The housing market just flipped. (Deflation warning)

We are starting to see deflation in the housing market in 2025, and this deflation has the potential to cause home prices to go down by a lot in your state and city. In this video, I'm going to show you the areas that are experiencing the biggest housing market deflation right now, and also give you my forecast for where prices are going to go down the most over the next 12 months. With data on ReVentureApp showing that home values dropped in 32 out of 50 states in May 2025, according to Zillow's Home Value Index, you can see it's these states in blue that had the biggest decline in home values, meaning that home prices are now dropping in over half the U.S., everyone. Over half of America is now in a housing market value deflation scenario, which is ultimately great news if you're a prospective homebuyer or real estate investor. Prices are getting cheaper. One thing you need to pay attention to is if you are buying a house right now, don't be afraid to offer below asking prices. My friend in Florida sent me this listing that just sold, and take a look at this, everyone. Back in January 2024, the previous owner bought this house for a million dollars in Venice, Florida. Then they proceeded to list it for $9.95, they cut it down to $8.95, and it eventually sold for $7.75, $120,000 below list price. I'm seeing more and more examples pop up like this across where I live in Florida. There's some heavy downward price pressure. The official statistics say that values in Florida dropped 0.63% on a month-over-month basis, which annualizes to about 7.6% over a year. You can see Florida had the second biggest decline of any area in America in May. Actually, number one was Washington, D.C., the District of Columbia, dropped 0.69%, which is 8.2% on an annualized basis. Other states that had big drops include Colorado, California, Washington, Hawaii, West Virginia, Texas, Louisiana, and Mississippi. You can also see Oregon, Arizona, Georgia, Kansas, Arkansas, Idaho, North Carolina, Nevada, South Carolina, Utah, and Montana were all in negative territory. What's interesting to me is that it's pretty rare to see this many states and cities in the U.S. experiencing month-over-month housing deflation. While some of you might say to yourself, oh, that doesn't seem like a big drop, 0.2%, 0.4%, in actuality, to see so many areas at once experiencing a decline is very rare historically in the U.S. housing market. When this breadth of home value declines increases, it tends to be a signal that the market overall is in decline and that we could see things deteriorate further into the future. When I say deteriorate further into the future, I actually am meaning that things are going to get better for you as a home buyer and investor. These prices are likely going to drop by more over the next year in the areas that are worst affected. Why don't you take a look at this graph, everyone? It's a graph measuring the breadth of the housing market downturn in the U.S. right now. We're looking at the percentage of counties experiencing a monthly home value decline. Again, this is data sourced from Zillow's Seasonally Adjusted Home Value Index. We're looking at the percentage of counties that had a decline from April to May. You could see in May, 62% of counties had a drop in home values. What's really, really interesting is that this 62% is actually the third highest level we've seen going back over 25 years in terms of how many areas are going down. The only other two times we saw anything like this were in 2022 into 2023 when we had that interest rate shock. When the interest rates went up in 2022, there was a brief housing mini-correction, and then in the last crash. It was around March 2008 when we saw 62% of counties go into a correction, and then after that you could see it accelerated to be 90% of counties, and we had a four or five-year housing market downturn. I think what's really interesting is that a lot of people in the housing market right now are starting to acknowledge that there is a slowdown, there is a correction. You look at the mainstream news articles, that's all the mainstream news is now talking about in terms of real estate is that there's a slowdown and a correction. What I think a lot of people don't know is that it's exceedingly rare to have this type of correction play out, and it's starting to happen fast in terms of how many areas are dropping. Right now, I just actually want to show you some listings that I've been looking at in Florida because these declines in prices in Florida are starting to get really, really big in some areas. I view Florida as a leading indicator for the rest of the US housing market. Take a look at how much the values are dropping. This is the house I showed you earlier, everyone, in Venice, Florida on the West Coast. It was a four-bed, three-bath built in 2020 where the seller literally took $225,000 loss from where they bought it for three years ago. Here's another house on the West Coast of Florida in Lakewood Ranch. This house is owned by an investor, and take a look at how much the value has dropped on this house. Back in 2022, Zillow thought this house was worth $532,000, and it very much was. This was a crazy period in Florida. Now, they've cut the price on this house down to around $379,000. This house has literally lost 30% of its value from peak, and we're starting to trend closer and closer back to pre-pandemic. Here's a condo in St. Petersburg. It's a one-bed, one-bath condo currently listed for $625,000, which is expensive. If you look historically, it was purchased for $750,000 in June 2022, and is now listed for sale at a $125,000 loss. There's starting to be real money lost in the US housing