New Home Sales Are Collapsing as Builders Slash Prices and Inflation Surges

Hey, thanks for joining us this Friday. We are really excited to share this information that's come out. And unfortunate for many people, if you already own a home or near a new construction community, you are in some big trouble because new home sales are collapsing and they're dropping even during busy season. And it's probably going to get worse until the end of the year. It's very likely that after school starts in August, we're going to see a massive collapse and basically home builders are responding with a ton of cuts. They're cutting the prices. They're giving in crazy incentives. And the existing people who live around those communities or live in the community and there's phase two, phase three, phase four, they are the ones that are going to get crushed.

So, we're going to dig into this information about how home prices are way too high. It's creating affordability issues and how the market is going to change and react moving forward and why this is such an important point in the market and what is happening with the consumer that is causing the demand to drop off. So hang with us as always. You know, my name is Jon Brooks. I own a real estate brokerage, Momentum Realty here in Jacksonville, Florida. I've sold through the company $3.5 billion in real estate transactions since 2020 and we continue to dominate our marketplace. If you need a top agent in your area, let me know. I'm happy to get you in touch with those folks. But let's jump into the data today.

I'd love to hear from you in the chat. Where are you coming from? What are you seeing on the ground? And if you have any questions during this presentation, go ahead and drop them in the chat and I'll answer all the questions at the end. So, thanks for joining me this Friday afternoon. And if you're like me, you've got a lot of kids home and it is complete chaos. So, let's jump into the presentation of what is happening and why they're plummeting right now.

So, here we go. Right now, we're seeing home sales plummet. Look at this. New home sales collapse 8.8% during busy season despite all of these rate buy downs. So, what we're seeing is, you know, builders will do anything not to cut the price of their home because if they cut the price of their home, it causes appraisal issues for the entire community. It's a massive problem. And so, what we're seeing instead is that the builders are just throwing massive incentives. They're even giving away golf carts. They're doing whatever they possibly can.

And what's interesting about it, by the way, if you don't understand how new construction works, I'll give you 50 grand of upgrades on your house. Well, does it cost the builder 50 grand? Absolutely not. It cost them probably a fraction of that. They do it all in house. So, please understand like you're not actually getting that tangible benefit from an expense perspective when you're buying these new home construction sales. The other issue is we're seeing actually a record number of new homes stacking up as inventory. It's like 9.6 month supply of inventory of new homes. So, it's not a problem of we don't have enough homes to sell. We've got more than ever before. The problem is that they can't get these houses to sell at today's mortgage rates.

They're buying them down to 3%. I just got a notification from a builder just this week that said our forward commitment has basically stopped. Which basically the builders what they do is they own their own mortgage company. They buy a bundle of mortgages for let's say like $10 million as a commitment for the next 12 months. They pay a price to have that certain rate locked in at a lower rate. And if they don't use that money, they lose it. Well, that 12-month period is now up and rates now are, you know, half a percent higher and they're going to have to pass those costs on to the consumer and that's exactly what's happening. So, these site agents are freaking out saying, how am I supposed to sell these real estate properties with a 4.5% at this rate instead of a 4%. So, this is what's happening with the builders and obviously the builders, you talked to the site agents offline, they're saying, yeah, this stuff is completely overpriced. And that's just how it is.

So, yeah, look out below. I do think that prices for new construction or if you're around new construction, that's where the majority of the stress will happen. I'm not talking about the northeast where they didn't build very much. There's a lot of, you know, nimby folks out there. I'm talking about in the sun belt where the builders went crazy and they built this mid-level luxury out there. And so, we don't have a housing shortage. We have a housing mismatch. I think it's very important to understand. We are missing workforce housing and we're missing starter home housing. It is not a matter of not having the physical structures. We have the physical structures. They built mid-level luxury stuff. They built 500 to a million dollar homes that the general person can't afford and they're completely priced out. They're loaded up with debt. Their savings rate is declining. Their wages are not keeping up with inflation and they're falling behind at a rapid rate.

And so that's why we're going to dig into this data and show you what in the world is happening that's causing this to happen. Now, of course, higher mortgage interest rates because of the war in Iran is an issue. And high prices have been holding back the market, and this is causing also refi activity to hit a 9-month low. Okay, so this is a huge problem. If you're a mortgage lender, obviously you can't get as much origination volume through. You're not making as much money. And now the lenders are fighting over each other to try to find the lowest source of financing for their borrowers to try to get the deals to keep going through because we're off about 35% from the peak in terms of the number of existing home sales that actually go through.

And this is a major story because the first thing that happens is a slowdown in the velocity of transactions. Then you start to see the listings pile up and then you see the prices start to drop. And that's why we're seeing, you know, basically every single week in our market, about 35% of the listings are getting a price cut. Okay? And this is really important to understand. If you're a seller, you need to get realistic about what's going on in the market. And you need to decide if you're going to move now or you're going to wait because I can guarantee you seasonality will be at play this year.

Once August hits, from August to December, the number of closed transactions drop by about 50%. So if you think it's slow right now, and by the way, it's busy season. If you think it's slow now, just wait until the end of the year. You're going to see the listings stack every single month. I even publish on my website, movewithmomentum.com, all the information about what's happening in Northeast Florida. You can go and see the charts there of how the seasonality plays. And I think it's really important to understand that the timing of this really matters.

