This article is presented by Rent To Retirement.

If you’ve been waiting for mortgage rates to magically fall, 2025 might test your patience. The smarter move isn’t hoping for cheaper money. It’s manufacturing a lower rate on the deal you’re buying today. 

The overlooked trick? A rate buydown. 

Used correctly, it can cut your payment, improve cash flow, and even help you qualify for more financing down the road.

Here’s the gist: A buydown lets you exchange an upfront cost for a lower interest rate. That reduction can be temporary in the early years, or permanent for the life of the loan. 

The kicker: You don’t always have to fund it yourself. In the right market conditions, you can often redirect seller or builder concessions toward the buydown instead of just haggling over price.

This guide breaks down the main buydown structures, what they cost, and how to calculate your breakeven so you’re not guessing. We’ll also cover when a buydown makes sense, when it doesn’t, and the negotiation plays that actually get it paid for. By the end, you’ll know exactly how to turn a “meh” rate into a number that pencils, and how to position your next offer so your monthly payment drops without sacrificing long?term upside.

Rate Buydowns 101

A rate buydown is exactly what it sounds like. You pay money up front to “buy” a lower mortgage interest rate. That lower rate can be temporary for the first few years, or permanent for the life of the loan.

Who can fund the buydown

• You, the borrower: Straightforward. Bring cash to close to secure the lower payment.
• The seller: Instead of cutting the price, the seller gives a closing cost credit that is applied to the buydown. This can be attractive in slower markets.
• The builder: On new construction, builders often offer sizable incentives. Directing those concessions toward a buydown can be more valuable than a simple price reduction, because it lowers your monthly carrying cost.

When a buydown makes sense

• You want better cash flow in the early years while rents catch up.
• You plan to refinance if rates drop, but want immediate breathing room.
• You’re optimizing debt-to-income for future loan approvals.

Temporary Buydowns: 3-2-1, 2-1, 1-0

Temporary buydowns lower your effective rate for the first year or two (sometimes three), then the loan steps back up to the original note rate. They are popular with investors who want early cash flow relief while rents stabilize.

How each structure works

• 3-2-1 buydown: Year 1 is three percentage points below the note rate. Year 2 is 2 points below. Year 3 is 1 point below. Year 4 onward, you pay the note rate.
• 2-1 buydown: Year 1 is 2 points below. Year 2 is 1 point below. Year 3 onward, you pay the note rate.
• 1-0 buydown: Year 1 is 1 point below. Year 2 onward, you pay the note rate.

The lender funds the monthly payment “gap” from a subsidy account, typically created at closing. You, the seller, or the builder can fund that account through concessions or your own cash.

Why investors use them

• Immediate cash flow cushion: Lower payments in the early years while rents and operating efficiency improve.
• Refi runway: If rates fall, you can refinance before the step-up years hit.

Risks and red flags

• Payment shock: Your payment will rise as the buydown steps up. Underwrite deals at the full note rate. If it doesn’t cash flow at the full note rate, don’t buy it.
• Concession limits: Loan programs cap how much sellers or builders can contribute. Verify caps for your property type and LTV.
• Early payoff rules: Ask whether unused subsidy funds are applied to principal if you refinance or sell during the buydown period.

A good rule of thumb is that the temporary buydowns shine when you can secure seller concessions to fund them. If you have to pay entirely out of pocket, compare against a permanent buydown to see which wins on breakeven and long-term savings.

Permanent Buydowns

Permanent buydowns trade discount points at closing for a lower interest rate for the life of the loan. One point usually equals 1% of the loan amount as an upfront fee. In exchange, your lender reduces the note rate. The exact rate drop per point varies, so ask your lender for a point-and-price table.

Why permanent can beat temporary

• Lasting payment reduction: Your lower rate does not step up after year 1 or 2.
• Total interest saved: Because the rate stays lower for the full term, you typically save more interest if you hold the loan long enough.
• DTI help: The lower payment is permanent, which can improve debt?to?income for future loans.

The break-even math

We’ll try not to overcomplicate things, but it’s beneficial for you to understand the math behind deciding whether a permanent buydown makes sense:

1. Loan amount = L
2. Points cost = L × percent paid
3. Monthly savings = P? – P?
4. Break-even months = (Points cost ÷ monthly savings)

If you’ll hold the loan longer than the breakeven, points can make sense. If you expect to refinance earlier, they may not.

The Cost Picture

Scenario A: No buydown

• Loan amount: $300,000
• Market rate quote: 6.875%
• Principal and interest: ? $1,971/mo

Scenario B: Temporary 2?1 buydown, funded by concessions

• Year 1 effective rate: 4.875% ? $1,587/mo
• Year 2 effective rate: 5.875% ? $1,775/mo
• Year 3+: Reverts to 6.875% ? $1,971/mo
• First?year cash flow vs. no buydown: About $384/mo, or $4,608 for the year.

Scenario C: Permanent buydown with discount points

• 2 points = $6,000
• Rate: 6.375% ? $1,872/mo
• Monthly savings vs. par: ? $99
• Breakeven: ~5 years

If you can secure seller or builder credits, a 2?1 buydown gives the largest short?term relief. If you’ll hold five+ years, permanent buydowns can win on total interest saved and predictable carrying costs.

How to Pull It Off

Step 1: Price the base deal

• Collect three lender quotes for the exact same scenario.
• Ask for a rate stack that shows cost or credit for each 0.125% move.

Step 2: Model both buydown paths

• Request both temporary and permanent quotes.
• Calculate monthly savings and breakeven for each.

Step 3: Identify who will fund it

• Builders often provide credits you can direct to buydowns.
• Sellers may agree to concessions in exchange for a smooth close.
• Out?of?pocket: Weigh against reserves and returns.

Step 4: Negotiate 

• Put the credit amount and intended use in your offer.
• On new builds, insert contract language letting you choose between temporary or permanent buydowns after lender pricing.

Step 5: Underwrite conservatively

• Model cash flow at the full note rate. Treat lower payments as a bonus.
• Hold reserves for principal, interest, taxes, and repairs.

Step 6: Lock and document

• When you lock, capture the loan estimate, point table, and buydown addendum.

You can also combine strategies. Use concessions to fund a temporary buydown for immediate relief, and add a fractional point if the cost?to?savings ratio is strong.

Why New?Build Concessions Are a Shortcut

The best buydowns aren’t always funded from your pocket. They’re often baked into new construction deals, and that’s where smart investors can win in 2025.

Why builders love concessions

Builders want to keep sales prices high to protect comps, so they prefer giving closing cost credits instead of reducing sticker price. For you, those credits can be redirected into a rate buydown that lowers your monthly payment.

Where Rent To Retirement fits in

This is exactly the type of leverage Rent To Retirement helps investors capture. Their new?build inventory often comes with 5% down financing and builder concessions that make buydowns pencil. Clients are securing rates as low as 3.99% by pairing builder credits with smart buydown structures.

Even better, because these are new builds, you’re not inheriting deferred maintenance or capital expenditure surprises. You get turnkey rentals with warranties, immediate rentability, and financing terms built to maximize cash flow.

If you want to put this buydown playbook into action without guessing, start with new construction properties where the builder is already offering credits. Rent To Retirement is the shortcut to make that happen.

Don’t Wait for Rates to Drop

Waiting for mortgage rates to fall isn’t a strategy. Whether you lean on a temporary 2-1 buydown for immediate relief or pay points for a permanent cut, the math is clear: You can engineer better cash flow today and still refinance tomorrow if conditions improve.

Ready to see how low your rate can go? Schedule your free strategy session with Rent To Retirement and learn how to secure new-build rentals with the financing structure that maximizes your returns.

Disclaimer. This article is for educational purposes only and is not financial advice. Always consult your lender, CPA, or advisor to confirm which financing option is best for your situation.

Dave:
We’ve been saying that it’s a buyer’s market, but is the buying window already starting to close? This is a key point to understand if you’re thinking about buying a new property in the coming months, are conditions better now or are there better deals to come? Today we’re going to find out. Hey everyone. I’m Dave Meyer. I’m a housing market analyst and the head of real estate investing at BiggerPockets. Joining me today on the show is Dr. Kara ing, a senior economist on the economic research team at Zillow. Kara is going to share some insights on some data Zillow recently released, which indicates whether the current buyer’s market dynamics are likely to remain steady or shift back towards sellers. And then we’ll discuss the impact of recent fed cuts on mortgage rates and also some really fascinating demographic data about US homeowners. This episode is going to be jam packed with information that will give you a leg up against your competition in the housing market. So let’s bring on Kara. Kara, welcome to the BiggerPockets Podcast. Thank you so much for being here.

Kara:
Of course, I’m happy to be here.

Dave:
Can you just tell us a little bit about what you do at Zillow?

Kara:
Okay, so my name is Kara Ang and I’m a senior economist at Zillow, and basically I get prayed to nerd out on data and then share this insight with everybody.

