The Biggest Housing Bubble in THE US HISTORY IMPLODES

For the past five years, we've been seeing the largest housing bubble in U.S. history continue to build up to record levels, and it is beginning to deflate and pop. And there are different markets across the country that are definitely showing some major signs of weakness already and have been on the decline for over a year now, while others are just getting started. And for a very long time, you never saw any public acknowledgment from big companies like Redfin or Zillow, anybody like that, even say that home prices are going to come down. In fact, their predictions over the past few years were that prices were just always going to continue to go up. Well, now both Zillow and Redfin are changing their tune on that prediction. In fact, a few weeks back, Glenn Kelman, who is the CEO of Redfin, came out on TV and stated, and this is a quote from him, we are seeing finally evidence of a real correction where prices are going to come down. And this is really like the first time that a major real estate executive like him has publicly acknowledged the housing market hitting this turning point that people like me have been talking about here on YouTube for years now. Take for example, Austin, Texas, Austin, Texas, you see home prices already down 22% from where they were at the peak of the home price bubble over there in 2022. We're also starting to see the same thing start to happen right now in Florida, where many different cities in Florida are seeing prices go negative year over year. In fact, that will save the Florida data for an entire video. I'll be putting out a Florida housing market video this week. For now, let's just stick with some high level stuff of what's actually going on and the latest trends we're seeing in real estate. We have home builders slashing prices by an average of 5% and almost 40% of home builders are cutting prices on their newly built homes right now. And over 60% of home builders are resorting to some sort of incentive to get their inventory sold. At the same time, the stock prices and the profits are down for these big home builders anywhere between 20 to 40% in some cases. And it's getting to the point now where brand new homes are basically the same price as an existing resale home. And this is something I talked about in my video the other day. And the reason why this is happening is because home sellers are behind the curve, whereas the home builders are always with the program. They have to adapt to the current market conditions in order to get their homes sold. So when you combine big incentives like mortgage rate buy downs, offering people 2.5% interest rates lower than what they're getting on a conventional loan to buy a resale home, combined with a price tag that is at or below what a resale home is selling for. And on the resale side, you have a lot of existing home sellers just in denial. And they think they're still going to be getting prices from 2022. In many cases, you can see that. And it's reflected in the listing prices that you see a lot of these homes coming up for. And it's probably a combination of sellers not really having a clue of what's really happening in the market. Just remembering the headlines from the pandemic, that there's bidding wars everywhere, paying over asking price for homes, and also a combination of bad real estate advice from real estate agents. Because a lot of real estate agents like to over promise and under deliver, especially when it comes to the price tag of the home. It's a very common tactic I see in Miami all the time. They will just promise you whatever price you want to hear that, yeah, we're going to be able to sell the house for this. Next thing you know, they're lowering the price by two, three hundred thousand dollars to even have people walk through the door. And this is all leading to a situation where right now we have the largest amount of inventory sitting on the housing market since pre-pandemic. So at this point in the game, Redfin is predicting that we're going to see at least a 1 percent decline in national home values in 2025. Zillow is also predicting that home prices are going to come down this year. And while all that is going on, we're seeing a lot of people who bought during the pandemic who are now underwater on their mortgage. And in case you don't know what underwater on your mortgage means, it just means that you owe more on the house than it is currently worth. And that's going to be a more and more common scenario as prices start to fall in different parts of the country, especially in neighborhoods where people paid over asking price for real estate. Take a look at this chart right here that shows you the share of active home listings at risk of selling at a loss depending on when they bought their home. If they bought before July of 2020, the chances of them selling at a loss are slim to none, basically one or two percent chance. But if you bought between July 2020 and July 2022, then your odds rise significantly to about 9 percent chances you're going to sell at a loss. And then if you bought after July of 2022, your odds of selling at a loss rises much further at about 16 or 17 percent of all the homes listed for sale that were purchased after this time frame are at risk of selling at a loss. And you can see by looking at this map right here that the big five markets in the United States where the is the highest for this happening are all in Texas and Florida, which is not really a surprise because these are the states that saw the highest amount of price growth during this time frame. That growth was always unsustainable and now it's starting to regress. This house right here is a perfect example of what I was just talking about with sellers having unrealistic expectations stuck