And again, if you need a top agent for your area, let me know. I focus on only the top 20% of agents. The top 80% of agents aren't worth what you pay them. It's the top 20% who really do the business inside and out. Here's what's happening. Over 40% of sales recently by home builders have a combination of seller concessions plus a permanent rate buy down in excess of 6%. How do they do it when there's caps on how much a seller can contribute to closing costs? This is why I was talking about the forward commitments. They're not including it in closing costs because they're just buying the rate down directly from these pools of mortgages that they're getting through their financing. So, they're avoiding the whole situation of, you know, hey, I'm giving you 3% credit towards your closing cost to buy down the rate. They've already bought down the rate off the balance sheet, off of the closing disclosure that you see.

So, this is a really interesting fact. If you're looking at new construction, this is what's going on. It is completely manipulated. Please understand, the appraisals are completely manipulated. Why? Because the builder owns the mortgage company, and the mortgage company gets to generally choose six people on their appraisal panel. And they're on rotation, right? But if somebody comes in there and prices a home lower than what the sales price is, they're going to get kicked off that rotation. So the builders have a lot of control over the appraisers and their panels. And this is why you're not really getting a fair, in my opinion, a fair shake on what's actually happening on the value of the home from an appraisal standpoint.

That's why you need to do a market analysis. It's why you need an agent to tell you, hey, even though the appraisal might say this, that's the value that the bank is comfortable with based on this independent third-party appraiser, it's not really, in my opinion, there. It's all manipulated because you get to pick who's on your appraisal panel. So, I think that you need to be really careful in this type of market environment. Also, understand that not everything is calculated in the appraisal in terms of a comp perspective. That's why you're seeing prices stay higher for longer and you're not seeing the massive declines. It's because people are giving up concessions first and that's not always calculated on the median sale price, right? That's a concession. So, we're not tracking net prices. We're tracking just the top line.

You don't know how much the sellers are actually giving up in concessions. It's a lot. The real estate market is a lot more shaky than it seems when you actually look at the data underneath the surface reporting levels that are out there. And I think this is the main thing that the mainstream media just constantly gets wrong. They keep saying everything's good. We have this housing shortage. We don't have a shortage. We have a mismatch. They keep saying everything's good. It's like not all reported, especially on the builder side. They try to restrict that information from getting out.

So what is happening? Why is this happening? It's because we are having inflation, right? We have had basically 62 consecutive months above the Fed's target of 2% inflation. And right now the core PCE came in at 3.3, which is really not good, right? We're going up in terms of the trend. We're not going back down. And this is right at a time where Trump is putting in, you know, Fed Chair Walsh who is in now and basically he's pushing for lower interest rates, but we have high inflation. So, can they actually get away from the mandate?

Secondly, there's 12 voting members on the FOMC to decide where rates go. And not everybody is on the same page as the Fed chair. The Fed chair definitely has influence. There's no question. But will it actually matter down the line? Probably not. But we're seeing inflation peak its head. Obviously, the war with oil prices is having a big play in that and it's starting to show up in the data. A lot of people said, oh, it's not going to show up. It always shows up in the data. It's just 6 months late, right? Because all this reporting is, you know, usually 3 to 6 months later. So, please understand this is a huge change in narrative that makes it very hard for the Fed to reduce rates and actually makes it more likely that the Fed will increase rates.

Well, if we see rates go up another, you know, 1% from here, that will kill housing. Okay, we're already in an affordability crisis where buyers are right on the edge of what they can actually purchase. And if we see the affordability crisis get worse through higher rates, it will squash the housing market. And so, you know, if you're a seller right now and you're thinking things will get better next year, that is a big gamble and that is a big risk. You need to figure out what your game plan is now and make moves because we could see higher rates next year. Even if the war in Iran and oil prices start to come down, we're still fighting inflation through the marketplace and I think that's going to be an issue that plays out through the end of the year.

So here's some of the information that came out. This is the highest core PCE since October 2023 and the Fed's preferred gauge is now running nearly 2x its target. So just looking at this data, it's going to be really hard for the Fed to justify lowering rates. So that's my argument for those people who say, oh, rates will save us. I talked to a lot of investors who swear, oh, you know, that the Fed will just lower rates and I'll be able to get out of my position in my real estate. And if you're already thinking like that, you're basically just a gambler at this point in the marketplace.

But the inflation is crushing Americans right now, right? You can see the personal savings rate has just continued to decline every single month going into March of this year. It's plummeted from 5.5% in 2025 to only 2.6% now. The drop shows that Americans are depleting their savings as they struggle to keep up with rising prices. And so if people don't have enough money just for their daily living expenses, how are they going to save up for a really high-cost mortgage at today's prices? It's just not translating.

And so we're actually seeing what's happening is there's very wealthy children with wealthy parents that are usually the top 10% of people out here and they're basically the ones who are buying right now. It's the older generations who have a lot of money who are giving the down payments to their younger family members to be able to purchase and that's the folks who we're seeing primarily purchase right now. It's very hard if you're a dual income family with kids. Even now, you know, if you're at the median income level, it's very challenging to be able to purchase and afford the payment that's going on right now. And that's why we're talking about the K-shaped economy, right? The top 10% continue to accumulate more wealth and be doing very well. And the bottom 90% are just grinding along the bottom. And that is why we're seeing the sales grind along the bottom because it's number of transactions. And the wealthy people don't have enough to be able to buy enough real estate. They only need a certain amount of houses to live in.

