When will the housing market crash again?

A housing market crash occurs when home values ​​fall due to a lack of demand or an excess supply of homes. The causes of the housing market collapse range from the economic downturn to high mortgage rates that make home ownership less affordable. A housing bust can have upsides (such as low home prices) and downsides (loss of equity and tighter finances). So what awaits the housing market in 2025? at the end?

Overall, economists do not foresee a housing market collapse in 2025. According to JPMorgan’s latest insights, supply is not expected to outpace demand for homes.

Housing experts point out that the supply of housing is gradually increasing, but the key word is “gradually”. The supply would have to move much faster to contribute to the crash.

“Barring a significant increase in the unemployment rate, which is not currently forecast, the housing market is expected to continue to recover from the 2023 lows,” Selma Hepp, chief economist at data analytics firm Cotality, said in an email.

Current data also confirm this, and in 2025 in August According to the US Bureau of Labor Statistics, unemployment is at 4.3% by 2025. in August very little has changed. (At the time of publication, the BLS had not released September data on government shutdowns.)

Are house prices falling? A little bit. In a recent report, Cotality reported that home prices fell 1.3% year over year in August compared to 2024. in August But in many states (especially in the Midwest), prices still rose.

Zillow 2025 in July the housing value and housing sales forecast predicts that in 2025 national house prices will decline overall and end up 0.9% lower than they started.

Hepp predicted that home sales will likely increase due to lower mortgage rates and an increase in the number of existing homes on the market. Although mortgage rates are unlikely to fall this year, they have been gradually declining in recent weeks.

In order for the housing market to crash, supply and demand need to be severely out of balance, which should be in favor of supply. Looking at the first 2025 half year we see that although the supply is increasing, the discrepancy is not as drastic as in 2008. in 2025 in August The Federal Reserve Bank of St. Louis showed housing supply for 7.4 months.

“In a normal market, balanced between buyers and sellers, we would have a six-month supply of homes,” said Rick Sharga, founder and CEO of CJ Patrick Co., a market intelligence firm for real estate and mortgage companies. For comparison, in 2008 the financial crisis caused a drastic oversupply of 13 months. That was more than double the six-month average and more than a few from the current 7.4-month supply.

Also, demand is falling due to current market supply, which is likely due in part to consumers taking advantage of falling mortgage rates. For example, in 2025 in October At the end of the year, the average 30-year fixed-rate mortgage rate was 6.19%. While this is not the low of 2021. starting rates, it is unlikely that mortgage rates below 3% will return. So buyers who want to buy get a foothold in the market where they can start building equity. If interest rates fall, owners can always refinance for additional savings.

in 2007 the housing bust that started, which contributed to the global financial crisis, continues to weigh on many economists and consumers. However, the factors that led to that crash are not relevant today.

“The dynamics of the housing market today are literally different than the conditions that led to the housing crisis,” Sharga said. “These include a limited supply of homes, high levels of home ownership, economic strength and strict guidelines for mortgage borrowers to follow.”

Mortgages today also look a little different. Gone are the days of low to no paperwork mortgages and zero credit for anyone and everyone. Today, lenders are looking for buyers willing to put skin in the game. The lowest down payments are typically found with VA loans that offer zero down and FHA loans with down payments as low as 3.5%. Both loans still require strict income, asset and employment verification.

With these subprime products gone and most mortgage lenders needing money, today’s homeowners also own significantly more home equity than they did in the early 2000s. Today, the average American owns more than $300,000 in home equity.

Divounguy said that in 2007 homeowners who could not afford the monthly payments tended to have little home equity.

“When their house didn’t sell, they couldn’t lower the asking price to sell their house,” Divounguy said. “It caused many to leave their homes.”

In contrast, people selling today have a lot of home equity and can afford to lower sales prices if they need to sell.

“Home ownership is still near record highs in most housing markets,” Divounguy said. Most homeowners have extremely low monthly payments due to record low mortgage interest rates during the pandemic. As a result, mortgage defaults and distressed sales remain low.

Whether you’re watching your home’s value or hoping to buy a new home, you may want to watch for signs of an upcoming housing market crash. Yun said an economic shock, such as a significant stock market crash or large, protracted job cuts, could signal the start of a housing market crash, as well as a sharp increase in housing supply.

If unemployment spikes and homeowners can’t afford their mortgage payments, they could lose their homes and face foreclosure if they can’t sell them, Hepp said. A large increase in foreclosures would reduce home values, leading to a potential housing crash.

“Significant increases in non-mortgage costs such as property insurance and taxes may be a concern for some markets right now,” Hepp said. “This could be a bigger concern for households on fixed incomes, who may decide to sell their homes if they can no longer make the payments. If this included a lot of real estate, it could reduce house prices and weaken the housing market. Still, the housing shortage still outweighs the impact of these additional costs, so it’s very likely that the housing crash isn’t particularly large.”

Sharga suggested that users monitor their local market conditions, such as whether the population and job market are growing or declining, as well as wages, home sales and home prices.

“While a national housing collapse remains highly unlikely, every market is unique, and in some countries prices will fall even as the national number rises — probably not enough to call it a ‘crash,’ but enough to make a difference for some homeowners,” Sharga said.

The housing crash is a mixed bag for homebuyers. Accidents usually result from other undesirable economic consequences, such as job loss. Even if home prices fall, many Americans may find it harder to get a home loan.

On the other hand, some homebuyers may enjoy the crash. Lower prices may mean that those who have saved and are working regularly will shop around for a cheaper home first. There is also a small group of buyers who think about any housing crash. in 2024 in december A survey conducted by LendingTree found that 36% of respondents wanted the market to crash for reasons ranging from market stability to lower property taxes. Of these, 8% of respondents believe that the crash could help them buy a home.

During a housing bust, homeowners who don’t need to sell can wait for home values ​​to recover. Being “underwater” on your home loan — depending more on the mortgage balance than the value of the home — as many people were during the previous housing market crash, won’t immediately affect your finances.

However, if you need to sell your home, you may want to consider a more competitive price. Buyers in a depressed market are looking for bargains, and you may be getting less profit on your home than you expected.

If you’re worried about when the housing market will crash again, there are steps you can take to protect your financial well-being.

• Build an emergency fund. Experts recommend having three to six months of expenses in the bank.

• Pay off your debt. Try to prioritize high-interest debt, such as credit cards.

• Shop within your budget. Whether the market crashes or not, it’s always smart to have a mortgage that you can comfortably afford.

• Make additional mortgage payments. Even a little extra each month can help you build equity in your home faster.

• Choose a mortgage with a fixed interest rate. Enjoy a steady mortgage payment and don’t worry if interest rates go up – a fixed mortgage rate is locked in regardless of what happens in the real estate market.

Will house prices fall in 2025?

Some economists expect housing prices to decline until 2025. end, although not enough to cause the housing market to collapse. Zillow experts predict that in 2025 housing prices will decrease by 0.9 percent.

Will 2025 right year to buy a house?

The right time to buy a home is when the purchase makes sense for your unique financial circumstances. For some, this could mean buying a home in 2025 if their income, other debts and employment support the mortgage payment required for the home they want. For others in 2025 may have years to pay off the debt and pay down the down payment, so they can get a better mortgage rate in the future.

Could the housing market crash again?

Yes, another housing market crash is possible one day. However, economists are not optimistic in the near future.

Laura Grace Tarpley edited this article.