Dave:
AI is coming for the labor market, or so every expert seems to be saying from Elon Musk to Jack Dorsey, to Sam Altman, a major disruption in the labor market, one that disproportionately impacts white collar workers could be heading our way. And if it does, it will ripple through the entire real estate market, impacting everything from regional housing demand to rent prices, and yes, even to mortgage rates. So today and on the market, we’re diving into a recent report detailing which jobs are the most likely to be impacted, how this could play out in housing, and what real estate investors should do about it.
Hey everyone, it’s Dave Meyer, Chief Investment Officer at BiggerPockets. Welcome to On the Market. Today on the show, we’re going to dig into what is being labeled the white collar recession. Basically, most of the studies and information that we have are showing that AI is coming for our jobs. Well, not actually all of our jobs, at least not yet, but some industries do seem particularly vulnerable and that really matters for real estate investors and for the broader economy. What recent evidence shows is that we may be at a sort of turning point for the jobs market. And this may not be the type of normal labor cycle that we’ve seen in the past where layoffs are sort of temporary and then they recover when the economic cycle shifts. Instead, we might actually be looking at sort of a generational shift in what industries are hiring, which industries are shrinking payrolls and which are going to pay the most in the future.
And if all of this does indeed happen, the implications are far reaching for the economy and the housing market. So in this episode, what we’re going to do is we’re going to cover first a new report from Anthropic, which is an AI company. They make a tool called Claude, if you’ve ever heard of that. They use their own data to show what industries are being impacted so far and which might be impacted in the near future. We’re going to talk about the current state of the labor market, and then we’ll shift into talking about what this means for housing, what regions and asset classes could be impacted, and what you should do about this with your own investing and portfolio. So let’s get into this. First up, let’s talk about the state of labor market as it stands today. We just got the jobs report actually last week for February, and it wasn’t good.
There’s really no way to mask it. It was a bad report. Non-farm payrolls fell by 92,000 jobs in February alone, and unemployment ticked up to 4.4%. Now, it’s important to remember, 4.4%, still very low historically speaking. A lot of people might point out unemployment rates, not a great metric. It’s not, but it is important that it is going up. I mean, it signals that things are not heading in the right direction. We also saw some downward revisions for jobs from previous months, just making the whole general labor situation a lot less stable. Now, of course, not all industries are impacted the same. Just like in real estate, not every market is impacted by macro trends the same. Same thing happens in the labor market. And we are not seeing uniform weakness. What we’re seeing is particular weaknesses in what are known as white collar jobs.
Never heard of this term. Basically, these are things like finance or insurance or tech or just general business. They tend to be higher paying jobs and they are a big part of the economy. According to some studies, these kind of jobs account for 40% of US GDP, that’s super high, and 20% of all employment. Now, normally, for decades, honestly, these industries added jobs very steadily. Of course, recessions are sort of the exception there, but during normal times, these industries in general were growing. However, over the last three years, they have on net cut jobs despite the fact that the economy has been growing and GDP has been growing. So the idea that white collar jobs are going to be impacted isn’t new. It’s actually a trend that has been developing for years. From 2010 to 2019, these industries were adding a lot of jobs, like 570 jobs per year on average.
But in the last three years, they’re losing an average of 190,000. So that’s a really big shift. You’re talking about a net shift of 750,000 jobs per year. In just the last couple of years, we’ve just seen postings for these kinds of jobs go down from the beginning of 23 to beginning of 2025. White collar job posting fell 36%. We’ve seen software developer jobs being absolutely crushed. They’ve dropped more than twice the overall rate. And it’s not just software developers, business analysts, market research, data entry people all getting impacted. Now, you might be thinking this happens, right? Layoffs happen, and that is absolutely true. They are an unfortunate part of the economic cycle. But there is some reason to believe, both from evidence and just logic that this economic cycle or this cycle in the labor market might be a little bit different. If you look at the types of layoffs that are happening, you see that we’re moving from times where companies would make big announcements, huge layoffs that would happen kind of infrequently.
