Housing Market JUST BROKE as Redfin Data Confirms Buyer Panic

New Red Fin report came out and is sharing that there's massive number of cancellations, actually the highest since they've started recording on purchase contracts and active inventory is skyrocketing. Is this just the beginning of a downturn or is this something worse where we could see some sort of great financial crisis similar to 2008? Let's dig into the data and see what it looks like. Cancellations are up.

They're up more than 15% of home sales. This is the tracking data from Red Fin. Roughly one in seven contracts for home purchases have fallen through. Um this is pending US home sales that fell through out of contract in the month of July as a percentage of total sales.

Now the reality is that there's even more transactions that are cancelling than just the ones listed here. This is just from Redfin analysis of MLS data. There's a lot of transactions outside of MLS data as well. But I can tell you on the ground here it is way worse than 15.3%.

And I'll share with you why exactly that is happening. So high cancellation rates specifically are in the south, right? We're seeing Texas, Florida, Georgia. We're also seeing out there in the west in California, but the Northeast remains strong with only about an 8% cancellation, but I can tell you this, the future does not look good for the Northeast.

It is coming by the end of the year. You will start to see the weakness in those areas as well. But you can see this is the these are the areas according to the report where the pending sales are coming down the most. San Antonio, Texas, Fort Lauderdale, Florida, and where I'm at, Jacksonville, Florida.

Now, you can see that compared to 2024, it's not that much worse on a percentage basis, but I can tell you on the ground, I mean, it is showing up because you have less contracts that are going under contract and then those contracts are falling through. So, we are actually a number of closed sales here in Jacksonville, Florida. We're down 30% from 2019 levels. So pre- pandemic type situation, we're already there and worse from a number of closings.

Now, number of closings is just where it starts. Okay, once the transaction volume slows, that is the number one indicator for the rest of the market following and seeing prices decline. And we can take a look at that from various different angles. And this is why the projection is that prices will be coming down over the next seven months, especially into next February.

Even though we had rates come down recently because of the weak jobs report, and I'll explain why falling rates may not be enough to save the housing market this time. So, Red Fin's also already reporting that there's 500,000 more sellers than buyers. So, we are absolutely now in a buyer market. So, the buyers are cancing their contracts.

They're negotiating more than ever. And it continues to get worse every single month. And this is a nationwide look of what is going on with buyers and sellers. Not only are retail buyers jumping out, but we're seeing investors jump out of the market.

This is the housing markets with the biggest drop in investor purchases also from Red Fin. This is Q2 2021 to Q1 2025. You can see Jacksonville, Florida is one of those areas, right? These areas where they had these big single family rental aggregators, American Homes for Rent, Progress Homes, Invitation Homes.

You might have heard these people. You might be renting from these people. And if you are, actually, drop your comments below. Are they increasing your rents at this point in the market?

Probably not, but they probably jacked it up over the last five years. You know, Phoenix, Charlotte, these areas with these cookie cutter houses where they tried to maximize rents as much as possible. We're seeing these investors jump out of these markets because they are frankly just speculative bubbles that are waiting to pop and they are popping. We're seeing a ton of inventory come on, tons of contracts fall through and the market is changing very quickly.

Of course, this is the main reason why is when you increase the prices way too much and you see interest rates move up, the affordability becomes the number one factor restricting the next wave of home buyers from being able to purchase. So, we are seeing a lot of Gen Z, Gen X, they are unable to purchase because the monthly payment is so crazy. Look at this. Back in uh 2015, it was only $1,100 a month to be able to purchase a median house price.

This comes from Fred and Reventure. This is the monthly payment to buy a house inclusive of mortgage tax and insurance. And by the way, it's worse for insurance. In Florida, we actually see about 72% increase insurance over the last 5 years.

And taxes have basically doubled with property values. So these numbers are just skyrocketing. And of course, the major factor is the interest rates have moved from 3% to 7%. And that has caused the monthly payment to just more than double up to $2,800 per month within just one decade, which is out of control.

Obviously, wages have not kept up with this. And so, the cost of buying a house is unaffordable. So, these buyers when they're going to look at a house, they're saying, "I don't have the money to do the fix up. I need to borrow money for my down payment." Their credit quality might not be good.

They're scared of losing their job. And all of a sudden, of course, you have cancellations. Or they just simply have more options to pick from. And then they just pick the best option even while they're under contract.

