Will homebuyer demand improve in Spring 2025?

One metric to watch is mortgage applications to buy a house.

They're down about 40% from their pre-pandemic norm. And are showing no signs of increasing.

This metric tends to "lead" home sales by 1-2 months. And its continued underperformance suggests a weak housing market in May and June 2025. 1) Mortgage applications have been down for over 2 years now, scraping at the lowest level since the mid-1990s.

Americans seem really hesitant to buy a house right now, and don't feel comfortable assuming a large amount of mortgage debt to do it.

I don't think people understand what's happening in housing market right now.

Florida now has 177,00 listings. Highest level on record.

Entire Northeast U.S. has 79,000 listings. Lowest level on record.

People are leaving Florida. And moving back north. A structural trend that will likely last years, and cause Florida's housing market to decline for an extended period. 1) The entire housing market got this wrong. Builders, investors, and 2nd/3rd homebuyers flocked to Florida during pandemic thinking it was a stable, safe place to invest.

Where they actually should have been buying and building is the Northeast.

One reason home builders could continue to struggle in 2025 is by looking at their inventory levels by stage of construction.

For houses that are Permitted, but not started, builders have 16.5 months of supply (record high).

For houses actively under construction, builders have 13.0 months (one of highest levels ever).

For houses completed, it's 4.0 months (roughly normal).

What this means it that builders have a ton of future inventory that isn't being sold, which will turn into completed homes in the next 3-6 months.

If the pace of buyer demand on completed homes drops off at all, then things could get very ugly, very quickly. 1) To put more data to this, look at the breakdown below.

There are 493,000 total homes for sale from builders as of March 2025.

118,000 are already completed (24%)
263,000 are under construction (53%)
112,000 are not yet started (23%)

So what drives the bus on future builder performance is what happens on houses under construction.

The first market to bottom in this housing downturn will be Austin, TX.

Prices are already down 20% from peak.

And the market has shifted from being 46% overvalued to now only 8% overvalued.

Buy the end of this year, Austin will be a "buy". 1) The way Austin has become more fairly valued is through two mechanisms.

First - prices have dropped 20.4% from their peak in 2022. Returning affordability.

Second - the median income in the metro has continued rising, and is now up to $102,000, increasing relative affordability.

A trend we're beginning to see across the US Housing Market are record price cut rates.

That is - a very high amount of home sellers cutting the price, as a % of totaling listings.

In the case of Arizona, the price cut rate (37.6%) is at the highest level going back nearly 10 years.

The more sellers that engage in price cuts, the more downward pressure on the market, and the more likely future value declines become.

Other states where price cuts are at a record: FL, TX, CO, TN, GA. 1) You can see the price cut rate by state on this map from Reventure App.

The redder the state, the more sellers engaging in price cuts.

Arizona is at 37.6%. Florida is at 32.0%. Those are two markets with the most downward pressure right now.

What's going on in Orlando, Florida?

There are now over 13,000 houses on the market for sale.

66% above the long-term norms for spring.

Supply is spiking. And demand is not rebounding. Could this market be on the verge of another 2008-style downturn? 1) For context, home prices in Orlando dropped 53% in the last housing downturn from 2007-12.

The typical price of a home peaked at $264k and went all the way down to $123k.

NY Fed is estimating that 9 million borrowers are now in default on student loan payments.

And that credit scores could drop 75-150 points.

Could have a big impact on housing market. 1) If someone's credit score drops from 760 to to 590, that is going to have a big impact on their ability to borrow.

Particularly if they're interested in buying a house and taking out a mortgage.

It’s beginning to look a lot like 2008.

At least for home builders.

I took this picture outside a home building site 45 min north of Tampa.

They had over 20 vacant spec houses completed for sale. And are advertising 0% down mortgages to try to move the inventory. 1) here’s the Zillow snapshot of all the homes for sale. All of these homes were completed and move-in ready.

Biggest inventory growth markets YoY.

Listings up 40-60%.

5 of the top 11 are California. 1) Overall inventory levels in California's housing market are still fairly low.

With only 0.6% of all the houses across the state listed for sale.

People are fleeing Austin, TX in droves.

The city lost -13,500 people to outbound migration in 2024.

The biggest drop the city has ever experienced.

This outmigration has now caused Austin's housing market to collapse. With home prices down -19.5% over the last two+ years. 1) In Travis County, which covers Austin and some surrounding areas, domestic migration was running +14,000 per year at the pandemic peak in 2020.

And has now reversed course to -13,500 per year in 2024.

That's almost a 28,000 net downward swing in movers.

Markets in Florida with the most price cuts to start 2025:

Punta Gorda - 41% price cut rate
Cape Coral - 39
North Port - 37%
Tampa - 36%
Naples - 36%

Most of these markets are experiencing their highest price cut rate in at least a decade.

A clear signal of a market downturn. 1) Here's Punta Gorda.

Price cuts up to 41% of all listings. Long-term average: 25%.

Tampa, FL is now losing people for the first time in its history.

The city lost -11,000 people due to domestic migration outflows in 2024.

Meaning that more Americans left Tampa than moved in. This was the biggest migration loss in Tampa's history going back to the early 1990s. 1) We're specifically talking about Hillsborough County here.

