The Housing Recession Nobody Sees

We argue that housing is already in a real estate recession, just not the 2008 version people keep waiting for. We use fresh 2026 data to show why volume, affordability, and demand matter more than scary headlines, then translate it into clear moves for buyers and operators. 

• why a housing recession can happen without a national price crash
• what the seller to buyer imbalance signals for leverage and timing
• existing home sales, inventory, and why transactions tell the story
• why local market analysis beats national narratives
• rental stabilization versus damaged pricing power and margin compression
• cap rates, NOI, and how asset values can deflate
• immigration and AI as demand and income wild cards
• a recovery timeline that may stretch toward 2029
• negotiation tactics for qualified homebuyers in a low competition market
• operator principles that matter when the market turns against you
Send me an email at executives@escgteam.com.
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I also send you my 30-day operator reset for free when you sign up to my newsletter.
 

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A Housing Recession Without 2008

SPEAKER_00 0:31

We are in a housing recession. It just doesn't look like 2008. I'm going to say something that I know some people are going to disagree with. I believe we're in a real estate recession. There you go. I said it. Actually, I believe housing has been in a recession for a while now. But the reason people have trouble recognizing it is because they're waiting for 2008 to happen again. Foreclosures everywhere. Banks taking properties back, home prices collapsing nationally, people handing keys back to the lenders. That's what most people think a housing recession is supposed to look like. But recessions don't have to repeat themselves. And this one doesn't look like 2008 at all. At least not yet. Look at what's actually happening underneath the surface.

More Sellers Than Buyers

SPEAKER_00 1:31

Nearly half a million more sellers than buyers. Redfin estimates that in July there were about 1.46 million sellers in the market and only about 967,000 buyers. That's almost half a million more sellers than buyers. And according to Redfin, this is 2026 we're in right now, the number of buyers was the lowest in their data going back to 2013. Now, tell me that's not a real estate recession. Tell me that's not a real 2013. Nearly 80% of the major markets they tracked were buyers' markets. 80%. Everybody keeps talking about the housing shortage. And structurally, yes, parts of the country still have a housing shortage, but you can have a housing structural housing, but you can have a structural housing shortage and still have a shortage of people willing or able to buy at today's prices and financing terms. Those are two different things. Supply doesn't matter without qualified demand.

Weak Sales And Sticky Prices

SPEAKER_00 3:14

That is what I think people are missing. Transactions are telling us something, guys. Pay attention. The August existing home sales numbers just came out. Existing home sales fell another two percent to an analyzed pace of about 3.98 million. That's the weakest pace in more than one year. Inventory increased to about 1.6 million homes, roughly a 4.9 month supply. Now here's what's interesting about that. A healthy market requires six months of supply. Yet we are experiencing a real estate recession with a 4.9 month supply. Still one month short of what a healthy market inventory should look like and should have. But here's where it gets interesting. The national median existing home sales price was still about 429,100, up 1.6% from last year. So this is not a national housing price crash. That's important. I'm not telling you houses everywhere are collapsing in value. I'm telling you the machine is moving slowly. Volume is weak, affordability is weak, financing is expensive, and buyers are scarce and selective. And sellers in many markets are slowly being forced to recognize that 2021 pricing expectations no longer work. Realtor.com says that the national median list price fell year over year for the 10th consecutive months in August. 20% of listings had already taken a price reduction, and prices per square feet or foot were falling in 36 of the largest 50 metros. But again, this is not one national market anymore. Austin's price per square foot, excuse me, was down more than eight percent. Tampa down more than five percent. Other markets

