Will the Housing Market Crash in 2025? Here’s What the Data Says

With high mortgage rates, fluctuating inventory, and growing economic uncertainty, many are wondering: Will the housing market crash in 2025? In this article, we’ll break down the current data, compare today’s market trends to common crash indicators, and explore how investors can prepare!

Summary:

• A housing market crash is usually caused by high unemployment, mass foreclosures, and very low buyer demand.

• Based on the current data and predictions from top analysts, the US housing market is unlikely to crash in 2025.

• Rental properties are some of the best assets to invest in during a recession or housing crash, as rental demand and rent prices often increase.

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What Causes a Housing Crash?

Whether you already own a home or investment property or are waiting for an opportune time to buy, it’s important to know the warning signs of a potential housing market crash. The 2008 housing crash was very much real estate-caused, but typically, these market downturns are triggered by a combination of factors:

(Very) High Unemployment 

People tend not to get behind on their mortgages unless they experience a loss of income. For this reason, unemployment rates generally need to rise before the possibility of a housing crash. When people are out of work, many can no longer pay their bills, including their mortgages.

Mass Foreclosures 

When people can no longer afford their mortgages, foreclosures start to mount. Current homeowners are forced to downsize (and even become renters), freeing up more inventory and causing home prices to drop.

A Plunge in Demand 

When demand plummets, home prices follow suit. With fewer people looking to buy houses due to job loss, those who can still afford to buy gain significant negotiation power.

2025 Housing Market Forecast 

So, is the real estate market going to crash in 2025? Here’s what top data analysts are saying:

Redfin: Home Prices Will Rise 4%

Redfin predicts a 4% increase in median home prices from the end of 2024 to the end of 2025. Even after a recent surge in new construction, the US has a housing shortage, creating enough demand to drive prices upward.

Zillow: Rents to Increase 3.1% 

Zillow claims single-family rents could rise by 3.1% in 2025. Amid recession fears and an affordable housing crisis, many Americans are putting their homebuying plans on hold, leading to greater rental demand and higher rent prices.

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Realtor: Home Sales Will Increase 1.5% 

The housing market slowed in 2024, but Realtor expects a 1.5% increase in home sales in 2025. This modest uptick suggests that we could see more movement in the next few years, especially if mortgage rates ease.

Signs of a 2025 Housing Crash

What are the main indicators of a potential housing crash? Here are a few things that would need to happen before the real estate market is in any kind of danger:

Housing Inventory 

A spike in housing inventory would be necessary to trigger a housing crash, as oversupply typically drives home prices downward. While inventory is currently rising, it’s nowhere near the levels of even 2016!

Source: https://fred.stlouisfed.org/series/ACTLISCOUUS 

Job Loss

A spike in unemployment is usually one of the first dominoes to fall before a housing crash. This isn’t currently a concern, as unemployment is even lower than it was back in 2015!

Source: https://fred.stlouisfed.org/series/UNRATE 

Buyer Demand

People stop buying homes when a housing crash is imminent. Although the current volume of mortgage applications is substantially lower than 2021-2023, applications have steadily risen over the past year, meaning buyers are still out there!

Volume of mortgage applications

Source: https://tradingeconomics.com/united-states/mba-mortgage-market-index 

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How a Housing Crash Could Affect You

So, the housing market isn’t likely to crash in 2025. But if it did, here’s how it might affect you:

Buyers

If you have the means to buy property during a housing crash, you’ll likely have more options and even more negotiation power than usual. Home prices drop, allowing you to make much larger returns in the long run!

Sellers

When demand is low, sellers have far less negotiating power and often need to cut prices or offer concessions in order to get their properties sold. Thankfully for buy-and-hold investors, you don’t need to sell during a down market. Hold, collect rents, save the cash flow, and wait it out!

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Investors 

A housing crash could boost rental demand, as more people sell their homes or are foreclosed on. If you own rental properties, this could keep your income stable, if not growing!

Renters

Rental demand could grow during a housing crash as many struggling homeowners and would-be homebuyers rush to find affordable housing. This surge in demand could lead to higher rent prices.

Who Wins in a Housing Crash?

There aren’t many winners in a housing crash. Many would-be buyers are dealing with job loss, sellers are forced to cut prices, and renters are in a similar position as before. However, investors with capital could see additional opportunity due to less market competition, more inventory, and lower prices.

What’s more, current landlords can wait out a crash while rental demand remains high. Although there’s the risk of non-paying tenants due to high unemployment, a decent amount of cash reserves could help investors weather the storm—much like they were able to do during the 2020 global pandemic.

Secure Your Financial Future from Crashes! 

Whether the housing market crashes in 2025 or many years from now, you can never be too prepared. If your entire net worth is tied up in your home equity when a crash hits, the financial impact could be severe.

Recession-proof real estate, like cash-flowing turnkey rental properties, offers stability in all economic conditions—whether the housing market is booming and your properties are appreciating, or it topples and increased rental demand (and potentially higher rent prices) cushions the blow!

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Will the Housing Market Crash in 2025 FAQs

Will Home Prices Fall in 2025?

While home prices could dip in 2025, Redfin forecasts a 4% increase in home prices this year. If you’re worried that falling home prices could signal a potential housing crash, keep in mind that these events are usually accompanied by high unemployment, excess inventory, and low buyer demand.

Is the Housing Market Going to Crash in the Next 5 Years?

While not impossible, a housing market crash seems unlikely based on the current data. However, if you want to ensure you’re protected in the event of a housing crash, keep plenty of cash on hand so you can weather any volatility and buy great assets at reduced prices!

Is 2025 a Good Year to Buy a House?

Amid economic uncertainty, many Americans are hitting pause on buying a home for fear of what could happen to the housing market during a recession. This could lead to even more opportunities for investors in 2025!