Is The Housing Market Frozen?

Welcome to the Skeptical Investor weekly article on BP! A frank, hopefully insightful, dive into real estate and financial markets. From one real estate investor to another.

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This week, we’re talkin’ is the housing market “frozen?” Is the consumer holding up? What is in store for rents in 2026? And, I dive into two new reports on the state of multifamily real estate.

Let’s get into it.

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Today’s Interest Rate: 6.34%

(☝️.15% from this time last week, 30-yr mortgage)

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The Weekly 3 in News:

1. -Despite tariffs and immigration headlines, residential construction material and labor cost inflation remain in check—at least for D.R. Horton D.R. Horton execs said their construction costs—including labor and materials—are down -1% quarter-over-quarter and -1.5% year-over-year (ResiClub).
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3. -ADP Will Provide Free Private Sector Job estimates each week in the absence of government data during the ShutDown. Yay we have labor data (ADP)!
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5. -Nashville News - New Music Venue planned in Nashville!Live Nation unveiled new renderings for The Truth, a 4,400 capacity indoor music venue in Wedgewood Houston. The Truth is built for live performances providing a bold, modern stage for artists and fans alike. The upcoming venue is located 5 minutes from Downtown Nashville at 424 Chestnut Street (CityNowNext).

Is the Housing Market “Frozen?”

I saw this post online from Kobeissi (which I do like, usually) and just had to comment for perspective.

Sometimes they can be quite pessimistic.

And it seems there are more and more doomers out there from CNBC to ranters on Twitter, calling for a recession, housing crash, a “national divorce,” or all-out armageddon in the streets.

You stop it right now. Stop it.

And they often do it with cherry-picked stats, and confusing charts.

Bro. R-E-L-A-X.

On real estate, is sales activity down from normal levels? Yes.

For good reason, we are in year three of a high-interest-rate environment. This makes mortgage payments higher. And the monthly payment is what people track most because that's what comes out of their checking account.

But it’s not frozen. Not even close.

Existing homes totaled just over 4 million in September.

4 Million!

Now, that’s not a more normal 6 million, but it’s not “frozen.”

And, looking back 15 years, we get even more perspective.

Damn, 2020-2021 was wild...

Remember, most sellers are buyers, so these are people choosing to purchase a home at a little over 6%.

Down 20-30% in most regions, yes. But still plenty of activity in the US housing market.

The Frost Has Not Arrived in Nashville.

A local example. Home sales this October were particularly strong in my home market of Nashville:

Sales activity was higher than in 2024 and 2023.

Why?

Well, mortgage rates have been down steadily since January of this year.

This will continue to improve home sales activity (and prices will continue to rise).

Doomer: “But, Skeptical Investor, high mortgages are stressing the consumer!”

Doomer: Hide ya kids! hide ya wife!…(classic). “

Me: “Not really.”

The average American is doing well, even with a higher mortgage payment. In fact, the cost of a mortgage as a percentage of disposable income is rising, yes. But more accurately, it is normalizing from an extreme low base during the zero-interest-rate policy era, 2020-2021.

And consumer retail sales are still quite healthy, up YoY.

And just today, the (often conservative/pessimistic) Atlanta Federal Reserve forecast a 4% GDP growth for Q3 of this year. Significantly above the consensus estimate.

Boom!

So…

…just know, people, millions of people, are still buying and selling homes.

They are choosing to trade in that lower mortgage rate to move to a desired location, or change jobs, or get divorced, or because they have finally saved up enough for a home, or whatever else life throws at ya…

So when you see the “doomer” posts online, including by reputable/popular sources, spoon a lump of skepticism into your coffee, take a sip, and dig a little deeper.

Of course, this could always change. But so far so good.

Let’s take a moment to look at multifamily real estate, one of my favorite asset classes.

The State of Multifamily Real Estate

The other week, we got fresh multifamily numbers from housing property manager Yardi and the National Association of Realtors, both of which I found elucidating.

I summarize below.

In general, continued heightened supply due to Fed 0% rate policy of 2020-2021 will bring modest rent growth for the next 12 to 18 months. After that, a sharp drop off and supply will have rent growth rates recovering.

Let’s dig in more.

According to them, the multifamily market continues to stabilize, with absorption steady at about 506,000 units and new completions down 18%. The sector is still working through past heightened supply, as I have written about before,with new supply still outpacing demand, but with the cliff edge approaching. New projects in the pipeline have slowed dramatically, down YoY pretty much since 2022.

And from NAR: “Units under construction have declined for two years and are now 33% below last year’s levels. Although new supply still exceeds demand by 13%, the gap is narrowing.”

