The Market Just Froze. And It's About To Get Much Worse

The market is slowing and it's not just seasonality. We are going to see massive changes in 2026 that are going to impact you and your real estate investments. If you're buying or selling or if you're just thinking about what's going on in the housing market, let's dig into what is happening today as inventory continues to stack every single month and the market is completely frozen. So, let's see this chart that came out from data rapper.

US home turnover is at the lowest rate in decades. 27.7 out of a,000 homes in the first 9 months of the year have sold. So this is just 2.8% of homes that changed hands in the first 9 months of 2025. Again, the lowest number in over 30 years.

And why is this happening? It's happening because 70% of homeowners are locked locked in to these sub 5% mortgages. A lot of times when people sell a house, they go out there and then buy another house. Well, those folks who are locked in, there's no reason for them to sell because they would have to then get a higher payment or a higher interest rate by buying another property.

So, they're just getting completely locked in. They're staying there. And until rates come back down and prices come back down, we're likely going to see this effect continue going into the future. So, fewer selling and buyers cannot afford to buy.

So the same reason why buyers can't buy their houses or the same reason why they can't sell and go out and buy their next house. So it is a stalemate in both sides are feeling the impact of this affordability crisis with super high interest rates for them relative to just the past couple years. Right? We're we're saying high relative to a 2.5% rate that we had in 2020 2021.

And that is basically those rates going up to about 6.2% 2% today has locked in this market along with prices jumping here in Florida more than 50% over the last 5 years still. So our expectation for 2026 is we're going to continue to see this turnover rate at one of the lowest levels that we've seen in decades as prices start to come down and should interest rates come down which I do expect to happen that will cause more transactions to occur in 2026. So real estate is cyclical. This chart just shows it.

This is inflation adjusted home prices. This comes from Reenture Consulting. It's a great chart to explain what's been happening over the last few decades. As you can see, we had this kind of lost decade for a period of time and then we had this massive bubble caused by the Federal Reserve reducing interest rates and promoting home ownership, reducing the down payment.

All of this to push prices as high as humanly possible. People then used their houses as ATMs loaded up with debt and then when the market came back to reality, we saw this massive crisis that occurred and then same thing that happened in 2020, we had the Federal Reserve go to zero interest rate policy, spiked all assets that basically are backed by debt and created another bubble situation. That's where we are right now. We're at record highs and we're at record affordability crisis as the Fed has tried to figure out how do we not pop this bubble.

We're actually calling it the great exhale versus some sort of bubble that's going to pop all of a sudden. I don't think it's going to happen overnight. I think it's going to happen over the next decade. The way that we're watching the demographic and employment situation play out.

And because the government wants to continue to pump housing as much as possible, Trump's been very vocal about that being the case. So, what's going to happen next year in 2026 is inventory is going to continue to move up. We've already seen about a 12% increase in 2025. In next year, Compass is estimating that we're going to see another 10% increase in inventory over the next 12 months.

This trend has turned around since 2022. March 2022 was the time frame where we saw the Federal Reserve start to increase their interest rates. That pushed mortgage rates higher. And now you see this kind of cyclical uh uh type of event.

Obviously, during busy season, more people list their house. And then when school starts, people take their house off the market or they try to buy before school starts. That's why you see this little p cyclical nature of the market right here. But ultimately the trend has changed and interest rates have started moving up.

Housing has become more unaffordable because of this. And we live in a payment economy. I know a lot of people think, well, oh, you know, there's like 40% of homes are completely paid off debtree. That's great.

The next buyers don't have all the money in the world to be able to purchase these houses cash unless they already have money. The next wave of buyers are loaded up with student loans. They're, you know, barely getting jobs and making it through. They're living paycheck to paycheck.

Those are the people are going to cash out those investments. So, you always need to ask yourself, who is the next buyer going to be that's going to gobble up of this inventory that's coming through. And by the way, the hedge funds stopped purchasing around this time frame as well because the numbers no longer made sense on paper for them to purchase at those interest rates. Not my favorite type of business.

If your business is completely dependent upon what interest rates are doing, I don't think it's a very good business personally. Uh, however, with assets that are backed primarily by debt with buyers, the cost of that debt is going to be one of the number one determining factors on what's going to be happening in the industry. And so, the housing industry is primarily driven by what the Fed chooses to make the interest rates. And that's my personal opinion.

It's backed up by facts and data for the last couple of years. A lot of people debate me on that, you know, with supply and demand and all that stuff, but yes, supply demand is determined by affordability. And then, you know, if the demand falls and people keep building, then of course supply starts to move up. That's what we're seeing right now is new construction inventory is stacking despite all of these incentives.

