From Graham Stephan.
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HOUSING MARKET IS WEAKENING
The housing market is showing signs of slowdown, with 47 of the top 50 cities weakening and listing prices now below 2024 levels. Sellers outnumber buyers by over 600,000, homes are taking the longest time to sell in more than a decade, and searches like “can’t sell house” are hitting record highs. Rising mortgage rates are further reducing demand, creating a growing imbalance across the market.
LOCAL MARKETS ARE SPLITTING APART
Not all areas are declining equally. Cities like Miami, Austin, and Nashville have far more sellers than buyers, pushing prices down. Meanwhile, more affordable regions like Milwaukee and Newark still have strong demand and rising prices. Affordability relative to income is now the key driver of price performance.
OIL PRICES ARE DRIVING HOUSING COSTS
Oil prices are indirectly impacting housing by raising inflation expectations. Higher inflation pushes bond yields up, which increases mortgage rates. As rates rise, affordability drops significantly, reducing buyer demand and forcing price adjustments.
CONSTRUCTION COSTS ARE SURGING
Rising oil prices also increase construction costs, since materials and transportation rely heavily on energy. Materials like aluminum and steel have surged in price, and builders pass these costs onto buyers. This creates upward pressure on home prices even as demand weakens.
THE MARKET IS FREEZING, NOT CRASHING
Instead of prices immediately falling, housing markets tend to freeze. Sellers hold onto properties, transaction volume declines, and the slowdown becomes visible only over time. This creates a delayed effect where the market appears stable before cracks fully emerge.
REAL PRICES ARE ALREADY FALLING
Although nominal home prices may appear slightly higher, inflation-adjusted values are declining. With inflation outpacing home price growth, real housing values are dropping, marking a “real-terms correction” where affordability improves without a sharp crash.
WINNERS AND LOSERS ARE CLEAR
Affordable Midwest and Northeast markets are seeing the strongest growth due to limited supply and steady demand. Meanwhile, previously overheated markets like Florida, Texas, and parts of California are declining due to overbuilding, rising costs, and slowing migration.
CONDOS ARE HIT THE HARDEST
Condominiums are under the most pressure, with far more listings than buyers. Rising HOA fees and insurance costs, especially in states like Florida, are making them less attractive. Historically weaker appreciation also makes condos more vulnerable during downturns.
PRICE GROWTH IS STALLING
Recent data shows minimal home price growth, with some periods already turning negative. Forecasts for 2026 range from slight gains to zero appreciation, which, when adjusted for inflation, implies continued real declines in value.
POLICY SOLUTIONS HAVE LIMITED IMPACT
Proposed solutions like mortgage buybacks, banning institutional investors, portable mortgages, and building on federal land are unlikely to significantly improve affordability in the short term. Most either have minimal scale or long timelines before any real impact is felt.
THE ERA OF EASY MONEY IS OVER
The housing market is shifting from easy gains to a more disciplined environment. Investors and buyers must now focus on fundamentals like location, affordability, and long-term holding periods rather than relying on rapid appreciation.
OPPORTUNITIES WILL COME FROM PATIENCE
While the market is slowing, this creates opportunities for buyers who are prepared. Negotiation power is increasing, incentives from builders are rising, and renting while investing the difference may outperform buying in many areas. The market is normalizing, not collapsing, rewarding those who stay patient and strategic.
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