And if you're looking at it from an investment perspective, they don't underwrite anymore. These houses do not underwrite anymore. I've been looking at real estate locally. I looked at a duplex and a quadplex. The quadplex was at least $250,000 overpriced at today's rates, and they know that, and it's so funny because the seller will list it. They know that it doesn't cash flow, and someone's going to buy it. I don't understand how they think that someone would buy an investment property that's going to lose $18,000 a year while rents are also falling in the marketplace. And so the sellers are delusional on the prices that they think they can get. Now, this isn't true everywhere. I've seen some where the sellers are more realistic and the numbers do make sense, but right now at today's rates, it just makes no sense whatsoever.

Here's the disconnect, too. The personal spending growth is surging, right? So, people are spending more. This is generally the top 10% who are spending more. Well, income growth is collapsing. So, how long can we have this kind of drain on the economy go? I don't think it can last for that much longer. And we keep talking about who's the next marginal buyer who's going to be out there purchasing your home. Well, it's not going to be those people who are seeing their income go lower and they've maxed out their credit cards and their personal consumption has exploded. They don't have, you know, their debt to income ratios are skyrocketing. We see them all the time. We see debt to income ratios over 46% every single time they're trying to buy a house and the math just does not make any sense.

So again, if you're just joining me now, you can drop any question about real estate down below. I'll answer all those questions at the end. If you need a top real estate agent in your marketplace, shoot me an email. Even if you have a question and you want to ask me about your personal situation, no problem. I respond to every single email that comes through on my channel. I appreciate you guys supporting the channel with a like and a comment as well.

So, here's the chart that I want to show you for the K-shaped economy, right? The top 10% of earners in the United States are now nearly 50% of consumer spending. So, the bottom 80% is going lower. They don't have any money. They're grinding out. They don't have anything to save. They don't have assets that are inflating in price. The government keeps spending like drunken sailors. Nobody seems to care about this and it's going to inflate the dollar. The dollar is just going to be devalued to the moon and the top 10%, all their assets are skyrocketing. We're at all-time highs in the stock market. They're killing it. The real estate's expensive but it's going down in price.

So I think what we're seeing is a shift in asset classes. People are moving away from real estate and going towards equities as a better inflation hedge because the cost of debt is pretty high for the numbers that simply just don't make sense yet on the real estate side. But the wealthy are doing very well and those who don't own assets are being left behind. And this is the major housing story that is completely missed because that bottom 80%, they want to buy. It's not like the demand's not there. They do want to buy. Just the payment just makes no sense. And we live in a payment economy. People will spend as much as their payments allow for.

Now, this is a massive signal obviously of the affordability crisis. I'm sure you've seen this chart before. It's been a viral chart, but a first-time home buyer went from basically 28 years old in the 1980s all the way to 40 years old. So, 12 years increase. So, people are basically pushing back their first-time home purchase by 12 years, which is crazy because they're not buying a house, they're not starting a family, they're not settling down, and they're not having a kid, and all this stuff is getting delayed. Well, that's going to delay all of their wealth building, right? Because real estate is traditionally thought of as a wealth builder. You buy the house, you stay in it for 30 years, it's paid off. You have a paid off house during retirement and you live off into the sunset. Well, now, obviously if you're buying when you're 40 and you stay in that house, and not many people do. Most people sell their house in 10 to 12 years, but if you stayed in it 30 years, you're going to be 70 by the time you get that benefit. So, it delays that mortgage payoff, which is a huge signal.

The first-time home buyers, even the percentage share of the purchases has dropped from like 35% down to 22%. And the all buyers median, the average age of the home buyers is 59 years old. So, when you think about that, you know, boomers, 62 years and older, is basically boomers trading their house to each other. So, somebody bought their house 20 years ago. They kept it the entire time. Now they're selling it. They're downsizing. They're collecting the equity. They're putting it somewhere else. And this is going to have major consequences in 20 years where the first-time home buyers are completely priced out. They're not having kids. They don't have any money. And that's going to show up. So, you have to ask yourself in 20 years, who's going to be the buyer of this real estate? Because they have no money. These people don't have any money.

And I feel horrible for what's going on in the economy. And I think most of the policies that are coming out are here to benefit the mega wealthy, which, you know, take it as you want. This isn't a political show, but the policies do impact the housing market. And I think that's important to understand. If you're constantly giving money to one group of people and then the middle and the bottom are falling behind more rapidly, I think there's going to be a huge divide that's going to be unsustainable at a certain period of time. And I think it's really important if you are interested in having, you know, long-term wealth in this country, you need to get involved. You need to start researching this stuff, start making decisions for yourself. I'm not telling you go one way or the other. That stuff doesn't matter the most for me. But right now, the people suffering are the people in the middle, the middle class and the low-income earners. And it looks to be getting worse for those people.

So, if you're one of those people, you need to start thinking about who's in charge and how their policies are going to benefit you and what that could mean for housing policy as well. A lot of the policies that have come out are honestly quite insane. And they don't make sense. They're great talking points, right? Because people are frustrated, but when you actually execute it in reality, they really make no sense. Even like the institutional home buyer ban, which I get it, like people hate institutional home buyers. They're less than 4% of purchases. Right now, they're actually net sellers of real estate and they're net builders of real estate because they do build to rent. So, you're banning something that first off was only really relevant prior to 2022 because they stopped buying in 2022. So, it's kind of like putting water, like the house burned down and then you're throwing water on the house after it already burned down. The policy literally makes no sense, but it's good for PR.

