Dave:The Fed cut rates again yesterday. They also at the same time announced a new measure that they typically reserve for more emergency style crises that seems to be somehow flying under the radar. But today we’re gonna unpack it, all of it. We’re gonna talk about the Fed’s announcement, some of the details behind the scenes that gives us clues about what might happen next year, the announcement of this new tactic meant to stabilize the economy. And on top of all the Fed news, we’ll also share the most recent housing market data that gives us some clues as to what markets will thrive and which will struggle in 2026.Hey, everyone. Welcome to On The Market. I’m Dave Meyer, housing market analyst, real estate investor, head of real estate investing here at BiggerPockets. Today on the show, we’re gonna dig into three pretty big news stories. First, we gotta talk about the Fed. We all know they cut rates, but there was more to this meeting that meets the eye. And even though mortgage rates did not really fall based on the cuts, there are some clues in the most recent announcements from the Fed that help us understand the broader state of the economy and the housing market, including some big news no one really seems interested in talking about, but I’m definitely interested in talking about it, so we’re gonna get into that. Then we have other housing market news for you. It’s the last time we’re doing this before the end of the year. We’re gonna talk about some inventory trends and some housing affordability news that think’s gonna really shed light on some investing conditions heading into 2026.So let’s do this thing. First up, we’re talking about the rate cuts because, of course, we are. The Federal Reserve cut rates for the third consecutive meeting, basically doing what was largely expected of them. If you asked any economist, real estate investor, trader on Wall Street, everyone knew there was going to be a 25 basis points cut, which is exactly what happened. The federal funds rate now sits between target range of three and a half to 3.75%. And this is part of a trend. Yes, they’ve done it the last three consecutive meetings, but if actually you look back over the course of the last 15 months, they’ve actually brought rates down a considerable amount. 1.75% in just the last 15 months alone. And I know that might not feel like a lot, especially if you’re particularly interested in mortgage rates coming down. But I just wanna call out that if you look at this in a historical perspective, seeing rates fall that much over this short of a period of time is a lot.It’s probably because they overtightened. I think we could all probably say that now, but they’re doing basically what they need to do to hopefully bring it back towards a more balanced monetary policy. Now, that part, like I said, is not news. But some of the behind the scenes stuff that got announced yesterday, I think is news and is worth talking about because it does give us hints about where the Fed might be going, where other types of monetary policy things that might more directly impact mortgage rates are going to go. And there’s just all sorts of things we need to unpack. So the first thing I think that you need to know is that this was the most dissent in a Fed vote that we’ve had for a while. I know a lot of people think that Jerome Powell is a dictator or he just decides what monetary policy is gonna be.That is not how it works. There are 12 Federal Reserve governors and they vote on the direction of monetary policy. For a long time, five, six, seven years, basically since the beginning of COVID, maybe even below below that, the Fed governors have basically voted in a block. Like maybe there’s someone who disagrees, maybe there’s two people who disagrees, but this vote is the first time in more than six years that there were three Fed officials who voted against the Cut. Now that’s not crazy. It’s not like a split decision. Nine people still voted for it, three against it, but it shows to me that the Fed itself does not know where mortgage rates are going. There is increasing uncertainty about what they’re supposed to do. And, you know, people say the Fed should do this, Fed should do that. The Fed is not one thing, it’s 12 different people, and those 12 people are increasingly disagreeing about what they should do.And I’ll talk about, more about what that means in just a minute, but I thought the interesting thing about the dissent, the three people who voted against this, is they all weren’t doing it for the same reason. Two people said that they didn’t think that the cut was warranted at all. They’re probably people who are more worried about inflation than the labor market. Remember, the Fed has this dual mandate. Their job is to balance inflation and the economy overall, kind of the labor market, and they’re in a tough spot right now. I don’t think anyone could say that they’re in an easy position right now and these decisions are easy. Some people are gonna think inflation’s a bigger concern. Some people are gonna think labor market is a bigger concern. Two of the voters believed that actually inflation’s a bigger concern than the labor market and they