👋👋 Good morning real estate watchers! Today, we are going to discuss how delistings are up 47% year-over-year. To recap, sellers don’t want to sell, buyers can’t afford to buy, and builders would rather knit than build. At this point, the housing market isn’t ‘cooling off,’ it’s in full-blown cryogenic freeze with Walt Disney.

But first, here’s what we’ve been paying attention to this week…

1️⃣ Tiny Homes, Big Dreams: A new bill proposes government-backed loans to help homeowners finance backyard tiny homes and ease the U.S. housing shortage. (WSJ)

2️⃣ AI Power Grab: xAI has purchased a 114-acre former Duke Energy power plant site near Memphis for $10, positioning itself to potentially expand its massive AI infrastructure just six miles from its existing 1-million-square-foot data center, which aims to host 1 million GPUs. (Bisnow)

3️⃣ Mixed Signals: The multifamily housing market shows mixed signals, with June's seasonally adjusted annual rate (SAAR) for starts jumping 30.6% to 414,000 units and permitting increasing 8.1% to 478,000 units, despite ongoing economic uncertainties and high mortgage rates that are hampering single-family construction. (RealPage)

4️⃣ Price Slide: Home prices slipped 0.1% in June for the third straight month, with 30 of the top 50 metros seeing declines. Washington, D.C., led the drop, dragged down by federal job cuts and what might be the nation’s most expensive game of musical chairs. (Redfin)

5️⃣ Rent Wins Again: Renting a starter home saved Americans an average of $908 per month in June compared to buying, with only Pittsburgh bucking the trend. Despite a slight seasonal uptick, rents fell year-over-year for the 23rd straight month, signaling a softer rental market. (Realtor.com)

TOP STORY

In 2008, you could spot the collapse coming from a mile away; if you were paying attention and didn’t work at Lehman Brothers. But in 2025, the tremors are quieter. No screaming headlines (yet), no mass foreclosures (so far), but there’s an unsettling creak in the rafters of the U.S. housing market, and some economists are wondering if the roof might be sagging.

“I sent off a yellow flare a few weeks ago,” said Mark Zandi, chief economist at Moody’s Analytics. “But now I think a red flare is more appropriate.” That’s the economic equivalent of yelling “fire” in a crowded open house.

Zandi isn’t alone in sounding the alarm. Mortgage rates remain stubbornly pinned near 7%, homebuilders are backing away from land purchases, and new home sales are sliding like they’re wearing socks on hardwood. Sales of new single-family homes sank 13.7% in May compared to April. Single-family starts dropped 4.6% in June. Permits (aka future pipeline indicators) are also down. Builders are waving the white flag, not just trimming prices but in many cases retreating altogether.

Homebuilders: From “Buy Down” to Burnout

Throughout early 2025, builders attempted to counteract high interest rates by offering mortgage rate buydowns, effectively subsidizing lower rates for buyers. That strategy, Zandi said, has run out of steam. “They are giving up. It’s simply too expensive.”

And when builders stop buying land? That’s not just a yellow flag, it’s the neon Las Vegas marquee of real estate warnings. As Zandi put it: “New home sales, starts, and completions will soon fall.”

The result? Inventory will shift, but not in the way buyers were hoping. The inventory of existing homes has risen slightly, but many sellers are realizing that listing a house in a high-rate environment is like throwing a party with no music or booze; no one’s showing up. Realtor.com reports delistings are up 47% year over year as homeowners test the waters, then yank their properties when reality doesn’t meet Zillow-fueled fantasy.

Prices: Going Sideways or Sliding Downhill?

For months, analysts marveled at the resilience of home prices in the face of affordability headwinds. That resilience may be eroding. The Case-Shiller 20-city index showed a 0.3% monthly drop in April, steeper than March’s revised 0.2% decline.

Meanwhile, 38% of builders cut prices in July, a steady increase from previous months. These aren’t fire sales—yet—but it’s an undeniable sign of stress.

Even the homeowner "lock-in" effect—where sellers stay put to preserve their low mortgage rates—can’t hold back reality forever. As Zandi notes, “Locked-in homeowners must move… they can only work around these needs for so long.” Life happens. Kids outgrow bedrooms. Jobs shift cities. Divorce attorneys stay busy.

The Broader Economic Picture: When Housing Sneezes…

The real estate sector isn’t just a barometer; it’s the canary in the macroeconomic coal mine. Housing has historically led recessions, and this time might not be different. Citi Research recently cited the late economist Ed Leamer’s work, reminding us that “residential fixed investment is the most interest rate sensitive sector in the economy.”

Translation: If builders and buyers both tap out, we’re in for turbulence.

Zandi agrees: “Housing will soon be a full-blown headwind to broader economic growth.”

And this isn’t happening in a vacuum. Add Trump’s tariff whiplash and a jittery consumer confidence index, and you have an economy already carrying a bit too much caffeine and not enough sleep.

The Back Half of 2025: What to Watch

As we look to Q3 and Q4, several indicators will shape the narrative:

But even if the Fed blinks, it may be too late to reverse course quickly. Housing is like a cruise ship, it doesn’t pivot on a dime.

So are we headed for a crash, a correction, or just a soft reset? That depends on which metaphor you believe in more: the straw that breaks the camel’s back or the pressure valve that releases just in time.

Either way, Zandi’s red flare is in the sky. And if you’re in the market, buying, selling, or just emotionally invested, it’s worth looking up.