It’s up 5% year over year. Not crazy, but frankly, I think we’re kind of just at the beginning of it. Again, like I said, not exactly a hot take to say that when pending sales are going to go down, inventory is going to go up.
That’s a well-known relationship, but there is a lot of nuance here. Inventory is actually sort of a complicated metric. Inventory can go up and down for lots of different reasons. It’s a great thing to track if you care about the housing market because it measures both supply and demand and it measures the balance of supply and demand. Just for example, if supply goes up and demand stays the same, prices tend to go down because there’s more homes for sale, same amount of buyers. The other thing can happen too, right? Supply can go down, demand can go up. It can do all these different things, but it tells us a lot about where the market’s heading. And over the last couple of years, since COVID at least, I think most people who watch and care about the housing market have wanted more inventory because that would take us out of this crazy seller’s market that we’re in for a really long time and get us closer to balance.
But you kind of want inventory to go up only if it’s for the right reasons, like the good kind. And right now it’s not going up for good reasons. Let me explain. My prediction was that new listings would fall and inventory would go up, and both of those things turn out to be correct so far. New listings is a measure of how many people choose to sell their home in any given month. Inventory is the total amount of homes that are for sale at any given time. So inventory tracks not just what got put on the market this month, but all of the backlog too, everything else that has been listed for sale over months or years ahead of that actual month. And what we’re seeing right now is that new listings, the people who chose to sell their home in September went down. It went down almost 1% year over year, which isn’t crazy, but it was going up year over year just a couple of months ago.
So this is a big shift in what’s going on in the market. And what it tells us is that inventory isn’t rising because sellers are all of a sudden flooding the market. It’s rising because buyers aren’t absorbing the homes that are already there. And this is the single most important distinction in this episode that you need to pay attention to because a lot of people will point to rising inventory and say, okay, this is going to be a crash and there’s always a chance of a crash, don’t get me wrong. But in 2008, inventory was surging because people were flooding the market with new listings because we were seeing lower demand and higher supply. And when that happens, that’s the environment for a crash. Those are the ingredients for a crash. Right now though, we’re seeing lower demand, but we’re also going to see some lower supply.
Depends how you measure it. Active inventory is going to go up, which is why I think prices are going to come down, but we are not seeing forced selling. The people who can choose not to sell are choosing not to sell. You can see it right here in the data, and this is why I keep saying that the most likely outcome is a stall and declining prices, but not a crash. Yes, there are fewer buyers and that stinks, but sellers are reacting exactly how you would expect in a correction, not a crash. If there was going to be a crash, new listings would be up, not down. Now that’s not always the case, right? You could have no new listings and no one buys a home for a couple of years, but in almost any crash scenario, you would need new listings to probably go up.
And I’m not saying that can’t happen in the future if there’s a black swan event or unemployment goes crazy or the stock market blows up or there’s a war, who knows? But as of right now, the fact that new listings are going down tells us that a crash remains unlikely, but a correction is the likely course that we’re going to take. Again, not any different from what I’ve been saying for two or three years now about the market, but we are going to see lower transaction volume and the inventory that goes on the market is going to sit longer. That’s my take on it. That’s what I think is going to happen. And so far the evidence is backing up my predictions. Before we move on though, I also just want to add some context because you’re going to see headlines, you’re going to see people on social media saying inventory’s going up, there’s going to be a crash.
I want to provide some context. As I said, active listings inventory is going up. It’s about 5% up year over year, but it is still below where we were in September of 2019. Just keep that in mind. If you just sort of take the most obvious data and sort of look at this logically and not think of conspiracy theories or plan out black swan events that could happen, if you just look at what’s happening today, it does not look like a crash is materializing. Instead, it looks like a classic correction. And that’s why I don’t know if my fourth prediction has come true yet. I said that nominal home prices were going to come down at some point in 2027 and I’m sticking by that. I think all the ingredients are there for correction. We have inventory going up, we have less demand, we have low affordability, all ingredients for a correction.
The new listings for selling piece that takes you from a correction to a crash is not there. And that’s why, although it’s going to be a cold, tough winter, if you’re selling a home, it’s going to be rough, but I don’t think we are in panic mode right now. I will let you know if that changes, but right now the data does not suggest that. Anything else is speculation. You’re free to speculate. We’re in a very uncertain world, so go ahead and speculate away, but I just want to tell you the evidence as of where we sit today remains correction, not crash. And I should mention, as I do all the time on the show, that this environment makes a good buyer’s market, right? I’ve been looking at a lot of stale listings, looking at things that have been on the market for 30, 60, 90 days, had recent price cuts, and there are a lot of them.