Local Markets Diverge Fast

SPEAKER_00 5:47

are still appreciating. That's why I keep telling investors stop underwriting America and underwrite the block. Now let's talk about rentals. This is where I think the cycle gets very different from 2008 and very weird. During the financial crisis, millions of people lost their homes. But those people didn't disappear. They needed somewhere to live. A lot of them moved into rentals. So rental demand was strong. So while housing was getting destroyed, rental demand had a natural source to support. That makes sense. This cycle, though, is different. We have not had a massive foreclosure wave. Distress sales today are still only a tiny percentage of transactions, and rental housing itself has already gone through several, and I'm saying several years of softness. Apartment list as national rents are still above 0.8% below where they were a year ago, and about 3.6% below their 2022 peak. Vacancy is still about 7.1%, depending on who's giving you the data. Redfin,

Rentals Stabilize But Margins Shrink

SPEAKER_00 7:17

CoStar, depending on where the data, but that's the average, but the range were you know between 5 and 7%, 6 and 7%, but we'll go with 7.1%. And the average vacant apartment is taking around 32 days to lease. Now I want to be very precise here. The rental market has begun showing signs of stabilization. Rents have increased month over month for seven straight months. Vacancies have started coming down. And Cushman in Wakefield says apartment demands actually exceeded new supply over the trailing four quarters for the first time since early 2022. So I'm not telling you rentals are falling off a cliff. I'm actually telling you something more important. Pricing power has been damaged. And that matters enormously to operators. Because your insurance didn't go down. In fact, it went up. Your repairs didn't go down. In fact, those went up too. Your labor didn't go down. In fact, those went up too. And your taxes didn't necessarily go down. I know that didn't happen because I had a 30% increase in one of the markets in one county for my taxes, where they went up. And your debt didn't get any cheaper. But in many markets, your ability to simply push rents 5, 8%, and 10% year over year disappeared. Poof, just like that. That is called margin compression. And weak operators feel margin margin compressions first.

Cap Rates And Asset Price Deflation

SPEAKER_00 9:12

Then you have valuation. Commercial and multifamily investors have another problem. Cap rates. And I want to be specific because this is not happening equally everywhere. Some markets and some asset classes are seeing cap rates stabilize or even compress. Others are still seeing pressure of cap rates to expand. CBRE's latest cap rate survey says the majority of respondents saw no change, but more people now expect cap rates to rise than fall, with some of the strongest concerns around Class C multifamily. And remember what cap rates expansion does. If NOI stays the same, so your net operating income stays the same, and the market requires a higher cap rate, your asset can become worth a lot less. Same building, same rent roll, same tenants, different capital market, guys. That's asset price deflation. This is why I tell people development creates value. Optimization converts value into wealth. You cannot control the markets. Cap rate, you can control the NOI, you can control the collections. You can control expenses. You can control your debt. You can control how efficiently you operate. There is another demand

Immigration Slows And AI Looms

SPEAKER_00 10:47

issue nobody should ignore. There's something else happening that I think real estate investors should watch carefully. Immigration has fallen sharply. I'm not going to turn this into political conversation because this is not. That's not what this podcast is about. But housing demand is arithmetic. People create households, households create housing demand. Harvard's Joint Center for Housing Studies estimates that the recent decline in immigration could result in nearly half a million fewer immigrant households being formed by 2027 than otherwise would have occurred. Think about how that impacts and that what that does to Class C apartments, especially in the rental markets. It doesn't mean immigration explains everything happening with rent. It doesn't. Operators need to understand it, not politically, economically. And then there's AI. The big AI. And here's the giant wild card. Artificial intelligence. Nobody sitting here today knows exactly what AI does to employment over the next several years. Anyone who tells you they know is guessing. I don't know either. But I know what I'm watching, because real estate ultimately depends on income. People need jobs, people need wages, people need confidence. Those things support household formation. They support rents, they support mortgages, they support home purchases. So if AI meaningfully changes white-collar employment, that eventually becomes a real estate story. And not a good one, my friends. Maybe productivity creates new jobs faster than old ones disappear. Maybe. Maybe it doesn't. Maybe. We don't know yet. But as an operator, you don't need certainty. You need anticipation. Clarity is power. Anticipation is the ultimate power. Here's my prediction.

