The Biggest Mortgage Bust in US history just got worse

Added: 2026-06-02

[00:00:00]The biggest mortgage demand collapse in US history just got even worse and we could be seeing a postmemorial day swoon for the housing market. New data reported by CNBC is showing that refinance demand just dropped 18% for mortgages, the lowest level since 2025.

[00:00:17]At the same time, applications to purchase a home were down4% week overweek. These are some of the lowest mortgage demand figures that we've seen in the last 30 years and suggest that sellers in the spring 2026 housing market are going to need to get with reality. Now, this is coming off the heels of a slight revival in demand that occurred in April and the first half of May. Pending sales went up in April in the first half of May, tricking many people into believing that the housing market was actually recovering.

[00:00:46]But now the data is showing that we're still mired in the worst demand recession in history for both mortgage applications and pending sales. You can see both of these data points which indicate home buyers interest in buying homes are at the lowest level in the last 30 to 40 years. And this is a big problem for sellers. This is now causing some sellers to finally give in and cut the price. A lot of these sellers, everyone, were holding out the last couple years. They were holding on to their low mortgage rates. They were thinking, "No, no, the market's going to recover." Well, the Wall Street Journal just reported that home price growth slowed even further in March. The Quiller Catality home price index went down to only 0.7% growth year-over-year. This is one of the lowest readings for home price growth in the US that we've seen since the last housing downturn. And so, not only is the demand down, the prices are now starting to go down. And in this Wall Street Journal article, they talked about how the markets with the biggest downturns included Seattle, where prices were down 2.5% year-over-year. On the other end of the spectrum, prices are still rising in Chicago and Cleveland.

[00:01:51]And more and more, we're seeing a bifurcated housing market in 2026. Some areas of America are mired now in a deep housing correction. There's lots of supply. Sellers are cutting prices.

[00:02:02]Other areas still have booming prices, prices appreciating at really high levels. And if you're a home buyer, an investor or a seller this year, very important you understand where your housing market ranks. JP Morgan just did a analysis actually on this and JP Morgan is speculating that the housing market is actually starting to unfreeze in certain markets and they broke out this really interesting chart which is showing the comparison of inventory growth in different markets to how much prices have either dropped or gone down the last four years. What you can see in this bottom right quadrant is we have markets here in the bottom right where prices are dropping over the last four years and inventory is way up. In the top left, it's the flip situation.

[00:02:43]Inventory is still in a shortage and prices are still going up. So, your experience as a buyer or seller totally depends on the type of market you're in.

[00:02:52]It totally depends also on the type of listing you're looking at. This same JP Morgan report broke out a really interesting graph showing the share and proportion of mortgage rates held by existing homeowners in 50 basis point buckets. And what you could see is we have a double peak. There's a big peak in the number of people that have a 2.5 to 3.5% mortgage rate. And then there's now an increasing peak in the number of people that have a 5.5 to 7% mortgage rate. And so your experience as a buyer is going to really depend on the mortgage rate that the seller has. If the seller has a cheaper mortgage rate at 2.5 to 3% that they bought in 2021, they are not going to be in a rush to sell. They are not going to be in a rush to cut the price. But if they have a 6 6.5% mortgage rate, you're going to have a much better chance of negotiating. And this mortgage rate situation is actually starting to really impact the country that I'm in right now and the city I'm in right now. A lot of people here on this street in this city, they have 5-year term mortgages. A lot of these people bought in 2020, 2021 with rates as low as 2 to 2.5%. And because in this country, the mortgage terms are really only 5 years, a lot of these people are now refinancing in 2026 at rates that are more than double. And people's payments are going up. I actually know someone that lives in this town. His rate is going to jump from 2.2 to 4.2%.

[00:04:15]his payment is going to go from 1,900 to 2,700 a month. And we were talking about, well, what's that going to mean for a lot of the local homeowners? This big jump in payments. It's going to mean more of them are going to be forced to sell. It's probably going to mean more downward pressure on prices. We're in a simply unprecedented time right now of a lack of affordability. The home price to income ratio today is around 4.3. The only other time we've seen prices that expensive relative to how much money people make was the 2006 bubble. Look what happened after the 2006 bubble.