So, this is an example of something that makes no sense. A 50-year mortgage obviously makes no sense. You're going to have a higher interest rate on 50 years than a 30-year, which would offset all the benefit in the first place. You'd just be paying more interest to the bank. So, I like the idea that there are ideas out there to help solve these problems, but none of these actually help solve them, and it's just a political campaign out there. I think that's a mistake.

Talking about the politics of it, I wanted to bring this up to you. This is Florida news, right? DeSantis just came out with the save our homes from excessive property taxes. I have been a critic about this in the past because I didn't want, you know, if we got rid of all property taxes in Florida, who does that mostly benefit? It benefits the top 1% who owns 30, 40, 50 million dollar houses and they don't have to pay any properties on their primary residence. That would give the majority of the benefit to very wealthy people. So, I'm glad that this policy came out in the terms of a $250,000 home exemption where everybody gets the same benefit across the board. It's not giving more dollars to the wealthy. It's actually helping everybody. There's 30% that would actually make 30% of homeowners pay basically zero on this portion for the homestead exemption, which is great.

I know he says they're ensuring funding for core services, protect small businesses, ensure fairness for Florida residences, which I don't know. This will probably get challenged for the residency because you can't have some laws that kind of penalize people for moving to the state later at a certain point in time. So, that's an interesting thing that'll probably get challenged. And create a state trust fund with assets to assist with core local services. Now, my initial reaction to this was Tallahassee is trying to consolidate power by taking away power from the counties and the counties have to go beg for money from Tallahassee to be able to finance their stuff so Tallahassee can really manipulate the counties on a local level. And I think that's one way, but another way you could look at it is how are you going to make up for all this lack of revenue that goes to these local governments?

Do you really think that the local government's going to fire all these people who they generally hire, whoever's in charge usually hires, you know, their friends, their family, independent contractors? I think what they're going to do is they're just going to increase the millage rate on the stuff that's not with the millage rate. Like they can control how much you get taxed on. But then whatever is left over, they can say, oh, we're just going to double our millage rate because we need more revenue. Or they're going to turn it into a sales tax, right? In that case, you're shifting the tax burden from homeowners to consumers. So, it's again a policy that just totally crushes the middle class, which Florida has a very thin middle class already, and it really changes the outlook of things.

So, look, I don't know where the math is at this proposal. There's no math. We've never seen a proposal this bad in terms of like there's no details of how this will actually roll out and the vote is in November. What, like, logical question, what if the county's median price point is less than 250,000? So, let's say you live in a county that's rural and they don't have stuff that's like, where is your revenue going to come from? You're going to have to create a sales tax. You're going to have to create excise. You're going to have to create these other taxes to be able to raise revenue. So, again, you're just passing the tax on from owners who own to basically people who don't own or consumers.

And like I was mentioning before, the county can just increase the millage rate on stuff that isn't taxed for the primary, and that I my personal belief because I know human nature, it's most likely that the counties will just shift the tax burden somewhere else and just keep spending. It's really hard to get accountability on this stuff. So I understand what DeSantis is trying to do in execution. I just think it's not going to happen in reality. And I think this is going to have a lot of issues which is not good because obviously if you roll something out for the first time in history in the United States you want it to be a success. And I don't know if this is the right direction.

So, I'd love to hear from DeSantis if you're watching this, one of your staff is watching this, you know, give us the answers. I'd love to do the research on this. I used to be a tax policy analyst. I used to be a quant on this stuff and I understand economic impact studies, forecasting, scoring, all this stuff because I've done those financial models. You know, reach out. I'm happy to learn more about what you guys are doing, how you see this playing out. But the key thing is you guys need to get out there and share this stuff soon because we have to vote on this and we need the data to be able to realize are we an educated voter on what this actually means as it plays out for each individual county.

So, just a little bit of Florida news and something to think about. It's not as simple as the headline is like, oh, we're getting rid of the property taxes. It's not that simple. That revenue is going to have to come from somewhere. And I think it's kind of interesting to think that these counties, you think these counties will actually just cut their budgets. Like I really don't see that being the most likely scenario. And again, there's already stuff that's coming out. This was from the Miami Herald. Renters who make up roughly one-third of Florida residents could end up absorbing higher costs through increased rents while not receiving the direct benefit from property owner tax relief, right? So, people who are renting investment properties, this doesn't apply to rental properties, the $250,000 exemption. If they increase the millage rate on those investment properties, those owners are just going to pass that expense on to the renters, right? So that's the argument behind that. So I think that's an important nuance that you have.

Here's another thing that I want you to really understand. This comes from John Wake and I love this article. Please understand that interest rates have been falling for 40 years and the articles that come out show that 80% of house price appreciation since 1990 was due to falling mortgage interest rates. It's a massive statement. Well, I researched this. Goldman Sachs and the Fed have similar results. Not 80%. But up to 60, up to 70% of price appreciation has been solely due to falling mortgage interest rates. So, the question to ask yourself is what happens when that direction changes?

So, here's the chart, right? It shows the blue line as the 30-year fixed mortgage rate is just going down, down, down, down. You can see home prices just skyrocketing across the board. Obviously, we had this peak bubble here and now we're in another bubble. We're absolutely in another bubble right now. So, the question is what happens when rates start moving up. What will happen? And that's why the Fed, Trump's trying to push the rates down because we live in a payment economy. People can't afford the payment. They can't buy the house. That's just how it is. And so, they're trying to do anything to influence the payment to go down so people can actually access homes. And the question is, will they be able to do that when the Fed's balance sheet is already bloated. We're already doing so much spending. Where are we going to get this cheap money from? People are already concerned about owning USD. And so, I think this is going to be a big issue down the line that's going to really play out.