You can going back to 1991 that the only other two years that were negative on migration were 2006 and 2007, at the peak of the last housing bubble.

The loss in 2024 was 3x worse in % terms.

The inventory stats in Florida are mind-boggling.

This is Lee County. Which comprises Fort Myers/Cape Coral.

Now up over 14,000 houses for sale.

Almost double the long-term average back to 2016. 1) Here's a ZIP code on the northern side of Lee County. In Cape Coral.

Over 1,000 homes for sale currently, as of Feb 2025.

Long-term average is less than 400.

Landlords are getting desperate in America's Sun Belt.

2 months, even 3 months free rent is now being offered on brand-new luxury builds.

Many of these properties were delivered during pandemic, and many are still sitting 20% empty. 1) The example above is a community in downtown Nashville, which is still offering 3 months free rent two years after completion.

Nashville is one of the worst-hit cities in this luxury rental downturn. Most properties near the center of the city are giving away these concessions, with 2-months free being standard.

Last year some were even giving 4 months free.

A concerning trend is now cropping up in Airbnb market: owners selling at huge losses.

In this case, the owner bought in Gatlinburg, TN for $980k in 2023.

But less than 2 years later is selling for $899k.

That's an $80,000 loss. 1) The result of this declining Airbnb market in East Tennessee is lots of owners selling.

For example - there are now 1,400 listings on the market in Sevierville/Gatlinburg.

That's quadruple the pandemic low. And the highest level of supply in a decade.

Washington DC housing inventory is exploding. 1) We're at the highest supply levels in DC's housing market in at least a decade. Perhaps longer.

The inventory explosion started in the spring of last year, around March 2024.

And it has intensified since.

(note that inventory drops every winter in DC. so there is nothing abnormal about the drop that occurred in January 2025. Inventory will likely pick up again on a seasonal basis in coming months)

Blackstone just sold this house in Florida at a $130k loss.

They bought it at peak of bubble in 2022 to rent it out.

But renting it was harder than expected. So they liquidated the property.

Given that Florida is in a housing correction, Blackstone had to cut the price to $360,000 from their original acquisition of $490,000 (-27% loss).

New buyers ended up getting a 4x3, 2,200 SF home built in 2020 for $360,000. In a good neighborhood.

Not bad. 1) A couple notes on this listing:

Blackstone owned it through their subsidiary entity SFR Acquisitions 2, LLC. Through a company called Home Partners of America, who Blackstone acquired in 2021.

Home Partners of America operated a "rent to own" model. And bought houses, rented them to people, with the idea that the renter could eventually buy.

I guess that business model didn't work out. So it looks like Blackstone is liquidating a large portion of the Home Partners portfolio, especially in Florida.

Home builders are signaling a recession warning for US economy.

There's only been five other times in US history where home builder inventory has been this high, relative to sales.

1974 recession (9% unemployment)
1981 recession (11% unemployment)
1991 recession (8% unemployment)
2008 recession (10% unemployment)
2022 rate hikes

4/5 times, there was a big recession, with a high unemployment rate. In 2022 it didn't happen.

What does this mean for economy heading into 2025? Are home builders signaling something regarding over supply and capacity that could flip into an economic downturn? 1) This data is pretty alarming to me. Home builder months of supply today is 8.96 months.

That's the 5th highest level ever.

This data comes from the US Census Bureau, and takes the total new homes for sale and divides by the sales pace.

It's the trailing 3-month average.

Probably my favorite housing market graph right now.

Orange line is inventory levels in Florida & Texas, combined.

Blue line is inventory level across entire Northeast US.

In Texas and Florida, there are 261,000 active listings on the market. 207% higher than the level in Northeast, which covers 9 states.

Prior to pandemic, these regions were the same.

Highlights the very bifurcated nature of this housing market. The downturn is happening in TX/FL, but we are still suffering a historic inventory shortage in the Northeast. 1) I'm shocked at how few people actually know this in real estate circles.

In my mind, it's the biggest story of the housing market.

The boomtown areas during the pandemic are falling fast. While the cold weather climates that everyone left during pandemic are still appreciating.

It's difficult to comprehend just how much homebuyer demand has fallen.

In January's MBA mortgage survey, purchase applications dropped 45% from the same week in 2020.

And they're down 53% from the same week in 2021.

Fed rate cuts and election being over have done nothing to stimulate demand. 1) This slow start to the 2025 housing market is coming off the heels of a 2024 which saw the lowest home sales volume in 30 years.

So not what you want to see as a broker, realtor, or home flipper.

Fewer Americans are moving to Southern states.

With domestic migration plunging 50% from the pandemic peak.

In 2022, 849,000 net people moved in.
In 2024, 411,000 net people moved in.

Basically back to pre-pandemic levels. If these trends hold, there will likely be continued issues in Sun Belt housing markets that relied on the big pandemic influx to fuel price growth. 1) Things look even worse when you consider the domestic migration levels relative to population size.

The 411,000 net people who moved South in 2024 were a mere 0.32% of the region's 132 million people.

Accounting for one of the lowest domestic migration growth rate in the last decade.