# The Best News We’ve Had in 3 Years | Dec. 2025 Housing Market Update

Source: https://www.youtube.com/watch?v=O8ncglfBYoY
Recap page: https://rapidrecap.app/video/O8ncglfBYoY
Generated: 2025-12-22T15:05:39.261+00:00

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## Quick Overview

The December 2025 housing market update reveals good news heading into 2026, characterized by improving affordability due to home prices being flat or declining in real terms (1.4% year-over-year price increase against 3% inflation) and a full one percent drop in mortgage rates from 7.25% to 6.25% over the year, signaling a stable correction rather than a crash.

**Key Points:**
- National home prices rose only 1.4% year-over-year, which Dave Meyer calls relatively flat and a correction in real terms when compared to 3% inflation.
- Mortgage rates dropped a full percentage point over the year, moving from a peak of 7.25% in January to 6.25% in December, which significantly improves affordability.
- The number of regional markets seeing price declines is stable at 105 out of the top 300, though Florida markets like Punta Gorda (down 13% YoY) show severe, concentrated crashes.
- Inventory growth has contracted significantly, dropping from 25-30% year-over-year growth early in 2025 to just 4% growth in October, and overall inventory remains about 200,000 homes short of pre-pandemic 2019 levels.
- A major emerging trend is high 'delistings'—properties pulled off the market—at the highest level since 2017, as sellers refuse to accept current conditions, which provides a floor for prices.
- While 900,000 homes are underwater on their mortgages (1.5% of holders), this does not signal a disaster unless forced selling occurs, as homeowners typically just keep paying.
- Delinquency rates are slowly increasing but remain below 2019 pre-pandemic levels, although FHA and VA loan delinquencies are rising following the expiration of foreclosure moratoriums.

**Context:** Dave Meyer, a housing market analyst and investor at Bigger Pockets, provides the final housing market update for December 2025, assessing the year's shift from a rapidly cooling market with 7% rates to the current state. The analysis focuses on price stability, mortgage rate movements, inventory dynamics driven by seller behavior, and the potential risks associated with underwater mortgages and rising delinquencies, aiming to define whether the market is correcting or heading for a crash.

## Detailed Analysis

The December 2025 housing market update concludes that the market is experiencing a correction, not a crash, based on stabilizing factors entering 2026. Home prices nationally are up only 1.4% year-over-year, which equates to a real-term decline due to inflation, while mortgage rates have favorably dropped by a full percentage point to 6.25%, boosting affordability to its best level in about 38 years. Inventory growth, a major concern early in the year, has slowed dramatically from 30% year-over-year growth to just 4%, largely because sellers are pulling listings (delistings are at their highest since 2017) rather than panic selling. This seller behavior, often seen in correcting markets like Austin and Miami, prevents inventory from spiraling and puts a floor under prices. Meyer dismisses the fear surrounding underwater mortgages (900,000 homes) because banks only foreclose due to non-payment, not negative equity alone. While delinquency rates are inching up toward 2019 levels, they are not yet at crisis levels, confirming the overall stability of the market foundation.

### Price and Affordability Analysis

- Prices up 1.4% YoY nationally, signaling a correction in real terms against 3% inflation
- Affordability is improving, reaching near 38-year lows
- 105 of 300 top markets are seeing declines, concentrated heavily in Florida (Punta Gorda down 13%)

### Mortgage Rate Environment

- Rates fell 1% over the year from 7.25% to 6.25%
- This drop brings millions more buyers into the market and improves cash flow for refinancing opportunities on mortgages secured in the 7% range

### Inventory Dynamics and Seller Behavior

- Inventory growth contracted significantly from 30% YoY in early 2025 to 4% YoY in October
- New listings are flat (up 0.4% YoY), but 'delistings' are at their highest level since 2017 as sellers wait for better conditions

### Market Stress and Distress Indicators

- 900,000 homes are underwater, but this is normal in a correction and not an emergency without simultaneous defaults
- Delinquency rates rose 0.16% in August but remain below 2019 levels, though FHA/VA delinquencies are rising post-moratoriums
- Foreclosures are up 6% YoY due to returning to normal levels, but foreclosure starts are down 10% YoY