market by some sellers. One entity that's driving these losses are actually the home builders. The home builders are really starting to cause values to go down in a lot of parts in America. Some of these builders are getting very aggressive in cutting the price. One builder in particular I'm going to talk about right now that's gotten very aggressive in cutting the price, and has actually cut the price 24% over the last three years. This is shocking. When I looked at this data, I was like, no way have they cut the price that much. That's what their SEC filing said. The builder is Lenar. They're the second biggest builder in America. Some of the stuff they're doing right now in terms of their pricing is shocking. This is data I pulled from Lenar's SEC filings for the second quarter of each fiscal year. You can see in the second quarter of 2025, their average selling price was $389,000. That was down 8.7% year over year. The previous year in 2024, it was down 16%. Their actual peak selling price for Lenar was in 2022 at $514,000. Their selling price has gone from $514,000 down to $389,000, which is a 24% drop. You can see Lenar's selling price right now in the middle of 2025 is basically less than it was before the pandemic. The second biggest builder in America has cut their net selling price back to below pre-pandemic levels. You can see MarketWatch actually picked up on this report. They were talking about how Lenar sees home prices drop to five-year lows, but they're still too high. The builder's stock actually rallied slightly after their earnings report as profitability met expectations. However, the issue for Lenar, everyone, is that these price cuts are now starting to cause their gross margin, their gross operating margin to drop. Their gross margin was 17.8% in 2025. That was the second worst reading in the last 10 years, and their net profit was down 55% year over year. Lenar is doing aggressive price cuts. It's starting to show up in declining revenue, declining profitability. The upshot for Lenar is that their deliveries of homes have remained stable and have actually gone up. Lenar delivered 20,000 homes in the second quarter of 2025. That was an all-time record, and it was actually about 58% above pre-pandemic levels. What I think is really interesting about this Lenar data, everyone, is that it's showing you what needs to happen in the housing market overall for the market to come back. Lenar's cut the price is 24%. Their profitability is down. Their revenue is dropping, but their volume is actually holding up. I think what that signals, if home values go down 20, 25% in the US, you will see the buyers come back in because Lenar's volume is holding up because they're getting really aggressive on cutting the price. The one thing I would push back on Lenar on, and I'd be curious if someone from Lenar would actually be willing to come on this channel and talk to me about this because I think this is really interesting, is that Lenar's aggressive 24% price cuts are actually resulting in a lot of people who bought in their communities going underwater. If you bought in a Lenar community in 2021, 2022, 2023, there's a good chance that your house is worth less now because Lenar is cutting the value of the newer versions of your floor plant. I saw this real time down here in Florida on a property I was touring, and I actually just want to show you guys this because I'm going to show you the real world ramifications of these price cuts that Lenar is doing. This is a house in Parrish, Florida, which is the south of Tampa and south of St. Pete. Now what's really interesting is this house is a three bed, two bath on the market for $265, but if you go back and look in the history, the owner bought this house for $318 in late 2023. They bought it for $318, but now they're selling it. They listed it at $299. They've had to now cut it to $265. It's actually pending. We'll see if this house sells. Hopefully it does for this owner, but in general, they're taking a huge loss. They bought it for $318, and they're taking a $50,000 plus loss less than two years later. This is yet another example of sellers losing money on the U.S. housing market, but you ask the question, why are they losing this money? Well, the same community, Lenar has the same floor plan two years newer on the market for $249,000. This is the same exact community, and so this is the same house. Folks, this is the same floor plan, three bed, two bath, 1,486 square feet. That's three bed, two bath, 1,486 square feet, but brand new, $249,000. Actually all of these newer versions of these homes pretty much are pending at $254,000, $255,000. I mean, it's a huge level of price reduction. I kind of am wondering how this is going to turn out for Lenar because on one hand, yes, they're driving deliveries and new orders. Their new orders were up 6% year over year, but they're also crushing the value of anyone who bought in their communities the last three years. I just have to wonder if there'll be some type of reputational damage done to their brand through these aggressive price cuts. However, another thought on this is that Lenar is simply leading the housing market here and that this is just going to happen everywhere at a certain point, or at least happen across a lot of markets seeing 20, 25% declines and that they're simply getting in front of this. Either way, the data is really starting to be clear about how deflation in the US housing market is starting to show up. When deflation starts to show up, it can turn into a self-perpetuating cycle where values drop and then values drop by more in the future and then it becomes baked into the mindset of homeowners and sellers and buyers that values are just going to keep dropping. If