Home builder inventory over the last 40 years.

Only other times it was this high: 2022, 2008, 1991.

All are either recessionary scenarios or near recessions.

This is ultimately good news for homebuyers. It means cheaper prices are around the corner. But potentially bad news for builders, and those who bought near the peak of the bubble.

There could also be an economic spillover in terms of construction job losses and downturns in regional economies most exposed to home building. 1) And this is more a story about the South in the U.S. than anywhere else in the U.S.

In the South, there are now 311,000 new builder homes for sale.

That's the highest level on record, even eclipsing the heights of the 2006-07 bubble.

No one is buying new homes that are under construction or permitted.

Months of supply for both is sitting between 15-20 months, which is basically the highest on record.

Meanwhile - completed spec houses have a decent sales pace of 3.6 months.

Meaning extremely weak demand in the future for builders. Any short-term success on sales is simply being driven by having lots of completed inventory and giving mortgage rates buy downs/cutting prices on completed homes.

The long-term outlook, measured by sales pace for Under Construction/Permitted, says demand is fundamentally weak.

And that the Housing market will continue to get cheaper. (which is good news for buyers) 1) Consider that the Months of Supply for homes Permitted but not Started is literally the highest level on record.

Meaning basically no one right now is willing to enter into a sales contract for a home to be built.

That says a lot about the current state of demand.

The housing downturn is broadening.

With over 60% of U.S. counties experiencing monthly home value declines in May 2025.

That's one of the highest percentages going back almost 3 decades.

The only other two times in the last three decades when this many counties reported a monthly drop, according to Zillow, were 2022 and 2008-2012. 1) This indicates that the U.S. housing correction is no longer just a Texas and Florida downturn.

In fact, over 30 states showed a monthly contraction in May 2025 according to the Zillow data.

The housing market is definitely slowing.

Especially condos.

With the condo months of supply on the market hitting 6.7 months in May 2025.

Highest level since the 2006-12 downturn.

Single-family supply is now up to 4.4 months. 1) It wouldn't shock me if condo inventory keeps climbing to levels not seen since the last housing bust in 2008-09.

Single-family will also likely keep increasing in future months.

Don't be surprised if condos are at 8+ months of supply by year end, while single-family is above 5.

The cost of buying a house with a mortgage has exploded.

Back in 1955, it cost $112/month to take out a mortgage to buy a house.

In 2025, it costs $2,800/month. That's an astounding 2,300% increase over 70 years.

In the last five years alone, mortgage costs have nearly doubled.

These costs have surged faster than people's incomes, creating a massive housing affordability crisis.

The question is: what happens next?

Following the 2000s housing bubble, there was a crash, and mortgage costs dropped 40% in half a decade.

But following the 1970s housing inflation, there was no crash. Instead, home-buying costs stabilized for two decades, allowing incomes to catch up.

I see similarities in 2025 to both previous eras, as we are in a massive home price bubble today (similar to the mid-2000s) and have also experienced rampant inflation over the last several years (similar to the 1970s).

The net result is that no one can afford homes right now. And the only cure for this is a combination of cheaper prices, lower mortgage rates, and higher incomes.

And it might take years to get there. 1) One thing is for sure: the current trajectory of housing costs is not sustainable.

Homebuyers are priced out of the market, and demand has collapsed as a result.

Many people in real estate keep tricking themselves into thinking a rebound is around the corner.

But there will be no rebound so long as prices remain high.

The U.S. housing market just broke 1,000,000 listings.

Excess inventory is piling up.

Relative to buyer demand, we now have the highest inventory in close to a decade.

Which is causing home prices to drop in over half the U.S. 1) This was the highest active listing count for May since 2019, according to data.

This is important because it signals that sellers are now facing stiff competition to sell their homes.

A marked reversal from the pandemic boom, and a signal that gains in affordability are coming for buyers.Realtor.com

Home values declined in over 60% of US counties in April 2025.

The only other two times we saw this breadth of home value declines was the 2008 crash and the 2022 mortgage rate spike.

More than half the country is now officially in MoM declines. Indicating that the housing downturn is spreading.

We'll have to see if this lasts into the future, and if it turns into a sustained correction like 2008 or is a blip like 2022. But given the trajectory of listings and inventory, it seems like more value declines are coming. 1) We have to be careful not to overanalyze one month of data. However, to see 60%+ of US counties recording a decline on Zillow's home value index suggests something big could be happening.

Florida investor bought for $550k in 2022.

Just sold it for $391k.

28% loss in 3 years.

Market turning down fast. 1) What's interesting about this house is that the investor, a Blackstone-owned entity, purchased it for $550k in April 2022.

And then turned around and tried to sell it two years later. Listing for $529k in April 2024.

The house sat on the market for a year, and they incrementally lowered the price until finally it sold.

We have the biggest gap ever between Home Prices and Mortgage Rates in 2025.

Prices are 90% above the 130-year average.

Meanwhile, Mortgage Rates are right around the long-term average (6.7%).

The resulting gap makes one thing clear: home prices are too high and need to come down. 1) Particularly telling is how this Home Price bubble, in inflation-adjusted terms, is even bigger than the one in 2006.

Homebuyers intuitively know this, which is why they have stopped buying homes.

The U.S. is in the midst of a severe demographic collapse.

Births are plummeting, deaths are rising, and our organic population growth is down 72% over the last 15 years.

Back in 2008, the U.S. Experienced:

4.31 million births 👶
2.44 million deaths 💀
1.87 million organic growth

Fast forward to 2024, and the figures are:

3.61 million births
3.09 million deaths
520,000 organic growth

That 520,000 organic growth figure is a mere 0.15% of the U.S. population, meaning we basically have no more growth from natural means (Births-Deaths).