If you’re a buyer right now, you have all the leverage. There are so many sellers competing for you right now. And so if you’re a buyer, negotiate hard. We’ll talk about that more in a minute, but just remember, correction does not mean it’s a bad time to buy. It means you have to buy smart, but you can still do it. So again, pending sales down, new listings down, inventory up, all correct. We’ll see if my prediction about nominal hold prices is right, but I just want to, again, provide a little bit more context. As of right now, top 50 biggest markets in the country, 17 of them are already negative in nominal terms. So that’s about a third of the biggest markets. It’s kind of a lot, right? Only eight markets are growing faster than inflation. That’s not a lot, right? You want your properties to grow faster than inflation, and there’s only eight markets rightnow.
It’s Chicago, Hartford, Milwaukee, New York, Cleveland, San Francisco, Kansas City, Province, Rhode Island. That’s it. The other 25, the other literal half are still up in nominal terms, again, in non-inflation adjusted terms, but they’re growing slower than inflation, which to me is another sign of a correction. And if I had to guess right now where we’ll be a year from now, I’d say almost all, if not every one of them is below the pace of inflation, maybe not San Francisco, 49 out of 50, let’s say, if the AI bubble keeps going. 49 out of 50 will be below the pace of inflation. I’d say at least more than half of them are down in nominal terms, maybe more than 60, 70%. That’s my prediction where we’re sitting today, unless of course mortgage rates come down. And we’re going to talk about how that is possible right after this quick break.
Stick with us.
Welcome back to On the Market. I’m Dave Meyer. Today we’re talking about the winter housing market conditions. We’ve talked about pending sales, inventory, new listings, and prices. Now let’s talk about the variable. It’s the big lever that could get pulled in the housing market and its mortgage rates. We all know this. We’ve been talking about it for four years, but we’re starting to see a lot of major forecasters who have been predicting lower rates for a long time change their tune. Just as an example, Fannie Mae, they came out with their October forecast and they’re predicting 7.5% interest rates on a 30-year fixed mortgage rates for the entirety of 2027. That’s up from 6.7%. That’s what they were predicting. Just a month earlier, they were saying 2027, we’re going to have 6.7%. Now a month later, they said actually it’s going to be 7.5% all year.
That is a huge difference. That is a really big difference in psychology of the buyers and in actual affordability. An 80 basis point revision in one month, that doesn’t happen a lot. That is a big move for a forecast, and we’re seeing this across the board. It’s not just Fannie Mae, it’s happening everywhere. And if you haven’t been paying attention, the reason rates are high and the reason that they’re stuck is because of the bond market. Treasury rates have shot up. They’ve been pretty volatile over the last couple of days. I’m recording this towards the end of October, and they were up to as high as 5.3%. There’ve been some hope about the end of the war in Iran and they’re down to about 5%. But even still, even if they stay around this 5% rate, we’ll still have low sevens, maybe high sixes for next year, and that’s going to be pretty tough, right?
I think it’s beyond just inflation and the war. I think bond investors are starting to get worried about the national debt and the potential inflationary pressure there in the US, and a lot of Western Europe is facing this crisis as well. And on top of that, US bonds are facing competition from AI, and so that’s going to push up bond yields as well. And so right now, the status quo, if nothing big changes, I’d say probably somewhere between 6.75 and 7.75 is the forecast for next year. That’s not my official prediction. I will make a prediction in December, but that’s kind of where I’m seeing it right now. It could also get worse, I should say. If inflation gets worse, if oil prices go up, it could definitely get worse, but there are actually two scenarios where mortgage rates do get better. The first is the end of the war in Iran, and that’s why we’ve actually seen mortgage rates start to come down a little bit in just the last week, this last week of October, is because there’s been some hope that oil prices are going to go down, that’s going to reduce the pressure on inflation, that’ll bring down bond yields, and that will bring down mortgage rates.
So that is number one, and that would be great, right? Hopefully there is a positive resolution and prices start to come down. Inflation is always sticky, will take a while, but ending the war or oil prices falling would do a lot for mortgage rates and bond yields to fall down. That’s number one. The second scenario is a recession. Almost all of the time when there is a recession or adverse economic conditions, bond yields fall and mortgage rates fall. And this is because when we’re in a recession or the stock market crashes or corrects or whatever, a lot of people take their money out of risky assets like the stock market and put it into safe assets, which is bonds. And the more money that pours into bonds, the lower interest rate the government has to pay, and that takes down bond yield, it takes down mortgage rates.
And this is why I often subscribe to this idea, there’s this theory about recessions where real estate is, they call it first in, first out, because real estate is very, very sensitive to mortgage rates and to interest rates. We all are seeing this. And so when rates go up like they have, real estate usually gets hit first. It’s exactly what we’re seeing. The stock market’s doing well, corporate earnings are doing well, unemployment rate is still pretty low relatively speaking, but real estate has been in a recession for four years and it’s getting worse, right? So we’re first in, but the idea is that once the rest of the economy starts to falter and goes into a recession, other sectors start to go into a recession. Just imagine the stock market tanks. Then what happens is people put their money in bonds that drives down mortgage rates and that helps real estate recover.