Dave:
Dream job. It’s kind of like my job. It is the best job for people like us. It’s so good. So tell us, what are the big picture things that you’re tracking? What are the big trends that you think are important for our audience?

Kara:
Okay, so there’s lots going on today, but one thing I want to flag is buyers who are waiting until spring or until something happens in their life to be able to buy a home. So what we’re seeing in the data is that buyers have a lot of options right now. They have more time to decide and they have a lot of bargaining power compared to past Augusts and previous seasons. And so this might be an opportunity for a buyer if they’re looking to take a look again to see if they can find a house that fits their needs. And then the caution for this is if you want to wait until the mortgage rates fall more for negotiation power to increase more, that’s a riskier gamble because what we saw in August was that new listings fell, it was a lowest level of new listings for the month of August in the history of Zillow’s data. So I think what’s happening is that sellers are sort of picking up on the fact that they’re losing negotiation power and they might be thinking, I’m going to wait. And so they kind of pulled back on listing their homes.

Dave:
I totally agree that this is the most interesting story in the housing market and for those of you who maybe not like Karen and me are looking at this every day, lemme just provide a little bit of context here. Basically for the last year or so, we’ve been seeing inventory going up really since it bottomed out in 2022 or so. It’s just been going up consistently. And that has been slowly the housing market from what has been a strong seller’s market more towards a buyer’s market. But eventually what happens in a normal investing cycle is sellers are like, well, I don’t want to sell into a bad environment and unless they’re forced to sell, they have the option to not sell or to wait or to do whatever. And that’s exactly what we’re seeing. And I want to get to what Kara mentioned in just a minute about what that means for buyers. But does this signal that we are in more of a normal correction than having risk of a crash because we’re sort of seeing the appropriate response from sellers, right?

Kara:
We are seeing the appropriate response. So you brought a very good point. Seller is very different from the seller we saw before the global financial crisis, they’re usually in a stronger financial position. They are not forced to sell, so they have the luxury of saying, this is not a market I want to enter into. I’m going to wait a few months maybe into the new home shopping season before I try again. So I mean that’s kind of encouraging and it kind of attracts with what we’re seeing.

Dave:
And do you think that will preserve prices somewhere near where we’re at because I’ve been following your predictions, Zillow’s updated home price forecast all year. I think it started mildly positive and it’s kind of drifted down a little bit to mildly negative for the year. Is that sort of where you’re thinking will wind up at the end of this year?

Kara:
Yeah, flattish to mildly negative. I mean, we think prices are going to fall by a little bit, but it’s not very much. And I think a lot of that has to do with sellers are kind of putting a floor on how much prices can fall.

Dave:
Right, exactly. And can you tell us about the regional differences in where we’re seeing sellers pull back the most?

Kara:
Yeah, so sellers are pulling back in a lot of places where inventory has recovered by a lot. So it’s going to be a bill of roller rollercoaster, but okay, think to Texas and Florida. These are places that had a big boom in the first part of the pandemic where everyone wanted sunshine and affordable living.

Dave:
No income tax.

Kara:
No income tax. That’s pretty nice. And then builders flocked in because they wanted to capture some of this demand. So they started building and then inventory rose and then it got to the place where prices were falling. Now we’re seeing sellers pull back in these places where they realize like, oh, if I don’t have to sell my home right now, I might have to wait. I might want to wait because it seems like this market is just very saturated. The inventory is accumulating.

Dave:
Yeah. That’s sort of why it feels healthy to me that this is happening because you would want to see sellers pull back in the markets where inventories going up and prices are declining the most. If we saw more people selling and piling onto that situation, that’s when I would worry about more significant declines, 5%, 10%, something like that. But you’re seeing the corresponding change, whereas the markets in the Midwest right in the northeast where selling conditions are still really good. That’s where we’re seeing new listings keep rising.

Kara:
Right. Well, yeah, I mean it’s still a seller’s market over there and not only is it a seller’s market, I mean northeast is structurally underbuilt, there aren’t enough homes to go around. And so it makes sense that if you are a seller and you want to sell, you’re not in a place that’s disadvantaged.

Dave:
What do you think this means for buyers? You alluded to it a little bit earlier that people can wait and there’s a chance that buying conditions could improve, but there’s a chance that they stay the same or they even get worse. Again, how would you approach this kind of market if you were a buyer?

Kara:
I would just take a look at what I can afford at today’s market, at today’s prices, at today’s mortgage rates, and see if I can find a home that fits because I think that is the most important thing. Buying a home is not going to the grocery store and impulse buying a candy bar. You’re stuck with this home for a long time. So you want to make sure that it fits your needs for now until the foreseeable future. And so that to me matters more than whatever mortgage rates are, whatever the prices are. I mean, these things are important in that it’ll determine whether or not you can actually buy that home if you can afford to buy that home. So that’s the first place I would check if you were shopping earlier in the season and you held off because we’re like, oh, I can’t find anything that I can afford. Mortgage rates have ticked up a little bit, but there’s still a downward trend compared to May. So if you haven’t looked lately, check what listings you can afford now because it might be that a home that was out of reach before is now within reach and it fits your needs.

Dave:
That’s great advice. I always recommend to people on our podcast, our audience, people who are mostly investing in real estate buying rental properties, but if you’re going to buy it for 3, 4, 5 year hold periods, just make, if it works today, that’s the most important thing that matters. Speculating about the future is really very challenging, and you and I do this all day and it’s still very difficult to forecast how this is going to happen. And I don’t know about you, but to me, the global economy is feeling less certain than ever and trying to forecast what’s going to happen in a given month, a given year is going to be even less accurate than it is traditionally, and it’s pretty inaccurate even during normal times. So I think that’s very wise advice

Kara:
And the range of what we’re forecasting isn’t very large, so we’re expecting prices to either flatten or fall by a little bit. So that helps a little bit. In terms of affordability, we’re expecting mortgage rates to dip down a little bit by the end of 2026, but we still expect it to stay within that six to 7% range that we’ve seen for a long time now. It might end up a little bit closer to the six than the seven, but all that together combined, is it worth waiting if I’ve already found a home that I can afford that I like to see if there’s a better deal out there. I don’t know.

Dave:
Yeah, it’s very unclear if that will happen. If rates do drop more than that, prices could go up and offset some of the affordability gains that come from a mortgage rate drop. So

Kara:
Why would mortgage rates fall by that much? You have to think about that

Dave:
Because the recession

Kara:
And then at which time are you going to want to buy a home then?

Dave:
Right? Right. Yes.

Kara:
With mortgage rates, it’s a very tricky idea because mortgage rates falling helps with affordability. But what would it take for mortgage rates to fall? The most obvious thing is if there’s softening in the labor market, which hopefully it’s not your job that’s been softened, right? That would prevent you from being able to buy a home.

Dave:
We got to take a quick break, but stick with us. We’ll be right back. This week’s bigger news is brought to you by the Fundrise Flagship Fund, invest in private market real estate with the Fundrise flagship fund. Check out fundrise.com/pockets to learn more. Welcome back to the BiggerPockets podcast. Let’s get back into our conversation. Everyone wants to talk about mortgage rates and you are echoing what I’ve been saying on the show all year that I think that rates are not moving down that much. I know a lot of people in this industry really want them to. It would probably help the industry, but I think it’s unlikely. Can you tell me why you think six to seven is the range going forward?

Kara:
Well, because we’re fighting two opposing forces, so mortgage rates can take lower. If we have a low softening labor market, which we’re seeing signs of, we’re seeing the labor market cool. But at the same time, you also have inflation that’s relatively stubborn, and so these are two opposing forces that keep interest rates up and one keeps interest rates down. And so that’s why you’ve been stuck in this range. Unless something happens to break one of these forces to win this tug of war, it makes sense that mortgage rates will stay within this range.

Dave:
I think that makes a lot of sense. Bond investors, the people who really have a big impact on the direction of mortgage rates, they’re as confused as we are. If there’s recession coming or if inflation’s going to win out, like you said, there’s these two opposing forces. And so until there is clarity one way or another, we’re not going to see mortgage rates move in much of either direction. Sure. Each data print we get, it moves a little bit back and forth, but we’re sort of settled in, I think a little bit with rates right now. And I think that’s true. Even if the fed cuts rates two more times this year,

Kara:
Remember how many rate cuts the market is expecting, it’s going to be very hard for the Fed to live up through the expectations. If the Fed doesn’t deliver on all the rate cuts that the market is expecting, mortgage rates may go up rather than down.

Dave:
Alright. That’s your outlook for mortgage rates looking at six to 7%, but how do you think that translates into buyer activity going into next year? As you said, people probably even mathematically shouldn’t wait, but people do. And we’re also at extremely low home sales volume relative, especially to the pandemic, but even compared to historical norms, we’re still pretty low. So where do you see overall buyer sentiment and housing market activity going in the next year?

