Home Prices Are Falling Fast - 2025 Meltdown

Before we get into the video, I just got to say, how about the new Metallica shirt, man? First time I ever worn this thing. I got this shirt at the Metallica concert here back in June in Santa Clara. One of those concert exclusives. Super cool, right? Now, something we have to talk about is the price cuts, guys, because the price cuts are really starting to add up these days. In fact, about one in five homes on the market in the United States saw a price cut in September, and that's 20% in case you're not counting there. Homes priced between $350,000 and $500,000 saw the largest amount of price cuts at 21.6% of those listings getting a price cut, while luxury properties over $1 million were less likely to see a price cut, but still 13.3% of those listings got a price cut in September. One thing that you can gather from that data is price cuts are more common on the lower end of the market because that's where most consumers are at. Most people cannot afford a half a million dollar house or even a $400,000 house. Median home price in this country is about $430,000, and only about 30% of buyers can afford that. Of course, you're going to see more price cuts of below $500,000 than above it. That's not really very surprising. People who can afford a million dollar house obviously have more financial flexibility than people who can buy only a $300,000 house. That also further explains what I've been telling you guys here on the channel for quite some time about why the median home price is an unreliable way to look at what's going on in the market. Because those higher end listings that don't see as steep a price cuts, and are also the lion's share of the sales right now on the US housing market, disproportionately affect the median home price data that we get. Because those homes consistently sell for a lot more, and more of those are selling right now than the houses between the $100,000 and half a million dollar price range, well, naturally, that's going to increase the median home price. Now in 2025, we have seen more price cuts on the US housing market than we have seen in any year since the pandemic. Even traditionally strong areas that have been holding up very well are starting to get hit. Like the Midwest and the Northeast, for example, 14% of listings in September in the Northeast had a price cut versus 21% in the South and the West. Homes are also taking a lot longer to sell than they did a year ago. The median time on the market rose to 62 days, which is a week longer than it was last year. And so now basically every market across the country has rising inventory, rising price cuts, and a longer time on the market. What does that tell you about where things are headed right now? On top of that, the lock-in effect is starting to ease up. 3% mortgages are obviously a thing of the past, and 6.5% mortgages are the new normal. And now about 20% of US homeowners with a mortgage has a rate at least 6% or higher. That is the highest share of homeowners with a 6% rate or higher since 2015. And people think that these are high interest rates, but really they're just historically normal. It just feels high after having ultra low interest rates for three years in a row. Just think about it. In the middle of 2022, only 7% of homeowners had a 6% or higher rate, and now it has tripled to over 20% in just three years. And that's why this whole golden handcuffs and the lock-in effect is going to become less and less of a factor in getting homes listed for sale on the housing market. You just don't have as many people with these low rates anymore, which is one less incentive to keep their house and not sell it. We still have 53% of people with mortgages having a rate below 4%, which is down from the record of 65% back in early 2022. And in many parts of the country, inventory has already returned to pre-pandemic levels. Some areas are even far exceeding pre-pandemic levels. And I want people to really understand this about real estate is that regardless of what the market is doing, regardless of what the Fed is doing, regardless of what interest rates are, that's not enough to slow down life. Because the reality is people get new jobs, they grow their families, they downsize after retirement, or they simply want to live in a different neighborhood, or they get a divorce, somebody dies, whatever, things happen, which ultimately forces people to sell their house regardless of those external circumstances. At some point, their life circumstances are going to be more important than what's going on in the external world. And that's why we're seeing more and more people with these higher mortgage rates. Also, rates have not been going down recently. They've been continuing to tick up for the past couple of weeks and are sitting at about 6.35% for a 30-year mortgage right now and have gone up ever since the Fed did its first interest rate cut a month ago. Mr. Wonderful, Kevin O'Leary from Shark Tank, he believes that the magic number is going to be 5.5% to get real estate really moving again in this country. I have to respectfully disagree. I'm not saying I know more about real estate than him. I'm just saying that the trends that we are seeing right now do not support that statement. I'd be willing to bet even if rates went lower than that, it still wouldn't be enough to bring back a serious amount of buyers to really start absorbing the housing supply that's being listed for sale because the prices will simply still be too high and it will not be affordable at 5% or even 4.5%, probably not even 3%. And nobody should really be expecting mortgage rates to go back below 4%, maybe ever again. That was a historical anomaly that was fueled by poor policy decisions made by the Federal Reserve and the government. In fact, throughout much of the 1980s, mortgage rates were routinely above 10% and throughout the 1990s, it was routinely above 6%. Now, today I want to talk about tiny homes, particularly Amazon's tiny home, because this is becoming a big thing in our culture because homes have become so expensive. But here's the thing, there are a big problem with Amazon tiny homes and really all tiny homes, including Elon Musk's tiny home, the Home Depot tiny homes, whatever brand it is, it doesn't really matter. They all face the same sort of challenges that I want to go over in this video before everybody just jumps in to think that this is the best, most affordable living solution that you can get. And it's better than renting an apartment, or it's better than buying a traditional house or whatever. If you do a quick search on Amazon, you can find modular and prefab housing kits, foldable structures and container style units and tiny house kits that start around $5,000 and can go well above $100,000. So obviously not all tiny homes are created equally in that sense. And one of the problems you will likely run into very early on, if you're considering buying a tiny home, is zoning restrictions. Most cities and municipalities across the country have zoning restrictions where your house needs to meet minimum single family home sizes and other design requirements that block you essentially from putting a tiny home on just whatever piece of land that you want. In addition to zoning restrictions, assembling and connecting a tiny home to sewer and power systems can cost anywhere between an additional $10,000 to $30,000. And that's if the lot already has those services available. If it's raw land and you have to pipe all those utilities in from