The U.S. housing market is currently experiencing "the great stall," characterized by flat price growth of 1% to 2% year-over-year and mortgage rates expected to persist in the mid-6% range through 2026. Homebuyers and investors should aggressively leverage seller concessions, which average close to 5% of the purchase price, to secure valuable rate buy-downs and closing cost coverage. When structuring deals, strictly adhere to loan-specific concession limits, such as the 3% standard cap for conventional loans and the 6% limit for FHA loans. To protect your cash flow and build instant equity in this sluggish environment, underwrite your real estate purchases conservatively by aiming to buy 5% to 8% below market comparables. While a national housing crash is unlikely due to strong fundamentals and a low national mortgage delinquency rate of 3.35%, watch out for localized market drops of 3% to 5% in parts of Florida, Texas, and Washington.

U.S. Real Estate Housing Market ("The Great Stall")

• Market Overview: The national housing market is experiencing a period referred to as "the great stall," characterized by flat, sluggish, and boring conditions where home prices remain relatively unchanged year-over-year.
• Price Trends:
  • Nominal home prices are experiencing modest gains, up about 1% to 2% year-over-year depending on the data source (e.g., Redfin, NAR).
  • In inflation-adjusted (real) terms, prices are actually declining, meaning purchasing power is decreasing.
  • A national housing market crash is considered unlikely due to stable fundamentals, though localized markets (such as parts of Florida, Texas, and Washington) may see minor drops of 3% to 5%.
• Inventory & Supply:
  • Overall housing inventory is dead flat, showing less than a 1% difference year-over-year.
  • New listings are up 8%, but this new supply is being absorbed by an equivalent 6% year-over-year rise in pending sales, keeping the market balanced.
• Mortgage Rates & Affordability:
  • Mortgage rates are expected to stay in the mid-6% range for the remainder of the year (optimistically around 6.2% to 6.3% if geopolitical conflicts ease). Rates are not anticipated to drop below 6% in 2026.
  • Despite worsening affordability and recent macroeconomic stress, demand has shown high resilience and has not pulled back significantly.
• Risk Indicators (Delinquencies & Foreclosures):
  • The national mortgage delinquency rate sits at 3.35%, remaining flat month-over-month and below the long-term average of 4% (as well as below 2019 levels).
  • FHA loans show higher stress, with serious delinquencies (90+ days) near 6%, significantly higher than in 2019, though they represent a smaller portion (11%) of the overall mortgage market.
  • Foreclosure starts are up 25% year-over-year (largely due to a return to normal run-rates after artificially low historical numbers), but remain 29% below 2019 levels.

Takeaways

• Leverage Seller Concessions: Nearly half of all home sales currently feature seller concessions, averaging close to 5% of the purchase price on homes where they are applied. Investors should negotiate for concessions—such as closing cost coverage or interest rate buy-downs—rather than relying solely on lower purchase prices.
• Understand Loan Limits on Concessions: Be aware of maximum allowable concession limits based on loan types:
  • Conventional loans: Up to 3% (or up to 9% if putting down 25%+ with lower down payment tiers varying).
  • FHA loans: 6% limit.
  • VA loans: 4% limit.
  • Conventional investment properties: 2% limit (DSCR loan limits vary by specific lender).
• Underwrite Conservatively: With the market remaining stable but sluggish, investors should underwrite deals conservatively—aiming to buy 5% to 8% below market comps or securing valuable rate buy-downs to protect cash flow and build instant equity.