Kara:
So from Zillow surveys, people are sort of coming to terms that mortgage rates aren’t going to fall significantly. So in terms of transacting, that is not necessarily the barrier for people to hold off buying a home or hold off listing their home rather, a lot of the softening in sales activity has to do with other forces in the macro economy, the fact that job growth is just sort of stagnated and Zillow also finds that people move because they get a new job. And I think there’s kind of a rate lock situation going on, but for jobs in the labor market, because I mean people aren’t really getting fired or they’re not really getting laid off, but they’re also not quitting and you’re not forming a lot of new jobs, so you’re basically stuck where you are, so you can’t really get move up, you don’t want to move down, you don’t want to move out.

Kara:
So it’s sort of rate rock for jobs. And anytime you have low job turnover, it means that residential mobility would also slow because again, Zillow finds that the number one reason people move is for a new job. So when people move for a job, there’s usually a strict timeline. They have to be in Dallas by October because they’re starting their new role. If you take out jobs as the reason for people moving and you’re just looking at the other life events like people getting married, people having a kid, people becoming empty, nester, these things do prompt people to move, but it’s less urgent. And so I think that may be another reason why you see sellers able to pull back if they can wait six months, it might be worth it for better conditions, but that’s not the case if they have to move for a new job.

Dave:
Well, bringing up the better conditions and the idea of waiting till spring, which people have always touted as the home buying season. I guess I’ll just ask you straight up, is the housing market still seasonal? I feel like for prior to the pandemic, we saw very predictable patterns both in inventory levels, home sales, volume, pricing, every single year it was very seasonal. Now it just kind of feels a little bit different. Are you seeing the same thing?

Kara:
Well, I think what you’re mentioning is sort of like mortgage rates create their own seasonality,

Dave:
But

Kara:
There is a reason why people list in the spring and then the season sort of tapers off before the holidays. Right. It’s because it’s a coordination exercise. You want a bunch of homes available so people can transact. If you’re a seller, you want to be able to list your home, have someone buy it, and then move into your new home. And that only works if there’s some kind of coordination. And it so happens that if you have a family buying a home in the spring, moving that home into the summer and getting settled before the school year, it’s just a natural place that makes it convenient for their lives. And also makes sense that it slows down before November, before December before the holidays because no one wants to eat Turkey in front of a bunch of pop.

Dave:
Yeah, just off of the boxes. If you’re anything off

Kara:
Boxes, there’s no table.

Dave:
Okay. Well that’s super interesting. So as we move back to what you, I think it’s Ill are describing as a more neutral market, maybe we’ll start to see some of that traditional seasonality come back. And if you’re correct too, that mortgage rates are perhaps going to be a little bit less variable and I’m going to kind of stay in this range that we might start to see some of those normal patterns arrive. Again, we got to head out for a quick break, but we’ll be right back. Stick with us. Welcome back to the BiggerPockets podcast. Let’s jump back in. So Kara, I know you’re actually around the corner from me right now, and you were speaking at a conference on housing policy today. Can you tell us a little bit more about that?

Kara:
Yeah, sure. So in this housing conference we were talking about some of the challenges renters are facing when they’re hoping to transition into homeownership. And we talked about the affordability challenges, so saving for a down payment and affording the monthly mortgage payments. And we talked about how homeownership gaps by race are persisting because of just some ways that generational wealth gaps are persisting. So for example, a down payment saving for down payment is very, very hard if you’re a renter because we know that compared to five years ago, the amount of income you need to make rent as a renter went up by $20,000. So that is a stretch on your budget, which makes saving for down payment very, very hard. And then if you are a first time home buyer, then you don’t have a home you can sell to leverage into your next home.

Kara:
And then also, if you’re a minority household and you’re the first generation home buyer, it’s harder to tap into the bank of mom and dad for down payment help because likely mom and dad don’t have a home. And we’re finding that the majority of buyers are tapping into at least two sources for the down payment. So for these minority groups that are the first in their generation to buy a home, they don’t really have these avenues. And so we were talking about ways Zillow is helping to address this, and we talked about leveling the playing field with information. And so one of the ways we’re leveling the playing field with information is with down payment assistance programs. So on Zillow listings, you have down payment assistance information for the particular region you’re looking at. Oh, cool. So it’s just a way to maybe help those people who are buying a home for the first time, not just themselves, but in their family to be able to access housing.

Dave:
That’s awesome. I was actually just a friend of mine who’s trying to buy a house for the first time called me this weekend. I was asking me for some advice and I was like, you should go and just Google every down payment assistance program, both in the municipal level and the state level. There’s all sorts of credits that almost not every state, not every municipality, but many of them do. So you say you’re aggregating that kind of stuff so people could see that right on Zillow.

Kara:
And I mean, it’s such an underused resource.

Dave:
That’s awesome.

Kara:
And the thing is, if you’ve never bought a home before, if you’re the first person in your family to buy a home, you don’t know about these programs, word of mouth isn’t going to help you. So we’re hoping to just educate everyone and so that way everyone who wants to buy a home has the resources to work towards that goal.

Dave:
That’s really cool. Well, thank you for sharing that with us and for anyone on this podcast who’s looking to either buy your primary residence or potentially even to house hack a property, a 2, 3, 4 unit property residential properties, a lot of times you can buy those kinds of properties with these types of programs. So definitely something you should consider. Now, Carrie, you mentioned affordability, which is to me the biggest issue in the whole housing market, and I applaud what Zillow is doing to try and help people understand resources. But from sort of an economic standpoint, if mortgage rates are staying close to where they are and prices, you said maybe they fall a little bit in real terms, how do we get back to affordability in the housing market?

Kara:
Well, the answer, and you probably already know it, is by building more. I mean us as a whole is just structurally underbuilt still estimates there’s a housing shortage of 4.7 million units in 2023, the last available bit of data. So there aren’t enough homes for all the households that need a home. We know over the course of the pandemic there was a lot of building and that sort of helped in terms of slowing down the pace in which this deficit is growing. But it didn’t stop the deficit, it didn’t reverse the deficit and certainly hasn’t closed it. So really we as a whole just need to be building more.

Dave:
That makes sense. And it’s what I often hear, but it is a long-term problem, right?

Kara:
But we got here because we were structurally under building for decades. And so it makes sense that the solution to undo something that was built up over decades would take a long time. But there are steps we can do to help this one is to make it easier for builders to build with looser building regulations so that people would want to build in these neighborhoods where there’s still demand.

Dave:
Yep. We’ve seen things on the federal level of opening up public land, for example. But do you think that will make a change or what level of deregulation do you think is necessary?

Kara:
I think it was probably increasing density. So the issue is a lot of places with a housing shortage, you have geographical constraints. It’s hard to build out to meet the demand for all the people who want homes. So what you need to do is you need to build up or by marginally increasing density. And what we found is that there’s a lot of support. There’s growing support for residents in their own neighborhood to have middle density options. So these are not large scale apartment buildings, they’re not single family housing. So the things in between, so those are adu, those are town homes, those are duplexes, triplexes. And if you think about reason why, so the first time home buyer is older than before. It’s because of the affordability challenges, the hurdles with the monthly payment, the hurdles with the down payment. So they’re more likely to have a family. And so their first home, their starter home might not be a condo. They probably want a single family home. But geographically, I mean you can’t build enough single family homes for everyone who wants one. And so these options, these middle housing options, a D use town homes, triplexes, duplexes, that could be a compromise and solution for the housing shortage.

Dave:
And because this is sort of like a longer term solution, how do you think the lack of affordability in the purchase market could impact rents and rental demand?

Kara:
So across the rental market and for sale market, everything is a little bit softer, a lot probably because of lower job mobility. And so there’s lower residential mobility. So overall everything is softer, but what we found is that rents is relatively more resilient. And that’s because of relative affordability, right? It is cheaper in a lot of markets to rent than to buy. And so when the for sale market, you’re hitting up against these affordability ceilings, it means that these people will go into the rental market and then that gives rents a little bit more wiggle room in terms of growth. We’re seeing this struggle with rent versus buy showing up in the way that Zillow users are engaging with our listings. So what we’re seeing is a rise in what we call the dual shopper. They’re looking at for sale listings and then they’re toggling back and forth between for sale listings and rental listings and trying to optimize what works best for the finances.

Dave:
It might be BiggerPockets community members just ruining your data because all of us landlords are out there just looking at the cost of properties and they’re like, oh, what would this property rent for? So then you go back and forth between selling and rent. So we’re probably just ruining all of your data.

Kara:
Well, we have a piece coming out that might make it easier. We were looking at active for sale listings and how many of them have a monthly mortgage payment that is lower than rental estimate?

Dave:
Oh, interesting. I will definitely be looking at that one very closely. Well, Kara, before we get out of here, I have one more question. We’ve talked a lot about the next year or two years, three years. And as an investor homeowner, it’s not the most exciting. It’s not bad either. It’s just kind of like a blah market, in my opinion. It’s very neutral. Do you have any thoughts on the long-term trajectory five, 10 years from now where the housing market is heading?