Every couple of years, they’d announce they’re cutting a couple thousand jobs for a big public company. Now what is happening is that you’re seeing more frequent, smaller kinds of layoffs. People where they’re laying off 50 or 100 people at the time. Now, not all companies are doing this. We’ve seen massive layoff announcement from Amazon to UPS to Starbucks. Those are still happening. But if you just look across some of the trends, you’re seeing more frequent, smaller layoffs in economy-wide. And these are being called quote forever layoffs because they kind of just are cycling. People are constantly worried about their jobs because they don’t know when the next layoffs are coming. And these forever layoffs now account for the majority of layoffs. And that’s why you may not have noticed that this is happening over the last three years. I know a lot of attention is getting called to it now because of AI, but this has been happening for three years.
We should know ChatGPT has been around for about three years, three and a half years, so maybe there is a correlation there. But the reason it hasn’t been so noticeable is that it’s more of a slow bleed. This isn’t an event. It’s kind of something that’s just been happening, and that makes it a little bit harder to track. So why is this happening? Now, I mentioned AI, and obviously we’re going to get into that in just a minute. We’re going to go deep on the AI thing in a minute. But I actually think there are three different things converging here all at once. First and foremost, in 2021 and 2022, companies overhired. Remember how tight the labor market was back then? People were jumping from job to job. People were getting massive raises. There was just not enough labor for the demand during that booming economy.
And frankly, I just think companies overhired. So starting in 2023, about three years ago when we started seeing these things happen, they were just cutting back. Corporate speak, people like to use the word right sizing when they’re laying off because they’re saying they overhired and they’re just getting it back to the right size. I hate that term, but I do think it’s kind of true right now that we are seeing companies sort of revert back to what their payroll should look like instead of what they were hiring for in 2021 and 2022. Then this sort of continued, right? In 23 and 24, we got a lot of automation, a lot of AI, new software, and they found that most companies found that they could just basically keep cutting jobs, even if it’s slowly 20 here, 50 here, a hundred here, they could keep doing that.
And now the third thing is in 2025 and 2026, we’re getting more AI advances that allow them to hire even less or layoff even more, or they’re just anticipating that more AI disruption is coming or AI capabilities, I should say, and so they don’t need to hire as much. And that brings us back to the big news from last week when Anthropic, the AI LL company that makes the product Claude, released a new report using their own data, detailing where they think the labor market is going to be disrupted most. And it’s kind of scary. I got to be honest with you, I looked at this report and I was like, wow, this is really going to change the entire face of our economy if it comes true. Let’s just remember here before I dive into this, this is one company and they’re finding there’s not really evidence that this is happening at scale just yet, but I do think the data is good enough that we should be talking about it.
So I’m going to dive into it. And you actually may have seen this chart. It’s been circulating on social media a lot. I actually put on my own Instagram. You can check that out at the data deli. We’ll also put it in the show notes. But basically it’s this big radial chart that shows two different things. There’s one thing, it’s the blue on the chart if you’re actually looking at it. That shows the potential for AI to disrupt the industry. And then there’s a much smaller sort of red area on the chart, and that shows where AI is actually being disruptive here today. And when you look at this chart, you see that the potential for disruption is just massive, at least according to anthropic in certain industries. When you look at business and finance, tech, legal work, arts and media, office admin, architecture, engineering, sales, life and social science, all of these are showing that the majority of their work can be done by AI.
That is a little bit scary, right? We are seeing huge numbers of industries that potentially could be completely disrupted. Now, I think it’s important to call out that that red section where we are seeing, is it actually disrupting? Not really. Most the biggest ones are sort of in tech, business and finance. They’re saying about 30 to 40% maybe disruption at this point, but they’re pointing out that that could get much bigger. But again, really important to call out that the disruption is not happening yet. What I take away mostly from this report is that they’re saying they think that these industries may be entirely disrupted by LLMs. Now, they’re not saying 100% replacement of humans, but they’re just saying there’s going to be a lot of overlap between what an LLM can do. That’s a large language model that’s something like ChatGPT or Claude where you talk to it, that a large language model can do and what a human can do.