I think that prices will essentially have to come down for a significant period of time. Now, I did it through my investment model and I found out that prices in Florida will have to drop from the peak of October 2022, 31 to 42% for the math to start making sense to buy a home. Okay? And in most circumstances, you can rent a similar home for $1,500 less than buying that home. So, a lot of people who are younger are saying, why would I buy a house and pay $1,500 more when I could rent a similar house and take that $1,500 and put it in the stock market and build equity that way? So, something to think about.

Okay. So I think this is the most important aspect of the housing market. Now let's get to the rising interest rates because it's already starting to show up in the commercial side. This is from Brandon Turner. He aggressively put this out on social media which I think he might in the future kind of regret putting this out but I've met him a couple times. He's a really nice guy. I've heard his stories at Bigger Pockets and he's a great storyteller. But this is the risk that's happening behind the scenes with commercial investors, private placements when you're a limited partner, all this other stuff. So he had bought a multifamily complex in 2021, and basically it was floating rate debt and the rates just jumped up. So even though he had higher rent, 30% higher, he had the occupancy at 95%, he still lost all of the investors money. $15 million of investor capital was lost.

And this is what we're seeing. We're going to see $1.8 trillion of commercial debt be refinanced this year. Well, how much of that is floating rates? Right. So, if they had a floating rate or their financing for that debt was at 3% and now at 6%, the deal doesn't underwrite anymore. So, we're likely to see by the end of the year if rates remain high and go higher, commercial real estate owners, especially multifamily, are going to be toasted. They're going to get absolutely crushed. And you're going to see these multifamily distress sales across the country because they no longer cash flow.

And so the debt is so important. You can't do a large amount of debt at the peak of the market and expect to be doing okay in a couple years. You need to, if you're going to do an investment that has a 30-year time horizon, you need to match the debt financing with that 30-year time horizon. Otherwise, you're just speculating. You could have also bought rate caps and done other things that are a little bit more sophisticated that I don't know if his team even thought about. But obviously when you're managing other people's money, you need to think about downside scenarios. And so that's why I'm thinking this is going to mess up multifamily. There's going to be a lot of distress coming through.

There's going to be a lot of opportunity for people with cash that can put 35% down and buy a distressed property at the same time where the numbers are still going to make sense. So look, even though we're going to see prices come down, which is great for the next generation, there's going to be a lot of distress out there. If you have cash, you can come in and purchase. There's going to be opportunity around the corner coming from this year to next year. But this is the main thing. If you're listening to social media influencers on investing, please be careful. Underwrite the deal yourself. If you don't know what the terms of the contracts mean, the operating agreements mean, the LP statements, all that stuff, what they mean, do not invest. If you need an attorney to explain it to you, do not invest. You really have to understand the risks of these assets and what it means to buy at the peak of the market with unlimited rate sensitivity. It's one of those things where you really need to know what you're doing as an investor. So, please be careful on that.

Well, here's something else that's interesting, right? This is from Melody Wright, a friend of the think big question everything, and she's looking at the National Association is revising down their forecast 14% lower over the past four years. We're constantly seeing Zillow revised down, the National Association of Realtors revised down. All of these people who said, oh, real estate only goes up. It goes up forever. It goes up 4% per year. And, by the way, they're paid media companies. Okay? I just want you to understand this stuff is not real. It's paid. It's bought and paid for. Builders have an incentive to do this. Lenders have an incentive to do this. And the National Association of Realtors represents the realtors. They are out there with the rosiest, most optimistic view of what's happening in the marketplace and ultimately they're just wrong. They continue to revise the home sales down. They're completely wrong on their forecasts and they've been wrong this year big time.

We talked about that at the beginning of the year. Hey, it's going to be way worse than these forecasts are saying. Obviously, we didn't know where rates are going to go, but we've been between, you know, 6 to 6.5% the entire year. We're just in an affordability crisis, period. The consumer, as I showed you earlier, is just completely maxed out. So, please understand that this is not all sunshine and rainbows. You need to see what's going on. And the other thing that you need to know is that it's not just Florida and Texas anymore, right? A lot of the people in the comments, even in this group, are like, hey, it's just because Florida, it's just Florida and Texas that are overbuilt. It's not the whole country. The whole country is being impacted by the affordability crisis, guys.

So, now you can see it's all on the West Coast, right? Usually it goes from the west coast to the east coast and then it goes over the mainland. But right now, I mean, we saw it in two states. Now it's west coast and the two states. And then we're going to start seeing it shift up as the market starts to correct. It's obviously going to impact every market very differently. Every market is hyper unique. Even Jacksonville is like five cities in one. I can't even compare one area of the city to the other. Depends on where the new construction is. It depends on where the speculation was. It depends on where the jobs are. All of those factors go into it. But this chart's helpful because it just shows you it's not just Florida and Texas anymore. It is spreading across the board. And frankly, housing prices are about to go negative.

