Written by Discount Property Investor Team

Buyers finally have leverage, but the cost of money is eating most of it. Here is how to work that gap, whether this is your first deal or your fiftieth.

Something odd is happening in the U.S. housing market this week, and it matters if you buy houses for a living or want to start. There are more homes for sale than at any point in years, sellers are cutting prices, and homes are sitting longer. That should be good news for investors. But on Thursday, Freddie Mac reported that the 30-year fixed mortgage averaged 7.40% as of October 8, up from 7.28% the week before, and that is the highest reading since November 2023. A year ago, the same survey showed 6.30%.

So the market is handing you better prices with one hand and taking the savings back with the other. Here is how that changes the way you find, price, negotiate, finance, and exit deals, with enough detail for a beginner to act on and at least one idea a seasoned investor may not have tried.

The five numbers that set the table

Let me start with the data, because every tactic below hangs on it. Realtor.com's September report, released September 30, is the cleanest snapshot we have. Active listings grew 5.4% year over year to roughly 1.16 million homes, and the gap to typical pre-pandemic inventory narrowed to 9.1%, the first time it has dipped below 10% in this recovery.

Sellers are responding the way you would expect. Price cuts showed up on 20.8% of active listings in September, up 0.9 percentage points from a year earlier, and homes spent a median 61 days on the market. Note what that second number says. Sixty-one days is one day faster than last year. This is not a collapsing market. It is a market where roughly one in five sellers has already admitted the first price was wrong.

The demand side is weaker. The stock of homes under contract fell 4.1% from a year ago, the second straight monthly decline and the steepest drop since March 2025. One clarification on that figure, because it gets repeated loosely: it measures homes currently under contract, not closed sales. It is still a clear signal that fewer buyers are getting to the finish line.

And then there is the rate itself, which has moved fast. Freddie Mac data shows the 30-year average climbing from 6.66% on August 27 to 7.40% on October 8. Here is how the last few months look.

May through September are monthly figures; October is the weekly Freddie Mac reading. The vertical axis starts at 6.0% to make the move visible. Data compiled from The Mortgage Reports' rate tracker, confirmed against Fox Business's coverage of the October 8 release.

That line is the story of the quarter. Rates have now risen for seven straight weeks, and the 10-year Treasury yield, which mortgage rates track closely, hovered around 5.22% on Thursday. Nobody can promise where it goes next, and I will not pretend to. What I can tell you is how to build deals that do not depend on a rescue.

Finding sellers: the pool just got deeper, so go where the pain is

When inventory is tight, finding a motivated seller means out-hustling hundreds of other people for the same few distressed owners. When inventory loosens, and rates climb, motivation shows up on its own in places you can search. You just have to know where to look.

Start with the price-cut list, not the cold-call list

Beginners tend to buy a skip-traced list of random homeowners and start dialing. That works, slowly. A faster first move is to pull active listings that have cut price at least once and have been sitting past the local average. With 20.8% of listings carrying a reduction, that is a large pool, and these owners have already told you something: they want out, and the market disagreed with their first number.

Here is the nuance that makes this useful. About 5.6% of homes on the market were delisted in September, in line with a year ago, so sellers are mostly cutting rather than quitting. That means the owner who cut twice and is still on the market is probably not going to withdraw. They are going to keep sliding toward a price you can work with. Your job is to be the person who shows up with a clean, fast offer before the third cut, or right after a fourth.

If you are new, you can do this for free. Set up saved searches on the major portals filtered to "price reduced" and "30+ days on market," then track the ones that keep changing. A simple spreadsheet with the address, original price, each cut, and the date works. In two or three weeks, you will see which owners are bleeding.

Distress data is rising, but from a low base

The second pool is true distress. ATTOM's August report counted 40,277 U.S. properties with a foreclosure filing, up 1% from July and 13% from a year earlier, and completed foreclosures, the bank-owned properties, jumped 42% from a year ago to 5,794. If you do not work foreclosure leads yet, this is the stretch to learn.

Keep it in proportion, though. ATTOM notes that overall foreclosure activity is still below pre-pandemic norms, so this is normalization rather than a wave. Do not build a business plan around a crash that the data does not show. Build one around steady, rising, geographically concentrated opportunity. Florida, Texas, and California led the country in foreclosure starts in August, which tells you where default-notice marketing will have the most to work with.

One caution: properties foreclosed in the second quarter of 2026 had spent an average of 563 days in the process. An owner with a default notice may be well over a year from losing the house, so approach with patience and a real solution, not a lowball.

Lead generation that fits a slower market

When homes take two months to sell, owners feel the clock. These are the leads that convert now.

• Expired and withdrawn listings. The owner tried the open market and it failed, so they listen differently now.
• Out-of-state landlords watching a vacancy run longer than planned.
• Pre-foreclosure and tax-delinquent lists. Cheap to pull, high in emotion, so lead with options rather than urgency.
• Agent relationships. Tell three listing agents you close fast with no financing contingency, and some will call before the next price cut.