Now, the reason this is sort of perpetuating the fears of a white collar recession is because the industries that I just named are basically the highest paying industries out there. The most at-risk workers earn 47% more on average than workers with no AI exposure and tend to have graduate degrees or advanced degrees as well. Now, if you look at the other end, the income spectrum, it’s totally different. It is not really hitting industries like construction, agriculture, healthcare, manufacturing, transportation. All of those, at least Anthropic is saying their tool clot based on what they’re seeing, how people are using it, what is required in those fields, at least as of now, they’re not likely to be impacted. Remember here, we’re talking about large language models. These are like the question and answer talking format things that you see in ChatGPT or Claude or Gemini or whatever.
We’re not yet talking about robotics. That might be in a year or five years or 10 years. I don’t know, but we’re not talking about robotics. So just keep that in mind. So big picture here, white collar industries likely to be impacted according to Anthropic, other industries, lower paying industries, more of the trades, those kinds of things not going to be impacted by LLMs anytime in the near future. Now, of course, not all of this has played out yet, but we are starting to see some declines in hiring, but as of right now, it is mostly hitting younger workers, not due to layoffs, but due to declines in hiring. They’re actually seeing, I saw some data that there’s a 16% fall in employment among workers age 22 to 25 in exposed occupations. And that’s basically what Jerome Powell has been saying. If you listen to the Fed chair, he’s been saying that we’re in a quote, no hire, no fire economy, because layoffs haven’t been huge.
Like I said, we’re getting this slow grip of layoffs, but not these huge events or cliffs where there’s massive layoffs all at once. Sure. Individual companies are doing that, but if you zoom out and look at the whole economy, we’re not seeing mass waves of layoffs across tons of different companies at the same time. So that’s why it’s been described as this no hire, no fire economy, which is where we are today. But if you believe this data and you look at some of the trends, they’re suggesting that things could get worse and unemployment might go up. Now, I want to remind you all too of something that I’ve been saying for a while, why I’ve been fearful about the labor market and been making episodes about this because one, it has a lot to do with housing markets, which we’re going to talk about in a minute.
But I also believe that the nature of this economic cycle of what’s going on in the labor market is not really something that the Fed can fix. We talk about this all the time. “Oh, the Fed, they should lower rates so that the labor market does better.” I don’t know. I don’t really think companies are all of a sudden, if you lower the federal funds rate by 50 basis points, are they all of a sudden going to be like, “You know what? I’m not going to use Claude, not going to use ChatGPT. I’m going to go hire someone again.” I don’t think so. I just don’t see that happening. Normally, the Fed lowers rates to encourage companies to expand and hire, but is that really going to matter if jobs are being replaced with AI? Hiring is not slowing because interest rates are high, in my opinion.
There are in some and maybe in manufacturing, maybe in some areas, but personally in tech, I don’t really see that as the reason why hiring’s slowing. And I just think it’s more because either AI is disrupting things or companies are banking on AI disrupting things. So I find this report fairly compelling, and it’s not this alone. I’m looking at this just logically. I have a lot of friends who work in tech or in white collar jobs. If you combine this with the trends that we’re seeing in employment, the revised down jobs numbers over the last couple of years, this report and just logic. If you just use an LLM, you can see that this is going to replace some level of work, right? I believe that this is something that we should prepare for. Is it going to happen exactly like this? We don’t know.
Probably not exactly like this either, but it is something I think we should at least be talking about and preparing for. So after this quick break, we’re going to talk about how this could spill over into the housing market and what you should do about it. We’ll be right back.
Welcome back to On The Market. I’m Dave Meyer today talking about the potential for a white collar recession. We talked before the break about jobs data that we’ve gotten in the beginning of this year and a report from Anthropic about what industries could be impacted the most. So in this next section of the show, we’re going to presume that Anthropic is right, and we’re going to see rising unemployment in white collar industries. Now again, we do not know if that’s going to happen. The unemployment rate overall remains pretty low, but I believe that there is risk. I’m not freaking out, but I do think there is risk here and it’s something we need to watch and it’s something we need to talk about the potential consequences of. So let’s get into it. In a scenario where job losses mount in these white collar industries, the way I see this could possibly spill into the housing market, sort of like the order of operations, the mechanism for how it could move into housing is first and foremost, sales volume is probably going to drop because buyers step back.