So, if you want to follow me on X, I'm Jon Brooks. I put out new real estate charts and information every hour or two based on the stuff that I'm seeing. I appreciate you guys connecting that way. But home prices are about to go negative. They're negative in real terms and Zillow is now forecasting 0.0% price appreciation over the next 12 months. I am putting it out there. It's going to be negative. It's going to be negative. At the end of this year, you're going to see some extreme pain, especially going into the midterms. There's going to be a lot of speculation, a lot of political stuff. We'll see what happens with mortgage rates. If mortgage rates go down another half percent, I think we're going to be okay. But if they stay here or go higher, I think we're going to have a massive problem for the real estate market moving forward.

So, look, I'm going to answer your questions right after this. I got two questions for you. Love to get your answers in the chat. What do you think will happen next for the real estate market here in 2026? And will it keep spreading? Do you think it's going to spread to other areas? Would love to hear from you. Again, if you need a top real estate agent in your area, reach out to me. I'm happy to get you in touch with some of the best. I know how to interview them. I know how to ask them the right questions. I know how to make sure that they have the number of sales to be a full-time professional. With that, ask your questions in the chat. I'll go up to the top and answer any of the questions that you have.

As always, if you want to follow me on Substack as well, it's jonbrooks.substack.com. I put out articles twice per week and I'm on LinkedIn. I'm basically everywhere now. I'm coming out with a book called Get In to Get Out. So, I appreciate any support you guys have on that. It'll be coming out in the next two months here. And it's our story of how we became the top real estate agents in the marketplace. And one day, me and Brittany saw this real estate agent who was 70 years old. And it was scorching hot out. We were driving through the neighborhood. We saw a 70-year-old slam this open house sign down in the yard and she was just hobbling across the street and we just couldn't believe it. We were just like, what got her to be 70 years old and still doing this because it didn't seem to us that she was doing it by choice. Maybe she was but we didn't want to have the option to do that.

And so we tell our story about how we became net worth millionaires in 3.5 years selling real estate. Then we invested in real estate. We bought multifamily. We've opened a title mortgage branch, all this other stuff and we tell our story of how we did it and what we do to help real estate agents actually become profitable because the majority of agents don't make any money. And so I've done a couple videos on that if you want to go back and check them out. But we really do want to help real estate agents learn how to build an actual business and provide enough great service to the consumer because there's not enough good agents out there. There's just not. And so if they're not going to be good agents, we encourage them to turn their license in and move on with their life. Don't become that one-off agent that's not really helping anybody. You want to hire a professional. As a seller and a buyer, you need to hire a professional, too. So, again, if you need help on that, reach out. All right, let's go into the questions and thanks for hanging out with me.

Apex, North Carolina, buy at 5425 or rent somewhere townhouse for two grand. Yes. So, I'm actually very familiar with Apex because they did a ton of new construction in that area in Raleigh and Durham and everywhere. I mean it exploded because we had all these tech companies start going to Raleigh, North Carolina and Apex was on the outskirts. So yeah, the numbers make no sense in that area to buy whatsoever. The only reason you would buy is if you just got an incredible price or you just don't care about money and you're the top 10% which is another factor by the way. Top 10% of buyers, they don't care. They've got so much money it doesn't matter. They don't think like the majority of Americans.

The only houses in my areas that are selling are million plus homes. Yes, that is because the wealthy are going to keep transacting. The K-shaped economy, the wealthy's assets are just skyrocketing. I mean, their stocks are up almost 10% this year and they're crushing it. They're making so much money they don't care. And so, we're actually seeing this phenomenon of the luxury stuff is selling better than the 500 to a million dollar stuff. And so we're seeing that across the board. Lakeland, Florida. Hey, that's close to me. I'm in Jacksonville. Been noticing my area of 599 for 1,800 feet. Yeah. So like a starter home at 599, you're paying what, like 4,200, 4,700 for a starter home. That makes no sense, especially in today's market, like you just don't make enough money to be able to afford that.

They've sold homes to every sentient being who qualifies. AI job promises across the board. I do think that AI is going to change a lot of this as well. It's going to create some deflation for sure. But it's going to make people who are A players just like 10x their ability to produce because it basically is a lever for knowledge and execution. Most people don't have the knowledge and they don't have the execution, they're going to be left behind. The top 10, 20% of people out there who do adopt the AI stuff and start using it, I think they're just going to absolutely rip and take off and it's going to be kind of like a winners take all economy. And that's basically what a K-shaped economy is.

So, as the economy begins to suck wind, look for that K-shaped narrative to become more prevalent. Yeah, it's going to get worse from here. Who suffers most? The mid-level earners with big stupid trucks, three to four family trucks. Families who need to feed kids. Yeah, you're talking our language because in Jacksonville, you see these people with $120,000 trucks that are paying basically $1,700 a month on their truck payment, which is kind of crazy. And it's a depreciating asset. Wars is in a box until the next financial crisis appears on the horizon. I think we're going to have some sort of credit event over the next few years where the bond market's going to react to just this inflation and the inflation will force the government to have accountability, but it's not going to happen a moment sooner because the government has no incentive to stop spending your money. They love, they want more of your money and they want to spend it on their priorities.

Looking at a Beazer townhouse in Orlando, sitting on the market for 60 days, I was actively working with them. They increased the price by 5,000. I mean, that's insane. Yeah. And I'd be careful at the builds right now, too. You need to get a really good inspector because a lot of them are having issues because they got slapped up. The Fed backed themselves into a low rate corner and have no escape. Yes. They're going to have to just let prices come down. Three years till there's a good deal. Again, gym rat crypto, I think it's going to take some time. This stuff is going to be manipulated to the moon to prevent this type of pain to come through the marketplace. I think we're going to have a structural decline for a decade. So, just keep that in mind. That's my opinion, because we have the silver tsunami. People are passing away who are older. They have tons of houses. They're going to sell. It's going to be a little trickle and the trickle is going to get bigger. There's going to be some inheritance that goes through that. I just don't think this is going to play out as fast as people think.