Why Recovery Could Take Until 2029

SPEAKER_00 13:44

I want to clearly label this. This is my prediction. Not Redfinns, not Zelos, not the Federal Reserve, mine. Martin Perdomo. As I sit here in September of 2026, I don't believe this real estate recession is completely behind us until somewhere around 2029. Could I be wrong? Absolutely. I deserve the right to be wrong. I am a human being, just like you. But here's my thinking. Let's imagine rates begin meaningfully falling sometime in 2027. Let's just imagine that. Big assumption. Then let's imagine that by middle or end of 2027, financing gets back to a level where deals begin making sense again. Who comes back first? I think we do. Investors, operators, people listening to podcasts just like this, you, my listener, people watching debt markets, people underwriting deals every week. We see the change before the regular consumer sees it. But even investors don't under, don't immediately run out and start buying the day rates move. We watch, we underwrite, we wait for evidence, we see transactions clearing again. Maybe that takes six months. Now, somewhere in 2028, then eventually the headline changes. The media starts telling the consumer rates are coming down, right? Housing is recovering, the regular consumer starts to hear this in the media, and it's a good time to buy again. Confidence starts returning back into the market. The ordinary consumer comes off the sidelines, and that can take another eight months, 12 months, maybe longer. Remember, real estate is a slow moving trend. And now we're getting into awfully close to 2029. That's the sequence I see today here. That's my prediction in 2026, September of 2026. I could change my mind as evidence changes. I absolutely can't. But as it stands right now, that's what I see. Being convicted doesn't mean being stubborn. Operators update their thesis when reality changes. But home buyers should hear me very clearly.

Homebuyer Leverage And Negotiation Plays

SPEAKER_00 16:33

Here's the irony of everything I just said. If you're a regular person looking for a home to live in, this might be one of the best negotiating environments you've had in years. Not because houses are cheap, they're not. Not because mortgage rates are great, they are not. Not because mortgage rates are great, they are not. But because competition is weak. There are nearly half a million more sellers than buyers. So if you are qualified and you have cash, you have stable income, and you're buying something you're prepared to own for a long time, I would be making what I call disrespectful offers. Not ridiculous offers, informed offers, aggressive offers. Ask for the price reduction, ask for the closing costs, ask for the repair credit, ask for concessions, ask for the rate buy down, ask. Because somebody else may not be standing behind you anymore to buy that house. Redfin itself is telling buyers that today's imbalance gives them more room to negotiate on price, repairs, concessions, and closing costs. The seller can always say no, but you lose absolutely nothing by understanding where the leverage sits.

Operator Discipline And Listener Outreach

SPEAKER_00 18:10

The operator lesson. And here's what all of this comes back to for me. The market creates the environment, the operator creates the outcome. You cannot control mortgage rates, you cannot control cap rates, you cannot control immigration, you cannot control AI, you cannot control how many units developers built three years ago, built three years ago, but you can know your break-even occupancy. You can know your collections, you can know your uh expenses, you can control them too. You can build reserves, you can structure debt properly, you can stop underwriting fantasy land, and you can refuse to confuse, you can refuse to confuse a rising market with your own competence. Because markets eventually expose everybody. The question isn't whether you're operationally in a difficult market. The question is what kind of operator are you becoming because of it? And realtors, I actually want to hear from you on this one. Tell me what you're seeing. Do you think I'm wrong? Do you think we're in a housing recession? What is actually happening with buyers and sellers in the market? Send me an email at executives atescg team.com. And I generally like to hear the view from people on the ground. And if you own rental property and you want more of the operating principles, I talk about it every week. Join my landlord to operator newsletter. I also send you my 30-day operator reset for free when you sign up to my newsletter. I'll give you the five moves to start treating your rental portfolio like a business. The link is in the show notes because buying the asset is only the beginning. The standard is learning how to operate. Thank you for listening. Appreciate you, and thank you for watching. Peace out.