in 2022. This house was originally listed for sale in April of 2024 for about three and a half million dollars. And as you can see, price cut after price cut, after price cut, after price cut, it finally went under contract just a few weeks ago here in June and they had to lower the price to two and a half million dollars. So this house took a one million dollar price cut and a year on the market essentially before it actually got under contract. That just goes to show you how far out of whack seller expectations are on the market. A year ago, this person thought that they could get a million more dollars for this house and it took a year of sitting on the market and a year of price reductions and probably low ball offers for the seller to finally realize that, yeah, this is what it's going to be if I want to sell this house. And this is a nice neighborhood here in San Rafael, California. This is the Peacock Gap neighborhood. Very nice spot. But being underwater on your mortgage can have real world consequences for people, especially if you want to sell. Now, if you're just sitting there and you have no intentions of selling the house and your house is now worth less than you paid for it, but you plan on living in it for the next 20 or 30 years, probably doesn't matter. But that's just not what most people do. A lot of people sell the house within seven to 10 years of buying it. And a lot of people are selling much sooner now, especially as the cost of maintaining these homes has exploded far past what most people expected it would be. Now, in 2008, people would walk away from their underwater mortgages and just let the lender foreclose on the property. But we're not really seeing that happen now. You're still seeing people trying to get out and eke out a small profit if possible, if not at least break even. Check out how beautiful these flowers are in this yard here. I don't know if that purple comes through on camera, but it just pops in real life. Gorgeous. Here's an example of somebody who bought a 1,600 square foot home, three bedrooms for about $400,000 three years ago. And the house is now on the market for $385,000. This person isn't underwater yet, but they want out of the house before prices drop further, which means they may have to take an even lower offer to get that home sold, probably around the $350,000 price range. Just like FOMO drives the market on the up and people get into bidding wars and pay over asking price for homes. Well, you're going to see the reverse of that happen right now, where people are afraid that if we don't sell now, then we're going to be selling at an even lower price in a year or two from now, especially if we were intending on selling anyways, we better get it sold. Even if it's at a small loss, I'd rather lose a little bit now than a lot later. And this is why I was warning people since the beginning of 2022, when I really noticed this bubble behavior starting to take place, that people should tread extremely cautiously if they were looking to buy in that market, because you're essentially buying at inflated values that are probably not going to last. And that's what we're starting to see. We're starting to see the reversal of those inflated values. And the real risk of being an underwater homeowner is you get trapped in your house. You're not able to sell that house unless you're willing to come to the closing table and actually pay to sell your house. You're not going to walk away with a profit. You're going to walk away with a major loss. And here's the other problem. A lot of people were sold the lie from real estate agents. Well, you just buy the house now. Don't worry about, you know, the interest rate. Don't worry about the price you're paying because you'll just be able to refinance later. Well, guess what? A lot of lenders are unwilling to refinance mortgages when the owner is underwater. So even if mortgage rates do come down by the end of the year or sometime next year, which even if they do, it's going to be by a negligible amount, it's not going to help people who are underwater on their homes, especially as home values continue to drop throughout the same time frame. The situation right now actually mirrors 2008 in a lot of ways, because, you know, in 2008, a lot of people received mortgages that couldn't afford the payments. Well, what happened this time is people could technically afford the payments when they received the mortgage, but nobody anticipated, probably not even the lenders, how much property taxes and insurance and home maintenance costs would skyrocket shortly after people received those mortgages, especially if it was 2022 or later. A lot of people have been blindsided by these increased costs, including myself. Take a look at this chart right here that shows you the share of FHA mortgages that were originated in 2024, where homes are underwater. And Cape Coral, Florida is the number one market, where almost 75% of these FHA mortgages are underwater right now. North Port, Florida isn't too far behind at about 45% of homes underwater. You got Austin, Texas sitting at close to 25%. Salt Lake City, Utah at about 20%. And Palm Bay, Florida at around 20%. And I saw that they had that major sewage leak in Palm Bay, Florida. So not only are people underwater on their mortgages, but you could be underwater in sewage right now, depending on where you're at, which is just horrible. That was something that should have never happened. It's a major infrastructure failure that happened very prematurely. And a lot of people are suffering now because of it. And you might ask, well, Michael, how come people who have FHA mortgages are more underwater than people who don't, especially in these areas? Well, the reason why is because when you do an FHA loan, you only put three and a half