that happens, if that gets baked into the mindset of homeowners and sellers, it could lead to a prolonged housing decline. What's interesting to me is that right now, with how much prices have decelerated on a national basis, we're about to cross a threshold that we haven't really crossed many times in US history. You can see that represented on this graph where we're looking at the national growth in home values and home prices in America going all the way back to the mid-1950s. We have 70 years here of home price growth. What do you see, everyone? Probably the first thing you might see is the 2007 to 2012 housing crash. That sticks out like a sore thumb here. Nominal prices declined 25% over five years. There's no other time in US history outside of the Great Depression where anything like that happened. However, I want to point you to what's happening now. National home value growth, according to Zillow, decelerated to 0.8% in May 2025. This is total US home prices down. Total US home price growth only at 0.8% year over year. We're coming close to flipping into negative territory on a national basis. There's only been a handful of times in US history where this has happened, where we've even gotten this slow on home price growth. One was, again, in 2023 after we had that mini correction due to the interest rate shock. The other was the 2000 to 2012 crash. If you go back to the early 90s, there was a moderate home price correction in 1991. Then there really aren't too many other instances. In 1982, when mortgage rates went to 18%, home value growth slowed to 0.5% year over year. Then it slowed to 0.6% in 1973. We are starting to enter uncharted territory with these declines. I think what's really interesting, folks, is to try to understand this home price growth relative to inflation. That's what we're doing on this graph. We have the blue line, home value growth, and we have the red line, inflation. What I want to do is explain to you all why we're in a housing bubble right now, and why I think it's likely that prices keep dropping, is because over the last 25 years, home price growth, the blue line, has significantly outstripped inflation, the red line. You can think of home prices as really largely a function of two things. One is inflation. The other is your local market dynamics in terms of supply and demand. Really, for 25 years, we had excess home price growth above inflation. That is a signal of a bubble. We had the correction in 2007 to 2012, but then we had this recovery pretty quickly. By 2017, 2018, we had that recovery, and then home prices just kept growing way faster than inflation. That's the signal of a home price bubble, indicating that we might be due now for some type of inverse correction, where home price growth goes negative and stays below the rate of inflation for an extended period. That's one way to understand this housing market, and why it feels so expensive to you guys right now, is because for the last 25 years, we've had home prices grow way faster than the rate of inflation. What's even more interesting to me is if you look further back into history of the US housing market. Let's go to 1953, everyone, and stay with me on this. I know I'm getting into the data technically and historically right now, but I just want you all to understand why this housing market is so different than other housing markets in US history. In 1953, starting from there all the way pretty much to 1984, what do you notice? Inflation and home value growth in the US tracked each other almost exactly. While there was a lot of home price appreciation in the 1970s during the Great Inflation, it was all because of the red line, inflation. Really the housing market was simply a function of how much the cost of other goods and services was going up, how much the incomes were going up. That's a key thing to understand, is that home prices used to be simply a function of inflation and income almost 100%, and now they became something else. Now they became the result of a speculative bubble. They went way higher than people could afford, and that makes a crash more likely. I see some people out there say, they say that, well, home prices have only really crashed nationally once before in US history, 07 to 2012, so they say that means they're not going to crash again. But the reality is, the reason they crashed from 07 to 2012 was because there was a bubble. Prices went above inflation and income. There's an even bigger bubble today. It's the only other time this has ever happened. The question is, if it does go into negative territory over the next year, how long is it going to stay in negative territory? Well, historically, housing market downturns tend to last about five years on average. Say we're one year in maybe to this slowdown, there could be another four years of home price declines coming in the future. I don't know for sure if that's going to happen, but historically, that's what the historical record says when certain cities and states go into a housing market correction. That correction lasts four or five years, and the reason that that is, everyone, is psychological in some respect, right? Home prices go up for a decade. Everyone thinks the market's going to go up, and then they start going down, and then all of a sudden, people lose money, and they start telling their friends, like, oh my gosh, I bought my house. I lost money. Don't buy a house. You hear all these horror stories about buying a house, and then there's just this inertia in the market for years and years and years, and prices drop. I think we could be on the doorstep of something like that again right now. If you are a potential homebuyer or investor or someone just trying to understand the market, it's important