WTF Just Happened To The Housing Market?!

What's up you guys? It's Graham here. So, this is getting out of control. For the first time in almost 20 years, the housing market has started to fall. 47 out of the top 50 cities are getting weaker. Listing prices are now lower than they were in 2024. And over the last few weeks, searches for can't sell a house and help with mortgage just hit an all-time record high. Now, seriously, if you don't believe me, home sellers are now outnumbering home buyers by more than 600,000. Mortgage rates are quickly going back up and the average home is now taking the longest time to sell in over a decade. That's why we need to talk about exactly what's happening throughout the entire housing market, how higher interest rates are completely destroying demand across the country, where prices are headed throughout the rest of the year, and then finally my own thoughts about what's going on. Because real talk, this is exactly the type of market where some of the best deals could be made if you know what to look for. Although before we start, if you appreciate videos like this where we just cover the facts and I literally cite every single source in the pinned comment of this video, it would mean the world to me if you hit the like button or subscribed if you haven't done that already. I know it's annoying for me to ask all the time, but it costs you $0 down and as a thank you for doing that. Here's a picture of a snail. So, thanks so much and also big thank you to Rocket Money for sponsoring this video, but more on that later. All right. Now, in terms of where we currently stand, I got to say the numbers are pretty wild. So, let's begin with 2026 prices. First of all, it's important to realize that anytime you see one of these dramatic headlines about the housing market, most of the data is already outdated by the time you see it. For example, the headlines today are often based on deals that were agreed to weeks or even months ago under completely different conditions than what buyers and sellers are currently facing. Like you might see that home prices were up 0.3% from a year ago, but that data was pulled in December and doesn't take into account rising mortgage rates, price cuts, and inventory piling up because those are the signals that actually tell you where the housing market is headed. And when it comes to that, as of right now, mortgage rates are back to their highest level in 3 months. 37% of home builders are dropping their price by an average of 6%. And as a result, homes are taking the longest to sell in over a decade. Of course, it's important to mention that not all markets are created equal. Because while sellers are panicking in places like Miami, where there's 197% more sellers than buyers, or Austin at 124%, other areas are seeing the exact opposite. Cities like Milwaukee and New York still have more buyers than sellers, pushing prices higher. So, the real question is, why is that happening? Well, home prices are currently growing the fastest where they're the most affordable compared to incomes. And when you could still buy a house throughout the upper east coast for around $400,000, it's going to attract a lot more people to the point where prices creep up. Although, in terms of the largest increase to home prices in 2026, it's probably not what you're expecting. And it all has to do with oil. See, here's the thing. Even though oil prices seem completely unrelated to the housing market, in reality, there's a lot more of a connection than most people think. For example, when oil is pushed above $100 a barrel and people pay more than $5 for a gallon of gas, investors demand higher returns on long-term bonds, which pushes up the yield of the 10-year Treasury, and mortgage rates rise right alongside with it. This is why today the market has begun to price in the chance of a rate hike occurring as soon as April. And if this happens, affordability is All right, to put this into perspective, a 1% increase in mortgage rates generally reduces a buyer's purchasing power by 10%. So, a $500,000 home at 6% would have the same affordability as a $450,000 home at 7%. Suggesting that the higher mortgage rates go, the more home prices will need to fall to balance it out. But that's still not the entire picture because there's one more impact of higher oil prices, and that would be construction costs. Like, to give you an idea of how severe this is, aluminum is up 39% over the last year. Steel is up 20%. And that cost doesn't just get absorbed by the builder, it gets passed on to the buyer. Look, all of that is to say that higher oil prices immediately affect home affordability. And when that happens, we see two outcomes. One, buyers wind up paying more for a home due to higher rates during a time where affordability is already impacted. Or two, prices have to come down accordingly to compensate. And if you want to hear something crazy, this is where the math gets absurd. At today's 6.25% 25% mortgage rate. Buying the medianpriced home of $398,000 with 20% down is going to give you a monthly payment of $1,954 a month before property taxes, insurance, maintenance, repairs, which is probably another $5 to $800 a month on top of that. But in order to qualify for that home, you need to make $106,000 a year, which means the average American family is