Follow up like it is the whole job

Most sellers who eventually sell to an investor said no, or nothing, the first time. Build a simple cadence: a call or text on day one, again at day seven, then every two to three weeks, plus a note whenever their listing price changes. A price change is the best reason to reach out you will ever get. "I saw you adjusted the price last week and wanted to check in" beats any script.

Running the numbers when money costs 7.4%

This is where deals are won or lost, and where 2021-era assumptions hurt. Three adjustments matter right now.

1. Haircut your after-repair value

Sellers are cutting, listings are lingering, and the national median list price has now fallen year over year for 11 straight months, down 1.4% in September. If your comps are sixty or ninety days old, they may be describing a market that no longer exists. Realtor.com's seasonal analysis expects listing prices to sit about 3.5% below their summer peak during the best week to buy, with homes taking roughly 64 days to sell. Use that as a rough sanity check. Lean on sold comps from the last 30 to 45 days, discount anything that sold with concessions, and if you are not sure, shave a few percent off the number you would have used in spring.

2. Price in the time you will actually hold

At a 61-day median for listings, and longer for homes that have had price cuts, your exit is not three weeks after the last coat of paint. Add at least two extra months of carrying costs to any flip or BRRRR model. If that makes the deal fail, the deal was thin to start with.

3. Remember that "gross" is not "profit"

A worked example you can copy

Here is a simple illustration, not a forecast, using the classic 70% rule with modern adjustments. Say your best recent comp suggests a $300,000 after-repair value. In this market, I would haircut that about 4%, so call it $288,000. Take 70% of that, which is $201,600. Subtract a $40,000 rehab budget, and you land at $161,600. Now subtract a cushion of roughly $7,000 for the two extra months of interest, taxes, and insurance you did not plan on, and your maximum offer is about $154,600.

The naive version, $300,000 times 70% minus $40,000, gives you $170,000. That $15,000 gap is the difference between a profitable flip and a stressful one. If the seller will not meet your number, walk, because the market will offer another listing in two weeks.

Estimating repairs and doing due diligence

Get a contractor through the house before you close, even for a rough bid, and pad your rehab number by 10% to 15%. Overruns hurt flippers more often than market swings do. Check title, liens, unpaid taxes and permit history early, and be extra careful with bank-owned homes, since completed foreclosure sales are accelerating and those properties often carry deferred maintenance and as-is terms.

Negotiating with sellers who have already blinked

Negotiation changes when the seller has cut price and the property has been stale. You are no longer fighting for an opportunity; you are solving a problem. Here is how I would approach it.

Ask the question behind the price. "What would need to be true for this to work for you?" tells you whether they care most about price, speed, certainty, or avoiding repairs. A seller who has a new job starting in November might happily trade $8,000 for a clean close on a specific date.

Sell certainty, not just cash. Realtor.com's chief economist said buyers are gaining leverage, but higher mortgage rates are limiting how much of that opportunity they can use. Translate that into your pitch. A seller whose last buyer fell out because of financing will pay for a buyer who closes. That might mean a short inspection period, proof of funds up front, and a closing date they choose.

Know your walk-away and say it to yourself first. Write down the number you will not exceed before you call. With 1.16 million homes on the market, discipline is your biggest edge over an emotional buyer.

Wholesaling and your buyers list

Wholesaling is often pitched to beginners as the zero-dollar way in, and it can be, but the current market punishes sloppy wholesalers. The reason is simple: your end buyer is a flipper or landlord whose margins are shrinking. ATTOM's Q2 2026 report put the typical flip margin at 21.5%, down from 25.7% in the prior quarter and 27.6% a year earlier. If you hand that buyer a deal priced for last year's margins, they will pass, and you will be stuck explaining to a seller why the contract fell apart.

So price your assignment fee from the buyer's numbers: work backward from what a flipper can pay at current financing costs, then add your fee. If the spread is not there, it is not a wholesale deal. Build your buyers list from actual closings, meaning recent cash sales in your zip codes, and ask each buyer for price range, rehab level, and closing speed. Forty buyers who bought in the last six months beat 400 who answered a survey in 2022. Finally, check your state's wholesaling rules, since licensing and disclosure requirements vary.

Fix and flip: thinner margins, so be pickier

The flipping data deserves a closer look because it is where the squeeze is most visible. ATTOM, which published its numbers October 1, found that 77,991 homes were flipped in Q2 2026, or 6.2% of all sales, with a typical gross profit of $60,526. For context, a year earlier that gross profit was around $71,000, and last fall many commentators were calling a 23.1% margin the lowest since 2008. We are now below even that line.

Financing is where the margin goes

Then there is the cost of borrowing. One lender directory, updated September 17, puts typical fix-and-flip hard money rates at 9% to 13%, with an average around 10.5%. On top of the rate, you will usually pay origination points, often one to three of them, plus draw fees and an appraisal.

Here is the math on one project. Suppose you borrow about $190,000 over a six-month hold at 11% with two points. Since rehab money is drawn gradually, call it roughly $10,000 in interest and $3,800 in points: close to $14,000 before taxes, insurance, utilities, or an agent. On a $300,000 sale, financing alone is nearly 5% of resale value, and it climbs if the house sits.