Not good for the housing market or the economy, and a serious issue that needs more attention. 1) Here's a potentially better way to visualize this: the natural increase in the population as a % of total population.

In 2024, the natural increase fell to only 0.15% growth.

Back in 2008, it was at 0.62% growth.

Shades of 2008 playing out in Florida right now.

In this case, the seller bought from a builder for $317k in 2023.

But have since had to cut the price to $265k because the builder is now selling the same floor plan, brand new, for less than $250k.

The seller has lost 16% on their original investment, and is $52k in the red. 1) I think the biggest misconception I see in Florida among local residents is that home building is a good thing for property values.

Lots of people still think that when you see builders, it's good for appreciation, and a sign that the area is "growing".

But in this part of the cycle, lots of home building is a negative for property values.

Over 60% of US Counties registered home value declines in April 2025.

The largest share in over two years. 1) There's only been two times before in the last 25 years where Zillow reported this many counties experiencing monthly value declines.

2008-2012 crash.

And the mini-correction that occurred in market in late 2022.

The national housing market continues to weaken.

Single-Family Months of Supply: 4.17 (highest since 2016)

Condo Months of Supply: 6.16 (highest since 2012)

What's hidden in the national averages is that certain states (TX, FL) are starting to look a lot like 2008. While other areas (NY, IL) are still looking like the pandemic.

A bifurcated housing market downturn is occurring, with values now dropping in 50% of states.

Watch this months of supply indicator in coming months, because it could go up further. 1) Generally realtors say 4-6 months of supply is a "balanced market".

But that is no longer the case, as home prices are very overvalued today.

The more overvalued that prices get, the more sensitive price growth becomes to months of supply increasing.

Zillow just reported monthly home value drops in 27/50 states.

This is no longer just a Texas/Florida downturn. 1) Florida, Colorado, DC, California, and Washington led the way in value declines from March to April.

Next was Arizona, Louisiana, West Virginia, Texas, and Georgia.

The national housing shortage is over.

With resale inventory on the U.S. Housing Market hitting nearly 1 million listings this spring.

Listings bottomed in April 2022 at around 379k. Since then, they have nearly tripled.

To the highest level of supply since 2019. 1) Good news for homebuyers, no doubt.

Higher inventory is going to put downward pressure on home prices, with values already starting to drop month-over-month in about 50% of states.

Home builder sentiment just plummeted to the lowest level in 13 years for the month of May.

The last time sentiment was this low, it was the 2007-2012 housing collapse.

Builders are reporting very low traffic. Increased use of price cuts. And are giving sales incentives on over 60% of listings.

Meanwhile, we have the highest level of spec builder inventory on the market since 2009.

Bad news for people who want home prices to go up. Good news for prospective buyers - things are about to get cheaper. 1) To quote the NAHB, home builders did outright price cuts on 34% of listings in May, and offered sales incentives on 61% of listings.

Those are high figures.

The housing market has never been this unaffordable in U.S. history.

With inflation-adjusted home prices setting a record over the last three years.

We're now in the biggest housing bubble of all-time, and the only period that came close was 2006, before the big crash.

Many people like to tell you "home values will never drop". But those people conveniently don't show you this graph.

There is no historical precedent for how expensive today's housing market it is.

And homebuyers know it. 1) What's extremely interesting is that home prices, for a very long time, simply tracked the rate of inflation.

More specifically, from 1890 to 1990, over 100 years, inflation-adjusted prices never went more than 15% above their long-term trend line.

Want mortgage rates to drop?

It's unlikely to happen.

Because the Mortgage Rate / Inflation spread for the US Economy is now back to its long-term 70-year average.

This indicates that the current mortgage rate environment (7%) is actually fairly normal for the current level of inflation (2.5%).

Going back to 1955, Mortgage Rates typically traded 3.7% above the inflation rate. Today it's 4.4%.

So perhaps we get a little relief in future. But not a whole lot. There's also the chance inflation picks back up, which would also put a floor on rates. 1) I see a lot of people in the housing market still obsessed over mortgage rates, and the prospect of rates dropping.

But increasingly, it seems like the environment of 6.5-7% mortgage rates is here to stay, and that this environment is abundantly normal when looking at long-term history.

Florida's organic population growth just fell below replacement level.

Meaning more people are dying in the state than being born.

This has now happened for 5 years in a row. And signals a new era for Florida's housing market: organic population decline. 1) The metric in the chart above is called Birth / Death ratio, and is derived from the U.S. Census Bureau.

Florida's Birth / Death Ratio in 2024 was 0.96, meaning more people died than were born.

A Birth / Death Ratio of 1.0 is roughly replacement level.

We need to talk about Texas.

Listings just hit 123,000 in April 2025.

53% higher than normal.

And prices are now dropping across the state. 1) Texas, at a state-wide level, is the 4th most oversupplied housing market in America right now.

Buyer demand keeps dropping, and listings keep rising.

The only other states with more relative supply are Colorado, Florida, and Arizona.

What's going on in Denver's housing market right now is unprecedented.

Inventory just shot up to 99.6% above the long-term average for April.

Meaning the market has entered a sharp correction. There were 10,345 listings on the market in April 2025, compared to 5,158 in a normal April.

Values in Denver are now dropping on a monthly basis, and could drop significantly over the rest of 2025 if this inventory spike holds.

Reventure is forecasting values in Denver to drop -9.1% over the next 12 months. 1) Inventory in Denver's housing market is spiking due to constrained buyer demand and a sudden surge in new listings from sellers.

This surge in listings has been so big that Denver is now the most oversupplied housing market in the U.S.