BiggerPockets Real Estate Podcast: May 2025 Housing Market Update

Host: Dave Meyer, Head of Real Estate at BiggerPockets
Release Date: May 16, 2025
Episode Title: May 2025 Housing Market Update: Price Cuts Arrive, Market “Softening” Continues

Introduction

In the May 2025 episode of the BiggerPockets Real Estate Podcast, Dave Meyer provides a comprehensive update on the current state of the housing market. Addressing significant shifts towards a softer market, Meyer discusses the implications for real estate investors and outlines strategies to navigate the evolving landscape. The episode delves into key themes such as market softness, regional trends, mortgage rates, and rent dynamics, offering valuable insights for both seasoned investors and those new to the field.

Market Softness

Understanding Market Softness

Dave Meyer introduces the concept of "market softness," highlighting a transition from a robust seller's market to a more balanced or even buyer-favorable environment. This shift is characterized by weaker price appreciation and increased negotiation flexibility.

• Key Indicators:

  • Price Gap: The median asking price is $470,000, which is 9% higher than the median sale price of $431,000—the largest gap since 2020.

    "Sellers still think, by and large, on a national basis, that we're in this pandemic era where they could just ask for anything and buyers are going to pay it." [02:30]

  • Increasing Inventory: Active listings have risen by 14% year-over-year, signaling more properties available for buyers.

    "We're moving from this really strong seller's market to a softer market that is more neutral." [04:50]

  • Price Drops: Approximately 20% of listings are experiencing price reductions, indicating potential overpricing at initial listing.

    "Price drops are not a measure of whether prices have actually gone down. They're indicating that properties may have been initially overpriced." [07:15]

Implications for Investors

• Negotiation Leverage: Increased inventory and price softness provide more room for buyers and investors to negotiate favorable terms.
• Opportunistic Acquisitions: The prevailing softness offers opportunities to acquire assets at lower prices or more advantageous conditions.

Regional Trends

Diverging Market Performances

Meyer examines the performance of different metropolitan areas, revealing significant regional disparities within the top 50 major metros.

• Declining Markets:

  • Jacksonville, FL: -4%
  • San Francisco, CA: -2.5%
  • Austin, TX: -1.6%
  • Dallas, TX: -1.4%
  • Oakland, CA; West Palm Beach, FL; Tampa, FL

    "Seven of the top 50 major metros are now seeing declining prices." [12:45]

• Growing Markets:

  • Milwaukee, WI: +12%
  • Newark, NJ: +11%
  • Cleveland, OH: +9.5%
  • Chicago, IL: ~+8%
  • Baltimore, MD: +7%

    "Affordable markets are performing well, even amid economic uncertainty." [15:30]

Long-Term Outlook

• Affordable Markets Thrive: Cities with more affordable housing options continue to attract buyers, maintaining strong demand despite broader market softness.
• Potential for Further Regional Shifts: Additional markets may experience price declines or stabilization as the national trend towards softness continues.

Mortgage Rates

Current Landscape

Mortgage rates remain a critical factor influencing the housing market's dynamics. As of mid-May, the median rate for a 30-year fixed mortgage stands at 6.9%, slightly lower than January but still elevated compared to historical lows.

"Mortgage rates are staying higher than many predicted, largely due to ongoing economic uncertainty." [21:05]

Projections and Impact

• Stable or Rising Rates: Due to factors like tariffs, stock market volatility, and student loan collections, mortgage rates are expected to remain high or even increase.

  "Until there is less uncertainty in the economy, we're in for higher interest rates." [22:00]

• Demand Dynamics: Despite high rates, mortgage demand remains up year-over-year. Softening is attributed more to increased inventory than reduced buyer demand.

• Affordability Improvements in Some Markets: In areas experiencing price declines, monthly mortgage payments have decreased, enhancing affordability.