So you can see them jump from house to house to house to try to find the next best deal for them. Which of course, if you're in a buyer in this market, great. Good for you. You have all the negotiating power.

Get with a top agent who knows how to negotiate and which properties you can negotiate on because it's not every single property. And there are pockets of Florida even that are still holding strong. So it is not every single market. Every market is very unique, but I can tell you Jacksonville specifically, you're definitely going to be able to have some negotiating power around this city.

And everything is a function of payment, right? So this is from Reventure. It's the US home prices versus mortgage rates since 1890. You can see just the home prices just absolutely spiking.

We see the crisis here, the great financial crisis spike drop and then just spiking. And again, we're just really out of control in terms of home prices and mortgage rates are starting to bump up. And again, we will see asset prices come down over the next few months here as the market evens out. So here's why it doesn't make sense for buyers really to buy right now.

Okay, this is what's happening that's causing these massive number of cancellations. There's buyer hesitation. We call this the cold feet. Buyers are increasingly nervous about the economic conditions, including inflation and job security.

We're seeing a lot of people lose their jobs right now and they're not able to find another job that pays a similar amount. They're scared about inflation. The cost of groceries keeps going up and things like that. That just keeps draining the the amount of money that they can save up for a down payment.

And then the market shift to a buyer market, right? So, the inventory has shifted the market powers to the buyers, giving them more options and ability to walk away if the deals for a better home emerges or issues are found during inspections. Now, we're training sellers right now. If you have your house listed, you need to have your house be absolutely meticulously perfect to be able to sell.

If you want it to sell quickly, if there's outdated flooring or carpet or paint, you need to do all of that before you list the house or you're going to have to reduce the price way more significantly in the cost to do those things to be able to get it to move to compensate the buyers for that time. Home prices um are just too high and the mortgage rates are too high. So, while mortgage rates have fallen a little bit and again, we just saw them come down to 6.3% after this week job report, that's not enough. They remain high, making the reality of these monthly payments a significant factor for buyers to back out of deals.

Again, we've done the modeling and basically even if we brought rates back down to 3%, it does not mean that these houses are still affordable. They're still unaffordable when you look at it from an income and wage perspective for the next home buyer who's going to be purchasing. And these home buyers, we're seeing we're scraping the bottom of the barrel. We're seeing FHA.

We're seeing people without, you know, enough money to bring down for a down payment. They're asking for closing costs. I mean, the people who could buy, they already bought the last few years. And the people are coming in are either people who are very wealthy and don't care about money and they just want to buy the house that they want and they're l they're pushing luxury along or they're dual income people who are just scraping by and barely able to purchase.

So, those are the two type of buyers that we're seeing right now um for the majority and it is a problem. And lastly, economic uncertainty is a huge issue. There's broader concerns about tariffs. People are very upset about the tariffs.

A lot of people view it as basically a national sales tax for the middle class. They're concerned about inflation and a a potential recession, which honestly that's what the Fed is looking at right now. You know, with the employment market starting to weaken pretty drastically in a short period of time according to the data. And they're going to likely reduce rates at the September 16th, September 17th meeting.

I don't know if it's going to be a 25 basis point cut or a 50 basis point cut. My guess is 25%. I think they still have some inflation concerns, but the employment market is probably a lot worse than what is being reported, and that will definitely scare these buyers from being able to purchase. What does it mean?

Again, buyers are more strategic and choosy. They're waiting. So, the we're actually seeing applications tick up a little bit, but they're not going out and actually purchasing. And they're seeing the monthly payment and they're saying, "I would not pay that monthly payment to go purchase that house because I would prefer to simply just rent the similar house for $500, $700 less per month, right?

Because it's an opportunity cost." Or maybe, hey, I'm going to move in with somebody else and double up on a house versus actually go out there and purchase something right now. And they they just want to wait and see because they don't want to get stuck holding the bag purchasing at the peak. That's what everybody's fear is. Geographic hotspots.

So, look at this. Cities in Texas and Florida and San Antonio, Fort Lauderdale along with the Sunb Belt cities like Jacksonville, Atlanta have seen particularly high cancellation rates, right? So when other people start cancelling, they see all these back on markets come on the market. They get notifications of that and it freaks everybody out honestly.

There's a sentiment factor to this that's extremely important for the consumer. Actually, sentiment is probably the number one factor for the housing market and the sentiment is getting worse every single month. But when they come back on the market, that listing gets stale. Then they cut the price and then it's a self-fulfilling prophecy for the rest of the community and potential for falling prices.