You saw that LAR report came out. They're down 22% from peak pricing already. We're already at 2009 levels of number of unsold completed homes for sale. This comes from Resi Club.

The numbers continue to just move up every single month. It's not some again, it's not an event that just happens overnight where you have a massive amount of inventory. Snap your fingers. And it doesn't happen across the nation all at the same time.

Real estate is very regional, very micro. And there's some areas of the country that are doing just fine. The areas that are not doing fine are the ones that have been massive speculative bubbles caused by institutional buyers and by mom and pops who just came in and p purchased as much real estate as they possibly could as they saw interest rates go down in the 2020 2021 time frame. And then those people who bought in 2022 through 2024 are now basically underwater or break even from where they were minus and if you have to subtract their purchase and sale costs, they're underwater in a lot of cases.

And we're starting to see that across the board in areas in the sunb belt. Now markets are changing very fast. 90 out of 200 metros have higher active inventories than they had in the 2019 time period. You always want to compare to the nonbubble or manipulated years.

And 2019 is what we want to go back and look at it. Look at this. Uh Colorado Springs has 109 uh% higher inventory. Alabama, Texas, Florida, Texas, Florida, Texas, Texas.

So, a lot of these areas in the sunb belt and surprisingly some places up in the Northwest and in Colorado. So, this is going to be really interesting to see how this plays out. I think these areas that are having the highest level of inventory are going to be the places where we're going to see the most amount of price declines until that inventory gets gobbled up. Obviously, you can't have your house on the market for so long and then you're going to eventually capitulate to what the market says your actual price of your home is.

So, a lot of people are and the one that might surprise you the most and I know a lot of people here locally say, "Okay, well, it's a growing market really, really fast, etc., etc." They also are building like crazy there. So, this is an area where there's just massive supply of inventory. Investors are finding these areas that they could buy the land cheap and build a house and now they built them and they're having trouble selling them because there's just so many of them. They have to reduce the price because the local wages just have not kept up with the prices over the last 5 years or the last decade in fact.

So look, listings take time to move up. So this chart is really important to understand. And the blue line is the number of active listings that we see in my local market here in Jacksonville, Florida. The new listings on that pink line are how many are coming, new listings are coming on the market and then sold listings are in the orange line.

Now, you might think, okay, well, why is the blue line not going, you know, up? Well, the reason why is because people are getting upset that they can't get the price that they want and they're rage quitting and yanking that property off the market, hoping to put that property on the market next year during busy season to get a higher price than what they're getting today. Well, that's probably not going to be the case because there's going to be a lot more inventory next year. We're seeing prices come down every single month here locally and you know I think the best thing you can do is get realistic on the price and sell it as soon as possible.

We are seeing the markets changing. Yes, the government may come in and try to prop up housing for as long as possible. I don't think it's going to be enough. Uh how are they going to solve the affordability crisis without letting prices just fall?

It would be uh it would be amazing for me to see what they've come up with. Obviously their la their last three proposals of portability and uh you know just throwing spaghetti at the wall that yeah they had the portability what they have they had 50-year mortgages and then they had the assumption of loans uh they came up with all these different ideas and none of them are going to actually work or be implemented in that fact because they don't actually make things cheaper. It just makes it a little bit more accessible for people to get. But just extending loan terms does not really improve anything for you.

And frankly, even if they extend the loan terms, the interest rate will be higher. So, there's a lot of things that the government is going to try to do to manipulate prices higher. Uh Trump has come out and said that multiple times. He doesn't want prices to fall.

He doesn't want people to overbuild and have prices fall. And in the Sunb Belt, we've already done that. So, we we don't know if they can actually step in and do enough to save us from the the declines that are likely to come in 2026. So, it's a slow march upward of this inventory and this inventory that was yanked off the market coming back on next year.

We're calling that pent-up supply. So, often you see like pent-up demand. We have that too with all these buyers that want to buy, who are just priced out. Now, we have pent up supply from all these sellers who want to sell, but they are not getting the price that they want.

So, it's going to take time for this to play out. And you just see this little gap here between new listings and sold listings continue to move every single month. And then over, you know, five, seven years, it's a massive difference between the number of listings and the number of buyers. And you just see prices just come down every single month, which we're seeing every week, we're seeing about 20 to 30% of of the listings in our market get a price improvement, which is a phenomenal rate, and that's good.

It's great for buyers. We need a price reset. Shout out to Dantis, who actually said that on X. He said just prices are too high.

And a lot of people just won't acknowledge that. They just want to continue to pump housing for whatever reason. And there's other people out there who say, "Look, let's acknowledge it and let's try to fix it. Let's see if prices do need to come down to the next generation has a chance to afford property." Now, here's Jacksonville, Florida.