  "Increased affordability in certain markets presents new opportunities for investors." [25:10]

Strategic Considerations for Investors

• Adjusting Acquisition Strategies: Investors may need to account for higher financing costs and potentially slower appreciation rates in their investment models.
• Focus on Cash Flow: Emphasizing properties with strong rental income to offset higher mortgage expenses.

Rent Trends

Mixed Indicators

Rent data presents a complex picture with varying reports from different sources. Meyer synthesizes these conflicting indicators to provide a clearer overview.

• Overall Rent Stability: When averaging data from multiple sources like Apartment List, Zillow, and Realtor.com, rents are largely flat.

  "When you average out all data sources, rents are mostly flat right now." [26:30]

• Increasing Vacancy Rates: The vacancy rate has risen to 7% in April 2025, up from 6.8% in July 2020.

  "Higher vacancy rates indicate a surplus of rental units, contributing to flat or declining rents." [28:15]

Supply Glut and Economic Factors

• Oversupply of Apartments: A persistent oversupply leads to higher vacancies and suppressed rent growth, especially in lower-end properties.
• Economic Sentiment: Low consumer confidence and potential rate hikes due to ongoing uncertainties may prolong high vacancy rates and hinder rent increases.

  "Consumer sentiment is at one of the lowest points it's been in quite a long time." [30:50]

Policy Implications

• Section 8 Cuts Proposal: The Trump administration's proposal to reduce funding for Section 8 could result in millions losing rental assistance, exacerbating housing instability.

  "If Section 8 cuts pass, we could see millions lose rental assistance, impacting the housing market significantly." [32:45]

Investment Opportunities

• Single-Family Rentals: Continued high demand for single-family rentals offers resilient investment opportunities despite overall market softness.

  "Demand for single-family rentals is going to stay high." [34:20]

Conclusion

Dave Meyer wraps up the episode by reiterating the key themes of market softness, regional disparities, elevated mortgage rates, and complex rent dynamics. He emphasizes the importance for investors to adopt a conservative approach, adjusting strategies to align with the current market conditions while remaining vigilant for emerging opportunities.

"The key to being a good investor is to just change your strategy to change your tactics according to what's going on in the market, what's going on in the economy, and hopefully these types of episodes can help you make informed, smart, profitable investing decisions." [35:00]

Personal Insights and Strategies

• Portfolio Adjustments: Meyer plans to liquidate certain assets to take advantage of current price softness, anticipating better opportunities in the future.

  "I'm planning my portfolio around a softer price appreciation for at least the next year." [34:10]

• Conservative Forecasting: Emphasizes the importance of not assuming significant price appreciation in the near term, while remaining open to opportunities arising from market adjustments.

Notable Quotes

• On Market Softness:

  "We're moving from this really strong seller's market to a softer market that is more neutral." [04:50]

• On Price Drops:

  "Price drops are not a measure of whether prices have actually gone down. They're indicating that properties may have been initially overpriced." [07:15]

• On Regional Trends:

  "Affordable markets are performing well, even amid economic uncertainty." [15:30]

• On Mortgage Rates:

  "Mortgage rates are staying higher than many predicted, largely due to ongoing economic uncertainty." [21:05]

• On Investment Strategy:

  "The key to being a good investor is to just change your strategy to change your tactics according to what's going on in the market, what's going on in the economy..." [35:00]

Final Thoughts

The May 2025 Housing Market Update by Dave Meyer offers a detailed analysis of the current real estate landscape, emphasizing the importance of adaptability and informed decision-making for investors. As the market continues to soften, understanding regional nuances, mortgage dynamics, and rent trends becomes crucial for building and managing a successful real estate portfolio.

For more insights and updates, listeners are encouraged to subscribe to the BiggerPockets Real Estate Podcast on platforms like YouTube, Apple Podcasts, and Spotify.

Disclaimer: The content of this summary is intended for informational purposes only and does not constitute financial advice. Always consult with a qualified advisor before making investment decisions.