shouldn’t cut rates at all.One of the voters though actually said that they’re very concerned about the labor market, not really concerned about the inflation, and so there should have been a bigger cut. So clearly the broad agreement that the Fed has had amongst its members over the last couple of years is starting to break down. But not crazy. Like I said, nine of the 12 voters felt that an, like a measured step was appropriate, that helping out the labor market, signaling to the market that they’re going to lower rates was appropriate. Even though there are still risks of inflation, they felt that this was the right thing to do. That was the majority view. Now, the Fed does release something called the summary of economic projections. I love looking at this. This is my favorite part of any Fed meeting. They basically pull the 12 voters and say, “Where do you think GDP is going?Are we going to recession? Where do you think the unemployment rate’s going? Where do you think the federal funds rate should go over the next couple of years?” And this, obviously, they don’t know, but maybe they know a little bit better than us. I think based on their track record the last couple of years, I don’t know if they could realistically argue they know much better than us, but they are at least informed economists, people who look at this stuff all the time. So it’s kind of helpful to know where they think things are going, because you can sort of back into some of the monetary policy based on that. What they are showing is that they think that inflation is going to peak in early 2026. So they think that because of tariffs, because of some of the immigration policy, inflation has picked back up this year.Again, nothing crazy. You know, it was heading down to the low twos, now it’s in the low threes. It’s above the Fed’s target, nothing close to where we were in 21, 2022, but it’s up. It’s been up. We haven’t gotten data for the last, like, three months, so we don’t really know what’s happening over the last couple of months, but it has been up. But the Fed sees that as short term. Those are famous last words. They called, uh, inflation transitory 21 and 22. That wasn’t right. That was just straight up wrong. But I think there’s reason to believe that this might be a more muted case of inflation. I am hoping so, because I’ve seen some other arguments that inflation might remain sticky, not go crazy, but like it, instead of going up to five or six or 7%, it might just, like, be really hard to get it back below three.And I think there are reasonable arguments there, but the Fed doesn’t think that’s gonna happen. Largely, they believe that inflation is gonna go down next year from about 2.8%. I’m using PCE inflation, not CPI, if any of you nerds care. Um, but then it will go down to about 2.5, then to about two, and then they think they’ll actually get to the Fed’s target closer to 2028. They are also forecasting no recession. They’re saying they’re expecting real GDP, inflation adjusted GDP to grow. About two-ish percent for the next four years, that’s about average. Average GDP growth is two to 3%, so they’re saying nothing crazy there. And as a result of that, because they don’t think there’s gonna be a recession, and they don’t think inflation’s going to be crazy, but it’s going to be sort of mild around the board, they’re saying that they’re only expecting one interest rate cut next year.Isn’t that crazy? That’s, that is less than I was expecting. I thought they would say more. They are saying, you know, we’re gonna end 2025, median federal funds rate, 3.6%. Next year, for the whole year, they’re saying the average is gonna be 3.4%. So that’s 125 basis point cut. The year after that, in 2027, they’re saying 3.1%. So as of right now, their path that they are projecting is just two more cuts for a total of 50 basis points over the next two years. Now, these are not promises. These are just forecasts, but the Fed is very honest that they change their opinions with every data print. Every time they get inflation data or GDP data or unemployment data, they change their minds, but I just wanted to call out, because I think it’s important that people know that we’ve gone from this period where everyone was expecting the Fed to be continuously cutting rates to a point where they’re saying like, “Hold the brakes.We don’t know what we’re gonna do, and our most likely path is not a lot of rate cuts.” So that’s something to keep in mind. Now, of course, you might be sitting there, and I would not blame you for sitting there and saying, “Why do I even care about this because it doesn’t even impact mortgage rates?” And that is true, right? People for years have been saying, “The Fed’s gonna cut rates, mortgage rates are gonna come down.” I have on this show for, I think years now been saying that that’s not really how this works, and hopefully we have enough evidence now that everyone understands that the Fed does not control mortgage rates. We just saw them yesterday cut rates 25 basis points. Mortgage rates went down by like 0.05%, a tiny little bit, and they’re actually up from where they were in September when the federal funds rate was higher.So