So we’re also, even though we’re first into the recession, we’re first out because affordability improves in real estate before a lot of other sectors, and that helps bring the whole economy out of a recession. I subscribe to this belief. Now, I don’t know if there’s going to be a recession, but if there is one, it could help set the bottom for the housing market. That happens often. But as of right now, I don’t see a big recession coming at least in the next couple of months. I think it’s like a fifty fifty shot if there’s a recession in 2027. Now, I’ve gone on this show many times and complained about the definition of recession, that there really isn’t one. It’s entirely subjective. I have even created my own metric and way to measure recessions. I call it the Main Street recession. If you can go back and listen to those episodes, and by my measure of recession, we are in one, but my redefinition of a recession is not enough to change the bond market, unfortunately.
I don’t have that power just yet. So will we see GDP contraction? I think it all depends on what happens with AI, right? AI is propping up the stock market, it’s propping up GDP, and if AI keeps going, then I don’t think there’s a recession. I’ve said before on the show, I think there is a bubble here and I think that it is going to pop whether it pops in 26, 27, 28, I have no idea. But when you look at the revenue these companies are creating versus their debt, it just doesn’t make sense. It really doesn’t. Look at the map. It doesn’t make sense. That’s not to say AI is not an incredible technology, that it’s not going to change the world. I think it will, but I think the asset values are very unreasonable. I don’t know how else to say it. It’s just unreasonable.
And I do think that could lead to a recession. And of course, no one likes a recession, but that could bring down mortgage rates. That’s the point here. And so if you’re wondering how long this lasts, you have to ask yourself, when do one of those two things happen? When does the war end and we get lower inflation or when do we get a recession or both? And I just want to make clear that if one of these two things happen or both of them happen, that still doesn’t mean we’re necessarily going back to 4% mortgage rates or 3%. Maybe if there’s something crazy that happens, but these could bring us down into the sixes. Maybe they can bring us down into the fives, but it really depends on other things. And so that’s why right now, because don’t know if there’s going to be a recession, how bad it will be.
We don’t know about a resolution of the war. We have to plan for seven and a half percent mortgage rates. That’s the only reasonable thing to do as an investor or a buyer right now or a seller. It’s the only reasonable thing to do. Now, you can make your own speculations about if those things are going to happen. I certainly have my own opinions about them, but I am not using those opinions to inform my investing decisions. I am a hundred percent in on seven and a half mortgages. That’s everything you underwrite right now. Cap rates are going to expand. Mortgages are going to stay high. That’s how to think about it. And this hasn’t changed. This is the opinion. This is the advice I have given on the show for years now. Use this scenario. Sellers know that interest rates are 7.5%. They know they have to compete for buyers.
That is what has changed in the last six months. They’re no longer holding the cards. Buyers are holding the cards. I’m trying to buy and sell. I can tell you for sure, because I’m on both sides of transactions, buyers are holding all the cards right now. So use it. Negotiate hard, underwrite at today’s rates, hunt for motivated sellers, know the pockets of your market that are going to recover quickly and find good deals. You absolutely can. When I say it’s a cold winter for real estate, what I mean is transaction volume. It’s going to be slow. It’s going to be a sluggish market. It’s going to be cold for sellers. It’s going to be tough out there, but for buyers, that’s where opportunity lies. So that’s my read on the market. It’s not all that changed from what I’ve been saying for the last several years.
I still think the great stall is the most likely scenario. Even if we get lower mortgage rates, I don’t think the market’s going to take off all of a sudden unless we have huge drop to mortgage rates, which I think would only come from a Black Swan event at this point, but you can invest in the Greg Stall. When there are times when sellers are motivated, like right now, that’s when you buy. Now you should buy below market comps for sure, but this is when you buy. When people are worried and fearful and are willing to offer deals, I could tell you, I’m a seller, it stinks. I’m willing to offer deals because there’s properties I want to get out of, want to raise cash and go buy other things. Other sellers are thinking the same way. So that is what I recommend all of you think about as we head into this winter.
But things are changing fast and I will absolutely be providing updates just like this at least once a month, maybe more if something changes, but at least once a month because we just saw, look, pending sales change dramatically in a single month and it’s really changing how sellers and buyers are behaving. And so if you’re an investor, if you’re working in this industry, stay tuned because I’ll be providing deep analysis into what’s going on in the market every single month with shows like this. But we’re doing it twice a week here on On the Market. So make sure to subscribe, stay tuned so you can stay ahead of the market that’s coming. That’s our episode for today. Thank you so much for watching this episode of On the Market. I’m Dave Meyer. I’ll see you next time.