You can see that the slowing of sales is building up inventory. So, inventory is continuing to just come on at a at a regular rate, and then the number of sales slowing is causing this inventory to continue to build, especially with condos and town houses are just absolutely getting crushed. I'd love to hear what you think. Are you seeing inventory starting to stack in your area?

And comment below where you are as well, so we know that because the regional differences cannot be overstated. There's areas of the Northeast that are doing phenomenally well. There's areas even in the Sunb Belt that that don't have these issues because they didn't have the speculation or the new construction. So, shout out, you know, just do a shout out below.

Let me know where you're from. Now, this is the major topic that will be coming up over the next decade or so, next few decades. Demographics are worsening. Okay, so senior citizens 18% nearly to 23% by 2050.

Right? There's an aging population happening here. Meanwhile, children under 18 will decline from 21 to 18%. Now, these may seem like small percentages, but they're not.

This is very important. Since 2008, the fertility rate has fallen from 2.08 to 1.6 in 2025. So, just in that short period of time, people are not having kids. They're not starting families.

It is so expensive to be able to do these things because they're loaded up with debt. They can't afford the rent. They can't get their savings right. And they're just trying to find a path to get out of it where it's causing the situation where we're going to have basically negative growth rate of our country without immigration.

Right? So, if we have immigration come in, that's the only way to solve this or people need to start having more kids. But people aren't going to have more kids if they can't afford to even feed themselves. Uh, and they're scared about their futures, right?

So, this is a huge problem that's going on and it's going to play out over the next next uh two decades here, three decades here because who's going to be that buyer in 30 years if people aren't having kids? Just sit with that question. If people are not having kids, who is going to be and answer the question, who's going to be the next buyer? I want to know.

So, the demographics are getting worse. Clearly, this chart is it comes out from the National Association of Realtors. It's made its rounds on social media. First-time home buyers is now 40 years old and the median of all buyers is 59 years old.

Repeat buyers is 62. That's that teal line right there. And I think this is just going to continue to move up because the next generation is just owning less and less. They're renting more and the prices of everything are getting to the point where they don't have anything left over after they're working their jobs.

And I see this personally. I have a lot of wealthy friends who live in a freaking bubble. You would not believe. They don't They're like, "This isn't real.

This isn't real." I own a real estate brokerage. We did, we're going to do about 1,800 transactions this year. We see it every single day. I mean, the younger generations are struggling.

They need to get gifts from their parents. They're trying. It's dual income young people. If they're loaded up with debt, I mean, the debt to income ratios on these folks is just unbelievable.

They don't see it because they don't want to see it. The wealthy and they're totally out of touch. They live in their just little wealthy bubbles with other wealthy people and they have no idea what 90% of Americans are going through. So, you know, I try to explain to them that they just are so blind and they live in their own echo chamber and they don't listen.

They just think that everything goes up all the time. And I think that's going to be a mistake for them if they continue to believe that over the next 5 to 10 years because all the data right now is pointing to a worsening market because of demographics, because of this supply and affordability issue. And look at this. This is really interesting.

This came out March 24th earlier in the year. Gen Z and millennial home ownership rates flatlined in 2024 as housing costs soared. Young Americans tracking behind their parents' generations. For instance, 33% of 27y olds own their own home today compared to 40% of baby boomers, you know, when they were 27.

So that 7% more people are left behind today because of these rising housing costs compared to the prior generation. I think this is a big deal and I think that we need to look at this because it it like 7% may not seem like that much. It's going to seem a lot when we are fast forward 30 40 years and they don't have a paidoff house and they're going to have to continue to rent and pay their mortgage payments because into their retirement years because they did they weren't able to afford one right now. How damaging will that be?

Like it'll be critically damaging to their financial goals. And so there will be a huge issue that's going to play out in that time period and if they don't get social security at that point because it's all bankrupt if that situation isn't solved. They don't own their own house. They don't have social security.

What are these people going to do? And that's the question I'm going to ask and that's why I'm staying away from real estate especially at these prices today because I do see this demographic situation playing out for the downside. This is another image that was going around media. 45% of women will be single and child-free by 23rd from oh my facts.

This is crazy. People are single and not having kids. Do you think this will impact housing in 30 years? I absolutely think it will.

Especially even the people who are having kids and only having one kid, so they're not replacing themselves. I think this is going to be drastic unless we have some sort of immigration policy that brings people in to prop up the population. But it looks like things are going the opposite way for at least right now. The other aspect that we're starting to see, this comes from Melody Wright.

Shout out to Melody. She does a great job researching this. But 600,000 borrowers went delinquent in November 2025. This is the largest single month inflow since 20 May of 2020.

