The Housing Market Just Hit a Record Low (Worse Than 2008)

The math has stopped working for the real estate market, and it is going to change everything moving forward. The next generation feels completely left behind, while one generation has loaded up on real estate and is locked in by low interest rates, because they do not have to move, and the math does not work. So we are seeing the market continually break down. That is what we are going to explain in this video: what is actually happening on the ground in the real estate market in Florida and throughout the United States right now. Not an ivory tower view, but what is actually going on based on the data.

The worst information just came out: pending home sales just hit a record low, worse than the great financial crisis. The index of contract signings tumbled 7.3% last month. This is no surprise. We are going into an election, and it is very hard to purchase a home right now because mortgage rates have moved up and prices are still very high. So the marginal buyer is completely left on the sidelines. Also, rents are falling, and we will share how much. In many counties rents are falling sometimes 10% to 20%. It is not showing up in the headline numbers, but they are definitely down. And this is causing people to reevaluate and say, maybe I should not be making the largest financial purchase of my life right now.

From 2020 to 2022 we had a massive spike in pending home sales. Once the Fed raised interest rates, it dropped off as mortgage rates moved up, and we have been grinding along the bottom. Now we are starting to see some capitulation, where buyers are saying enough is enough, and that is why contracts are down. In Northeast Florida, where I am, pending sales are 35% off the peak, and looking forward they are down another 25%. Obviously it is very location specific. What is happening in the Northeast is not the same as what is happening here in the Sun Belt, but it is absolutely brutal.

The main issue is the affordability crisis. You now need $102,000 a year to buy a median home. That will change depending on which state you are in, how much the property tax is, how much insurance is. In Florida I have seen statistics up to $114,000, while the median income is about $87,000 nationwide, and locally it is $68,000. So incomes would need to increase in some cases 30% to 40% to catch up with where prices have historically been. We are completely out of whack on a historical basis, with a disconnect between prices and wages. This is why the new generation is so upset with what is happening, and things will continue to get worse until the two start to gravitate toward each other. My bet is that wages will stay stagnant and prices will come down.

That is my guess because wages just do not seem to be going up with AI. We are seeing companies lay off 10% or 20% of their workforce every day, giving their existing employees AI and saying, you need to do double the amount of work. That is basically the strategy right now. If that is happening to you, comment below. We would love to hear what is happening on the job front, how you are using AI, and what you think it will do to your job. Because if people do not have jobs, they cannot purchase houses. This is a housing story, and the AI story is very connected to it.

Pending home sales are falling, and existing home sales are falling. We are down to 3.99 million homes sold. It has dropped dramatically from over 6 million down to about 4 million, and it is going lower based on pending sales. We should see sales continue to fall into the end of the year because of seasonality. In February we see a big boom. People get their tax refunds, and in the spring they go out and buy a house. Once school starts in August, it drops all the way into the holidays by about 30% to 40% every year. So that is no surprise. But when we compare it to the same month last year, that is where the surprise is, and that is where we are seeing the pain.

The majority of the conversation has been around mortgage rates, because rates impact affordability the most, outside of prices being too high. Rates are 7.32%, up from 6.19% a year ago. So we are back above 7%. It is possible we could see 8% by the end of the year. It really depends on what happens in the markets. Oil prices remain elevated, adding to inflation. A lot of people are expecting one to two more rate hikes between now and the end of the year, and that would certainly push mortgage rates higher.

But the government is in charge. They are massive, and they will try to push these rates down as much as possible for as long as possible. They have already said they want home prices to remain high, and if they want home prices to remain high, they cannot have spikes in mortgage rates, because over time that creates financial gravity for housing prices. The bond market is also screaming. The government is spending way more money than it takes in. It is constantly issuing debt, and it is having a hard time selling some of its bonds, especially longer-dated bonds. Now the risk-free rate is above 5%, and this is where the math disconnected on rentals. People do not want to buy rental properties anymore, because you have to beat the 5% hurdle when you can lend to the government and get around 5%. You have to figure out where to put your money and place your bets, and a lot of people are not putting their money into real estate, because the return profile has to be higher and real estate just does not have the returns, given the amount and price of the leverage you need.

We had the low in Treasury rates and mortgage rates in 2020, and because rates were so low we had a wild speculative moment that jacked prices up. Now prices will have to come back down. The payment is the main story. It is $1,184 a month higher than just ten years earlier. This chart shows how much of the change in principal and interest on the typical U.S. home came from prices and how much came from rates, and the interest rate has done a lot of the damage. Home prices have been coming down a little, but mortgage rates are driving this story. This comes from Aziz on X.

The median home price to median income ratio is now 4.7 times. It is really high. It spiked in 2022 after the Fed started hiking. The first hike was in March 2022, and they kept raising into the end of the year, which created this massive disparity. I think when we look backward, the peak of the market will likely be November or December 2022, and that is where people will measure from. When the Fed raises its overnight borrowing rate, it filters through the economy. It usually takes six to eight months to show up in the numbers. And then you see the drop-off in activity in late 2022 and into 2023.