[00:04:44]There was a big crash. There was a big deflation. And so long as the home price to income ratio stays at this level, you're going to see buyer demand really low. If we add to this graph the pending sales, you can see the clear relationship. Pending sales are low when home prices are expensive relative to income. And so for the policy makers in the US housing market who are trying to figure out how to restimulate demand, how to bring these mortgage application numbers up, how to bring the pending sales and the buyers back in, it's all about cheaper prices, getting prices more affordable, getting more inventory on the market. Now, this is something that's a bit controversial because uh the Trump administration and Trump in particular earlier this year came out and said he doesn't want lower pro home prices. Specifically, Trump said that people that own their homes, we're going to keep them wealthy. during a January cabinet meeting, he said that we're not going to destroy the value of their home so that somebody who didn't work very hard can buy a home. And look, Trump's 80 years old. His main constituents are older voters who own their homes. So, he's mainly thinking about I want to protect their value. However, what I think Trump is missing there is just the financial disconnect in the market today. It has nothing to do with not working hard. It has to do with the fact that uh incomes in the US simply aren't high enough to support prices. And to get a mortgage, you need to have income verification. To have a down payment, you need to make a high income and save money. So, this just a simple math equation. It's not about working hard or not working hard. And we've never seen before this situation of sky-high prices relative to to incomes persist. In this Bloomberg article, they're actually talking about how home prices would have to fall 15 to 20% or incomes rise 15% for affordability to reach historical levels. And so I think a lot of people would actually welcome home prices dropping 15 to 20%. Including existing owners. I pulled you guys earlier this year, 85% of you want home prices to go down, including a majority of people who already own their house. Because look at it this way, what do you get out of prices being in this big bubble if you own your house? What financial improvement are you getting in your life other than this kind of like financial ego boost in your mind that you can check your Zestimate? But counter to that, it actually results in you paying a lot more for costs. Like for instance, property taxes. Property taxes are a huge issue in the US right now. They're going up all across the country. People can't afford to pay these property taxes, existing owners. And one of the main reasons is because the values went up so much. So imagine that you're living in your house 20 or 30 years. All that a higher value is going to do is going to mean a higher tax bill for you.

[00:07:12]And in a city like Nashville where I live, they just did a 40% roughly reassessment on assessed values. and the bills, tax bills went up 40 to 50%.

[00:07:22]There's homeowners in Nashville right now fuming because they're saying, "Why is this happening?" What these local taxing municipalities do at the county and school district level is they just try to extract, you know, money from homeowners and you know, you ask yourself the question, if in four to 5 years your tax bill can go up 50%. What are they spending that money on? Like did the budget for the local municipality go up by 50% in 5 years? if it did, they should probably audit that budget and see what's going on. And so, I get why a lot of homeowners are angry about these tax bills because in some cases, you say like, what what's going on here? You know, the governor of Florida is attacking this, Ronda Santis.

[00:08:02]They're going to have a referendum in November to try to bring the property taxes down. I think we got to put a check on how much these property taxes are going up. But one great check would be for home values to correct.

[00:08:14]Correcting home values will lead to lower assessed values or slowing assessed value growth which will make property taxes cheaper in the end. Now, interestingly, I'm walking around here on the east side of London. I'm in the UK in a little town called Horn Church, which is about 30 mi to the east of the center of London. One interesting thing about the real estate here in London in the UK, is they do not have high property taxes whatsoever. Property taxes here are really low. They pay something called a council tax, a couple hundred a month. So you don't have like these big burdensome tax bills for listings like this. Just take a look actually some of these houses. I'm just walking by this brokerage shop here. You can see here £475,000 for this house here. Three bed house.

[00:08:58]£475,000. It's pretty expensive.

[00:09:00]£425,000 for this one here. £500,000 for this threebedroom here. And it looks like we got a condo here for £125,000.

[00:09:09]And we got £725,000 for this detached house. says three to four bedrooms. Is it three? Is it four?

[00:09:15]Looks pretty nice. Looks like it was renovated recently. It's 500,000 to 700,000 £700,000 for a house. 30 m to the uh east of the center of London.

[00:09:24]Now, the UK due to these high prices is also going through a housing slowdown.

[00:09:28]The National Office of Statistics here in the UK is showing that price growth is now flat year-over-year. And then in England, prices are actually down half a percent year-over-year. So UK includes England as well as Scotland, Northern Ireland and Wales. So those comprise the UK. And actually in the center of London, prices are dropping quite a bit.

[00:09:48]There's a lot of articles online about how there's a housing correction going on in the center of London. And this is an international phenomenon. US, UK, uh New Zealand, home prices in New Zealand are down 16%. Home prices in Canada are down almost 20%. So the prices just got way too high in way too many countries and way too many cities over the last 5 years. So it's helpful to actually zoom out on that a little bit, right? You know, if you guys are wondering, is there a housing correction going on? Is it happening? Will it happen? It's happening all over the world right now.

[00:10:22]Not just in America, not just in Austin, Texas, but here in East London, it's also happening. But England might actually be in an even bigger bubble than the US because you look at the data. The typical value of a house in England is around £290,000.

[00:10:39]£290,000. Now, a pound is equivalent to $1.34.