hopefully we all understand now that the federal funds rate controls shorter term interest rates. This is not 10-year treasuries, which is what we care about with mortgage rate. It is not 30-year fixed rate mortgages. What it could help with is short-term borrowing costs. So it’s what people call the short end of the curve. It can help support asset prices and equities, like if you’re looking at the stock market, it could help bolster the stock market. It could sure up the financial system. It could even potentially help the labor market. But are these cuts helping mortgage rates in the first place? No. So I’m telling you this because, yes, people might be discouraged when they hear this news that the Fed’s not gonna cut rates much more, but hopefully you see now that that is not what matters when it comes to mortgage rates. We’re still sitting at 6.3%.In order for mortgage rates, residential mortgage rates to actually come down, we need one of two things to happen. There are other ways things can happen, but one or two major things typically can bring mortgage rates down from where we are today. We either need inflation to go down, ideally below 2%, which I think will probably take a while, or we need to go into a significant recession where people take their money out of the stock market and they put them into bonds. Those are the ways that this happens. Right now, it does not feel like either of those are imminent, right? There’s risks of a recession for sure, but like, are we, you know, in the next month or two gonna go into a deep recession? Doesn’t seem that likely. The data doesn’t support that. Inflation’s been going up for four or five months, and I think even if it turns the corner in early 26, the way the Fed expects, it’s probably a slow road down from there.And so until this log jam of uncertainty works itself out with inflation and recession, we’re not getting a lot of movement in mortgage rates. That’s why I’ve said next year, I think the range is gonna be between five and a half and six and a half percent, and my guess for an average is somewhere around 6.1, 6.2% for next year. I don’t think it’s gonna go down that much. Now, if you’re in commercial real estate, this could help because commercial loans are based on shorter term loans, right? You have a three-year arm, a five-year arm. Like I said, what the Fed does more directly impacts those shorter term types of loans. And so this could help HELOCs. It could help any loans that are tied to SOFR. Uh, it could help commercial loans. So that is good. For the coal commercial real estate industry, which needs a win, this could help, but again, temporary expectations because rates are not expected to come down much more than they are today.If there’s a big recession, that could change, but as of right now, people are expecting monetary policy to remain somewhat stable. Now, that’s the big news. That’s sort of what’s being covered everywhere in terms of the Fed news. But I just wanna call out something else happened yesterday with the Fed that not a lot of people are talking about. I wanna talk about it because I think it’s super interesting and it could be a stepping stone to actual real mortgage rate relief. We’re gonna talk about that, but first we gotta take a quick break. We’ll be right back.Welcome back to On the Market. I’m Dave Meyer. Before the break, we talked about sort of the headline Federal Reserve news, but what I wanna turn our attention to now is something else that happened with the Federal Reserve yesterday, because the big news is always what they’re going to do with the federal funds rate. As we said, they cut it 25 basis points, but yesterday, they did something else. They pulled out another tool of their little bag of tricks, and they announced that they would begin buying treasuries in January. Specifically, they’re going to be buying short-term treasuries. These are short-term loans. In a program they call reserve management purchases. So although this might sound like quantitative easing where the Fed has gone out and bought long-dated US treasuries or went out and bought mortgage-backed securities, they’re saying that this is different, at least for now.They are saying that because they are just buying short-term treasuries, it is not quantitative easing. Their goal in this reserve management purchases is to basically … It’s kind of like a technical move to ensure the smooth functioning of the financial system. They are trying to be proactive to address potential strains in short-term funding markets, and that they can ensure … Their goal is basically to ensure that that federal funds rate, the one we were just talking about, that the range is to be between 3.5 and 3.75, they basically need to put liquidity into the system to make sure that the costs that banks pay to borrow money overnight from the Fed, that’s what the federal funds rate is, stays between 3.5 and 3.75%. If they didn’t make these purchases, if they didn’t inject liquidity into the system, their concern is that even though they lowered the target, in reality, because there wasn’t enough money, there wasn’t enough liquidity, that banks would be paying more than their intention, and