The United States has tied it’s future to the housing economy and the 30-year mortgage. When sellers start losing, it could mean trouble for the wider economy
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When it comes to housing, what most obsesses the media, commentators, activists, and politicians is rising prices. Rental housing especially provokes the caricature of the greedy landlord culturally popular and prevalent since at least the first performance of La bohème. When rents go up, there is a “crisis,” but not when they do down; that’s when the greedy landlords suffer. But the other side of this is the buyer and seller equation in the housing market, when prices fall it spells trouble for people paying long term mortgages. A recent Fast Company article points to data that shows prices for single-family housing is falling in some key markets.
The Fast Company head line, Housing market shift: 21 major markets seeing the strongest move toward buyers, hints at the interesting shift in the top 50 housing markets in the country. The subheading goes further, suggesting that “housing markets where active listings have built back up the most have been more likely to see homebuyers gain power.”
All markets fluctuate, but changes in the housing economy can have widespread effects whether they favor buyers or sellers.
Screen Capture by Author.
The chart created by Lance Lambert from a ResiClub analysis of active inventory data from Realtor.com was created with Datawrapper. It measures the change in how many homes are available for purchase between now and the same period in 2019. According to Fast Company,
“Many of the softest housing markets, where homebuyers have gained the most leverage, are located in the Southeast, Southwest, and Mountain West regions. Many of those areas were home to many of the nation’s top pandemic boomtowns, which experienced significant home price growth during the Pandemic Housing Boom, which stretched housing prices beyond local income levels.”
If you remember my earlier posts this month, you’ll remember that this these same regions are flashing some serious warning signs with increasing rates of underwater mortgages and foreclosures. While this might be good for buyers in the market, it could spell serious trouble for sellers who might find themselves making a distressed sale – a sale of a home that still leaves the seller with debt – or not being able to sell at all because the loss would be too big. Worse, many mortgage holders might not be able to continue to service the debt on their home and they could lose it to foreclosure.
Of course, this is nothing new. Any market, from slippers and shoes to eyeglasses and hats, can experience the same sorts of shifts. But in the housing market, when values fall, the people that really get hurt is borrowers. Remember, most people don’t own their home, they hold a significant amount of debt. When life changes – a move, a divorce, a job loss – the monthly payment does not. And if the value of a home falls low enough, the seller could be in real trouble.
Are we heading toward another “mail in the keys” crisis like the one in 2008 when many households used cheap money to borrow then found themselves unable to service the debt or sell the home? Maybe, but as I keep saying, we’ve done nothing to address this fundamental weakness in the American economy, a deep reliance on massive long term debt to buy an asset that only generates wealth for the borrower if other people suffer from the effects of housing scarcity and inflation.
Source: https://www.forbes.com/sites/rogervaldez/2025/12/04/in-housing-a-buyers-market-can-mean-trouble-for-sellers/