percent down of the purchase price, which means you really don't have any equity at the beginning of your home ownership journey. And what happens is it only takes a very small drop in home prices for people to be completely underwater on their mortgage. And that's why even though it's not mandatory, it is recommended that you put 20% down when you buy a house, because not only will you save having to pay for private mortgage insurance known as PMI, but also you will have a substantial amount of equity buffer in case of a market downturn. Sure, it's possible that prices can come down by 20% shortly after you buy the house, just like it did in Austin, Texas. But it's not nearly as likely as prices coming down by only three to five percent, like what's happening in a lot of these Florida markets where the FHA buyers are now underwater. In fact, it is so dangerous to put zero percent down with a VA loan, only three and a half percent down with an FHA loan, that virtually all of the rise in mortgage delinquencies over the past 12 months and nearly three quarters of all underwater mortgages are FHA and VA loans. But you always have people defending these type of loans. Well, look, I got this type of loan and look at me now, I wouldn't have been able to buy a house without it. That's why they exist. I agree with that. There are some people who are responsible and get one of these loans and they don't sell the house. They don't try to flip it. They build equity over time. They actually pay off the mortgage and don't borrow against their house. And it was their ticket to homeownership. But the share of people who treat it that way is extremely low, especially in 2025, with the give me everything now society that we have, the instant gratification society. People want to be able to own the house. They want to be able to have the family. They want to be able to have the brand new car and they want to have the hundred thousand dollar college education all at the same time, which leads to massive amounts of debt and unaffordability and the inability to actually afford their home. And if there's any equity built at all, people borrow against it the moment they can. And for all these reasons we just talked about, that's why you're starting to see millennials already selling homes that they bought during this time frame, because many of them are the underwater homeowners and they bought into the FOMO, they bought into the idea that, yeah, I should pay over asking price for a home. This sounds like a good idea, otherwise I'll never be able to get one. About 86% of millennials who are selling their homes today said that they made mistakes in terms of buying their home during the pandemic. And nearly all of the first time home sellers who were surveyed recently by Opendoor, 91% of them said that those mistakes of rushing into the market have helped play a major role in their decision to sell today. People basically have buyer's remorse and regret the decision they made to buy in that neighborhood or to buy a house that was too small or to pay over asking price for the home and now see the value start to come down or realize that they can't really afford to keep that house with how much the property taxes, insurance and maintenance costs have gone up. And it was an easy trap to fall into because between 2020 and early 2025, we saw home values in the United States go from about $289,000 up to a whopping $418,000, which is a 45% increase in five years. That's unprecedented. We've never seen anything like this happen in American history. And it was all fueled by government debt and deficit spending and a $6 trillion injection of cash into the US economy over a two or three year time span. According to a study from real estate, which in February this year, 56% of people who bought homes after 2020 have experienced buyer's remorse and nearly one third say their home purchase negatively impacted their finances due in part to escalating costs for taxes, insurance and repairs. Exactly what I just said. In fact, I did a video on this a few months ago talking about how homeowners are paying about $24,000 annually on top of their mortgage payments for the added costs. This is everything besides the mortgage. We're talking the maintenance, the taxes, the insurance, the whole shebang is about $24,000 a year on average. You don't have to attack me in the comments if you pay less than that or you pay more because it's just an average and that's a lot of extra money. Just those extra costs of owning a home can probably be enough to pay for most people to rent somewhere in the country that's not very expensive. That's why renting is so much cheaper today than buying a home. Also, a lot of millennials made the mistake during this time frame that remote work would be permanent. They took a remote job or their job let them work remotely and they bought a house in an area where they thought, wow, this is great. I can easily afford a home here compared to my salary. Almost all of these companies have reversed their decision on remote work and are requiring employees to be back in the office at least a few days a week, if not the full work week. In this open door study, they found out that 23% of millennial sellers cited the end of remote work as a key reason for moving. I saw this comment on YouTube also, which I want to highlight here because I think it is just spot on in terms of how everybody thinks about housing right now. Take a look at this. Here's the problem is most homeowners think homes are something akin to stocks where they can park their money in it and it will magically increase in value without any improvements made to the property itself or the area around it. Many homes are worse than when the seller bought, yet they expect a huge increase in price. Complete delusion. And