The real estate market doesn't move in straight lines. After years of rapid appreciation, some markets are showing signs of cooling—with home prices declining or growth slowing considerably. According to recent Realtor.com data, markets like Austin, Boise, and several across Florida have experienced notable price corrections, while others continue seeing modest gains.

For real estate investors, particularly those focused on long-term buy-and-hold strategies, these shifts raise important questions: What do cooling markets mean for your portfolio? How do you choose markets that offer stability through market cycles? And what should you do if your property loses value?

Understanding Market Cooling

Market cooling happens when demand softens, inventory increases, or economic conditions shift. Price declines don't necessarily signal disaster—they often represent a return to more sustainable growth after overheated appreciation.

Several factors contribute to cooling markets:

Overvaluation: Markets that saw explosive growth during the pandemic (think Austin, Phoenix, and Boise) often experience corrections as prices realign with local economic fundamentals.

Rising Interest Rates: Higher borrowing costs reduce buyer demand, putting downward pressure on prices.

Migration Reversals: Some Sun Belt markets that benefited from pandemic-era migration are seeing residents return to urban centers or move elsewhere as remote work policies scale back.

Local Economic Shifts: Markets heavily dependent on specific industries can cool when those sectors face headwinds.

Keep Reading: How and Why Do Real Estate Markets Crash?

So What Makes a Stable Real Estate Market?

You might see these trends and still worry. We understand that completely, but know that this is all part of the cycle. What matters aren’t the incidental ups and downs, but how you select stable markets and pivot your strategy to make the most of current market conditions.

What should real estate investors look for?

Diversified Economies: Look for markets with varied industries rather than reliance on a single employer or sector. Memphis, Houston, and Dallas-Fort Worth all benefit from economic diversity spanning healthcare, logistics, manufacturing, and energy. When one industry faces challenges, others provide stability.

Consistent Population Growth: Steady, sustainable population increases matter more than dramatic spikes. Markets such as Birmingham, Little Rock, and Huntsville show consistent growth without the volatility seen in "boom" markets.

Affordable Housing Relative to Income: Markets where median home prices remain reasonable compared to median household incomes tend to maintain stronger rental demand. When homeownership becomes prohibitively expensive, rental markets strengthen, but risk a later, more substantive correction.

Strong Job Markets: Employment drives housing demand. Markets with growing, diverse job opportunities maintain rental stability even during downturns.

Historical Resilience: Review how markets performed during previous recessions. Markets that demonstrated resilience during 2008 and 2020 have proved themselves under adverse conditions.

The key isn't finding markets that never experience price fluctuations—they don’t exist. Instead, investors need markets where fundamentals support long-term growth despite short-term volatility.

What to Do When Your Property Loses Value

If you own property in a cooling market, remember: paper losses only become real losses if you sell. Buy-and-hold investors have the luxury of riding out market cycles. You can afford to keep your eye on the big picture.

Here’s what to do:

Don't Panic: Real estate markets are cyclical. History shows that well-located properties in fundamentally sound markets recover over time.

Focus on Cash Flow: If your property generates positive cash flow, short-term value fluctuations matter less. Your residents are still paying down your mortgage and generating monthly income.

Review Your Fundamentals: Ensure your property remains competitive. Are rents aligned with market rates? Does the property need updates to attract quality residents? Strong property management becomes even more critical during market softness.

Consider Your Timeline: If you planned to hold for 10-15 years, a temporary dip shouldn't alter your strategy. Time in the market beats timing the market.

Resist the Urge to Sell: Selling during a market downturn locks in losses. Unless you face financial distress or the market's fundamentals have permanently deteriorated, holding is the right call.

The Long View Wins

Cooling markets aren't inherently bad for investors, as they create opportunities to acquire properties at more reasonable prices. Investors who succeed focus on markets with solid fundamentals rather than chasing headliners.

At REI Nation, we've operated through multiple market cycles over two decades. Our markets—spanning Memphis, Dallas-Fort Worth, Houston, Little Rock, Birmingham, and others across the South and Midwest—were selected for stability, not speculation. We prioritize markets where rental demand remains strong regardless of short-term price fluctuations.

When you invest in fundamentally sound markets with strong property management, temporary market cooling becomes a blip in your long-term wealth-building story.

Ready to build a resilient real estate portfolio? Schedule a consultation with your REI Nation advisor to discuss markets positioned for long-term stability.