If all of a sudden we see a lot of layoffs, this is what happens anytime there’s large increases in unemployment, we see sales volume drops. Then we’ll probably see lenders start to tighten their credit, right? They won’t be as willing to give mortgages to people who might be losing their jobs that can negatively impact the market. Sellers could start selling, but I think they’re probably more likely to cling to their low rate mortgages unless they are forced to move because as a reminder, just the way things have gone in the last couple of years, for a lot of people, paying your mortgage is cheaper than renting. So it doesn’t really make sense to panic, sell your house and then move into a rental if you’re just going to be paying more. So I do think that’s an important thing to remember here that sellers, unless they are forced to sell, are likely to hold onto their homes.
We’ll definitely see days on markets start to rise as demand drops and credit tightens, and we’ll probably see prices decline. Not everywhere, of course, but in areas with high concentrations of white collar workers, I do think we will see price declines in those market if this all plays out. And I think it’s important to remember that what I just said, those things happening would be happening in addition to a market that is already slow. We saw pending home sales fall 6% year over year through February 2026, and it was already slow in 2025. That was the largest decline we have seen in a while, the typical home now taking 67 days to go under contract, which isn’t crazy, but it’s a week longer than it was last year, and it’s the slowest it’s been since 2019. We also, before unemployment goes up, our seed people worried, right?
Two thirds of people in a recent survey said that they’re either somewhat or very worried about possible jobs cuts in their workplace in the next year, and over 60% were worried about losing their own job or having their hours reduced. And so if you just look at these things, I think there is a chance unemployment goes up, but the fact that people are fearful alone is already suppressing transaction volume even before those actual job losses could potentially accelerate. So just remember that we’re starting from a very slow point and it could get even slower. So my main thing is that it will probably suppress overall demand in the housing market, but I also think it could really impact one of the more active parts of the housing market right now. We’ve talked about on the show, I’ve done whole episodes on the quote unquote K-shaped economy that basically wealthy people are spending a lot of money, people on the lower end of the income spectrum are not spending a lot of money, and that is reflected in real estate too.
We see luxury homes selling pretty well right now, high income people still buying houses. And if the professional class for these white collar workers that sort of anchor the, let’s call it the top half of the K, it’s not half, but let’s call it like the upper leg of the K, it’s usually about 20% in most analyses, 20%, if that starts to erode, the upper tier of housing market could start to lose its floor and start to drop down a little bit. And again, transaction volume will be impacted as well. So just keep a lookout for those things if demand starts to decline. But don’t freak out just yet because demand going down, this is what people on social media and YouTube often get wrong, is that demand going down does not mean a crash. And there are important things to remember here on top of just demand.
First is supply, right? You got to think about which way supply is going to go. Now, a lot of people might say people are going to panic sell their homes and there is a chance that could happen, but I actually, where I’m sitting right now, I think supply could go either way. I think it’s possible that inventory actually goes down. If people are scared, they don’t want to move, they don’t want to rent a house that’s more expensive than their current mortgage, that could actually lower total new listings and that could offset lower demand. That would lower transaction volume, right? When demand and supply shrink at the same time, that can lower transaction volume. It does lower transaction volume, but it means that pricing could actually stay stable. It might fall a little bit, but it’s not going to go into any sort of free fall.
So I think that is a very likely scenario that we see even if demand declines. Now, of course, it could go the other way. I think if things get really ugly, if we see a huge spike of employment, as I’ve been talking about for a while, I remember at the beginning of the year I said I thought there was about a 15, 20% chance of a crash, and that would happen if we saw a huge spike in unemployment. So if we see a spike in unemployment, we could supply go up. People start to panic, they can’t make their mortgage payments. That’s when we see the potential for bigger price declines. Not going to say a crash because I think it’s far too early to predict anything like that. We don’t really have any evidence of force selling right now, but I do admit that the risk of bigger price declines happens to be going up.
I said last week on the show, I think it’s gone from about a 15% chance of a crash to about a 20, 25% chance of a crash. And I’m saying 10% price drops or bigger, but I think the risk that we see two to 5% declines is pretty high, but that’s what I predicted back in November before any of this data came out. So I think that correction, probably still the most likely outcome. But just want to remind you all, keep an eye on the supply side because that tells us where prices are going. You can’t just look at demand in a vacuum and say what’s going to happen. You have to look at both. And I think what will happen with supply depends on how severe. If we see unemployment hit eight, nine, 10%, probably going to see big declines in the housing market, but we’re a long way away from that.
