We have some massive news, everyone, and that's the fact that Zillow just downgraded their housing forecast across the entire US. Zillow is now forecasting home prices to drop in every major metro area over the next 12 months. You can see they're now forecasting prices to go down 1.7% on a national basis. And their biggest market that they think is going to drop is San Francisco, where they're predicting 5.2% declines. But as you can see here, folks, they now are forecasting declining prices in every major city. And that's a huge deal because Zillow is normally more optimistic on the housing market. And the fact that they are now getting pessimistic should be a warning to all of you out there who were skeptical that the housing market was in a downturn that yes, this is actually happening.
Now, interestingly, it's not just Zillow. Bloomberg just ran an article today saying that top forecasters are warning the housing market's days of big gains are over. Other forecasters like Altos Research have cut their forecast from 3.5% to zero due to the fact that there's a lot of discouraged home buyers that are expecting wages to go down and higher unemployment. Negative vibes on the economy are really spiking. And so we're reaching a mainstream consensus that the housing market is now in a downturn and could correct over the next year. Of course, home prices are still really, really expensive. I want to be clear in this video. I'm not saying it's a good time to buy a home right now. I'm not saying that houses are cheap.
I'm merely saying that the pendulum has shifted and that prices are starting to drop and will continue to drop over the next year. However, a central question for a lot of you out there as prospective buyers or investors is how much could prices drop in my area and like when is that focal point? When is that threshold when the market crosses into a good time to buy? And what I'm going to do for you all right now is actually reveal some of my forecasts for the housing market this year.
So you can see where I think home prices are heading in different markets and then when I think it's going to be a good time to buy. So what I did here folks is I actually lined up my Reventure app price forecast for the next 12 months against Zillow's price forecast for the next 12 months so you could see how our forecasts compare. And the interesting thing is that Reventure, my company, thinks that prices in the US are going to go down 0.4% over the next year on a national basis, while Zillow thinks prices are going to drop 1.7% over the next year.
So, something very interesting has happened, folks. Myself, as being one of the more bearish people in the housing market, I am now no longer that bearish. Zillow is actually forecasting a bigger decline in national home prices. Now, what's interesting is that uh there's big differences between the cities that we think are going to drop and go up. For instance, I think New York and the metro area surrounding New York is going to go up 4.8% over the next year based off the data. Zillow thinks the New York's going to drop 2.4%. And as you can see, Zillow thinks pretty much every market is going to drop, which I heavily disagree with.
I don't think every major metro is going to drop. I feel very confident in saying New York, Chicago, Philadelphia, Detroit, Baltimore, St. Louis, Pittsburgh, Cincinnati. These rust belt Midwest markets will go up over the next year due to the fact that there's still an inventory shortage. However, we're going to see big declines in a market like Denver. Reventure is forecasting an 8.6% drop in Denver over the next year. We're forecasting a 6.3% drop in Austin. We're forecasting a 5.8% drop in Tampa and a 5% drop in Phoenix as well as a 6% drop in Dallas. And those drops are going to be welcome relief for home buyers in these markets. It's going to mean cheaper prices, cheaper mortgage payments, lower down payments. However, again, if prices drop 6% or 8%, that doesn't necessarily make it a good time to buy.
Because if you're a home buyer looking to purchase a home right now, I think the biggest thing for a lot of you out there, and you can let me know if this is true in the comment section below, when you buy the house, you want to feel like you're getting a good deal. You want to feel like you're not dramatically overpaying and that the value of your house in the long run is going to go up.
That's what every home buyer wants. And the trouble in this market in 2025 is that very few people feel that way when they go on Zillow and look at houses because most of them are still really overpriced. Like if we go to my backyard here in Florida, everyone take a look at some of these listings. We got a three bed, two bath house that they just did a $14,000 price cut on. And that's great that they cut the price. The problem is it's still about 70% above what this owner bought it for in 2020. How about this brand new build town home? They just did a $25,000 price cut. It looks pretty nice on the inside. They've actually cut it $170,000 from the initial list, $8.25 down to 650. However, that's still a $5,600 a month monthly payment, which most people can't afford, indicating that a lot of people are still going to look at this and not buy it. But ultimately folks, this was easy to see coming if you just looked at the data. And one reason is due to skyrocketing inventory. So this graph is taking a look at the number of homes for sale on the US housing market.
And what do you see is that over the last 3 years, the inventory levels have nearly tripled on the housing market and are now back to prepandemic norms. So the inventory in March 2025 on the resale market to buy homes was the same as March 2020, right when the pandemic initially hit. So, the fact that there's no more housing shortage in the US is causing a slowdown in home price growth. Additionally, sellers on the US housing market are now cutting prices at the highest rate in a decade.