This is where the buyer is just cautioned because they feel that you know there will be a decrease in home prices in the future and they need to price that decrease into their purchase now by negotiating a lot with these sellers and good for them because we need these prices to come down. I don't believe in government intervention that they should come in and reduce rates. I think we need to get back to a normal nonbubble market and the government should stop sticking its nose into everything. And I was hoping that the government would actually be less involved, but it seems like they're getting more involved with every aspect of the economy right now, which I don't think is a good thing.

But ultimately, the home buyers are in the uh control of this. Look at this. Home buyers hold the cards in most of US city uh markets. These are the red dots are the buyer market.

The the blue dots are the sellers market and those gray dots are basically the balance market. But you can see there's only a few markets left that are holding up. And you may be seeing it in your market. Comment below.

Are you seeing it weaken right before your eyes? Are you seeing, you drive down the street and there's more for sale signs? I can tell you it's true here in Jacksonville. I've got like 20 listings in my own neighborhood and they're still building new construction, multif family all around us.

And we're just like, who is able to purchase these? Uh, and who's going to rent these out? Because migration to Florida specifically is down 80% from the peak. So, we don't know who the next buyer is going to be.

And so, we just think, look, we just have so much supply and demand is dropping at the same time that prices of rent and prices will just come down. Here's where the mortgage applications are. And this is where we are at in current demand. I mean, we are 30 34% below the prepandemic norms and 55% below the pandemic peak.

So we are actually lower right now in terms of purchase applications than we were in 2008 through 2012 which is crazy because population has increased about 20% during that time period. So we should be seeing more applications not less. This is just another indication that you know the the housing market has some trouble ahead and it's not really getting better anytime soon. So what's really happening?

Okay, students uh graduates are having a hard time finding jobs. Credit card delinquencies are just as high as they were and higher than the great financial crisis already. So they're loaded up with debt. So you can't find jobs.

You're loaded up with tax with debt. The tech and white collar jobs are being laid off. So we're seeing tons of layoffs right now. The dollar is losing its value because Congress just continues to print and print and Doge really did not do much at all.

Um and then fast food sales are slumping. You're seeing this across the board. Weak retail foot traffic. So, we're seeing this with even the stocks associated with this.

Like, you look at Target and things like that. They're starting those companies are starting to stall out. And also, the tariffs don't help. Um, housing rent affordability at record lows.

So, we need those to decrease. The housing market is frozen. We're at the lowest levels. You know, since the great financial crisis, a number of closed sales, small business confidence.

I mean, we drive down the street, you know, I'll show you a video on the next video. You know, literally just entire shopping malls. It'll be like half of them are are businesses that have gone out of business. Wage growth is slowing, right?

Because there's more people who are available to to work and persistent inflation. We are still seeing inflation in a lot of goods that we're that we're going after. So, what does this do? I mean, the consumer is getting crushed.

The US consumer financial situation is getting worse. We're at the worst level that we've been for a very, very long time. And so people are not feeling good about the economy. And when they're not feeling good, they're not going to go out and make the largest purchase of their life and go out and buy a property.

Now the question is, will the government step in and do anything? And so here's the reality of it. You look at different demographics um in different situations and basically folks who are boomers 62 years and older, the majority of their net worth is tied up in their house. So what in and they you know the estimate sadly is that 15 million boomers will pass away in the next 10 to 15 years and the majority of their net worth is in their house.

So if their house is at a depressed price then they're going to have a huge issue. So I could totally see why the government would want to step in and try to save the housing market to keep this cohort of of voters basically and people from losing the majority of their net worth. But look at this. 87 89% of the net worth.

Latinos, 81% of their net worth in in housing. Uh, white homeowners, 47% of their net worth. I mean, this is a significant amount of your net worth. More than 50% of your net worth is in your house because it acts as an automatic savings account is a really big deal.

And so, what's the government going to do? And the question is like, are they going to save the boomers or are they going to save the next generation of home buyers and be able to support them? I mean, the voters usually are the the boomer generation. So, I think that they're probably and they're the ones that are in control, right?