We’re at 4.4%, and although eight doesn’t sound that different, it’s very different in a historical context. 8% unemployment rates are very rare, and although it can happen, it doesn’t look like we’re imminently approaching that. So that’s number one thing to look at in addition to demand is the supply side. The second thing to remember, super important here, is mortgage rates. If there is a huge increase in employment, and we see a traditional recession, or even if they don’t call it a recession, because I think that’s stupid, but whatever they decide to do, if we see a big increase in unemployment, it is probably going to bring down mortgage rates. That is the one thing other than quantitative easing that could really bring down mortgage rates in the foreseeable future. Because fear of recession caused by higher unemployment will probably send bond yields down as investors seek safety, and that takes mortgage rates down with them.
How low? I don’t know. I really don’t know. It depends on if the Fed does quantitative easing. If things get really bad and they do quantitative easing, we could see mortgage rates in the fours, maybe in the threes, but I do not think that is the most likely scenario. I think instead we could see bond yields fall into the low threes. Maybe we get mortgage rates towards five or potentially into the high fours. Depends how bad the recession gets. I’m not telling you this though to make predictions about mortgage rates. I’m sticking with my mortgage rate prediction for the year right now, but I am just saying some of the potential downside in the housing market of big job losses could be offset by higher general affordability due to lower mortgage rates. This is one of the reasons why I think a crash is not the most likely scenario still and why I still think a correction is more likely because even with lower demand, things like lower supply and lower mortgage rates could offset some of the impact of that unemployment.
So just keep those in mind. Those are the three variables we’re going to watch, supply, demand, and mortgage rates. And even if demand goes down because of high rising employment, we got to keep those other two factors in mind. But as we all know, even if all of this happens, not all markets are going to be impacted the same. And when we get back from this short break, we’re going to talk about which markets are at risk, which ones are the most resilient and what you should do about it.
Welcome back to On The Market. I’m Dave Meyer talking about a potential white collar recession and what it means for the housing market. And before we get into some of the regional differences that we are forecasting and get into those geographies, I think I’m just going to state the obvious. I kind of mentioned it before, but if we’re talking about where the risks are, where the opportunities are, I just want to say that the higher end of the market could be impacted, right? If white collar workers are getting laid off disproportionately, more expensive homes are the ones that are going to get hit the hardest, right? So just keep that in mind, more sort of workforce, starter home kind of homes probably going to be relatively more resilient, but personally, I think the regional differences are the real things to pay attention to. The housing impact, I think, is going to be felt first and foremost in cities that have really high concentrations of tech employment or white collar employment, where the proportion of people who work in these white collar jobs is high.
In these markets, home prices could fall. Now, I am not going to make predictions generally about all of them, but I do think that we could see single digit declines in the mid single digit declines in a lot of these markets. These are markets like Washington DC and Chicago, Dallas, Boston. We actually, if you look at the data, you could see that in these kinds of markets between the beginning of 2023 and the beginning of 2025, they had some of the highest proportion of declines in job postings for white collar jobs. And there are jobs where the overall labor pool is disproportionately built on, unfortunately, the jobs that are at risk. In addition to that data, I’m just going to call out two markets in particular, Seattle and San Francisco. These are two of the biggest, if not the biggest tech hubs in the country.
You actually don’t see them on the list. Maybe because they are sort of home to the biggest AI companies like both of these cities, home to Amazon and OpenAI and Meta and Google and Microsoft, and maybe there’s less anticipated impact because they also are the core of the AI boom. But personally, I live in Seattle. I think there is still risk in these markets. You’re seeing Amazon lay off 30,000 workers, that’s going to impact Seattle where Amazon is based. So I think all of those kinds of markets, I think you would be remiss not to mention places like New York as well, big tech finance concentrations as well. So a lot of those big major markets, but also the Sunbelt too. I think the Sunbelt continues to see compounding problems, right? They have been struggling for a while due to rising prices, to increased insurance costs, all this rising taxes, all this stuff is going on.