Where flips still work

The good news is that flipping has not died; it has become a game of selection. ATTOM found that homes bought for $100,000 to $200,000 delivered the strongest typical margin at 28%, followed by 26% for $200,000 to $300,000, while the $300,000 to $400,000 range returned 20%. Lower-priced homes have more room between purchase price and finished value, and the buyer pool of first-time purchasers is still deep.

The geography is even more dramatic. Among large metros, Pittsburgh posted the widest margin at 81.5%, followed by Buffalo at 76.6% and New Orleans at 75%. At the other end, San Antonio recorded a typical loss of 0.3%, while Dallas generated 1.8%, Austin 2.8%, and Houston 3.7%. Those are gross numbers, which means a typical flip in several big Texas metros is losing money after costs. If you are a beginner and live in one of them, it is worth considering whether your first flip should be somewhere else, or whether wholesaling or rentals is a better entry point.

Rentals and BRRRR: the refinance is the hard part

Buy, rehab, rent, refinance, repeat sounds elegant. At 7.4%, the "refinance" step is where plans break, so test it before you buy.

A quick illustration. A $150,000 loan at the 6.30% rate from a year ago has a principal-and-interest payment around $928 a month. At 7.40%, it is about $1,039. That is roughly $110 more a month on a single modest loan, and your actual investor loan will likely price above the headline rate, since Freddie Mac's survey describes conventional loans for borrowers with excellent credit and 20% down. If your rent barely covered the old payment, it will not cover the new one.

What rents are really doing

The rental picture is mixed, and honest underwriting means looking at your property type and city, not one national number. Apartment List reports that the national median rent was $1,388 in September, down 0.1% for the month and down 0.4% from a year ago, though the annual figure is recovering after bottoming at negative 1.6% in April. The same report notes the multifamily vacancy rate edged down to 7.0% from a February peak of 7.3%, which suggests the market may be stabilizing.

Single-family tells a different story. Zillow's July report put single-family asking rent at $2,314, up 3.0% from a year earlier, while multifamily rose 1.7%. If you own or plan to buy a house or small multifamily, the apartment headlines may be describing a different asset than yours.

Local data should override both. In Charlotte, single-family rentals held their asking rents from April through August but took about 11% longer to lease than a year earlier. In Las Vegas, available single-family rental inventory rose from roughly 2,000 to 2,450 homes over two reporting periods while completed leases dropped from about 1,400 to 1,225. Neither shows rent collapsing. Both show vacancy creeping up, which is a cost you should model: one extra month of vacancy per year is more than 8% of annual rent.

My rule for beginners: underwrite rent 3% to 5% below the listing comps, assume at least five weeks of vacancy per turnover, and require the deal to cash flow at today's rate. If it only works by refinancing in 2027, you are speculating on rates, not buying a property.

Regional differences: the national average hides your deal

I keep returning to this because it changes strategy more than any other single factor. Realtor.com's September data shows the West with the highest share of price-reduced listings at 22.8%, then the South at 21.6%, the Midwest at 20.7% and the Northeast at 15.2%. Inventory growth runs in nearly the opposite order.

Source: Realtor.com September 2026 Monthly Housing Trends Report, released September 30. The final column is my interpretation, not Realtor.com's.

Zoom in to metros and the spread gets wider. Among the 50 largest metros, price cuts were most common in Salt Lake City at 33.6%, Denver at 32.1% and Portland at 31.6%, and least common in New York at 10.3%. In those first three cities, a patient buyer with cash or strong financing has real negotiating room. In New York, the same strategy will mostly burn your time.

Inventory is just as uneven. Active listings jumped 31.2% in Minneapolis and 28.5% in Seattle, while falling 13.7% in Jacksonville and 12.3% in Miami. Rising supply gives you leverage. Shrinking supply deserves a closer look before you assume scarcity means safety.

The takeaway for beginners is to pick one or two metros and learn them thoroughly, instead of chasing national headlines. For experienced investors, it is a reminder that a portfolio concentrated in one region is making a bet on that region's data, not the country's.

Scaling: build a pipeline, not a lucky streak

Whether you are on deal one or deal thirty, the same principle holds. An acquisition pipeline is a system for converting attention into signed contracts, and its health shows up in a few simple numbers: leads generated, leads contacted, appointments set, offers made, offers accepted, and deals closed.

Track those for a month and one stage will be leaking. For beginners, it is usually follow-up. For intermediate investors, it tends to be offers that never get accepted. Raising acceptance from 5% to 8% costs almost nothing, while doubling lead volume is expensive.

Scaling in this market also means being careful with leverage. Financing at 9% to 13% punishes any slip in your timeline, so growth funded by hard money needs a reserve fund and clear exit options for every property. Build a bench of lenders now, before you need them: one hard money lender, one local bank or credit union, and one DSCR or private-money partner. Rates and terms vary, so compare quotes on the same deal rather than on advertised starting rates.