Why did St. Petersburg real estate not really go down? K-shaped economy. Great question. Yes, it's because the wealthy are still going to buy these massive houses. It's not the people who are buying 1, 2, 3, 4 million dollar houses that are struggling. It's the people who are buying the $400 to a million dollar house. And I think that's the majority of the story. And you got to understand too, people who are relocating from the northeast from New York, New Jersey, California, they've got boatloads of money and they buy stuff cash. So it doesn't matter. So again, we actually see this phenomena studying Japan and basically what we're seeing even though they have a declining population is the areas that are urban, like everybody is moving to the same area and it's pushing prices higher in the cities and everything else is collapsing because everybody wants to be near each other. It's just the wealthy all buying up the same stuff that's very close to each other and then all the poor and middle-class people are basically living on the outskirts and that's where prices are actually dropping.

So there's basically like two types of housing markets going on and I think that's going to happen with the major cities as well, in certain pockets. So, you know, you look at Tampa, prices are already down, you know, 20% in some areas. Amazing locations never go down. Yes, if you have an amazing location, you got an amazing view, there's going to be a wealthy person right behind you that's going to purchase this. Think about this. After 20 years of jigging and fiddling with interest rates, we are at twice previous rates and inflation is out of control. Yeah, the inflation for the average consumer is awful. I mean, the amount of money that you earn on an hourly rate versus what you need to pay to live is getting ridiculous. And that's where I think the administration has kind of completely disconnected. Obviously, when you're running as a billionaire, you don't even look at prices. But I think there's just a massive disconnect about caring or trying to find a path forward for the middle class.

The middle class is very scared. The working class is very scared. They're living paycheck to paycheck. 78% of people are living paycheck to paycheck right now. It's a massive problem. Real estate does go up 4% every year when inflation is 8%. Yeah, you just lose 4% every single year. Wait till jobs crater. Jobs will be the next thing, but jobs will bring down prices. But obviously, if you don't have a job, you can't buy a house. So, it's not going to be good for housing. When stocks go up way more than 8% year-over-year, then that 4% real estate appreciation is negligible. And by the way, you can't pay the bills with house equity. Real estate is primarily shelter. Yeah, I mean, people do pull out their home equity to try to consolidate bills, but there's been reports out that show that those home equity lines are starting to dry up.

Fed officials used to think to seek to alter the business cycle. Recent officials wish to repeat it. I do think that the Fed just kept interest rates too low for too long and that's part of the reason we're in this issue is because it just caused massive speculation. It also caused companies to bloat up and hire tons of employees and now that they don't need all those employees and AI's around, the people are getting laid off left and right. You see all these white collar jobs just completely disappear. What delayed the Airbnb apocalypse? We are seeing Airbnbs just get absolutely crushed, by the way. So, there's people who bought an Airbnb for like 1.2 and now they're selling for 800,000. That's what's happening locally. People are shifting to long-term rentals. They're repurposing them. They're turning them into mid-term rentals. They're trying to find any way to do it. But that pain is there. Like, you can see why is this not happening? It just, people shovel their money in to save their deal until there's nothing left. And so it delays things a year or two. They try to find other solutions. They sell something over here to cover this. They don't want to lose it. They are still obsessed.

They think the rates will still go down and they can refinance and it'll eventually work out. There's a lot of hopium out there in the marketplace. Of course there's going to be hope after you have like 50% increase in home prices in three years, right? You're going to be like, oh, it's going to be like this forever. It's not like that forever. Real estate goes through market cycles. We're one of the most unaffordable markets ever in history. So, it's one of those things to be thinking about. In my market, existing family homes are continuing to go up. There's little to no inventory. Every market is completely different. So, let us know where you're coming from. The Fed will not allow meaningful home price declines. That's why I'm saying I think it's going to take a lot longer than it looks. And that's why I think we're going to have a structural decline over 10 years. There's not going to be some sort of event where you're just going to see prices decline within a year. It's never actually been that way. Even in 2008, it took five years to get from peak to bottom. So, real estate's an illiquid asset class. It just takes time to go out.

Wanted to buy in the Chicagoland area, but everything was just insane. Ended up renting for now. Any insight on that market specifically, prices just keep seeming to go up. Email me and I can do some research. I can let you know. I can get you in touch with the top person in that area who will be able to help you out. So, I'm not very familiar with that area, but I have the tools to be able to get you the information and I know the people in that area who will be able to talk to you about that. I don't believe that there will be a bond crisis just like Japan, your aging demographics. I understand your perspective, but there will be a bond crisis at some point. At some point there will be so much debt that's compounding at such a rapid rate that it'll be uncontrollable and the government will just try to print its way out of it. And then the bond market will react by having to have higher rates to be able to get those dollars that are worth less and less.