Kara:
Well, a lot of that will be determined by us. So over the course of five, 10 years, that’s when you could possibly make a dent in the housing shortage. So if we are able to make it easier for builders to build, right, we might be able to shrink that gap and maybe five, 10 years from now, hopefully I’ll see you before then the next time on BiggerPockets, we’ll talk about how it’s so great that everyone wants a home can have at home because of all the building we’ve done over the last decade.

Dave:
Well, I hope you’re right. That would be very nice. And if you have any evidence that that’s happening, please come back on. We would love to hear about it.

Kara:
Of course.

Dave:
Well, thank you Kara, so much for joining us. We appreciate it. And thank you so much for listening to this episode of the BiggerPockets Podcast. We’ll see you next time.

Ashley:
Welcome back to the Real Estate Rookie podcast where we tackle the real world questions. New and growing investors are asking every day.

Tony:
And today’s episode is proof that no matter where you are in your journey, whether you’re closing on your first deal or managing 20 plus units, real estate brings new challenges at every level.

Ashley:
We’re breaking down three powerful questions from rookies at different stages, including if you should buy a property with a friend. What happens when one tenant wants to vacate and the other wants to stay? And lastly, some feedback from an investor who was a guest in an Airbnb that felt DI am Ashley Kehr.

Tony:
And I’m Tony j Robinson. And with that, let’s get into today’s first question. So this question comes from Jason in the BiggerPockets forms. He says, I live and work in LA and currently pay $2,750 per month in rent. I have $80,000 saved up and want to buy a fourplex and live in it so I can stop renting. I have my VA home loan to use as well. I make a bit over $200,000 a year. My plan is for me and a friend to go in on one together, I’d own 75% and he’d own 25%. We would put down 5%. The ones I’m looking at are between 1000001.5 million. And most have four two bedroom, one bath units in the area that I’m looking for. I could probably rent them out for 2,500 to $3,000 each. My friend would live in one unit, his 25%, and I’d live in one unit.

Tony:
Rough estimates put total monthly costs at around $9,000 per month. So each unit would need to pay 2250 to cover it. That’s how much me and my friend will pay. And the $500 per month I’d be saving on not renting anymore, along with the extra rent I bring in from the tenants will all go into fund to cover emergencies and vacancies. I start that fund with 40 k to put aside initially looking for your opinions. And for context, my friend is also my business partner in a business. I also own majority ownership. So this wouldn’t be our first contract we’ve written up together. Plus my majority ownership makes me feel better and I’m not leaving California because I love it here. Alright, so a couple of things to highlight from here. I just want to recap what he said. Great income, right? 200 plus KA year, 80,000 bucks saved up, has a VA loan looking to buy a fourplex, one to 1.5 million. Splitting this ownership with a partner, 75% to him, 25% to the partner. I think my first question is do you even need a partner? And this is coming from the two people that wrote the book on real estate partnerships, but I think based on what you’ve shared, I don’t fully understand the value of bringing in a partner on this deal. You’ve got the VA loan

Ashley:
And Tony with the VA loan. I don’t think you can partner with anyone. I think with the VA loan it has to be a spouse and if it is a partner, there’s a bunch of forms and hoops you have to go through. But I think it has to be some circumstance where it’s like a life partner, not your friend that’s buying the house with you and your two buddies. I don’t think you could even partner on the property using the VA loan

Tony:
Unless you and your firm want to get married just to buy this deal. I guess that’s always an option as well. But assuming that you don’t

Ashley:
In Vegas at BP Con, there you go.

Tony:
So that’s one option, right, is do you even need to partner? Because I don’t see anywhere in this question a strong motivating factor to actually partner. If he’s only putting up 25%, maybe just go get a threeplex instead of a fourplex. It might be the same amount of cash out of pocket, but now you own this deal by yourself. So I think that’s the first question for me, Ash is like, do you even need a partner on this deal?

Ashley:
And too with the VA loan, you can do 0% down. He says we would put 5% down, but with the VA loans you could do 0%. So that might even make it more attractive for him. And obviously you’d have to run the numbers because that’d be a different mortgage payment to see what he would end up cash flowing if it did change to that. But I agree, I think that what is the reasoning for him getting a partner on this is that just because they both want to get started in real estate and this is like an opportunity for them to do it together, what I would do is I would buy your property with the VA loan, have your friend buy your property with their VA loan, both of you house hack it, and then do some kind of agreement. When you guys move out of that property, you guys could decide, okay, we’re going to put these two properties into an LLC now that we both co-own that their investment properties now when we’re not living there. And then you can continue to build your portfolio together if you want. But I definitely think that this person has the opportunity to go ahead and do it themselves.

Tony:
Yeah, I mean because if we just look at the numbers here, we’ve got a fourplex. He said each unit would rent 2250. So I’m going to do some math here to make sure I get the right numbers right. So three times 2250 each unit, those three units will be bringing in about 6,700 bucks a month in total rent. He says rough estimates on cost would be around nine K. So even at that amount you’re still paying less in rent, you would be paying the additional 2250, so you’re still paying less than you were paying in rent, but for a property that you actually own. So does the deal make sense? I mean, yeah, if we’re just looking at how much are you spending for your living expenses, you would come out ahead both from an equity taxes, cash out of pocket on a monthly basis by doing this property. But if we put your friend back into one of those units, do the numbers still work out the same, right? I guess now he’s paying 2250, so maybe the net is still the same, but yeah, I guess I’m just not seeing the value of bringing this other person into the deal.

Ashley:
Yeah, I agree. And he did say that they’re already existing partners, so there’s low risk there because they have this going on. So I do wonder, is it just a comfortable thing you want to take on the risk together? Because that was one of the reasons that I did my first deal. The challenge I really see with this is that going in on this deal is that this is going to be your primary residence. So I’m just going to say the VA loan is out. So say you do 5% conventional loan, which they have those. So he had put 5% in his scenario anyways, so you could go on that, you go on title. Each of you make sure that you are doing the steps that you need to take to actually protect yourself. So besides just an agreement stating you own 75 and he owns 25, as in are you going to get umbrella policies?

Ashley:
So are you going to make sure you have some liability protection on both of you? Is there a plan that when you move out you’re going to put it into an LLC? Because having a partner and owning a company that’s like an LLC together and having a partnership is very different than co-owning things in your personal name, especially as you start to accumulate cash, accumulate wealth and things like that. So just make sure you talk to an attorney that if you do do that where you’re both owners of the property because there’s tenants in common or joint tenancy. So I would talk to an attorney on how to actually structure that.

Tony:
Last thought I’d share on this question is we’re looking at house hacking, but we just interviewed James Kit who house hacked a bunch of duplexes to build his portfolio, but in addition to renting out one side who’s also renting out rooms within his unit and know you said these are two ones, but you’ve got an additional room in there, maybe could you rent that out to beef up the revenue that you’re generating on this unit? And additionally, the other two ones, maybe instead of renting out the whole thing, maybe you rent those out by the room. So just maybe other potential strategies to increase that rental revenue because you did save 2,500 to 3000 per unit, but maybe you could get that up to 32 50 or 3,500 by adding in the room rentals as well.

Ashley:
We’re going to take a short break, but when we get back, we are going to discuss what happens when one tenant on a lease moves out, but the other one wants to stay. We’ll be right back. Okay, we are back with our next question and this one is asked by Kevin, who’s a small landlord owning just a handful of properties he has never faced this situation before. So tenants of a family of five are divorcing. We already passed the 12 month lease renewal date, and we are in the automatic month to month right now as the original lease stated, at the time the lease was due for renewal, I sent out a lease renewal to both of the husband and wife. The husband signed right away, but the wife didn’t. The wife didn’t comment and she didn’t reach out to me. So we ended up without a formal renewal of a 12 month lease, but started the automatic month-to-month lease extension, husband insisted to move the wife off the lease and get the lease renewed for another 12 months.

Ashley:
But I don’t think I can do it without a formal, at least an email confirmation from the wife. And probably more officially like an addendum requires all parties to sign if we finally have the consent from the wife to take her off the lease. And the next question is if I still need to have the husband to reapply requalify for the new lease, while the husband made 90% of the income of the household, but the custody situation and negative impact by divorce are just as unknown, what are your thoughts? Okay, so the first thing we should probably touch on is getting the husband asking for the wife to be taken off the lease. So yes, you would need to do an addendum to the lease or do a new lease, but you would have to sign a new lease with just the husband or you could do an addendum where she asked to be removed from the lease.

Tony:
And Ashley, let me ask a follow up question because they also say that they’re in California, right? Which we know is a very tenant friendly place. So obviously you don’t invest in California, but I’m curious if they’re on a month to month, could this landlord simply do a non-renewal of the current lease, which would negate both parties and then sign a new lease with the husband?