that's exactly what you see. So many of the homes I run into for sale on my walks out here are homes that people bought two, three, four years ago, did absolutely nothing to it, sat on it and just relisted it for an extra million or $2 million and thought, that's all I got to do. But in the meantime, that house is getting a lot of wear and tear from you living in it or whatever happening, the elements and with nobody making significant repairs or improvements to that house, it is effectively in worse condition now than it was three years ago when you bought it. But yet you want an extra million dollars. People aren't falling for it clearly, as you can see by the house I showcased earlier in this video. And speaking of that, I showed you a real world example here in Northern California of people taking massive losses on the house. They had to sell that house for 30% less essentially than they originally thought that they would get for it. Well, now you're starting to see the Southern California real estate market show signs of cracking as well because home prices in Southern California declined just slightly in May compared to a year earlier. And it's the first annual drop since 2023. Southern California still has an average home price of about $876,000, which is crazy expensive, but prices went down 0.2% compared to May of 2024. So it's a small decline, but a decline nonetheless. Also, as of May of 2025, there were 38% more homes for sale than a year ago in Los Angeles County. And similar increases have been seen in other areas of Southern California as well. And that's how it all begins. That's what I saw starting to happen in Cupertino, California as well when I was down there. You're seeing the inventory up substantially and the prices are either remaining flat or starting to just fall a little bit, but that's how it begins. Even in areas where people think that it just can't happen, it is happening. We don't know the extent of how far prices are going to come down in these neighborhoods, but the markets in these neighborhoods are already showing signs of weakness. And you have to understand that even if the people who live there can afford the prices, no one wants to grab a falling knife. So if people realize that prices are coming down quite substantially, nobody wants to buy that house. They want to wait for it to get cheaper. I saw that constantly when I started my real estate career back in 2009. Almost every buyer I dealt with wanted to wait on every single listing because they're saying prices are going to come down further. And part of the problem in the California market is unless you own a property, especially that was purchased before the pandemic, it's really hard to have enough money to go out and buy a new one because that's where the vast majority of people here get the money to buy a new house here is the appreciation from an old house. They inherited a house or they bought a house 20 or 30 years ago for peanuts and now it's worth millions and you turn around and sell that thing. Well, now you just got a couple million dollars sitting around in the bank and you can afford to pay cash for a house today, or at the very least put a sizable down payment and have no trouble affording it. But if you are not in that category, well then good luck. Right now, Zillow's forecast for Southern California, and this is if we do not hit a recession by the way, this is just under current market conditions, is that home prices will be 1.1% lower in the Los Angeles and Orange County regions of California. So we already are in a recession according to a lot of people, including myself, and it just hasn't been named official yet by the US government, but it likely will be at some point this year. But even if they never call it official, it doesn't really matter. All we got to look at is what the real world data is telling us. The price declines could actually be far worse than that in just a year's time in Southern California or all parts of California can start resembling what the Florida market looked like a year ago. But overall, I'm feeling very optimistic on the direction that the housing market is heading because this is the correction that we've been waiting to see. This is the collapse of the bubble that we needed, and it is starting to happen. The dominoes are starting to fall pretty much everywhere except for parts of the Midwest and the Northeast where prices still continue to climb quite substantially, but those markets are outliers based on extremely low levels of inventory. And one thing I want to make sure everybody is aware of is I don't want you to take all this information at face value and make every single decision based on it. I want you to do your own research on your own market because maybe you live in a market where home prices are up 10% year over year and home prices are still going up. And that's just as important to know as if home prices are coming down or not. So what you do is you take the national data that I'm telling you in this video, along with some of the local data, you make some observations and anecdotes from it, and then you analyze your local market and decide what's going to be best for you. Is it a good time to buy? Is it a good time to sell? That's the reason I make these videos, to try to help you figure those things out. I'm not sitting here advising you, telling you 100% what to do. I'm not your financial advisor. I'm just giving you the information and the latest updates of what's going on in the market. You analyze it for yourself and figure out the best move for you. So if you enjoyed this video, please make sure you are subscribed to the channel. And if you don't want to wait for my next video to come out, check out this one on the screen right over here, and I'll see you in the next one.