Ohio prices near Daytona is dropping. Good priced homes still go fast. Yeah, if the house is in great condition and it's priced right, they do sell immediately. But most houses are not in good condition and they need a ton of work on it. Crazy inflation if what you say comes to pass. Yes, I do think we're going to have an inflationary period because like you even hear Trump say, oh, we're going to try to outgrow the debt issue. Okay, we're not going to take spending seriously. We're just going to try to outgrow the market and not feel any pain in the market because that's how politicians lose power if the economy is not doing well. So, you know, I get it. Walsh will find creative reasons to cut rates. Walsh doesn't have control to cut rates as 12 people on the FOMC. They all have to have a majority vote. So I think he's going to influence it for sure. But if he can actually pull it off and get these other people, these Fed presidents and the people who are on the rotation to actually cut rates, I would be very surprised. They are pretty stickler to their Fed mandate. So I get it. People do have this hopium that rates will come down. I'm just not there yet. We'll have to see though. I could be proven wrong.

The Fed exited the real estate market years ago. Their balance sheet of MBS continues to be rolled off. Yeah. And then they tried to do the off Fed balance sheet MBS purchases through Freddie and Fannie, the 200 billion, which didn't do anything right because it went from 5.99% rate up to 6.5% today. And right now what you're actually seeing is a disconnect. This is not talked about enough, but we're seeing a disconnect between the 10-year Treasury and mortgage rates. The 10-year Treasury came down quite a bit, right? It came down like 20 bips. Well, mortgage rates did not come down 20 bips. It only came down about 8. And the reason why is because the markets are pricing in mortgages being more risky. So it's not correlating as much as it used to. And I think that trend might continue. We're watching it very closely right now. Me and a couple of my lender friends.

The Chicagoland area is still total sellers market in my opinion, but renting is also much cheaper like everybody talks about. Yeah. So again, like the question is like why buy if you can get it so much cheaper? Remember, real inflation is nuts. Probably north of 5%, much higher. Yeah, I do think a lot of this stuff is manipulated. The ratios of it don't honestly make sense. The way that they track and measure inflation doesn't make any sense. And it's been a lot worse than what the data keeps saying out there. Walsh should raise rates, but he won't. Yeah, I mean, honestly, I think that they should raise rates another half percent. That'd probably squash the inflation, but it would slow everything down. Prices would come down, which would be great for the next generation. But you got to understand the voters in this country are of a certain age, and that age does not want their property values to go down. So, they're going to vote for people who are going to push prices higher. That's just how it is, right? Politicians basically pay for votes.

You see Nancy Mace out there, she's saying, oh, you know, we should have nobody over 60 should have to pay any property taxes. It's like age-based no property taxes. It's like she's basically selling that as a pitch to get votes, right? This is what this is all about. She knows that that age demographic votes. So, they're going to give benefits out to the people who vote them into power. Just moved into a new condo, paying 2K a month with HOA included. One of the neighbors is trying to sell the same unit we're renting for 480. Congrats on the purchase. 2K a month with HOA included. Depends on where you are. Love to hear where you're at. I don't know if that's good or not, but you got to ask yourself what could you rent that same exact place for? That's generally the question. I'm not a big fan of condos or townhouses. Those tend to get hit the hardest during downturns. And then people don't pay their dues and then the other folks have to make up for it and it becomes kind of like it's just running through things. Just renting at the moment is very good. We got lucky. Oh, good. Okay, you're renting. Yeah, be very very careful on condos and townhouses in this market.

What's the best way to finance a condo that doesn't qualify for FHA? You can get private lenders. If you want to reach out to me, depending on where you're at, I've got lenders across the country who can help with that. You're just going to have to pay a higher interest rate because it's more risky if they don't qualify. But if you want to do it, there are lenders out there. You're just going to pay more of an interest rate. Not buying till prices are realistic. Yeah, I think that's the way to go. If I was a buyer today, I would be renting and putting the money into equities. Because I think equities, even though they're at all-time highs, you're seeing the profit margins, these companies that just jump up massively because they're laying people off from AI and the bloat that they had from prior years. That trend could continue for quite some time.

And the bubble, you got to understand these bubbles, too. They don't burst immediately. That's why everybody's wrong on the real estate timing. They're wrong on the stock market timing because you can be in a bubble for years. I mean, years until it just comes to roost and then it forces the market to correct. And I think that's probably what's going to happen here. It's going to be some sort of market forcing event that really pops the stock market and pops the real estate market. Part of the reason why the real estate market isn't coming down as much is because that top 10% has their money flowing up in the stock market and they're just buying these luxury properties and that's pushing all these price points up.

You helped me with a property in St. Cloud. Found out from the agent the owner is a boomer who is completely uncaring if that house doesn't come this summer. Cool. I'm glad I was able to help. I don't know your screen name and who you are from an email, but I'm really happy to hear that. That's why I made this channel. I'm trying to get the word out of what's actually happening on the ground, not the BS you hear in the news that is just completely manipulated, completely bought and paid for. And look, I have no incentive to say this. I own a real estate brokerage and all these other companies in this industry. I'm sharing this because I would hate to see that next FHA buyer buy at the peak of the market and get totally screwed in the next three to four years when they have other options that could actually be better for them right now.

So, look, if you need help, reach out. You need a top agent, reach out. Follow the channel, follow on X. Appreciate any comments. I have a book coming out for real estate agents. Again, have a great weekend. Enjoy it with family and friends. I'll be here next week. My next video drops on Tuesday. I'll be sharing more information and then I do a live video every Friday or at least I try to. I was sick last week so I missed that one. So glad you showed up today. If you like this video, give me a like. When the video finishes, give me a comment. Appreciate anything that you can do to support the channel and I'll see you next week. Thanks so much.