Ashley:
I don’t know about California because I feel like from what I hear in California is that you can’t ever send a non-renewal unless you’re going to rehab the property or move in yourself for a family member. But I don’t know that for sure in New York State, yes, you could do that. You could send the notice and it’s depending on how long they live there for. So if they live there for less than a year, so it’s just the one year lease, which in this situation they’ve lived there over a year, so less than two years, then you have to give 60 days notice. So you would give the 60 days notice that the lease is ending and then you could sign the new lease with the husband. As far as Requalifying, I would look at, you’re not going to know probably right away what his obligations are from the divorce to actually get any additional information unless the divorce is finalized.

Ashley:
You could ask him, is he now required to pay any child support or things like that that would affect the amount of income he’s getting. But if he is been a good tenant, they’ve always paid on time. I would not make him go through all the hoops of actually reapplying, again, redoing his credit, redoing the screening. I would just ask if there is any child support he pays, because honestly, you’re not going to be able to, even if you screen him, you’re not going to know if he’s paying out child support unless it’s taken out of his paychecks every week and you ask for new copies of his paycheck. So you could do that. You could ask for updated proof of income. I think you’re in a fine situation unless you’re looking for an excuse to get them out. In my experience, my opinion, I would keep them there, the guy there if he’s been a good tenant because you don’t know what will happen and come out of this and it could be everything stays the same and fine.

Ashley:
You don’t have to deal with the turnover or he does stop paying. He can’t pay and then you have to evict him. But that I think is up to your discretion if you want to take that risk or not. So maybe asking for an updated proof of income could kind of ease your mind that he can still afford it. Maybe ask about the child support if he’ll now be paying child support and he’ll be harder for him to afford the payments. But also too in California, what are your options for actually getting the person out? So can you do the non-renewal and they have to move out? What does the process look like to evict someone to, and is it not worth it risking that? But if you got another tenant in place in a year, they could be getting a divorce too. So I mean, there’s all different types of things that could happen.

Tony:
I think the last piece of advice is just to talk to an attorney that really understands California tenant landlord laws, because that’s going to really be the limiting factor on how much flexibility you have in this situation. So go talk to an attorney and I think that’ll answer a lot of these questions as well.

Ashley:
Yeah, and I would just be most careful about how you remove the wife and either getting her permission or doing it the way Tony recommended because she could come back and say that she still has tendency there and claim that she is still on the lease, still living there. So okay, we’re going to take a short break, but then we have a question from an investor who stayed as a guest and an Airbnb and has some feedback on how host should be offering out their listing. We’ll be right back. Okay, welcome back from our short break. Our last question here is from Jules. Interesting experience as a guest. I’m an investor and I booked a place five months ago for an event this month with two parking spaces. In fact, I messaged a couple of other hosts with descriptions that were unclear, but this listing specifically listed to parking spaces, the listing has been updated, there are other changes, and the parking is now listed as free parking, including guest pass.

Ashley:
I reached out to the host and they responded that the second spot is shared with another condo. First come first serve parking spots are literally $100, and that doesn’t include overnight. When I requested VRBO check the earlier listing, they responded that they don’t keep a record and wanted me to show them a screenshot of the original listing for proof. Maybe I am an idiot, but I didn’t think I needed to take a picture of the listing. I booked the confirmation email links to updated listing. Tony. I specifically picked this question because I was like, wow, I never thought of that on the guest side or the host side. So as the guest side, how do you protect yourself so the host can’t go and make changes before your arrival? Things you are depending on and on the host side, how do you actually make changes to your listings but it not impact guests who have already booked?

Tony:
I’ll give you a real example. So oftentimes when we create a new listing, we’ll duplicate an old listing, especially if it’s in the same market, just because the way we lay things out. If we’re talking about the city, it’s the same city. So we did this, and this was probably two summers ago now, where we duplicated one of our existing listings for a new listing that we were launching and this new listing, it was a beautiful property. We had just finished the renovation professionally designed, but we were still waiting on the hot tub to get delivered. There was a delay in the shipping. So we said, Hey, we’ll just launch it then we’ll add the listing, we’ll add the hot tub after we’re live. When we duplicated that old listing, it still had the box in the amenities section checked for hot tub. So even though nowhere in the photos that we mentioned the hot tub, even though no rare in the description of the listing that we mentioned, hot tub, the box for hot tub was still checked under amenities.

Tony:
So the very first guest gets there, very first guest, and they’re like, Hey, place looks fantastic. Where’s the hot tub? And we’re like, oh, we’re so sorry for the confusion, but there is no hot tub. And they sent us a listing and said, you said that you have a hot tub here. So we immediately go in, we update the listing now so that the hot tub is no longer mentioned. But what we did in that situation was we went to that guest and we said, Hey, you’re right. Our bad. We messed up. We’ll refund a percentage of your stay because this is a major minute that you booked and it wasn’t there. We take full responsibility. We then reached out to the other guests that were incoming and said, Hey, mistake was made on our end. Hot tub is not yet ready. You have an option.

Tony:
You can either cancel your listing, we will give you a full refund, or you can say, and we’ll give you a small partial refund for the inconvenience. So that is how we handled it. We felt that was the right thing to do by our guests. It sounds like what this host did was they were notified of this mistake on their listing and didn’t offer anything to the guest in exchange. And luckily it was booked vrbo because if this was Airbnb, they for sure would’ve been penalized in some way, shape or form from Airbnb. Do I agree with him? Not at all, because it’s almost the opposite of how we handle it in our own situation.

Ashley:
Well, thank you guys so much for listening to this week’s of rookie reply. I’m Ashley Hughes, Tony, and we’ll see you guys on the next episode.