So what we're seeing is just more people are not being able to pay their bills. They stop paying their credit cards. They stop paying their car. They stop paying their house.

They stop paying their rent. And it's starting to build up. So this is a change in direction, right? So we had like basically no activity happen with foreclosures for four to five years with these workout programs.

Now that these workout programs have become a little bit more challenging to jump through the hoops, we're going to start seeing delinquency come through. We're going to start seeing potentially foreclosures or packages of these properties being sold to institutions. Either way, that's going to be inventory that's coming to the market. No matter which way you go through it, whether it's the institutional route or if it goes retail through the foreclosure process, we'll see.

But the the facts are that this is starting to increase. This will impact housing prices as it is more supply coming to the market for sale um or for rent. In the meantime, existing home sales are grinding along the bottom. We're seeing the number of units going into the end of the year.

I don't think I think we're going to see a little uptick next year in the number of units sold. As prices come down, that'll bring more buyers back in. They'll buy more units. And the number of sold sales are much below their 2020 era pricing.

So much lower. You can see the number of closed sales here versus 2019. Here in Jacksonville, Florida, let's see, we're down 20.2% number of closed sales. So, as you saw that chart before, closed sales come down, new listings continue to come on.

Eventually, new listings pop and you just see over a year or two, just a massive more amount of inventory. I mean, we went from 2,000 active listings all the way up to 12,000 active listings. And now we're down just a little bit as people start rage quitting and putting their house on for next year. But you can see across the board in a lot of different market close sales are down.

This is a huge indicator of what we're going to see next year in the marketplace. And now the next issue that we're seeing we're starting to watch very closely is that employment is slowing. The economy has barely added any jobs since April. Obviously there's been tons of layoffs.

There's been a lot of health care spending recently as well which has propped up a lot of this. But a lot of the unemployment um people are just getting laid off. Middle management, upper management. There's there's concerns about AI.

I do think AI is going to have a big role over the next decade or so because people are just going to become 10 times more efficient in whatever they're doing and they can have AI do a lot of the manual tasks. So, I think a lot of jobs are at risk and you need to make as much money as humanly possible now because we don't know what the future holds. So, I think making as much, saving as much and investing as much as possible is the best thing that you can do for your family in the meantime. That would be my recommendation to you.

If you have any other ideas, comment below. Love to hear what recommendations you have to combat against AI other than adopting it obviously and using it yourself. Um I think a lot of people who don't adopt it are being left behind. But employment challenges are are starting up.

Employment pictures heading into 2026. This comes from Challenger Gray and Christmas. 1.17 million layoffs announced through November. Uh 5-year high of layoffs and private sector job losses as well.

And of course that's going to impact consumer sentiment. If people aren't buy if people are losing their jobs or fearful of losing their jobs, they're not going to go out and buy a house. Consumer sentiment is at a great financial crisis level already. And it's really important to track this.

Obviously, when sentiment starts moving up and getting better, that's going to be an indicator as well that real estate will start to rebound a little bit. But I do think that we're going to see consumer sentiment continue to get worse as the market continues to deteriorate, especially here for housing. I'm not talking about these other type of industries. I'm talking about the housing market because we are overbuilt here in the south and I think it will start to spread across the board as the affordability crisis catches up with each individual market.

Sentiment drives the real estate market and the future is looking slower. This came out from Red Fin. Pending home sales fall 6% the biggest drop in nearly a year. So we are reversing directions.

We had this boom period as we saw in that chart in the beginning and now we're starting to reverse directions and start to have go into a bust. We don't know the direction. We know the direction, but we don't know the magnitude or the timing of when that'll happen. I expect it will play out again over a decade because the the government will step in and try to prop things up and extend and pretend as long as humanly possible.

So, I'd love to hear from you after listening to this data. What's the biggest risk to housing? Is it affordability? Is it demographics?

Is it employment? Do you see inventory rising in your area? And comment below. Love to hear what you have going on.

I hope you had an awesome holiday going into the next year. You know, blessings to you and your family and can't wait to connect with you more. You can follow me now on X. I post a lot of these charts that I have here.

So, I appreciate you guys going on there. It's just John Brooks. You can follow me on Instagram as well. I am John Brooks.

And of course, subscribe to my Substack. Comes out two times a week this year. It's going to come out three times a week next year. You can get up to date with the most important facts factors that are driving real estate here in Florida and in some areas across the country and we look forward to connecting you with you then if you have any questions love to have you reach out and of course if you need a real estate agent and you don't know who is good and who is bad because 80% of them don't sell at all like they're just horrible real estate agents you want to get in touch with one of the best agents in your market reach out to me shoot me an email I'll get you in touch with one of those agents and of course you need one in Florida that is our wheelhouse in Georgia as well.