already $23,000 short. That's why if we see a 25 basis point increase in mortgage rates, which to put things simply is just one quarter of 1%, an additional 1.4 million potential buyers would be priced out of the market immediately. And this gets actually way worse when you look at the income requirements. When rates were at 4.22%, you'd need to make $67,000 a year to qualify. At 5.22%, you'd need to make $75,000 a year. At today's rate of 6.22%, 22% that's $84,000 a year and at 7.22% you'd need to make $93,000 a year. This is also the reason that home prices don't just instantly fall. Instead, sellers just don't sell. We see less volume, the market freezes, and we don't really notice the cracks forming until it's too late. So, in terms of what's expected to happen over the next year, which markets are most impacted, and my own thoughts about what's going on, you're going to want to hear this. Although before we go into that, I got to say the people who wind up getting the best opportunities at the biggest discounts are usually the ones who get really good at one thing, and that would be tracking your expenses. Like, I'll give you an example. Recently, I went through my subscriptions and cancelled anything I haven't used in the last few months. 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They just see the headline number, read that median prices have increased another 0.3% over the last year, and think, "Oh, this proves that home prices only keep going higher." Except when you account for inflation of 2.4%. That home didn't actually get more expensive. Instead, it lost 2.1% in terms of purchasing power. And that is what's now becoming incredibly common throughout the United States. To put that in context, for the first time in years, wages growing at 3 to 4% in 2026 is actually outpacing home price growth. And the difference between what you earn and what a home costs is finally beginning to narrow. Slowly, but it's happening. Now, in terms of what economists call this, it's a real terms correction. And so far, it's the healthiest way for an overpriced market to normalize. Like, instead of a dramatic 30% crash that wipes out decades of equity, home prices just trade sideways while incomes begin to improve. No one panics, no one's forced to sell, it just flatlines while incomes gradually improve. In fact, Redfin just recently called this the Great Housing Reset, where for the first time since the Great Recession era, incomes will rise faster than home prices for a prolonged period. Of course, in terms of where home prices are rising and falling the most, this is where your zip code matters way more than any headline. And as far as what we're seeing, the largest price gains are currently in Milwaukee, up 10% year-over-year, North Dakota up 6.4%, Delaware up 6.3%, and Illinois up 6.1%. However, in terms of the biggest losers, Florida is down 2.73% across the entire state. Colorado is down one and a half percent and on the city level, Oakland is down 9.1%, Dallas down 3.8% and Austin is down 5.9% after already being down another 20% from its peak. Now, the reason for this is pretty simple. These were some of the hottest markets during the pandemic. So, builders ramped up supply at the same time that prices surged. But now that migration has slowed, affordability has gotten worse, and insurance costs are rising, more sellers are trying to get out at the same time that fewer buyers are stepping in, which creates a lot of downward pressure. Although, I got to say, none of this even comes close to what's happening throughout condominiums right now because they are getting crushed. As of today, there are 83% more condos listed than there are buyers. HOA fees and insurance costs are skyrocketing, especially in Florida, where the average insurance premium is nearly $3,200 a year. And since condos typically underperform single family homes in terms of appreciation, when the market gets hit, these see it first. So in terms of what this means for the future, the newest proposals in place to boost the market and my own thoughts about what's going on. Let's first talk about 2026 price predictions. According to Standard and Pores across the largest 20 cities in America, national home prices grew just 1.3% for the year, which is the weakest fullear gain since 2011 when prices fell 3.9%. To break this down a little bit further, they also noted that 2025's price gains were split in the middle. In the first half of the year, prices rose 2.6%. But in the second half of the year, prices fell 1.3%, which means we have continued that downward trend so far throughout 2026. As proof of this, realtor.com noted that the median list price fell 2.4% year-over-year, marking the 18th straight week of flat or negative price growth. It's also the fifth consecutive week in which prices are 2% or more below last year's levels. But in terms of what this means for the rest of the year, it really just depends on who you ask. Like Redfin believes we'll see just a 1% increase throughout the rest of the year. The National Association of Realtors thinks we'll see a 4% gain. Zillow's now revised the numbers back down to a.7% jump in 2026. And JP Morgan believes that we'll see zero appreciation, which once you account for inflation, pretty much every single prediction is negative for housing prices in 2026. Beyond