to have this framework in mind, right? That we're in this overvalued market that's starting to correct, but could correct by a lot more in the future, and the ultimate way to have an understanding of the risk factors of buying in your market and how much prices could drop is to look at two key data points, everyone. One data point is the overvaluation rate. How fundamentally overvalued prices are in your area compared to the long-term norms. If home values are 50% overvalued in your city and zip code, well, that's telling you be very, very careful buying. There could be a lot of downside. Meanwhile, if prices are undervalued, it's telling you it's a safer time to buy, and that overvaluation metric is really one of the first things you should look at if you're trying to make a decision about, is now the right time? How much should I offer on this house? What's the downside? What's the upside? Look at that overvaluation rate, because I'm going to tell you folks, where I am here in Florida, the prices are dropping, but they haven't dropped by enough because the values are still crazy, crazy overvalued. Take a look at this. If we look here at Pinellas County in Florida, and just to zoom out, you can see Pinellas County here, this is where St. Petersburg and Clearwater is, it's across the bridge from Tampa, and you can see if we zoom in, there's some zip codes here that are 50% overvalued, 48.9% overvaluation, 50.7% overvaluation, 38% overvaluation. And what that means, everyone, is that home prices are in a big bubble. When you see this level of overvaluation, it's telling you to be very, very careful buying in these markets, because essentially what it's telling you is that the home value to income ratio has gone up above the long-term norm. So in this zip code here in Pinellas County, the average home value to income ratio is 3.7. Over the last 20 years, today it's 5.1. That's telling you it is a overvalued market. Prices went up way more than incomes, telling you there's a lot of downside. Now interestingly, in downtown St. Petersburg, we're actually saying at ReVenture App, values are undervalued, 4.6% undervaluation. So when you go to ReVenture App after this video, and you sign up for the plan to look at overvaluation rate, the way to understand this map is that the redder it is, the redder your area is, the more overvalued. The bluer it is, the more fairly or undervalued. So we do have some undervalued markets now popping up in parts of Pinellas County and parts of Florida. Those values have started to go down. We do have some undervalued areas popping up, meaning they could be better places to buy. However, the second data point you are also going to want to track is the 12-month home price forecast. Because an area can be undervalued but still go down. That happened in the last crash. Prices became undervalued by 2009, but they kept dropping another three years because of the market dynamics. And you remember what I said earlier, home value growth is a function of two things, inflation and income, market dynamics. Our overvaluation rate is addressing kind of the inflation and income component. The market dynamics is our price forecast. And so you're going to want to understand both of those. What are the market dynamics in your market? How much are values going to go up or down the next year based on the data today? Well, if we go to ReVenture app and then look at the home price forecast for this area, well, okay, it's a different story. Values are forecast to drop pretty much everywhere over the next 12 months here in Pinellas County. We think values are going to drop 10% in the next year in a lot of these zip codes. And so that's saying even if an area is undervalued, like 33701 in downtown St. Pete, we still think values are going to drop another 7% over the next year just because of the current supply and demand fundamentals. So this is a data point that's going to help you know, should I buy now or should I wait? And if I buy now, should I offer below ask? How aggressive should I get in terms of offering money on a house below asking price? And just to actually, again, go back to this house I showed you guys in the beginning where the seller lost $225,000 and it sold for well below ask. This was in Venice, Florida, 34293. Let's type in that zip code into ReVenture app. So check this out everyone, 34293, we're forecasting in the zip code a 10% decline in values over the next year. Interestingly, the buyer here got it for 13% below asking price. So you can use this forecast everyone to kind of tell you how much to offer below asking price so you can get the house at a value that's more reflective of where the market's going in the future. So if you're a potential buyer right now in 2025, you've got to access this data so you can make a more informed decision and ultimately save lots and lots of money on a house. Our users on ReVenture app have saved tens of thousands, even hundreds of thousands of dollars in some cases by using this overvaluation data, using this price forecast data to better understand the actual dynamics in their market. So what I would encourage you all to do right now is head to ReVenture app and sign up for that ReVenture premium plan. The cost is $399 a year or $33 a month. Now I know that sounds expensive to some of you guys out there, however, you can utilize that data and potentially save a hundred times that amount on buying a house by knowing where the market is going in the future. We really recommend you guys sign up for that right now at www.reventure.app and make sure to hone in on the home price forecast and the overvaluation rate because those two data points are going to tell you a lot about where prices are heading in your market in the future.