But also partly because all of these pandemic era remote workers that moved to Florida or to Texas or to Arizona, a lot of them have had to return to office, which has reduced overall demand. And now that the remote work migration is sort of reversing, that could accelerate it, right? If you’re seeing white collar workers, even the ones who can still work remote, if those people start to lose their jobs, this would probably accelerate the correction in a lot of Sunbelt markets that are also oversupplied right now. So I do think those markets are at risk as well. Now, the markets that I think are most insulated, I think are markets that are mostly focused on the trades or healthcare heavy metro areas. These are small mid-size cities that are sort of affordable rents that I talk about all the time. Affordability is going to drive the housing market.
And I think that this is true because we see a lot of markets like Columbus or Indianapolis or Cleveland or Kansas City, they have employment bases that are concentrated in healthcare or manufacturing or logistics or the trade and have lower overall exposure to AI displacement and they happen to be more affordable. So I think that those are going to be the most resilient markets. These are a lot of the markets in the Midwest and some in the Northeast. I’ll call out a couple of sectors here. I think personally, healthcare is a really good thing to look for if you’re trying to find markets that are going to be resilient. Healthcare, pretty key defensive sector. If you look at the jobs numbers over the last couple of years, it’s the largest growing area. I think there’s a lot of tailwinds there. If you look at baby boomers aging, there’s probably going to be a lot more hiring in healthcare as well.
And those are pretty high paying jobs that aren’t likely to be disrupted by AI in the short term. So that’s sort of how I break down regional differences. I also want to just mention that I said at the beginning of the year, I know a lot of people are forecasting rents going up, but partly because of weakness in the labor market, I said,” I don’t think rents are going to go up. “You might remember, I was debating my old boss and friend, Scott Trench about this where he said he thought we were going to see massive rent growth in the back half of this year. I just don’t think so. I really don’t think so. If we’re going to see job losses, even if people are fearful they’re not going to stretch for a more expensive apartment, I think we are going to see very soft rents across the country, and that’s something I think every investor should be paying attention to, which brings us to our last section here for the day, which is what this means for real estate investors and what you should do.
Because I obviously just talked about regional differences, but as I’ve talked about, you can invest in any market. So here’s what I would recommend you do given all this information. First and foremost, you must watch your own market carefully. We talk about it all the time from the beginning of the show for four straight years, we have been talking about this, but you need to do your own research. We talk about regional trends on the show, but we can’t talk about every single market. So what you need to do here, I’ll give you some specific data sets you should be looking at. Number one, delinquency rates in your own market. If those start to go up, if you start to see forced selling in your market, that is a red flag, a major red flag that prices are going to go down and that you could see significant price drops.
The second thing to look at are layoffs. You can look at something called unemployment claims, initial and continuing unemployment claims. You can Google all this or ask ChatGPT to pull this up, ask Claude to pull this up, even though it’s going to steal your job after it does it, but you could go ask them. Look at them in your area and then look at rising inventory. If you see rising inventory, rising delinquency rates, rising layoffs, that’s a recipe for price declines. I think most markets, what you’ll see is that inventory is going up in a lot of Sunbelt Western areas. Delinquency rates are low though. That’s good. So you’re probably going to see more muted declines, more muted corrections. I’ve been saying this for a while, but I stand by that. But do the research and look at this for yourself. Markets that have low AI exposure and good affordability, carry on.
If you’re in a market like Kansas City or Cleveland or Columbus, AI exposure is low, inventory is manageable. Jobs keep coming to those areas. Do what you’re doing. You don’t need to change much because even though the headlines might be scary, your area might not be impacted. Now, of course, the opposite is also true. Markets with high exposure, low affordability. I’d be very careful in acquisitions, right? Because in those markets, I would underwrite falling prices. I would underwrite slow or no rent growth, and I would be very careful. Now, of course, that means there’s going to be better deal flow though.This could also turn into really interesting opportunities because remember, there’s a flip side to every risk, which is opportunity. And some of these major markets that may have not be permanently impacted, think of a market like Chicago. They might see a little blip here, but Chicago is a big dynamic economy that will probably start growing again.
