Homebuyer Demand Has Collapsed, But Sellers Are Still In Denial

Home buyer demand is absolutely collapsing and it's getting worse every single month. It's time for sellers to become realistic about it what is really happening in the market and sit down and pencil and do the math. This will make them realize that the game has completely flipped and they need to act now because there's more price changes that'll be happening in the future this year especially here in Florida in the Sunbelt areas, but it is spreading across the country. Let's dig into the data and see what's actually going on.

Number one, this comes from Reventure and the next couple charts are from Reventure and Nick does a great job. This shows that housing demand falls to near the lowest on record in February 2026. You can see that the demand according to this demand index which is a combination of sales mortgage apps, internet searches for homes and buyer sentiment. I love this chart.

I love that Nick is putting together this information cuz we need more real estate data that is up-to-date and showing us what is going on in real time. Now, this is the index that shows us dropped all the way to five out of 100 according to his rankings. Near a record low. This is despite mortgage interest rates hitting a year low at the same exact time.

So, interest rates are not enough to bring these buyers back to the market and this is a huge problem for sellers that are just seeing their house sit. They're pricing their house at a ridiculous price. They need to run the numbers of what would it cost a buyer on a monthly payment to purchase the same house at the price that they're asking for versus renting that house. When you show them the math, you'll see very quickly that in many cases it is much more affordable to rent the house from the buyer's perspective than to buy it from you at that price.

So, you have to ask yourself what is the price that would make it make sense. Now, I'm not saying that they need to drop the price drastically to make this happen, but use this information to make the seller aware that buyers have options. They can pick other houses that are reducing the price. They can go off and rent.

They can go to a luxury apartment and get three or four or five months free rent or discounted rent for for a whole year and then just wait and see what happens from there. So, again, this is a massive issue that we're seeing record low demand. This is even worse than you can see in 2020 and in some cases it's worse than what we saw during the Great Financial Crisis. So, this is this is really bad and it's going to get worse moving into 2026.

So, on one of these one of the components of that graph is the mortgage applications and mortgage applications are a leading indicator, right? Somebody wants to go buy a house, they put in a mortgage application, they see the payment. In a lot of cases we're seeing people that they make the mortgage application and then they get immediately frustrated with what's going on with the amount of the payment that they immediately decide, "Hey, I'm just going to actually rent and wait this out." And right now it's showing that mortgage applications are actually worse than what we saw in the Great Financial Crisis. Home buyer demand is now down 42% and what's even worse is that rental demand is also dropping.

So, aggregate demand from buyers and from renters after a massive run-up over basically a two-year period, three-year period, is now collapsing back and over-correcting to the downside. This is leading us to have right there's less applications, now there's less pending home sales, record low in contract signings to close out the year of 2025. This means that we'll see a weakness in February and March and inventory will continue to stack. So, the number of sales that are closing is going down, the number of listings are, you know, staying at a a normal rate at this moment in time and the inventory is starting to stack because of that discrepancy every single month.

It's building up and building up and building up. And that's when we'll start to see certain sellers say, "Hey, I give up. I'll go ahead and turn my house into a rental." Then they do the math on the rental property and they find out, "Oh, wow, it's underwater in the rental amount. So, I need to actually sell this." They go back and then they they go back and sell it and they sell it often at a discount to get the property actually cleared.

So, we need to come up with what the real clearing price is for the marketplace, which can take quite a bit of time to happen. Now, why is the market frozen right now? Again, buyers are completely fatigued. It's freezing the market.

On this green line here, you can see the mortgage payment to buy is about 2,700 across the United States. However, you can rent basically the same unit for $2,000. So, that's a $700 difference. So, you have to ask yourself as a seller, why would somebody buy my house if they can rent the same unit for $800, in some cases up to $1,500 less than this payment here, and they have to have all the holding costs and repairs and maintenance and all these other things.

So, again, it is cheaper to rent than to buy, and this discrepancy will have to close over time. That'll either be through lower rates or lower prices. My guess is that we're going to see lower prices. But here's the issue.

We're actually starting to see rents decline very rapidly as well. So, even if rates come down and the the mortgage payment to buy comes down a little bit, if rents come down as well, that gap is still going to be there, and that's why I think we're going to see a lot more price declines coming up this year. Now, what we're also seeing is this interesting dynamic between demographics and age groups. 73.7% of the US wealth held today is by those over 55 years old.

It's up from 56.2% since 2000. This is according to Fed data. We're starting to see, and we there's a lot of charts out there going around that they're wealthier Americans, the top 10% are now responsible for up to 50% of the spending in the economy. So, and we are in a consumption economy.

So, we have this dynamic where the bottom 80% are getting poorer and the top 8% top 10% are getting a lot wealthier. And so, the But, you need those bottom 80% to be able to purchase the houses from the wealthy people. So, there's this huge disconnect. Otherwise, you're just going to have wealthy people trading houses back and forth to each other.

Meanwhile, we're creeping up on more and more supply every single month. These older, wealthier folks will have to eventually give up their houses or they'll just hold them and rent them forever. We'll see what happens, but my guess is the majority of these houses will come to market because of the silver tsunami that's coming through. And sadly, 48 billion baby boomers will sadly pass in the next decade and these houses will come to the market one way or another.