In March 2025, 23% of sellers reduce the listing price on their home. That was the highest price cut rate for the last 10 years. The long-term average for March is 17%. So, way more sellers reducing prices is also yet another sign of the downturn in the market. So, what I'm going to do now is provide you all with the framework for how to understand when these price drops are going to translate into a signal for when it's a good time for you to buy a house. And there's really two metrics I use to figure this out. One metric is called the overvaluation rate, how overvalued your housing market is. The other metric I use is something called the mortgage payment as a percentage of income in an area. And these two metrics are really a great smell test if it's a good time to buy in your zip code and city or not. And so let's actually start with that mortgage payment as a percentage of income data point. And we're looking at it for all the different states in America here.
How much the typical home buyer has to spend on their mortgage and tax payments. And let's talk about Florida. Let's talk about Texas. Let's talk about Nevada. California. We're going to talk about a bunch of different states here. So stay with me. I'm actually going to lead off with California. In California, the typical household earns 99,000 a year, while the typical yearly house payment to buy a house is 60,000. And so that creates a 61% mortgage payment as a percentage of income ratio.
And you can see this 61% ratio, it means that vast majority of people in California can't qualify to buy. But really pay attention to the long-term norms here. The last time we saw California this unaffordable was 0607, right before the last crash, when the mortgage payment to income ratio went down to 30%. And then it stayed in that 30 to 35% range all the way until 2021 and now it's up to 60% while the long-term average is 43%.
So California is always going to be expensive. The long-term average is people spending 43% of income on mortgage payments. But the point is today it's at 61%. This is not a sustainable level. And this indicates it's not a good time to buy the fact that mortgage costs are so high relative to the long-term average. What about in Texas? Now in Texas, Texas is almost u 50% cheaper than California for the local buyer. The local buyer in Texas only needs to spend 33% of their income to buy a house.
However, you can see this is way above the long-term average. The long-term average in Texas is only 23%. Texas was always affordable market. Even in the last bubble in '06, it wasn't that expensive. So today, Texas is still in a historically unprecedented environment with the cost of buying indicating that we're not yet at the right time to buy. Same in Florida. In Florida, you have to spend 39% of your local income on mortgage payments if you want to buy.
Meanwhile, the long-term average is 27%. And so, the way to think about this data point in this graph, everyone, is if you're a prospective buyer or investor trying to figure out when your market's going to get cheaper is look at this graph, maybe look at it on a month-over-month basis, and are we getting closer to the long-term average? If we're getting closer to the long-term average on mortgage costs as a percentage of income, that's telling you it's a better time to buy.
We're not there yet, clearly in Florida, but the more that it goes down, the more that you'll be sure the market is more fairly valued and it's a better time to get in. And this data I'm showing you is somewhat controversial because a lot of people in real estate reject what I'm telling you right now. A lot of people in real estate like to say, "Don't pay attention to the data. just buy a house because it'll go up over the long run. And ultimately, you know, that's true over 20 years, over 30 years. Home prices will go up over 20 or 30 years due to inflation and due to income growth.
Like incomes will grow by a certain percentage a year and home values will follow that growth. That's why housing is generally viewed as a good investment for the long run. The problem though is that the housing market can enter bubbles like it is today where home price growth vastly outstrips income growth. And when that happens, it's not so much of a good idea to think about housing like I'll just buy it and it'll go up because you're buying it at a historically overvalued level.
To make this abundantly clear for you guys, so you you really understand where we are in this market today, look at this graph which is tracking inflationadjusted home prices going all the way back to 1953. So we have basically 70 plus years of data here and look at how inflationadjusted home prices for a long time were like really stable, meaning that values went up at the rate of inflation and no more.
However, that changed in ' 06. In '06, we had our first housing bubble ever in US history where prices vaulted up above inflation and income growth. And it was this graph which told you in the last bubble, not a good time to buy and that there was going to be a crash and correction, right? Well, now look at where we are today. The inflation adjusted home price figures are even higher than they were in ' 06. So, we are literally in the biggest housing bubble of all time. That is not an opinion. That is a fact based off this data on inflationadjusted home prices. Also, if you were to look at data on home value to income ratios, you see something similar. Home price to income ratios today are also at a very historically high level that we've only seen twice before in US history. And both other times, we saw this level of overvaluation. It became a lot more affordable over the next decade.
So, that's the framework and the groundwork you need to approach the housing market right now. Don't believe someone who tells you you should just buy because it's a good thing to do. Home prices always go up. Those people aren't paying attention to the data. They don't truly understand how the housing market works and what drives home prices. And so what I'm going to do now is give you that other data point to help you understand when it's a good time to buy. And that's the overvaluation rate. So, what the overvaluation rate is, it's a data point I created on Reventure App to help you guys understand if it's a if it's a good time to buy in your market.
And it takes the long-term home value to income ratio in a city and looks at how today's ratio is trading to the long-term average, and that helps determine over and undervaluation. So, let's just pick a city at random, everyone. We're going to do a little rapid fire around here. Pick some different cities. Let's pick Las Vegas. Las Vegas, very interesting housing market. Now you can see we have Vegas tabbed as 25% overvalued on Reventure App and you could see this level of overvaluation disturbingly is similar to what we saw in ' 07 right before the big crash. And when you see uh the market trended to overvalued territory on this graph, that means it's not as good a time to buy.