[00:10:44]So, £290,000 is about £390,000 for the typical house in England. Now, obviously in London, it's much more expensive, but that's the countrywide average. In the US, the typical house is 365,000.

[00:10:58]So in nominal terms, adjusted for the currency, it's more expensive to buy here. But what you got to do is compare it to income. In England, the typical household income is about 3839,000 per year for a household, which means that the home price to income ratio here is about 7.7. The typical price is 7.7 times income. Now in the US, it's 4.2 4.3 times income. So there is a bigger bubble here. In England, it was kind of similar actually in Germany as well. And what matters more than the absolute home price to income ratio is how today's ratio compares to the long-term average for an area. So for instance, in California, the price to income ratio is like seven, right? Closer to England.

[00:11:44]And that is high and higher than the long-term average, but it's not as big a bubble, say, as Idaho, where in Idaho, the home price to income ratio is now above five, which is by far the highest we've ever seen. So, if you want to spot a housing bubble and you want to help explain why demand might be down and if prices could drop in the future, look at that home price to income ratio for your market and compare it to the long-term average. Couple other interesting things about England's housing market that I was doing some research into that I think you guys should know. Number one, first of all, capital gains tax here is a thing, but for primary residence holders, there's no capital gains tax.

[00:12:20]So, if you own your residence as a primary residence and then you sell it, you will never pay capital gains tax on the gains. I personally think that's the way it should be in the US. Why in the US, if you're a homeowner, should you pay capital gains tax on your primary residence? It doesn't make sense. That's the place you're living. That's not a speculative financial asset. There's already an exclusion for $250,000 if you're single, 500,000 if you're married, but let's just get rid of it.

[00:12:45]It's kind of a nuisance. It's kind of a hassle. All these people end up doing things like step up basis. They try to pass it down to their heirs to avoid capital gains tax. Just get rid of capital gains tax for primary home owners like they have in the UK. Another interesting thing about the UK is that the realtor fees are extremely low. The realtor fees here are like 1 to one and a half%. Whereas in the US, total realtor fees are like 5 a 12%. So they don't have the same burdensome fees on closing here in the UK that we have in the US. And you know, I personally think we should try to lower those fees in the US as much as possible to help consumers and help sellers keep more money in the pocket of the homeowner and the home buyer allows more transactions to take place with those lower fees. However, they do charge stamp duty here in the UK. And what stamp duty is is an additional fee on the purchase or sale ranging anywhere from like 2 to 5% that goes to the local government. So I mentioned here that they don't have big ongoing property taxes. They have some council taxes but not big property taxes. What how they make up for it is they tax the purchase and sale of the homes at a higher level 2 to 5%. And so you pay that stamp duty when you buy or sell here in the UK. That's going to the local governments as well as the regional governments. I personally don't think that that's a great thing to have because that's going to discourage more people from buying and selling. If the government's taking two to five percent of every sale transaction, it's going to lead to fewer people buying and selling homes. Of course, because they have lower realtor fees here, it ends up kind of being a wash in terms of how much the buyer and seller pays. And then if you want to further increase inventory, put more taxes on those who own second and third homes there. New York City is doing this right now. They just passed the Pieta tear tax. They're taxing anyone who owns a house as a second or third home or condo with a value over 5 million and doesn't live there full-time. They're having to pay an additional le levy on top. I think that's actually a really good proposal because that's going to incentivize more of those second and third owners and investor owners to eventually sell their homes. I think more municipalities should do that. Find a way to tier the property tax structure so that primary residents pay less, second, third owners and investor owners pay more. I think that's something Republicans and Democrats, the president, I think most people could probably see the logic in that. Congress just signed a housing bill to boost housing supply in that bill actually is the investor ban.

[00:15:00]They're banning investors from buying if they own over 350 homes. But to get more investors to sell, find a way to increase the fees and the taxes that investors and second owners pay. Lower the fees and taxes that primary owners pay. It's going to be a win-win for the housing market. Help bring more affordability back. And if you guys really want to get ahead of the housing market in 2026 and 2027 and know where it's heading in your area and know how much to offer, here's what you should do. Go to ww.reventure.app/listing tool. We just launched our brand new Reventure listing analyzer tool. You can plug up to about 90% of all listings into this tool. It's going to give you offer rangers for the for the house based on the underlying data. We look at data on comps, on our one-year price forecast from Reventure, as well as the purchase history of the property and the seller desperation. We take all of that data together and spin out an offer range for you guys where you can feel confident offering on that house and feel like you're not going to get screwed over if you're a buyer. And highly encourage you guys to go there right now and check it out. Upgrade to that premium membership. Only $39 a month, folks. This tool, this membership at that price could save you tens of thousands of dollars. It saved me over $100,000 on my purchase in Atlanta earlier this year. This is a great bang for your buck. Go there right now.

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