Or a market like Boston, right? Huge concentrations of medical and big pharma and those kinds of jobs. So could it go down in the next couple of years? Yeah. Could there be opportunities to buy at a discount? Also, yes. So in those markets that are going to be impacted, you need to be very careful in acquisitions. But I would keep a close eye for opportunity because I do think there’s going to be good assets for sale if all this comes through fruition. The last thing I’ll remind people of is be careful on the higher end of the market. I think this is going to be true most places, but every market has some level of white collar workers. And if this stuff that Anthropic is saying comes true, if we see this white collar recession, I’d be careful at the higher end of the market regardless of what market you’re in.
So be careful there. But also remember that the other segments of the market might have a lot of opportunity. B and C class assets are probably still going to do pretty well in terms of prices and probably will still see really good rent demand. You actually might see more rental demand in these kinds of markets where people don’t want to get into the housing market. So I think that these are areas to focus your attention. This is, again, not in every market, but just generally speaking, if you look at the national trends, B and C class assets for rental properties are probably going to do pretty well. Flipping, not my area of expertise, but I would generally believe that flipping is going to do better in that entry level starter home category than in the higher ends of the market. And so I always say this, but you can invest in any market.
Just be smart about what you do. And I think being in these markets that are resilient against AI disruption and staying in that B2C class area of the market instead of the high tiers in the market are the best things that you can do for your portfolio if these trends continue. Again, we don’t know, but the trends are there. And if they continue, these are some things that you can do to keep growing, keep profiting as a real estate investor, even if they do happen. So that’s what we got for you guys today. Just some closing thoughts. To sum this up, I’ll just say the white collar softening in the labor market, it’s real. I think it’s structural. I think it’s probably here for a while. I don’t know what it means. I don’t know if that means it’s permanent or we’re going to start to see different kinds of high paying white collar jobs emerge in the next couple of years.
We just don’t know. But the data shows that the white collar labor softening started before or around the time of AI and it’s actually just accelerating. The second thing to remember is that I don’t think the housing market has priced this in yet because it’s a lagging indicator, right? People are fearful, but they haven’t really lost their jobs. And I don’t think housing has been really impacted by that yet, but it could come in the coming years. This is one of the reasons why at the beginning of the year, I said that prices could, will probably … I forecasted price declines in the national housing market this year, and this is one of the major reasons for that, not just affordability, but softness in the labor market. Third thing to remember, geography is going to be really big. The forces that are going to impact Seattle or Austin or San Francisco, not going to matter that much in Kansas City or in Cleveland or in some of these different markets.
So remember that where you’re investing is going to dictate your strategy. And the last thing I’ll say is, remember, this isn’t 2008. Could prices go down? Yes. Could a crash happen? Also, yes, but it still remains less likely. I think the correction that I’ve been talking about for years remains the most likely scenario because equity is high. People have a lot of equity in their homes. Lending has been very tight. Forced selling, there is no evidence of it. And even if it comes, it probably won’t come in the wave. Demand erosion that could happen is probably going to be in that upper middle tier of impacted markets. And that could bring down prices in general, but it’s not going to strike everywhere. The chance that this prices go down 10 or 20%, it’s there. I’m not going to pretend that it’s not, but I do not believe that it’s the most likely scenario.
I think a single digit correction is still the most likely scenario, but we’re just going to have to wait and see. We are in such crazy uncertain times. I know I’ve been saying that for four years of hosting this show. We started during COVID. Now we have AI disruptions. We have a war in Iran. There is so much uncertainty. And so the key thing here is I’m telling you where I see things as I sit here at my desk today, but I am not going to hold any of these predictions precious. If I think that I was wrong, I will change my opinion and I will let you know. I look at data literally every single day for hours, every day. And my goal here is not to be right retroactively, it’s to be right going forward and to give you all the information that I can as soon as I have it.
As of right now, I do think there’s risk to the labor market. I don’t think that means there’s going to be a massive crash in the housing market. I think certain markets will be impacted, but overall, the correction, the single digit correction is still the most likely scenario. If that changes, I will be sure to let you know. Thank you all so much for listening or watching this episode of On The Market. I’m Dave Meyer and I’ll see you next time.