Minnesota Real Estate Investors Association, Inc.

10 reasons why the real estate market could weaken in the next 6–12 months, leading to more foreclosures and more motivated sellers

By: Loreal Loftus

1. High Mortgage Rates Stay Stubborn

• Mortgage rates are stuck in the 6–7% range. This keeps monthly payments high, pricing out buyers and putting pressure on sellers who need to move.

2. Rising Inventory

• Active listings are already up 20%+ year-over-year. More homes on the market = more competition = sellers forced to cut prices or offer concessions.

3. Job Market Softening

• If unemployment ticks up, more families will struggle to make mortgage payments, which often leads to delinquencies and foreclosures.

4. Flat or Declining Home Prices

• Home prices have cooled. If values drop just a little, some homeowners who bought recently with low down payments could be underwater (owe more than the house is worth).

5. Expensive Operating Costs

• Insurance, property taxes, and repair costs keep rising. For landlords and owners with tight budgets, this squeezes cash flow and creates more motivated sellers.

6. Wave of Adjustable-Rate Resets

• Borrowers who took ARMs or short-term financing a few years ago are now facing higher payments when their loans reset, creating distress and possible defaults.

7. Credit Tightening

• Banks are pulling back on lending—especially for commercial real estate. This makes it harder for homeowners and investors to refinance out of trouble.

8. Overbuilding in Some Areas

• Some markets (especially Sun Belt cities) have too many new apartments hitting at once. This pushes down rents and makes it harder for landlords to cover expenses, leading to distressed sales.

9. Rising Foreclosure Activity Already

• Foreclosure filings are already up compared to the past two years. As protections and forbearance programs expire, more distressed properties will come to market.

10. Consumer Debt at Record Levels

• Credit card balances and auto loans are at all-time highs. Families stretched thin may have to choose between paying the mortgage or other bills. That stress creates motivated sellers before they lose the home to foreclosure.

? Bottom Line:
The next 6–12 months could bring more distressed sellers, price cuts, and foreclosures. For investors, wholesalers, and agents, this means more opportunity to help motivated sellers solve problems—and to find discounted deals.