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.

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.