But, frankly, young people are just getting frustrated with the system in general. I don't think this is a good thing. I think we need to find ways to make it more affordable and have a more positive outlook for young people, especially from a financial standpoint. And young people just are opting out.

They're just saying, "I'm not going to pay 30 to 50% higher than what I think this house is actually worth. I'm just going to sit and rent." So, now you're starting to see the sentiment change of "Screw it. I'm just going to sit back and rent and I'll just watch from afar. I'm not going to overpay for a property." And the other half of it is I just don't even have the money to buy it even if I wanted to purchase the house.

So, and this is what's happening next, right? The rents are starting to fall. People are doubling up. People are living with their parents.

Uh and this is where new construction rents are down since the peak. So, this These are the areas, right? You can see Phoenix, Arizona. It's already down 17.3%.

This is in a very short period of time. Austin, Texas down 16%. I see other ones that have that actually higher, 20 to 25%. San Antonio down 13.5%.

Jacksonville, Florida 13. Where I'm at, 13.1%. So, you can see double-digit declines already from the rent information. This comes from JPI Research Real Page.

And this becomes a big issue because I know this is for the new apartments that have been built, but existing family homes are experiencing a very similar thing because we just talked about the seller can't get the price that they want. They end up looking, "Well, maybe I'll rent this house. I want to keep my low interest rate." They go turn it into a rental. Well, now we have build-to-rent.

We have these owners that are becoming landlords overnight and there There's tons of inventory that's coming on the market that's competing. And single-family homes do compete with new apartments. When tenants are looking through, "Hey, which Where am I going to go?" They're going to get the area that's offering the best bang for their buck. And a lot of these luxury apartments are really nice and they do compete with the single-family home.

So, when these rents continue to drop and it does impact the single-family rentals as well, the calculation for investors to come in and actually purchase as a price backstop, right? The argument is, "Well, when prices get low enough, there'll be a backstop of institutional investors that will come in and purchase the properties." That's only true if rents keep up. If rents move down as well, this can be very bad for housing because that backdrop actually moves down as well right behind it. And that is what we're starting to see is when you see double-digit rent declines in a short period of time, it seems like there's more pain ahead and there's more vacancy as well, which completely kills the cash flow of the properties, especially the multi-family properties.

It We are starting to see pain ahead in a lot of these markets. And this just goes back to the price is too high. This is house payments as a percentage of median income. Anytime it gets around this 40% mark, it kind of turns into a bubble period.

And you can see here, 1981 is 47.5. They had a massive interest rate 18%. Now, we had the housing bubble in 2006, 38% of the house payment as as a percentage of median income, and then housing bubble number two, which is basically where we're at today, 2024, 2026, is about 40% as well. So, when we get into these ratios and the market overheats, that's when we start to see, over years, doesn't happen overnight, real estate is an illiquid asset class, we'll start to see a step down in price as the inventory stacks and the demand collapse because the math stopped making sense.

The prices are just too high and we need the prices to come down. And thankfully, prices are starting to change and we're starting to get this cooling effect nationally. Um the pain is actually starting in certain pockets of the country first, usually at the coasts, in the speculative markets, and then it moves inward across the Midwest and I think the Northeast and the Midwest will actually both be impacted. We're seeing a lot of relocations to the Midwest because people are seeking affordability.

However, the jobs in a lot of these locations just aren't there. So, I think there's going to be some interesting migration patterns that come up as the market adjusts and does its mean reversion after this massive, massive run-up. Here in Florida, we had a 68% increase in price within just a few years. So, we basically had a decade worth of growth, decade more of growth, within just a few years because of the market being so manipulated.

And now we're seeing the mean reversion. This is where we're seeing negative equity rate by market. So, the folks that bought from 2022 to 2025 at peak prices, they're already starting to see negative equity. You can see in Jacksonville, my area, 6.3%.

Florida is just getting hit. Texas is getting hit. Some of the coastal areas are getting hit and you can see that it's changing across the board. I think this will continue.

These bubbles on this chart will continue to get bigger every single month as we see prices start to cool down and go negative as we see the demographic changes, as we see the affordability changes, as we see sentiment from the consumer change across the board. And frankly, this is already happening while we have a record high stock market. Uh and I think if the stock market takes a hit, I think if the job market takes a hit, you could really see an acceleration of this nega- negative equity across the board. And as discussed, there's certain states that get hit first.

You can see Florida is traditionally one of the ones that get hit. This time it's Texas as well, and you're also seeing California. And over time I think we'll start to see the home price index declines spread to other states outside of these areas. So I'd love to hear what you're seeing in your market.

Are you seeing demand collapse in your market? Are you seeing more sale signs out there? Are you seeing higher days on market? Who is the next wave of buyer that you think would buy your house?

And why would they buy it at this point in the market cycle at the price that you're selling it? I'd love to hear from sellers if you're if you have a house listed. And as always, if you need a top agent in your market either to buy or sell, or even invest in a piece of real estate, reach out to me. I know the best people around the country.

I've been doing this for a decade. We're all connected. It's not There's not as many top producers as you think are out there. Reach out to me.

Send me an email. My information is on my site, and I can get you in touch with the best of the best. And then lastly, who are you? Where are you located?

And what are you seeing on the ground? I love hearing the stories from many of the people watching these videos. As always, you can follow me on Substack. My Substack link is down below.

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