that, as far as what the Trump administration has suggested as a fix for home affordability, there are four items in the works with the first being one, a $200 billion mortgage buyout. For those unaware, in January, Trump directed Fanny May and Freddy Mack to buy 200 billion worth of their own mortgage back securities, which is just a fancy way of saying that the government stepped in to drive mortgage rates lower, and in the short term, it actually worked for a few days. Rates dipped about 0.2%. But that effect is pretty much entirely gone today. Why? Well, even though $200 billion sounds like a lot of money, in reality, it's only 1.4% to the entire mortgage market. And since it's a one-time injection and not an ongoing program, its effects are pretty much non-existent. Plus, cheaper financing doesn't fix home affordability. It just gives buyers the ability to pay more. Now, in addition to that, too, we have banning institutional investors. The thinking here is that large Wall Street institutional investors are competing with average everyday home buyers. So, by eliminating them from the housing market, there should in theory be more available for everyone else to buy. Except the reality is Wall Street investors only make up less than 1% of the entire single family market. So removing them as buyers unfortunately is going to have no impact whatsoever on home affordability. But then we also have three portable mortgages. With this, the idea is that you'd be able to take your existing 3% mortgage with you if you decide to sell and buy another house instead of being forced to trade up to a new 6% rate, which is the reason that so many homeowners are frozen in place. Now, even though I love the idea, I'm all in favor of it. Unfortunately, banks are not because they're already sitting on billions of dollars worth of underwater low rate loans. So, this would essentially lock in those banks to huge irreversible losses. So, it's probably not going to happen. But assuming they're able to find a workaround to that, it could unlock a lot of inventory as people trade up to buy something a lot bigger. And finally, four, we have building on federal land. The fact is the government currently owns 28% of all land in the United States. So instead of this land largely going unused, the administration is setting up a task force to identify which parcels near existing cities could be developed for affordable housing. Now, even though most of the land is located in an area that no one would reasonably want to live in, the Wall Street Journal estimated that 7.3% of it already overlaps with existing cities. So there is something there, but it probably wouldn't show up for at least best case scenario another 5 to 10 years. So, in terms of my own thoughts and what all of this realistically means for you, here's what you need to know. In terms of what I actually think is going to happen, the answer is no. I don't think we're headed for a housing crash because there are too many sellers with too much equity for prices to meaningfully fall. Although, I do think the era of easy money in real estate is over. Like really, for the last few decades, you could buy any property in any condition for any price, and long-term you'd be just fine. But those days are long gone. In today's market, you'll really have to do your research, check the location, make sure the price you're paying is worth it. Look at your entire cost, and determine how long you're going to keep it for, and if it even makes sense to buy. That's why I'm beginning to think that you can score some good deals right now if the seller's reasonable and is willing to compensate you for the market falling over the next few years. Look at builders. Some of them are throwing up to 14% in incentives at you. And for this reason, it might make sense if you have a long-term outlook to begin to put some feelers out there. Now, I also think if you're not buying, there is zero shame in renting, saving the difference, and investing that in an index fund instead while the market begins to normalize. In the big picture, though, this is really one of the moments where the headlines sound a lot scarier than the reality actually is. Because yes, housing is slowing down, affordability is stretched, and some markets are clearly rolling over. But at the same time, this is also what a very normal market looks like after years of excess. So whether you're buying, selling, or just watching from the sidelines, do not get caught up in the hype. Focus on fundamentals. Think long-term and always make sure just don't run the numbers to make sure what you're getting actually makes sense. Right after, of course, you hit the like button and subscribe. Oh, and by the way, if you want to see videos like this before I post them publicly, in addition to bonus videos like going through my entire watch collection or touring the brand new studio, feel free to join as a channel member and I'll be able to post a lot more videos there that are just too niche for the YouTube algorithm. And sometimes when I post something that is uh too narrow, that doesn't do well, all the rest of the videos don't do well. So, this is my way around it. And uh if you join as a channel member, you'll get extra videos every single week. So, with that said, hope you enjoy it. Thanks so much and until next