This comes from Lance Lambert. We appreciate him coming on the channel just two weeks ago, so go check out that video. He has 66 of the 300 big markets with falling prices. I know there are a lot of talking heads who say prices never go down and always go up 4%. It is just not true. It is very market dependent, and it is not true nationally either. We are likely about to see national home prices go negative year over year. Austin is doing badly. It is not just Florida anymore. Two or three months ago the argument was, it is just Florida, it is just Texas. That is no longer the case. Look at Asheville, Savannah, North Carolina, Hawaii. A lot of different markets are falling. And these home price figures are backward looking, usually about three months behind. So I think the data could be pretty drastic going into the end of the year, and we will see falling prices in more areas moving forward.

Three Florida metros rank in the top 15 for price drops. I think this data is a little light. The numbers are not reflecting what is happening on the ground, because when a buyer makes an offer they are also asking for repairs and for credits from the seller, and a lot of that is not captured in the price. If we took a realistic picture, it could be double what you see on the screen. We see it every single day working with buyers and sellers.

Here is one of the stories: demographics are destiny. There is a study from Harvard saying about 50 million boomers will sadly pass away over the next 20 years, at an accelerating rate. It starts as a stream and becomes a river. The majority of the boomer generation owns real estate, and the majority of that real estate gets sold when they pass. There is no one in the home, so it has to be sold to someone else. Birth rates are declining, and we do not have the immigration or migration happening anymore. So where are the people going to come from to occupy these homes? Many of these homes are outdated and larger. If you are a real estate investor, the whole idea is that someone behind you will purchase the house at a higher price, so you have to ask who that person is.

Boomers own 41% of the real estate, and millennials and Gen Z, two generations, own 22%. That is not too unusual, since you have to reach a certain age and income to buy. But the median home buyer is now basically 60 years old. That is the person who bought 20 years ago, built a ton of equity, and is buying and selling now. Or it is younger buyers whose parents are giving them down payments. We are seeing a lot of that, because the next generation, even with dual incomes, is really struggling.

Sentiment is so important for real estate, and 85% say it is a bad time to buy a house, according to the University of Michigan. That spiked from 36% in January 2021 to 85% today. Once sentiment gets into a market, it is really hard to change direction. Sentiment held steady for a very long time, and now it is worse than the great financial crisis level, nearly double. People are doing the math. They saw the bubble period and they want nothing to do with it. A lot of people I know sold their real estate. The ones who did not sell their investment properties are kicking themselves, because they are dealing with negative cash flow, and we have those conversations behind closed doors. No one is really willing to admit it. [A well-known multifamily investor's name is omitted here.] One well-known investor bought a lot of multifamily and his last fund basically went to zero, and they are working through that. You are going to see a ton of issues in multifamily moving forward. There is a lot of distress underneath the surface that has not come off the banks' balance sheets. They are doing extend and pretend as long as possible, hoping rates come back down and bail them out. If rates go the other way, it could be really dangerous.

Sellers are now outnumbering buyers by over 500,000. In some cases I saw 600,000. This comes from Redfin data. Buyers continue to dwindle and sellers looking to get rid of their properties keep rising. I expect these trend lines to continue until prices reach a level that makes sense for wages, and again, I do not think wages will catch up. So prices will have to move. I built an internal model when I was a real estate investment banker, and for Jacksonville the numbers showed prices would need to come down about 31% to 43% from the October 2022 peak for investors to step in as a backstop and start purchasing. That assumes rents keep up, and they are not. They are down about 10% to 20% from the peak, and that is a huge problem.

If there are more listings and fewer buyers, days on market move up. I think we will get back to normalized levels by the end of this year going into next year. Homes are sitting for 61 days, two months. It was 41 in 2021. I remember selling homes before they even hit the market in 2020. The market was crazy. I think this trend continues. Every indicator for housing right now is flashing red. Price cuts are spreading. Going back to 2016, price cuts are at 20.8%, up from 19.9% last year, according to Realtor.com. The local numbers in Jacksonville are way worse. We are seeing price cuts on up to 50% of listings within a week or two, because sellers are not getting showings. Migration to Florida has slowed by 93% from the peak. So if people are not moving here, and the people who live here cannot afford to buy, who is the buyer? No one is coming to see the house. There will always be about 10% of houses that sell like hotcakes: great condition, unique property. I am in real estate, I understand that. If you have that unique property and there are wealthy buyers out there, it will sell immediately. But the majority of houses are not in perfect condition, and they have issues. That is the real story. And if you are near new construction, you can really get stuck in your house.