Dave:
The buyer’s market is here, deals are getting better, but there is risk in the market too. So the key is to understand exactly what’s happening right now, so you know a good deal when you see it and you can avoid costly mistakes. Are home prices likely to go up or down? Could the correction turn into a crash? Today we’re breaking down the most recent housing market data to help you understand how to find and execute on the increasing opportunities in the housing market. Today on the show, we’re going to be looking at the data as we do every single month. And today we have a lot to cover. The market is moving into a correction, as I’ve been saying, was likely all year. And this creates interesting dynamics for investors, both good and bad. So today we’ll start with what’s happening with both prices nationally and regionally.
We’ll talk a little bit about what’s likely to happen with price growth and appreciation in the next year. We’ll even get into how rents are trending a little bit, inventory, trends, housing market health because we got to monitor if the correction’s going to turn into a crash. And then of course at the end we’ll talk about what this all means. Let’s do it. Let’s talk about price growth first. This is an important one. Of course, everyone wants to know this one and it’s the one that really is changing. I think according to the data. We are in a correction at this point. It really depends on who you ask, what the exact number is, but most reliable sources have price appreciation somewhere between positive 1% and negative 1%, so pretty darn close to even. But that is on a nominal level and that is really important to remember.
We’ll talk about that a couple times throughout the show, but when I’m saying they’re up or flat, I am not talking about inflation adjusted prices. So on the high end, they might be up 1% year over year. When you just look on paper, yeah, they’re up a little bit. But when you compare that to inflation, which is up about 3%, you’re actually losing a little bit of ground. And as a real estate investor, I want to know that difference. That difference matters a lot to me. The difference between nominal and real, real just means inflation adjusted pricing. And I think for most of the year at this point, we’ve seen that we are in negative real price appreciation even though we’re kind of flat on nominal home prices. So personally I would categorize that as a very mild correction. This isn’t a crash yet, and we’ll talk more about whether or not that is likely and it is certainly not happening in every region of the country.
We’re seeing very different performance depending on where you are, what state you are, even different cities in the same state are seeing really different performance. But I think on a national level, this kind of lull that we’re feeling, I think at this point we can qualify it as a correction and a buyer’s market. And as I said at the top, and we’ll get into a lot today, that means there’s both risk and opportunity. But before we talk about how you should go about playing this new market dynamic that we’re in, just wanted to drill into some of those regional differences that we’re seeing quickly. Not much has changed in terms of patterns, just the scale has changed a little bit. So if you’re living in the Midwest or you’re living in the northeast right now, you’re probably not sensing that correction that I’m talking about because even if you look at the numbers seasonally adjusted and inflation adjusted, you’re probably seeing positive home price growth year over year.
Almost all of the markets in the northeast are still positive. The Midwest is starting to see more of a mixed bag, but like I said, the scale is changing. So even those markets that were really positive, take Milwaukee at the beginning of the year, Milwaukee was like 8% year over year growth. Cleveland was really hot. We saw Indianapolis really hot. They’re still positive, they’re just less positive. So now they’re 3% year over year. Now they’re 4% year over year. And so that’s why I am saying that we are in a buyer’s market and we’re probably heading into more of a buyer’s market is because even the markets that are doing well are doing less well. Now that is certainly not an emergency, but you see the same trend of slowing appreciation in pretty much every market in the country at this point. The markets that have actually turned negative in terms of sales price are mostly concentrated in the west.
We see markets in California and Washington, Oregon, Arizona, Denver for sure, and then in the southeast and in Texas with the biggest declines still being in Florida and along the Gulf Coast. So overall mixed bag. But the reason I’m saying that we’re a buyer’s market is there’s just a lot of evidence. There’s data that buyers now have a lot more leverage in the market, and this can be a very good thing for investors as we’ll talk about, but there’s this metric I want to share. It’s called these sale to list percentage. It’s basically a ratio of what percentage of the asking price does it ultimately wind up selling for. So if you were in a perfectly balanced market, which pretty much never happens, it would be at a hundred percent. That means every seller gets exactly the price that they list it for. If it is above a hundred percent, that usually means that you’re in a seller’s market because people are bidding over asking in order to lock down deals or like we are seeing right now.
When that number falls below 100, that usually means that you’re in a buyer’s market and buyers have regained power right now, according to Redfin, the average sale to list percentage or ratio has dropped to below 99%. So it’s not like we are seeing a huge difference, but it means on average sellers are not getting their list price and this is across the entire country. And so we’ll talk about this more at the end, but one key takeaway that every investor should be thinking about when they hear this news is that they should be offering below list price because they probably, according to the average, are going to be able to get that. And of course, 1% not crazy, but that’s the average. And so for investors who want to buy below current comps, who want to get the best possible deal that they can, not only should you be offering below list price, but the chances that you’ll get a below list offer accepted are going up.
So that’s what we see so far in terms of sales prices across the country. Of course, I’m sure everyone wants to know now where do we go from here and actually pull together forecasts from a couple of the top most reliable data providers out there to share with you. And then I’ll give you my reaction in just a second. Zillow, which I know people knock on Zillow data, but I really appreciate one thing about Zillow’s data. They revise their forecast every single month and what they are saying right now is that they think through the end of 2025 that will wind up with home prices at negative 1% nominally so similar to where we’re at, but a modest correction. Now that is a change from where we started the year Zillow was forecasting modestly positive prices, but they haven’t changed that much. They’ve just pulled it down a little bit over the course of the year.
Now we have the case Schiller lens, which comes from Reuters. They actually updated their forecast in September and they are still forecasting a positive increase in appreciation of 2.1%. They say that they think home prices will grow next year, 1.3%. Core logic says 1.4% year over year. Goldman Sachs, they haven’t updated since April, so I don’t take that one as seriously, but they were saying 3.2% and realtor.com hasn’t updated there since December. So take that one with a grain of salt, but they’re saying 3.7% year over year. So that is what some of the more notable names in the industry think is going to happen. And I’m going to share with you what I think is going to happen, but first I need to share with you what’s going on with inventory and new listings because I’m going to base all of my predictions and forecasts about pricing for the rest of the year and into 2026 based on inventory data and demand data. That is what is sort of the lead indicator for prices in the housing market. So let’s dive into that, but first we got to take a quick break. We’ll be right back.
Welcome back. I’m here giving you my September housing market update So far we talked about that housing prices are pretty flat on a national basis and we are still seeing some of those regional trends and I shared with you what many the big forecasters in the industry think are going to happen. Now I want to share with you my projection for the rest of the year and just some early thoughts about 2026, but first I need to tell you what’s going on with inventory new listings. We need to dive into some of this other data because that is what informs us where prices are going to go inventory. That word is basically just a measure of how many homes are for sale at any given point. And what we saw in August was actually really surprising the pattern over the last several years, basically since 2022 when rates started to go up is that inventory has been climbing and that makes sense if you have been paying attention to these housing market updates.
But basically what’s been going on is more and more people are starting to sell their home and even though there is some demand, there is still stable demand. We are seeing homes sit on the market longer and that means inventory is going up just for some reference from 2012 to 2017 ish, the average number of homes for sale at any given point in the United States was about 2 million for the years leading up to the pandemic from 2017 to about 2020, it was 1.7, 1.8 million ish. Then during the pandemic it dropped all the way down to about 1.1 million. That was during peak craziness and it has been slowly climbing back up and we are now back above 1.5 million for the first time since 2019. So that’s pretty significant and that is worth noting and you’re going to see a lot of headlines saying that inventory is climbing like crazy, but remember that even though it has been going up and we’re about 1.5 million, we’re still about 16% below pre pandemic levels.
And I think the most interesting statistic I saw while I was researching and pulling the data for this episode is that inventory actually fell from July to August according to Redfin. And that should make you pause because the narrative in the media and the truth has been that inventory has been going up like crazy. And I reference this media narrative because I think I hear this a lot from people who are saying that the market is going to crash and they point to inventory going up over the last several years as evidence of that. And if inventory were to go up indefinitely at the pace that it is going up for the last couple of years, sure, yeah, the market would crash, but there is no guarantee or no reason to even believe that inventory would go up forever. So seeing inventory fall from July to August, which is the last month we have data for is really notable.
It is showing that inventory is starting to level off and it is only one month of data, so we’re going to have to look at this for a few months, but just even seeing it level off for one month is really notable and there are reasons to believe that this pattern, the shift in pattern could be sustainable and that is because we have this other lead indicator that we need to look at, which is new listings. Now I know it’s a little bit confusing, but new listings and inventory are actually different metrics, inventory measures, how many homes are for sale at a given point in time? The new listings actually measures how many people put their home for sale on the market in that month. So we’re talking about August and the difference is that you could have a lot of new listings and inventory can actually go down because there’s a lot of demand and those homes are selling quickly, but actually what we’re seeing is inventory go down because new listings are actually going down as well.
And this is another super important dynamic. We’ve actually seen this in the data for the last month or two that counter to the crash narrative that are saying more and more people are selling their homes, they’re desperate, they’re going to do anything to sell their homes. No, that is not what is happening. What’s happening is that people are recognizing that this might not be a great time to sell your home. They are also noticing sellers also notice that there is a correction going on and they’re probably thinking, you know what? I don’t really want to sell right now and so I’m going to not list my home for sale. And I think that is what’s going on. That mindset is what’s happening throughout the market. People are just choosing not to sell and that is one reason and I’ll share some other data with you.
I believe we are in a correction, but we are not likely heading for a crash because for as long as people have the option not to sell, it is very unlikely that you get crash dynamics that really just hasn’t happened before and so it remains very unlikely. Now this is going to be one that we’re going to watch really closely. As you probably know, we do these housing market updates every single month. And so when we report back in October for September data, I will share with you what’s going on with inventory new listings because I’m personally very curious if we see this fall, and for those of you who are astute observers of the housing market, you’re probably saying, oh, maybe they fell because of seasonality. They always fall this time of year and that is true, but the data I’ve been sharing with you is seasonally adjusted, which is how we want to look at this kind of stuff.