You don't have young people in government. So, they're probably just going to bail themselves out and the next generation is just going to have to pay the price for that bailout down the road because you keep pushing these prices up, you're locking out the next generation of home buyers. They are not going to be able to have access to home ownership and they'll just continue to rent. And Black Rockck knows this and all these other, you know, companies that are buying up rentals and they're going to stuff the younger generations into these rentals until, you know, as for as long as they can and that's a that's their business model.

So, look at this. This is what just came out this morning. The US economy has barely added any jobs in the last 3 months. This is crazy.

It's more more likely that we've actually lost jobs in the last three months. There's a lot of layoffs that are happening, but this is the SAM rule, which is basically lower employment leads to lower prices. You can see right here on the red, every single time we see unemployment spike really just like a year or two later, we see a massive uh decrease in the case Schiller index, which is the the house price index. And so it's likely that we'll continue to see, you know, prices come down here according to this rule.

So lower employment definitely leads to lower prices. If you don't have a job, obviously you're not going to be able to get a mortgage. That comes from calculatedblog.com. This is uh an announcement that basically says the hiring is weak.

So it fell to the weakest level for August on record and intended job cuts mounted amid browder economic uncertainty from challenger gay and Christmas. So this is crazy. US-based companies announced in August plans to add 1494 jobs, the fewest number in going back to 2009. So you can definitely see the stress in the jobs market as much as humanly possible.

Now, what's happening in Florida specifically because of all this, right? Migration is down. The buyers are cancelling contracts. FL Florida housing supply is insane.

Like, it's insane. It's much higher than the entire, you know, Northeast. They're completely overbuilt. There's a lot of distress.

I'm getting calls personally about short sales almost every single day. And they can't, hey, I can't sell my house. I need to either short sale or I need to rent it. We do the rent analysis and there's not enough on the rental income to be able to support, you know, they're going to be losing three or four or $500 a month and they're like, "Well, I'd rather just try to short sale it than continue to to lose uh money out of pocket." That's going to distress the entire neighborhood when they put that short sale up there and they can't sell it and it's going to be a serious problem.

A lot of new construction communities already with this problem if the person needs to move out of state for employment or something like that. So, the prices are just nuts. This is the rule of 28% which basically says you know 28% of your median household income should go to your mortgage payment and for us to normalize to close this affordability gap prices must come down 46%. Now my internal investor model shows that we should see a price decrease of at least 31% at most 42%.

At 42% I think that investors will come back in the market depending on where interest rates are. But that's my projection right now between 31% to 42% of a decline. We're already in Jacksonville down about 10 to 12% since the peak uh from October uh 2022 is when we peaked for prices. But I can definitely see why prices need to come down.

And frankly, you know, yeah, we lower rates and kind of push this further, but that's not going to help the situation as much as you would think. Prices are the number one thing that needs to come down, not interest rates. So, this is what's freaking people out. This is why people are saying, you know what, it's better to rent.

It's cheaper to rent. Insurance is up 72%. The insurance market here is awful. Thankfully, there's a couple insurers that are coming into Florida that's going to bring down hopefully insurance prices later, but you know, we're just one hurricane away from changing that up.

Property taxes have practically doubled with, you know, basically the price growth that we've seen in the assessments. Repair costs are up 50%. And buyers again can they have opportunity. They they can pick and choose.

They don't have to buy. They can rent. They can double up with people. You know, I know when I was younger, I doubled up with people to live in the same apartment complex while, you know, just stacking money away.

But Florida specifically is completely overbuilt. I mean, you can get a rental for less and you can get 3 to four months free rent if you go to the right place and still get incredible, absolutely incredible amenities. So, you know, when you're thinking about yourself as a seller, please take into consideration that buyers do have options. They don't have to buy your house.

And it's not your agent's fault. It's because your house is priced too high. And buyers cannot afford to purchase it. It's not a deal to them.

It does not make financial sense for them to purchase. So, when you get that buyer, hang on to them, make them happy, and agree to their repairs, and get the deal closed. Otherwise, you could be holding that sucker for who knows how long. None of us have a crystal ball.

My projections are again, I think prices will come down over the next 12 to 18 months here in the Jacksonville area. So, I'd love to hear what you're seeing. Are you seeing cancellations? Are you seeing in uh inventory creeping up in your area?

Where are you at? And if you're a buyer and you just bought this year, do you have buyer remorse already? I'm sure you're if you bought anywhere in the country, you are starting to see the market change in for properties around you to start sell for less than what you bought maybe in 23, 24, and definitely this year in 25. Love to hear what you guys have going on.

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