that could basically negate the entire point of the interest rate cuts in the first place.Now, I know this is, like, real minutiae. This is, like, literally the plumbing of the financial system, but this stuff matters. I think a lot of people have learned over the last couple of decades that the stuff that you usually don’t see going on in the financial system often carries big, considerable impacts on the rest of the economy, and for normal people like you and me who normally have nothing to do with this. Now, again, the official view here is saying that they are just doing this technical thing. They’re trying to ease liquidity pressure, and they don’t want any stress in the money markets, making sure that the wheels of the financial system keep turning. Of course, there are more skeptical views out there, most notably, you know, if you guys know who Michael Burry is of the big short fame, he’s been saying that, “I don’t know if this is really as innocuous as it seems.” He’s basically pointing out that it’s just another piece of evidence that the economy is more dependent on the Fed than ever, that they need the Fed to essentially be micromanaging the economy in order for it to stay afloat.Because what they’re saying about this stress in the market is that if they didn’t do this, if they didn’t start buying these treasuries, and it’s a lot, it’s $40 billion of treasury, so it’s not an insignificant amount of money. If they didn’t do this, then rates would go up, and that could negatively impact the stock market. It could negatively impact short-term interest rates. Now, I tend to take them at their word for now, that they are just trying to make sure that the policies are working in the way that they do. But the reason that I am bringing this up is because I have said before on this show that I think that there is a chance, I don’t know if it’s the most probable chance, but that there is a chance that the Fed will start buying long-dated treasuries or mortgage-backed securities again. They have not said that they are going to do that.They have said that they are not going to do that. But as housing affordability becomes more and more in focus, and if there is more stress in the financial system, if the economy starts to falter, if we start to see the labor market really start to deteriorate, which, by the way, the Fed yesterday said that they thought government jobs numbers are being overestimated by 60,000 per month, so maybe the labor market isn’t as good as they are saying that it is. If all these things happen, the Fed, the President, everyone, the Treasury, might start looking for ways to improve housing affordability. They stimulate the economy in new ways that don’t have to do with just lowering the federal funds rate, and buying mortgage-backed securities and buying long data treasuries might be on the table. This is one step closer to that. I don’t think we’re close to it, don’t get me wrong, but to me, the fact that they no longer are doing quantitative tiding, and they are starting to add to their balance sheet, this is a big shift in policy.They’ve been selling things off their balance sheet for years, now they’re adding to it again. So it just sort of paves the way for more ways to add to their balance sheet in the terms of long-dated treasuries and mortgage-backed securities, and the reason I’m telling you that is because that would really bring down mortgage rates. That is not like the federal funds rate where it’s like, “Oh, this kind of has this indirect long tail way of impacting mortgage rates.” If the Fed starts buying long-dated treasuries or mortgage-backed securities, you will see mortgage rates come down. That could be the thing that drives it down below 6%. That could drive it down to the low fives. If they go crazy, which I doubt they will, it could go into the fours. So that is the thing to watch for when you see these Fed meetings. It’s a long explanation, but I really do think it’s important here because to me, this is kind of the X factor for 2026.I’m not saying it’s likely to happen, but I think there is a chance that it happens, and it’s something you’re gonna wanna know about if it happens, because if this does ultimately bear out, it’s gonna change the housing market very fundamentally. Demand is gonna go up. We’ll probably see supply increases, home sales volume is going to go up. Some people think this could really send us into crazy appreciation. I don’t necessarily think that, but this would be a major shift, and they are taking a step towards it. So this is something we are going to keep an eye on, on, on the market for the next year, or indefinitely, and I wanted to give you this explanation of what’s going on here so that when we talk about it, you have the context to understand why this really, really matters for the housing market. And I would say definitely more than what’s going on with the federal funds rate.This is the real news we need to watch for from the Fed, yes or no, are they gonna start quantitative easing again? I don’t think it’s yet like a fifty fifty chance. It’s not that probable, but that probability in my mind just went up yesterday. That’s what we got for