There are all sorts of ways that analysts seasonally adjust this data and we’re seeing it fall on a seasonally adjusted basis, which is why it’s so significant. Now, of course there are still markets that are seeing huge increases in inventory. Lakeland, Florida is the biggest example. I actually pulled some data that shows the change in inventory from pre pandemic levels because I think that’s still the metric we want to use here because sure, it might not ever go back to pre pandemic levels, but looking at inventory year over year, which is how you would want to look at it, it just doesn’t really make sense because coming up from a artificial low we’ve been in the last few years doesn’t really tell us all that much. And so if you look at inventory changes from 2019 to the same month in this year, that’s what really tells you a lot.
And what we see is in certain markets like Lakeland, Florida, that’s the number one, it’s up 60% over pre pandemic levels, which is huge. Austin is up above 30%, San Antonio above 30% Denver sitting at about 27%. We see Tampa pretty high, new Orleans pretty high above pre pandemic levels. That’s why these markets are likely going to see price declines. Meanwhile, you look at places like Providence, Rhode Island and Hartford, Connecticut, they’re still like 60% below pre pandemic levels, so the chances of them seeing corrections are relatively small, but it’s still absolutely possible. So given all of that, my forecast for the remainder of the year is that we were going to remain relatively flat. I’m sticking with the prediction I made in November of last year is that we were going to be plus or minus two or three percentage points on a national basis, but the general vibe of the housing market is going to be pretty much flat, and I think that’s what we were seeing and my hypothesis about that is that affordability in the housing market just wasn’t going to change that much.
I know that in the beginning of the year, a lot of people were saying mortgage rates were going to be in the fives. I never bought that. I have been saying that they were going to stay in the sixes somewhere between 6.25, 6.75, somewhere in that range for most of the year. And that has been accurate and I think that’s where mortgage rates are staying for the remainder of this year. I know that the Fed has said that they are going to cut rates two more times this year. I don’t think it’s going to move mortgage rates that much, maybe a little bit, but I would be pretty surprised if it goes below 6% by the end of this year just because of what is going on with inflation, what is going on with the risk of recession. I just don’t think mortgage rates are going to move and I think inventory is starting to level off. So if you look at those two things combined, I think we’re going to get more of the same, at least for the remainder of 2025, which it’s crazy to say is really only three more months. So as we look forward to 2026 to understand if we’re going to get into a crash or if the housing market will cover or if we’ll have more of the same, we really need to understand the state of the American homeowner and we’re going to do that right after this break.
We’ve talked about prices, we’ve talked about inventory, and I want to turn our attention to a third bucket of data that I think is super important going forward. This is homeowner health. Just generally, how is the average American homeowner doing with their properties that they own? Because to me, this is another lead indicator, maybe the main lead indicator that we need to look at going into 2026 about whether the correction that we’re in is going to turn into a crash. Like I mentioned, inventory is super important to that, but if we want to understand why inventory is leveling off and whether that’s going to change and it’s going to start accelerating again, to me it really comes down to homeowner health. As I said earlier, people right now, the reason inventory is leveling off is because they’re choosing not to sell. They don’t have to sell.
In other words, they’re not being forced to sell, which is the term that we use in the housing market to describe when people no longer can pay their mortgage and are forced to sell their property on the market. This dynamic can really push up inventory and can flood the market in the right circumstances to create crash scenarios. So we need to know if this is going to happen, and luckily we have tons of data that help us understand whether or not this is likely. The first thing that I like to look at is just delinquencies, right? This is how many people are behind on their mortgage payment because I know people look at price declines and think, oh my God, they’re going to get foreclosed on. That is not actually how this works. This is a common misconception about the housing market. You cannot be foreclosed on just because the value of your property goes down.
If you are underwater, that does not mean that the bank can foreclose on you. The only way that foreclosures start to happen is if people start to default on their mortgages. Basically they stop making their payments. And as of now, that is not happening. What we saw in 2008 in that time, we saw delinquencies go up above 10%. They were above 5% from about 2006 to, I don’t know, 2014. So for eight years we saw a delinquencies rate above 5%. As of right now, they were at 3.5%. Before the pandemic, they were about 4%. So even in 2019 when the housing market felt relatively normal, the delinquency rate was higher than it was today. And this actually makes sense, right? Think about how many people refinanced their mortgages during 20 20, 20 21, 20 22. The ability for people to pay their mortgages has only gone up over the last couple of years.
Now, there are certain kinds of mortgages that are seeing increases of delinquencies and we’ll get into that, but I really want to just emphasize this. Foreclosures really are still below pre pandemic levels and delinquency still below pre pandemic levels. Now, there are some pockets of mortgages that are seeing increases in delinquencies. Those mostly come from FHA loans. We have seen those go up to about 10 11%, which are above pre pandemic levels. So that is notable. They’re about at 2015 levels, but they’re not like skyrocketing and they’ve started to level off a little bit and the fact that they’ve risen in recent months actually makes a lot of sense because there was a moratorium on foreclosures in the FHA loans for a while that ended I think in April. And so seeing them spike up in April makes sense, but we really haven’t seen them keep going up from there.
Same sort of thing is happening with VA loans as well. We’re seeing modest increases in delinquencies. They are above pre pandemic levels. So these are things that we do need to keep an eye on, but keep in mind that these types of mortgages make up about 15% of the overall mortgage market. So that’s why when I say the aggregate delinquency rate is still low, that’s true. It’s because FHA and VA loans only make up a small portion of the mortgage market. So that’s one side of the homeowner health equation. Basically we’re seeing very low delinquencies. We’re seeing very low foreclosure rates. Of course, that can change. If we saw just a huge break in the labor market, unemployment skyrocketed, that could change, but as of right now, there is no evidence that that is happening. So that would have to be a total change in the pattern going forward.
Obviously we’ll update you on that. The other piece of homeowner health that I want to share with you I don’t think we’ve talked about on these market updates over the last couple months is just how much equity US homeowners have right now. The number is actually about $17 trillion in terms of equity in the United States. I just want to say that again. The aggregate amount of equity that the US homeowners have is $17 trillion, which is an all time high. And the number of mortgages that are underwater is tiny. It’s like 1%. But what’s kind of crazy about this is just how healthy the average American homeowner is still right now with that $17 trillion of equity built in of that $17 trillion. This is crazy. The tapable equity, which is basically if everyone in the United States who has a home and has positive equity, they all went out and did their maximum cash out refi.
They could pull out 11.5 trillion in equity, which is remarkable. And it’s going up. It was up 4% quarter over quarter, it was up 9% year over year. And this just shows how much money the average American homeowner has right now. So again, this is another reason why we probably are not going to see a crash because there’s just so much wealth for the average American homeowner and they’re not having problems paying their mortgages. So if things get bad in the broader economy, they’re just going to choose not to sell, and that provides a bottom for a housing market, and that is what happens during a normal housing correction. And I think that’s what we’re seeing here. So in summary, average American homeowner still doing pretty well. We are not anywhere near where we were in 2008 where all of these red flags were flashing warning signs.
We saw delinquency rates going up before 2008. Homeowner equity was declining for years. That is not happening right now, and of course things could change in the future, but the data suggests we are in a regular correction and we are not on the precipice of a crash. So remember that. So what do we make of all this data as investors for the rest of 2025 and heading into next year? My main point to investors right now and has been for the last couple months, and I think is going to remain that way for the foreseeable future is that being in a buyer’s market is an interesting time. It creates risk in the market for sure because prices could be going down and we don’t know when they’re going to pick back up. At the same time, it also creates opportunity. I see this almost every day.
The average deal that I’m seeing come across my desk is better than it has been probably since 2021 or 2022. And I think that is going to stay that way for a while because even though the market is not in a free fall, I do think we’re going to see more motivated sellers and I think we’re going to see a lot of the social media investors, people who are sort of a little bit interested in real estate investing but not really committed to it. I think they’re going to kind of go away for a while at least because the benefits of investing in a correction market like we’re in are not that obvious, right? The average person is going to see, oh, prices went down 1% year over year on Zillow, and they’re going to say, you know what? I don’t want to buy that.
But for an investor who has a long-term buy and hold perspective, they could be thinking now is the time to buy great assets at a slight discount. And to me, that is an attractive option. Now, you have to be very disciplined and patient to not buy junk on the market because there’s going to be plenty of that. But if you find the opportunity to buy great assets during a less competitive market like we’re in right now, that is a good opportunity for buy and hold investors. The other piece of this that I haven’t really gotten into much today, maybe I’ll do another episode on this soon, is that I believe that cashflow prospects are going to improve starting in 2026. We are getting through a lot of the glut of supply in the multifamily market, and it’s still going to take a little bit of time, but I do think we’re going to start seeing rent prices increase gradually next year, and with prices staying stagnant, that means the opportunity for cashflow is going to improve and that should get every buy and hold long-term investor excited.
But the key again to investing in this market is one, having that long-term perspective because if you’re buying a property to sell it in a year or two years, I think it’s a little bit risky right now. Now, I’m not saying you can’t do it, but if you’re going to do a burr, just run the numbers and make sure if you can’t refinance that it’s still worth holding onto. I think that is the prudent conservative way to approaching this kind of market. If you’re going to hold for five to 10 years and you can five great assets and they pencil at current interest rates, I would do those deals. I’m personally looking at those deals, and I think that is a perfectly good approach to investing in this market. But remember, be patient and negotiate because you can. We are seeing buyers, Regan the power in the housing market for the first time in a long time, and you as investors, it’s on you to go out and use that newfound leverage that you have in the market.
To me, that’s an exciting opportunity, and hopefully you’re feeling the same way that you’re going to be able to go out and buy great assets at below current market comps. That is real estate investing 1 0 1, and I think it’s going to be achievable for a lot more people in the coming year or so. That’s our housing market update for September, 2025. Thank you guys so much for listening. I’m Dave Meyer, and by the way, if you have any questions about this, always hit me up on BiggerPockets or on Instagram where I’m at the data deli. Happy to answer any questions you have there. Thanks again. We’ll see you next time.