It means you'd be paying a price that's historically expensive compared to what people have paid over the last two decades relative to the fundamentals of the market, most notably the income levels. Now, interestingly, markets can become undervalued. Vegas became very undervalued from '09 all the way to 2018. For a good 9-year period, it was a great time to buy a house in Vegas because you were legitimately getting a good deal.
And that's what this graph tells you. Are you getting a good deal if it's undervalued or a bad deal if it's overvalued? What about a market like Atlanta? You can see Atlanta home values are 28% overvalued today. A typical home price of 381, a fair home value of 298 based off income. This means that it's a bad time to buy. Like if you buy in Atlanta now, yes, prices are dropping and will continue to drop, but you're still paying a price that's really expensive compared to the long-term norms.
Actually, funny enough, everyone, the most overvalued housing market in America right now is one that you wouldn't expect. Knoxville, Tennessee. In Knoxville, prices are now 36% overvalued. They've skyrocketed to a level we've never seen before. There's no fundamental justification based off income and rents in Knoxville for these prices. So, it's a tough time to buy right now. And what's great is that we make that overvaluation data on Reventure App available for nearly every city, county, and zip code in America. So, if you're trying to do due diligence on your local housing market and decide whether it's a good time for you to buy and when the right time to buy might be, access that overvaluation rate data on Reventure App under a premium plan. I'm going to tell you at the end of this video how you can do that. But first, I want to just show you more examples in this rapid fire round. One example that I'm focusing a bit more on now is Austin, Texas. Because Austin's interesting, as many of you know, Austin has gone through a housing correction already.
Has gone from 46% overvalued 3 years ago to only 8% overvalued today. So, if I had to point out a market that probably in the next year is going to start to become fairly valued or undervalued, it is Austin. And that's due to the fact that prices have dropped 20% and that incomes keep growing. And so, at some point, probably in the next year, I will be giving a buy signal on Austin, Texas.
In the short term, we still expect prices to drop, but soon the fundamentals in Austin, will indicate that it's actually a good time to buy. You can see that uh certain markets also in the Midwest, everyone, aren't as overvalued. Pittsburgh is only 9% overvalued. I would feel pretty confident if I'm a home buyer in Pittsburgh pulling the trigger right now. Values aren't going to correct by that much. Another market is New York, the New York metro. Everyone, I know I have a lot of home buyers out there looking in Long Island, New Jersey, Westchester, maybe even some in Manhattan. New York's housing market is only 5.8% overvalued.
Yes, it's expensive, but it's actually trading within the bands of the long run norms relative to income, indicating I don't think there's going to be much of a correction in New York. Same actually in Bridgeport, Stanford, Connecticut. Prices are only 8% overvalued. We talked about Knoxville being the most overvalued market. Interestingly, Youngstown, Ohio is number two. Port St. Lucy is number three. Grand Rapids, Michigan is number four. Boyisee, Idaho is number five. Detroit is number six. Columbus is number seven.
Buffalo is number eight. Madison, Wisconsin is number nine. Atlanta's number 10. So funny, we've had some Midwest rust belt markets start to enter the most overvalued category because a lot of them have still appreciated a lot over the last year. I'd encourage you guys again sign up for premium plan on reventure app and take a look at this data in table view form so you can see a list of the most overvalued markets. But most definitely look at this at the zip code level because it's amazing how big differences exist in neighborhoods. Like where I am in Florida, you can see there's certain zip codes here in downtown uh St. Pet near downtown St. Petersburg where prices are 52% overvalued in some of these zip codes. 40% overvalued, 53% overvalued. If prices are 53% overvalued, you have to be very cautious buying because it's telling you again that the home prices went way up above the long-term fundamentals and that there really wasn't the type of gentrification that actually happened. that is needed to support the prices. Now, interestingly, we have certain markets here in Penllis County which are undervalued.
Reventure app actually thinks downtown St. Petersburg is 4% undervalued, indicating that the income growth has kept up with the price growth. And we're actually even seeing that play out in monthly home price growth. Now, the only zip code in Penllis County to grow its home value February to March was downtown St. Petersburg, likely due to the fact that prices are slightly undervalued. So, we're even seeing this overvaluation data start to show up in a correlative fashion with where prices are heading on a month-over-month basis. So, I just think it's so important right now, everyone, even if you're not imminently trying to buy a house, is to understand what these metrics are for your market. So, when you are ready to buy in the next 3 months or the next 6 months or the next year, you have a framework so you can properly understand where home prices are heading in your market and when the trigger is going to be for when the market shifts from overvalued to undervalued because that's when it's going to be a good time to buy.
You can access that data for yourself at ww.reventure.app. Sign up for a premium plan and look at that overvaluation rate data for your city and zip.