the Fed News. Hopefully you guys understand that there’s a lot going on here. Even though mortgage rates didn’t move that much, there’s a lot going on behind the scenes that tells us that we could be in store for more changes in 2026. We are gonna take one more quick break, but when we come back, we’re gonna talk about some new inventory and housing affordability data that we have that gives us some indications about which markets are going to be hot and which ones might struggle in 2026. We’ll be right back.Welcome back to On the Market. I’m Dave Meyer. We’ve talked about the Fed. We’ve talked about them adding to their balance sheet, increasing, in my opinion, the possibility, although still remote, that we’ll see quantitative easing in 2026. Now we’re gonna turn our attention to some housing market data, specifically inventory and affordability data that gives us a look at what markets might do well next year and which ones might see the biggest corrections. Now, as you know, I believe that inventory is the story of 2025. It’ll probably be the story of 2026 unless there’s quantitative easing. That, that’s the story of 2026. But for right now, inventory is still the story. It is up a healthy amount this year. It depends on who you ask, but if you are looking at realtor.com, they’re saying it’s up about 14% year over year, which sounds like a lot, and it is a significant increase over where it was last year.Last year, this time, we’re at about 950,000 active listings. Now we’re at about 1,070. So it’s gone up about 1120,000 in the last year, and that’s important. And I think you see this a lot in the news that inventory is skyrocket. You see a lot of the housing bros or crash bros say that this is a sign that the housing market is going to crash because inventory is going up and up and up. But I think there’s a couple things odd here. There’s something called the base effect, which is when you compare to an artificially low last year, the growth in one year looks really high. And as we know, during the pandemic, inventory was artificially low. And so seeing it grow from year to year is not surprising. That is exactly what you would expect. It’s actually what you should want. That is a sign of a healthier housing market that we are getting closer to pre-pandemic levels.Now, that’s what I wanna focus in here on because I think the measure that we should be looking at is not what happened year over year, but is what is going on in inventory compared to pre-pandemic levels because the last four or five years have not been normal. It’s hard to say like, oh, compared to 2022, inventory’s doing this and that has these huge implications because those were super weird years. But by comparing to pre-pandemic levels, we have a comparison at least to the last known, quote-unquote, normal housing market. So let’s talk about that and talk about some of these geographical differences because they’re kind of crazy. Overall, national inventory is still down below pre-pandemic level. So if you see those sensationalist headlines, remember this. Overall inventory, homes for sale in the US, still below where they were in 2019 by about 70,000 properties. 70,000 is not that much, right?It is getting pretty close. So I think that’s good and is probably why we are seeing the signs that the housing market is getting a bit more healthier. The balance between buyers and sellers is getting better. Inventory is restored to normal levels. Days on market are starting to get back to normal levels. It’s largely because this inventory is starting to normalize. So overall, I don’t see this as a panic. This is not a reason to panic. But if you actually break this down by individual markets, you’ll see there probably are some states that are seeing conditions that are likely to lead to significant declines in prices. And by significant, I don’t mean like crash. I mean like four, 5%. Like to me that’s significant, it’s not a crash, that’s a deep correction, right? And then there are other states that are still well below pre-pandemic level.I’m guessing if you listen to the show, you could probably guess what those regions are, but I want to dig into this a little bit. I’ll even throw up a map on there for anyone who’s watching this on YouTube right now. Yellow is sort of places that are below. Pre-pandemic levels, blue are places that are above. And everything in yellow, most of the places in yellow that are deep yellow are all in the Northeast and the Midwest. So the state right now with the lowest inventory compared to pre-pandemic levels is Illinois. 