Foreclosure auctions represent one of the most visible—and competitive—stages of the foreclosure process. By the time a property has reached the Notice of Sale stage, it has an auction date scheduled, often drawing the attention of experienced investors looking for speed and volume.

But what do the latest numbers show? According to August 2025 data from ATTOM Data Solutions, foreclosure auction activity rose nearly 20% year over year nationwide, signaling a growing pipeline of distressed assets heading to the courthouse steps. For real estate investors, this data offers both opportunity and a reminder: Preparation is key.

The Numbers: August 2025 Notice of Sale Filings

ATTOM reports 16,147 foreclosure sale notices nationwide in August 2025, down 9.43% from July, but up a substantial 19.09% from August 2024. This annual increase suggests more distressed inventory is advancing through the foreclosure process and reaching auction.

State-level highlights include:

• North Carolina: 405 notices, a 52.83% YoY increase, showing a surge of properties headed to auction.
• California: 1,207 notices, up 11.24% YoY, underscoring ongoing distress in one of the nation’s largest housing markets.
• Texas: 2,982 notices of sale, the largest volume of any state, even with a significant month-over-month decline.
• Ohio: 533 notices, up 12.92% YoY, reflecting steady growth in Midwest auction activity.
• Florida: 934 notices, slightly down from last year, but still a meaningful share of national totals.

Why Investors Should Care

The Notice of Sale stage is unique because it provides clarity and timing. Unlike the uncertainty of pre-foreclosure, investors now have a specific auction date. This allows for in-depth preparation, including:

• Researching title history and lien status
• Reviewing comparable sales and rental trends
• Preparing funds, often cash, for auction purchases

For investors who can move quickly, this stage can provide access to volume and speed—two advantages that are harder to capture at earlier stages of foreclosure.

Investor Opportunities at the Auction Stage

Properties scheduled for foreclosure sale often attract seasoned investors. While competition can be intense, there are distinct opportunities:

• Auction purchases: Buying at auction may allow investors to acquire properties below current market value, particularly if competition is thin or the property has unique challenges.
• Speed to acquisition: Auctions can shorten the time between identifying a distressed property and securing ownership, compared to drawn-out pre-foreclosure negotiations.
• Potential IRA integration: Investors using self-directed IRAs may use strategies such as non-recourse loans to prepare for auction bids, allowing them to participate in these opportunities in a tax-advantaged environment.

The challenge? Auctions are typically as-is and cash-only, and investors often cannot inspect the property before purchase. Thorough due diligence and risk tolerance are essential.

State Spotlight: Notice of Sale Activity

Breaking down the August 2025 data by state reveals the diversity of auction activity:

• North Carolina: With a 52.83% YoY increase, North Carolina’s auctions are growing at one of the fastest rates in the country. For investors, this could mean more volume across both urban centers like Charlotte and Raleigh and smaller regional markets.
• California: At over 1,200 auction filings in August, California continues to see steady growth in distressed properties despite a high-priced real estate environment. Investors here may benefit from focusing on ZIP codes where auction activity is concentrated.
• Texas: With nearly 3,000 notices of sale in August alone, Texas represents the single largest pool of auction opportunities. Investors who can navigate its nonjudicial foreclosure system may find volume unmatched elsewhere.

What It Means for Real Estate Investors

The rise in Notice of Sale filings signals two important things:

1. A larger supply of distressed inventory is moving toward public auctions.
2. Investors who prepare early may be better positioned to compete effectively.

For auction-savvy investors, this stage offers speed and visibility. For those newer to auctions, the increase in filings suggests it may be time to build relationships with local auction houses, county courthouses, and title professionals to understand the process.

The Strategic Advantage of Data

Success in foreclosure auctions doesn’t come from showing up at the courthouse on auction day—it comes from tracking data in advance. Monitoring Notice of Sale filings by ZIP code or county gives investors the ability to:

• Identify where auction volume is building
• Compare trends across states and local markets
• Align capital and financing strategies to auction timelines

Imagine spotting a county where auction filings have doubled over the past quarter. That insight allows an investor to target properties in advance, understand the risks, and secure funds—rather than reacting on auction day.

Take Control of Your Investment Strategy

Auction activity is growing, but the best opportunities may only be visible to those who track data consistently. Equity’s Foreclosure Reports—powered by ATTOM Data Solutions—provide monthly updates on Foreclosure Starts, Notices of Sale, and REO properties—sortable down to the ZIP code level—so you can prepare for opportunities before the market responds.

Subscribe today for just $19.95/year for a single state, or $69.95/year for the entire country. Visit our Real Estate Reports Page and click to view the Foreclosure Reports to start tracking foreclosure data now.

Equity Trust Company is a directed custodian and does not provide tax, legal, or investment advice. Any information communicated by Equity Trust is for educational purposes only, and should not be construed as tax, legal, or investment advice. Whenever making an investment decision, please consult with your tax attorney or financial professional.

BiggerPockets/PassivePockets is not affiliated in any way with Equity Trust Company or any of Equity’s family of companies. Opinions or ideas expressed by BiggerPockets/PassivePockets are not necessarily those of Equity Trust Company, nor do they reflect their views or endorsement. The information provided by Equity Trust Company is for educational purposes only. Equity Trust Company, and their affiliates, representatives, and officers do not provide legal or tax advice. Investing involves risk, including possible loss of principal. Please consult your tax and legal advisors before making investment decisions. Equity Trust and Bigger Pockets/Passive Pockets may receive referral fees for any services performed as a result of being referred opportunities. 

International interest in American real estate is up for the first time in eight years. According to the National Association of Realtors (NAR), the number of properties purchased by foreigners went up 44% from April 2024 to March 2025, even as high mortgage rates and increasing housing prices have kept some Americans on the sidelines. The dollar volume of these sales hit $56 billion, up 33% from the same period a year ago.

The issues that are keeping domestic buyers back don’t seem to be affecting foreign buyers. So what does this say about the market for U.S. investors? 

Why Foreigners Are Snapping Up American Homes 

There are several reasons why foreigners might invest in the U.S. Often, it’s because they see the U.S. as a stable place to invest compared to their home countries, Yuval Golan, CEO and founder of real estate financing platform Waltz, said in a conversation with BiggerPockets.

Golan’s company helps foreign investors purchase U.S. homes. In the first two quarters of 2025, 59% of the deals it closed were to refinance. This means many foreigners are looking to buy another property, said Golan.

“Usually, when people want to sell their properties, they don’t refinance,” Golan said.

According to the NAR, most buyers came from China in the April 2024 to March 2025 period, at 15% of foreign purchases, followed by Canada at 14% and Mexico at 8%. India and the U.K. trail behind at 6% and 4%, according to data from the NAR.

For Waltz, most of the interest is from Israel and Canada, Golan said. Many buy property for a vacation home or for their children to live in when they study in the U.S. Others might buy properties as an investment.

Most of the time, they are buying in markets that are already tight in supply and popular with domestic buyers as well, such as Florida, California, Texas, Arizona, and New York.

Casey Gaddy, a senior agent at Keller Williams Realty, said in a conversation with BiggerPockets that while most foreign investments involve luxury residential properties, there is interest in high-rise condos and single-family homes.

“Some are investing as a hedge and means to park cash in what they consider a stable economy; others are purchasing secondary homes, while others are creating long-term rental pipelines for passive income,” Gaddy said. 

What This Means for American Investors 

While sales to non-U.S. buyers only account for 2.5% of the existing market, according to the NAR data, it can increase competition for Americans, wrote George Ellison, cofounder of Propbee and former real estate executive at Bank of America, in an email to BiggerPockets. “That can make it harder for U.S. buyers to secure homes, since foreign buyers often come in with cash offers and fewer contingencies,” he said.

This can put a strain on already tight markets, said Gaddy. “We all know the reality of tight inventory in many cities, and increasing demand from overseas can knock out first-time homebuyers,” he said.

But overall, experts see the interest in American real estate as a good thing. “If foreigners stop buying U.S. real estate, it means people don’t trust [the U.S. dollar], and it harms the economy. When foreigners buy in America, the USD retains its dominance,” said Golan.

If foreign investors are still buying up property despite higher interest rates, it shows that “the fundamentals are strong,” said Ellison.

“International investors see U.S. housing as one of the most reliable places to put their money. It reflects confidence in long-term appreciation and rental demand, even if in the short term, it highlights affordability gaps for many Americans,” he added.

Final Thoughts 

While an increase in foreign purchases might cause competition in some areas squeezed by supply, the underlying reason for the increase is a good one for real estate investors. All this foreign investment indicates that the U.S. housing market is still strong.

Most rookies think you need a mountain of cash to buy a rental property, but the truth is that the financing strategy you choose matters much more than the size of your bank account.

Today, we’re breaking down five of the best (and sometimes overlooked) ways to get your hands on the money you need to close—from low-money-down bank loans to options that let you bypass the bank altogether!

Welcome back to the Real Estate Rookie podcast! In this episode, Ashley and Tony share some of their favorite ways to fund real estate deals in 2025. Whether you’ve got very little money saved or already have a sizable down payment, we’ve got options for every budget. You’ll learn how to put less money down with FHA and conventional loans, but we’ll also share several strategies that allow you to use other people’s money (OPM)—like real estate partnerships, private money, and seller financing!

Already own your home? We’ll even show you how to tap into your existing home equity so that you always have funds on hand—money you can use to build a real estate portfolio much faster than you thought possible!

Click here to listen on Apple Podcasts.

Listen to the Podcast Here

Read the Transcript Here

Help Us Out!

Help us reach new listeners on iTunes by leaving us a rating and review! It takes just 30 seconds and instructions can be found here. Thanks! We really appreciate it!

In This Episode We Cover:

Links from the Show

Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email [email protected].