We had this narrative of a housing shortage pushed to us by the mainstream media. It was never a housing shortage. We had a demand shock due to low interest rates and a migration shock at the same time, and it all came to areas like Florida, where we never had a shortage. We had plenty of homes, and then all this migration created demand. That was not a shortage of supply. Builders responded by building mid-level and luxury supply that locals could not afford, because they thought demand from the Northeast and the West would continue. Now what we have is not a shortage but a mismatch. We have enough physical units. Locals cannot afford to buy them, people have stopped relocating, and now we have overpriced homes in areas where the jobs are not there to support those prices.

Now we have 113,000 finished new homes with no buyer. That has moved up, and I expect it to keep moving up. It is almost as bad as the great financial crisis already. Builders are slamming the brakes right now, but I do expect more builder inventory over the next few years. Builders are sacrificing right now. One builder's incentives hit 10.4%, and I think another study said 13%. This is what I mean by the things other than price, behind the scenes, that affect what is actually happening in the market. In 2022 they were only giving up 2.2%. Now we are at 10.4%. That is an 8.2% swing that is not showing up in the sales price but is relevant to the transaction. So you could say prices are down another 8.2%, because builders have to dangle the carrot and pay a buyer through the mortgage rate or otherwise to purchase an overpriced house.

I think that is dangerous if you are using FHA, VA or a low down payment to buy new construction while the builder is still building phase two and phase three. I think it is high risk right now to buy at peak prices and be locked in. If you lose your job or need to move, you lose the low rate you paid for, you have an overpriced house, and you are competing against the builder. We are seeing short sales pop up in those types of markets, unfortunately.

Builders are also cutting prices. The median sales price of new houses sold peaked at $460,000 and is now down to $393,000. So new home prices are down 14%. Look at the incentives on top of that and the numbers are clear: this is almost a crash in prices. A crash is 30%. A correction is more than 10%. So we are between a correction and a crash. 10.4% plus 14% is 24.4%. That is pretty significant to me, and I think it tells a big part of the story.

Builder confidence is at 29, one of the lowest ever and the lowest since 2012. It is approaching the 2009 low, and I bet we could eventually get there. If mortgage rates continue to move up, builders will feel worse. You do not have a housing shortage when builders are scared to build because the math does not make sense. There is no housing shortage. In my view it is propaganda from the mainstream media, paid for by builders and other associations, to convince you to go buy a house and make you think it is going out of style. Builders are pulling back drastically. Housing starts fell to 1.22 million, down 7.4% from a year ago. Builders are saying, we are going to slow construction because we do not see the buyer demand we had and we have all this unsold inventory to get rid of. It is likely to get worse on the new construction side. So if you are a buyer, it is a great time to negotiate.

On the rental side, rental vacancy is the highest since 2017, back to pre-pandemic numbers. Rental vacancy is up to 7.3%, and we are seeing areas with vacancy up to 20%. It depends on where you are, but this trend is terrifying for investors. Renters have more power. You should negotiate your rent every year. If you have been able to do that, comment below. One person on YouTube said they did not know they could do that, and they ended up saving about $400 a month after reaching out to their landlord. Sometimes you have to be willing to leave, and landlords will try to keep you if you are a good tenant.

Rent growth has also slowed. This says 3% nationally, from FRED, but locally in the Sun Belt some rents are down even 30% to 40%. A friend in Austin said some rentals there are down 40% because people stopped relocating there. It was 8.8% at the peak, which was a crazy time. Now we are coming back to reality, and I think it goes down further, because there is so much multifamily supply competing and so many build-to-rent communities still going up and not selling. So I think rents will keep dropping across the board.

Florida prices are well off the peak. Lake County is down about 29.2%, almost a crash. Each county is completely different. Duval is off 1%, which does not match what we are seeing on the ground. This comes from our in-house median calculations, and we are grinding through the numbers to make them make more sense. This is the smoothed median sold price versus the post-2021 peak, as of August 27, 2026. Lake County is about the worst and Duval is flat. When you include incentives, it is actually worse. The other issue is that median sold price is not a great indicator. Measuring the same property sold twice is much better. We have all of this, plus other cuts of the data, on our website, movewithmomentum.com, so you can see how each one is calculated and what it actually means.

You can look up your county at movewithmomentum.com. It is available for Florida and Georgia, and we are expanding rapidly. So grateful for the support. You can now sign up for a newsletter for your county and ZIP code and see where the pain is in the market. If you sign up, one of our agents will reach out. We have a lot of local agents across Florida and Georgia. If you have anything to share about the content or the data, comment below. If you need help buying or selling a house, let us know. We do everything from luxury to distressed. Reach out. I respond to every email: jon@movewithmomentum.com.

What do you see happening in the next six months? We have the election coming up November 3, and after that the rest of the year will probably be pretty slow. Let us know what you think will happen, or if you disagree. A lot of people tell me, I am in the Northeast and it is not happening here. But I have friends who are agents in the Northeast, and they say it is slowing. It is a different process, since they did not have the same boom as the Sun Belt, but they are starting to slow because of mortgage rates. I would love to hear from you. As always, thanks for following, and I will see you next week.