57%. That is a lot. 57% below pre-pandemic levels, even here in 2025, almost 2026, that’s a lot. New Jersey, negative 55%. New York, negative 40. Alaska, actually, that’s outside the Northeast. But Alaska minus 40. You actually see North Dakota as an outlier there, minus 40. A lot of the Midwest as well, Wisconsin, Minnesota, Michigan, Ohio, Pennsylvania, Vermont, all of them still below pre-pandemic levels.Now on the other end of the spectrum, you see a lot of markets, I would say, are mostly in the Sunbelt and in the West. So the state with the most inventory above pre-pandemic levels is Arizona with 39%. That’s also a lot. Like, uh, there was normal healthy levels of inventory in 2019. Now you’re 40% above that. That’s a lot in Arizona. In Texas, it’s 34%, Tennessee is 37%. Florida, which is sort of one of the epicenters of a crash right now, is 23%, not as crazy as these other ones, but that’s still up. You also see Colorado, Washington, Nevada, all up there as well. Now, the reason this matters is that any market where inventory is significantly above pre-pandemic levels, I think is at risk of price declines. Arizona is at risk of price declines. Texas, Tennessee, Colorado, Washington State, Utah. These are places that I think we will see downward pressure on prices in the next year.This is just how it works. When there is an increase of inventory, there is going to be downward pressure on pricing. And I want to remind people that inventory does not mean the number of properties that get listed for sale. That is called new listings. Inventory is a measure of how many properties are for sale at a given point in time. And it sounds like the same thing, but it is an important difference because inventory, unlike new listings, actually measures both supply and demand, because inventory can only go up if there is an imbalance between supply and demand, because even if there’s more new listings in a market and there is a proportionate increase in demand of people who wanna buy those new listings, inventory won’t go up because those properties will sell quickly and will keep inventory low. That’s why inventory is such an important story.It’s such an important metric in our industry because if it goes up, it shows an imbalance in supply and demand, and that’s what we’re seeing in those markets. On the other end of the spectrum, places like New Jersey and Connecticut and Illinois are probably gonna see upward pressure on pricing next year, right? If you have far fewer homes for sale, if demand even stays even close to what it’s been over the last couple of years, you’re probably gonna see prices continue to increase in those markets. And that’s why I was saying that this data that we have is an indicator of which markets will perform well next year and which will struggle. Now, I’m not saying that means where you should invest or not, but I do think it means where you should change your tactics because you’re gonna wanna be careful in states that are gonna have downward pressure like Arizona or Tennessee or Texas or Florida.And you’re probably not gonna have as much negotiating leverage or ability to buy deep in New Jersey or Illinois or in the Northeast. That’s just how it works. We’re in two totally different markets. The conditions of buying in Arizona and the conditions of buying in Illinois are completely different right now. They couldn’t be more different. And so you, as an investor or someone who works in this industry need to understand what’s going on there and make your strategy accordingly. Now, obviously, state level data doesn’t tell the whole story. Individual metros matter the most. And so I’ll just give out a couple of things here for you to know. Florida does still continue to see some of the most significant decreases. Punta Gorda, 83% above pre-pandemic levels, that’s crazy. But then you see markets in Florida that are strong, right? You still see, like, Miami doesn’t have crazy inventory growth.Orlando doesn’t have crazy inventory growth, but the, it’s very polarized. So you see some of the most dramatic changes there. Austin, up 54%, Memphis, up 58%. Denver up 49%. San Antonio, 42. Phoenix is up there as well. So those are the markets that are seeing the most significant declines, and those are sort of like big markets. There’s obviously still small markets that are experiencing these as well. Again, the regional patterns hold. If you’re looking at cities that are seeing the strongest markets, Hartford, Connecticut, minus 71%, Rochester, New York, minus 52, Cleveland minus 43, Chicago minus 55. These are markets, individual markets that are going to stay strong. Now, I do wanna talk about affordability too in addition to inventory, but I just wanna call out one other thing here. In the data that we’ve seen, I think that inventory growth is going to moderate. You know, in certain areas, it’s going to keep going up, but there’s a new stat that new listings, that stat that shows how many people list their property for sale, that went down year over year as of the last reading, according to Redfin.Do you hear that? Crash bros, everyone hear that? It is not this spiraling crisis right now. There’s actually less people listing their property for sale this year than there was at the same time last year. That is already adjusted for seasonality that doesn’t just mean because it’s in December. This is this December, lower than last December, because would be sellers are pulling back. This is what you would expect to happen, and I just wanted to call that out because it means we are likely in a correction and less likely to be in a crash. Last thing I wanna get into today was just about affordability because I think the two things, like I said, inventory’s gonna dictate which markets do well, but as you probably know, my thesis about the whole housing market is that affordability is the key. And that markets that are affordable, generally speaking, are gonna perform the best and are gonna hold up the best during this correction.Now, of course, there are going to be exceptions to that rule, but I think generally speaking, that is true. Look at this example. Compare Pittsburgh, which is the most affordable housing market in the country, not because it has the cheapest homes, but because when you compare home prices to incomes, it’s the best ratio. Pittsburgh. 