scratch, it can cost up to $60,000. So think about it. You're buying a tiny home so that way you can get out of paying the crazy high housing costs, right? These are some major big expenses that you'll have. But to be fair, even if you spent $50,000 on a tiny home and then you had to spend another $60,000 connecting all the utilities, you're still only in it $110,000, which is still far less than a traditional house. However, you haven't bought the land yet. Obviously land costs vary tremendously depending on where you would be looking to buy a plot of land. So that's going to be an extra expense as well. But even then I would argue you still are going to be very far ahead and in the money when it comes to the cost of the land, hooking up the utilities and the cost of the entire tiny home versus the cost of a traditional single family house in America. So who should buy a tiny home then? Well, for one thing, they definitely work out well for first-time buyers who just cannot afford a traditional house. They're also great for multigenerational families. If you can put one in the backyard as like an ADU or something and like here in California, they're starting to let everybody do that. Like for example, if you got one of these big houses here and you got enough room, you might be able to throw one of these in your backyard and have an in-law suite or use it as an Airbnb. Obviously there are pros and cons. The pros are the lower upfront costs compared to traditional homes. You have a faster path to home ownership without being in debt for decades because of a 30-year mortgage. It's a minimalist lifestyle if that's something you appreciate. And you have flexible use cases. It can be a vacation home. It can be a starter home. It can just be an investment where people use it to make money. And then of course the downside or everything that we just talked about, some of these tiny homes actually aren't even that cheap. There's another company, they start at like $100,000 and they go all the way up to half a million dollars depending on the tiny home that you want to get. That kind of defeats the whole point of buying a tiny home, in my opinion. And then of course the zoning restrictions like we just talked about. Here's a perfect example. Coincidentally, I'm walking past this lot for sale. It's all raw land here. You kind of see there's nothing in there besides lands, but they're not going to let you put a tiny house right here. You're going to have to build the house that conforms to all of the Marin County standards and California zoning laws and restrictions and whatever, which probably explains why this is still an empty piece of land. Oh, and for anybody wondering, I am walking down Strawberry Drive today in Strawberry, California. But here's the thing. I don't think that these tiny homes or prefab homes are going to have a major impact on the housing market altogether because this is probably just going to remain a niche product for a niche customer, mainly because a lot of people don't want to live in a space that small or physically can't, depending on any type of disabilities they might have or the amount of things you have. And you're just not a minimalistic type of person. However, it seems like prefab homes can be a thing of the future. When you look at these houses that they're already 3D printing or they build in factories and then they just deliver it on site and they can assemble the home in a matter of a couple of days. I think that definitely could be the future of home building rather than the traditional way, especially since a lot of these traditional homes are built so poorly and the quality is not consistent. Whereas these prefab homes and 3D printed homes have a much higher durability factor to them and seem to be a lot more robust, which make it a much better choice, especially in areas that are prone to natural disasters like Florida. Now let's talk for a minute about how the government shutdown is actually affecting real estate transactions right now. And there might not even be a government shutdown anymore by the time you guys see this because things change so fast with this, but let's just mull it over anyhow, because as of October 1st, when the government officially shut down, the National Flood Insurance Program cannot sell new policies or renew flood insurance policies. And that can be a big problem for people who are required to have flood insurance in order to satisfy their mortgage. Because depending on where you buy a property, you might actually be required by your mortgage holder to have flood insurance. Now, of course you could get private flood insurance through something like Lloyd's of London or something like that. But if you have the National Flood Insurance Policy, you are being affected by this right now if you're up for renewal. If you just renewed, let's say back in July and you're good for another year, you're not being affected. You're only being affected if you need to get a new policy or your policy is up for renewal this month. Other things regarding real estate might be affected as well. If you're getting a Fannie Mae or Freddie Mac backed loan, you could see a delay in your closing right now. If you're getting a USDA loan, you could see delays in your closing right now. If you're getting a VA loan, you might see delays in your appraisals and certificates of eligibility. And if you're getting an FHA loan, especially if you're trying to buy an FHA approved condo, that's likely not to happen right now. They're only operating on essential staff right now. And closings with FHA could be delayed as well. So this government shutdown definitely can impact the real estate industry, particularly if you have an upcoming closing happening right now that might get delayed or might not happen at all due to the shutdown. But remember, if you are getting a conventional loan, you are also unaffected by this. You see, that's why it's good to be outside the grasp of government. Yeah, government offers VA and USDA and FHA loans and all of this stuff, but using those things sometimes comes with consequences. And this is a perfect example right here. A lot of these programs, especially like FHA, for example, shouldn't even exist because it allows too many people that aren't really qualified to buy homes to actually buy one. And this gives us all a preview of what life would look like if the government didn't have their hands in every little thing. Oh, you want to buy a house? Well, it turns out you're going to need a more sizable down payment, at least 10% to 20%. You're going to have to be able to qualify for a conventional loan, which means a much better credit score, which means a much higher income. So by not having the government involved in all these things actually forces people to be more financially responsible and make better choices with their money. But because these government programs exist, it makes it too easy for people to get into homes that they can't afford. And that's why you're seeing record levels of delinquencies, especially with FHA loans. And now that the Trump administration is ending all of those handouts and payments that people have been getting for those delinquent loans, people are going to start seeing what things really look like without all this intervention. So I hope you're ready for that. And if you are, make sure you are subscribed to the channel. And if you don't want to wait for my next one to come out, check out this one on the screen right over here, and I'll see you in the next one.