Zillow reports 53% OF HOUSES IN THE RED. (no one saw this coming)

Key Concepts

Housing Market Downturn: A period characterized by declining home values, increased inventory, and reduced buyer demand.
Zestimate: Zillow's proprietary home valuation tool.
Inventory: The number of homes available for sale on the market.
Months of Supply: A metric indicating how long it would take to sell all available homes at the current sales pace.
Sunbelt States: A region in the southern United States known for its warm climate and growing population.
Affordability Gains: A situation where home prices decrease relative to incomes, making housing more accessible.
Housing Cycle: The cyclical nature of the housing market, characterized by periods of growth, peak, decline, and trough.
Negotiating Power/Leverage: The ability of a buyer to influence the price and terms of a real estate transaction.
Home Price Forecast: Predictions of future home value movements based on market data.

Housing Market Declines and Zillow Data

The US housing market is experiencing a significant downturn, with home value declines becoming more widespread. According to Zillow, 53% of homes have lost value over the past year, marking the largest downturn since April 2012. Homeowners in Florida, Texas, and Northern California are seeing the most substantial value drops, with over 90% of houses in Northern California experiencing a Zestimate decrease. This trend is creating opportunities for homebuyers as sellers are increasingly compelled to cut prices. Examples include homes listed for $249,000 and properties in Cape Coral, Florida, now priced below $300,000, with Zestimates down over $60,000 from their peak.

Despite these localized declines, national home values remain near record levels. Inflation-adjusted home prices are still over 80% above their 100-year average, suggesting that the current downturn is likely just the beginning.

National Association of Realtors (NAR) Predictions vs. Data

The National Association of Realtors (NAR) predicts a market rebound in 2026, forecasting double-digit growth in home sales and a 4% price increase. They also anticipate a measurable increase in sales next year, with their chief economist stating that nationwide home prices are not in danger of declining.

However, the speaker cautions against solely relying on NAR predictions, noting that their members (realtors) have a vested interest in promoting a bullish market outlook. The speaker emphasizes the importance of examining actual data.

Current Market Data and Trends

National Home Values: Over the last 12 months, national home values have been flat, with no significant growth or contraction, according to Zillow.
Single-Family vs. Condo Values: Single-family home values have seen a slight increase of 0.2%, while condo values have declined by 1.5%.
Florida Market: Florida is experiencing a significant collapse in its condo market, with values down 9.9% in the last 12 months, the largest one-year decline since the 2009 housing bust. The single-family market in Florida is the worst-performing in the US, down 4.9%, though not as severely as the condo market.
Declining Single-Family Markets: Other states experiencing declining single-family home values include Georgia, South Carolina, North Carolina, Tennessee, Texas, Arizona, California, and Nevada.
Zestimate Reliability: While some homeowners and realtors express skepticism about the Zestimate, Zillow reports an average error rate of 1.8% for on-market homes and 7% for off-market homes. The speaker argues that when aggregated across many properties, the Zestimate becomes a reliable indicator of market trends.

Inventory and Buyer Demand Dynamics

A crucial factor influencing market direction is inventory. According to Realtor.com, there are over 1.1 million active listings in the US housing market, a 15% year-over-year increase, reaching the highest level since 2019. This near pre-pandemic inventory is occurring while buyer demand, measured by mortgage applications, remains about 30% below the pre-pandemic average.

This imbalance between rising inventory and declining demand is leading to an increase in the "months of supply" on the national market. As months of supply increase, sellers are becoming more desperate to cut prices, explaining the current softening of the market and the widespread decline in home values and Zestimates.

Regional Market Variations

Market conditions vary significantly by location:

New York: Single-family home values in New York State are up 3.9% year-over-year, with growth observed in cities like Albany, Utica, Syracuse, Buffalo, and areas like Westchester, the Bronx, Manhattan, and Brooklyn. Condo values in Manhattan and Brooklyn are also trending upwards.
Sunbelt States: Single-family home values are trending downwards in Sunbelt states and are likely to continue this trend due to increasing inventory.
Tennessee: Has 50% more homes for sale than normal for October, with over 34,000 homes listed, significantly above the long-term average.
Texas: As of October 2025, there are 134,000 homes for sale, well above the long-term average, indicating downward price pressure.
California: Inventory has reached its highest level since 2019, with 71,000 homes for sale as of October 2025. Simultaneously, home sales activity has plummeted to one of the lowest rates in the last 12 years.

Performance Scatter Plot Analysis

A scatter plot of single-family and condo home value performance over the last 12 months (through October 2025) reveals distinct market behaviors:

Best Performing States (Top Right): North Dakota, Connecticut, Alaska, Pennsylvania, Nebraska, Rhode Island, Iowa, and Kentucky are seeing increases in both single-family and condo values.
Worst Performing States (Bottom Left): California, Texas, Arizona, Florida, Washington D.C., South Carolina, and Nevada are experiencing declines in both single-family and condo values.
- In California, single-family values are down 1.9% and condo values are down 3.7%.
- Florida is particularly notable on the bottom left.
These states in the bottom left are experiencing the most significant affordability gains.

Housing Cycle and Future Outlook

The speaker asserts that the housing market is shifting into a downturn, characterized by falling prices and increasing inventory. This shift is occurring incrementally, as sellers are slow to accept the reality of declining values. This slow adjustment is typical of the housing market, which is described as a "slow-moving beast."

For patient buyers, 2026 is anticipated to be a rewarding year. The speaker predicts a significant surge in listings by the spring of 2026, potentially reaching a 10-year high in inventory by mid-2026. While a modest increase in home sales is possible, the speaker doubts the NAR's prediction of a 15% increase.

Historical Context and Seller Behavior

The speaker draws a parallel to 2007, when the NAR also predicted a market rebound that did not materialize. This historical example underscores the importance of relying on data rather than optimistic forecasts from industry associations.

For buyers looking to purchase in the next 12 months, a key warning is that even in a declining market, some sellers will continue to overlist their homes. The downturn is not uniform, and negotiation will remain crucial.

Austin, Texas Case Study

Austin, Texas, is highlighted as a strong buyer's market, with over twice as many home sellers as buyers. Despite values being down 25% over the last three years and substantial inventory, only about 48% of post-pandemic sellers in Austin are listing their homes at a loss. This indicates that even in a down market, many sellers still aim to profit.

Reventure App and Negotiation Strategy

The speaker promotes the Reventure app as a tool for buyers and investors to gain an edge. The app offers:

Home Price Forecast Reports: These reports provide objective data on where the market is heading, which can be used as leverage during negotiations.
Granular Data: The app allows users to access detailed data for specific zip codes, including forecasts for potential price drops.
Single-Family and Condo Value Breakout: This feature provides specific insights into different property types.

The speaker advises users to upgrade to a premium plan on Reventure.app to access these reports and forecasts. A monthly pass costs $49, and an annual pass offers a 32% discount. The ability to present these objective data-driven forecasts to sellers can empower buyers to negotiate lower prices.

Conclusion and Takeaways

The US housing market is in a clear downturn, with widespread home value declines, increasing inventory, and softening buyer demand. While some industry groups predict a rebound, current data suggests a continued period of adjustment. For prospective buyers, 2026 is poised to be a favorable year, offering increased inventory and significant negotiating power. Utilizing data-driven tools like the Reventure app can provide a critical advantage in navigating this evolving market and securing favorable purchase prices. The key takeaway is to be patient, informed by data, and prepared to negotiate effectively.