54% of houses in Pittsburgh are considered quote unquote affordable to the average people who live there. More than half. That’s pretty good. Compare that to San Francisco. Just as an example, only 7% of homes are considered affordable. Even in that market where salaries are massive, only 7% of homes are considered affordable. And San Francisco is not even the lowest. Miami, Miami, Florida, 0.4% of homes are considered affordable. So basically none. No homes are affordable. And this isn’t just in the expensive places that you think of like San Francisco or Miami.If you look at Dallas and Houston, big metros, huge economies, good markets, but, you know, relatively less expensive than some of these coastal cities, they still have under 15% of homes considered affordable. When you zoom out, you see that out of the 34 largest US metros, about a dozen of them, only about 12, a third of them, roughly, have more than 30% of listings that are affordable. That means that two-thirds, less than one-third of properties are affordable. That’s not a great sign for the housing market, in my opinion. Nationally, over 75% of homes are considered unaffordable. And I found this particular status kind of depressing. The average American household to be able to afford a home needs a raise of $33,000 per year to be able to afford a median priced home. Now, take that into account because the median income in the US is $83,000.So you need roughly a 40% raise to be able to afford the median price home. This is why housing is unaffordable and why I think that the fact that we’re in a correction makes sense. People just can’t afford it. And until that affordability improves, the housing market is gonna continue to be slow. Now, I am hopeful that we’ll see home prices on a national level sort of stagnate, wages go up, mortgage rates come down a little bit and improve that, but I do think it’s going to take time. And the reason that this matters is, again, if we’re trying to understand how markets are gonna perform and how to adjust your strategy, I personally have a hard time imagining prices will go up in places where prices aren’t affordable. Now, there are gonna be outliers, like I said, San Francisco, New York City. Those places have just enormous … They sort of defy gravity, those places because their, their salaries are so high, there’s such job creation engines, there’s so much excitement about AI in San Francisco right now, for example.Like those places might defy gravity. But average places that are unaffordable, like I mentioned Houston and Dallas, you see actually New Orleans being unaffordable to the average price person. Places like Lincoln, Nebraska have very low affordability places. Of course, these places have jobs, they have economies, but not the kind where people make insane money and are willing to pay up for access to those economies and for the amenities of those cities. So I think those places are gonna have flat or declining prices because they need, those cities need more affordable housing. And so I do believe that prices are gonna come down in markets like that, and that’s something that you should take into account. Now, I’m not saying that that means you can’t invest there. I think there’s gonna be good deals in those kinds of markets, but I do just think that you should be looking at these things.Looking at inventory numbers, looking at affordability relatively in your market is gonna tell you a lot about price direction and it’s gonna tell you a lot about volatility. Markets that are more affordable, in my opinion, are gonna be less volatile, they’re gonna have less risk. And that’s why for my rental portfolio, that’s where I’m focusing, right? Markets in the Midwest, I feel pretty good about them. They still could see declines. I’m underwriting for that. I understand that, but I think there’ll be much more modest declines and they’ll probably recover more quickly because they’re more affordable. That has been my thesis about the housing market for years. I have so far been correct about that. And I’d recommend you at least look at this. It doesn’t need to be your be all, end all metric that you look at, but between inventory and affordability, you’re gonna learn a lot about the direction of the market you’re considering investing in going into next year.You can find a lot of this data on realtor.com, on Redfin. It’s all for free. So do yourself a favor, go and check out this data for yourself. All right, that’s what we got for you all today here on On the Market. Thank you all so much for listening. I’m Dave Meyer. I’ll see you next time.
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