Consequently, vacancy rates have risen slightly to 8.2%, but, importantly, rents have not decreased.

Current rent growth sits at a modest 1%, but Yardi does predict it will stay below 2% until 2027.

Why?

• -Elevated new-supply deliveries returning to pre-COVID levels.
• -Moderating household formation amid a softening labor market and decelerating population growth.
• -Persistent high long-term interest rates, fueled by decent GDP growth and elevated federal deficits/debt burdens, keeping mortgage rates elevated and multifamily turnover suppressed.

Yardi’s year-over-year (YoY) national rent growth projections:

• -2026: Mid-to-low 1.2% range.
• -2027: 2%.
• -2028 and beyond: 3.4–3.8%, reflecting a modest ramp-up.

Here is where NAR sees the strongest absorption and rents:

Macroeconomic Context

The Yardi report provides additional color against strong, expected economic numbers for the second half of 2025.

In summary, without any edits from me:

• -“[GDP: For the rest of 2025 Q3 is anticipated to decelerate, though not recessionary. Investment contracted, while consumer spending remains robust but skewed toward higher-income brackets (stagnant for bottom 80%).
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• -Labor Market: Downward revisions to job creation indicate a weaker starting position for 2025; restrictive immigration policies curb labor supply, while economic realignment dampens demand.
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• -Inflation: Creeping toward 3%, with risks from inventory exhaustion, tariffs, rising food/energy costs (e.g., AI infrastructure demands), partially offset by declining oil/natural gas prices.
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• -Monetary Policy: Fed expected to continue short-term rate cuts into 2026 to address labor weakness and sticky inflation; however, long-term rates remain high due to fiscal pressures, with rising 10-year Treasury yields a key risk for multifamily cap rates and valuations.
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• -Housing Spillover: Single-family (SF) inventory constrained by lock-in effect, sustaining elevated prices nationally—except in Florida and Texas (e.g., Austin, Dallas, Miami at ~ -4% YoY), where oversupply and softening demand weigh on values.
• Additional headwinds - suspended U.S. government operations, disrupting data reporting and economic forecasting.]”

Very interesting. And I agree with this general sentiment.

I give my thoughts in my weekly Skeptical Take below.

My Skeptical Take:

I do agree with the direction of Yardi’s analysis, but its economic forecast is a very conservative estimate.

It all out ignores what I view as likely accelerated GDP growth in 2026, as new tax policy and an extraordinary AI Industrial Revolution drive productivity gains and fatten both company and consumer wallets (I know that sounds gross, but that is the most likely scenario. Not for everyone, but in general and in terms of the economy, yes, it will).

I am not, so far, worried about AI replacing jobs en masse. And in the medium and long terms, it will drive immense new job growth. And eventually, the Age of Autonomy will free people to work on higher-value activities.

Fun fact: most jobs, in most industries, that exist today… did not exist at all in 1940.

Our grandchildren will be shocked to learn that people operated cars themselves on the road, amidst thousands of other distracted, drunk, angry, or just plain poor human drivers.

Just as it's hard to comprehend all elevators needing to be individually/physically operated by a person, like they were up to ~1960.

An example of many.

For Real Estate Investors: The consumer will hold up (absent some new exogenous economic shock), which will drive modest rent growth through next year (1-3%).

2027, however, should be the start of rent growth recovery, with 2028+ even stronger, and so on.

And rates will continue to stair-step down slowly.

This could take 12 to 18 months, as I have written about before.

Rates really matter for the consumer.

Most people have debts, not assets.

This will drive home buying AND rent growth.

That may sound counterintuitive, but the data shows that's what happens. They go up together (and similarly, building more luxury apartments reduces rental costs for low-end Class-C units).

**And stay tuned for next week’s article, where I dive into why mortgage interest rates may take closer to that 18-month time period to get to normal, or roughly 5.5%.

My posture is 8/10 positive.

With a skeptical eye on the political food fight in Congress and labor market softness in the short term. And you can count on me to keep you apprised of any warning signs.

But remember to ignore the noise / headlines.

I don’t invest for tomorrow; this is a long, if not “infinite game” (great book).

So when it comes to economics, the media, politics or life, frankly, it is our responsibility as individuals to act like a combine, and separate the wheat from the chaff.

A quote I’ve kept close in mind over the years:

“I used to blame my troubles on other people; but as I have grown older—and wiser, I hope—I have realized that I myself, in the last analysis, am to blame for almost all my misfortunes.”

— Dale Carnegie

So stop waiting, stop the analysis paralysis. Stop worrying. Start living, as Carnegie says.

The future of real estate is bright.

Until next time. Stay Curious. Stay Skeptical.

Herzliche Grüße,

-The Skeptical Investor