Housing Market Collapse Forecast for 2025, According to Professionals' Opinions

The housing market in 2025 is forecasted to undergo a rebalancing, rather than a significant crash akin to the 2008 financial crisis. This outlook is supported by several key points, including a slowdown in home sales, moderation in price growth, and increased buyer accessibility in some segments.

Home sales are projected to decline to near 30-year lows due to elevated mortgage rates averaging around 6.7%. This reduction in affordability and dampened demand may lead to about 4 million transactions in 2025, marking one of the slowest years historically.

Despite reduced sales, there is an increase in housing inventory, shifting bargaining power towards buyers. The inventory is expected to grow by about +16.9% year-over-year, easing the intense competition seen in previous years and potentially improving accessibility for certain buyers.

Median home prices are expected to grow modestly by around 2.5% in 2025, a slowdown compared to prior years but not a collapse. Experts describe this as a soft landing or manageable correction, not a crash with dramatic price drops.

While some localized markets, especially in overvalued cities, might experience significant price reductions, this is not reflected in the national market consensus, which emphasizes stability over freefall.

The lack of widespread forced sales, mass repossessions, or systemic lending failures distinguishes the current environment from the 2008 crisis years. AI forecasts and expert analyses generally do not foresee a 2025 crash but note slower growth and possible localized price declines. Lending conditions remain more robust than in previous crisis periods, reducing crash risk.

The housing market in 2025 will be defined by its resilience and adaptation, moving towards a more balanced, albeit still challenging, environment. Realtor.com predicts a shift towards buyers, with a slowing down of price growth and a steady number of home sales. Zillow predicts a small downward adjustment in home values, a significant increase in inventory, and a continued, but slow, recovery in existing home sales.

The unemployment rate has remained low, and inflation has largely stayed within the Fed's target range, creating a solid foundation for housing activity. The trend of "delistings" is highlighted, where home sellers are choosing to wait rather than lower their prices to meet the current market reality.

The housing market is not a monolithic entity, with vastly different local realities. Hotter markets like those in the Northeast and Midwest continue to see homes sell quickly, while some areas in the South and West are seeing larger inventory increases and more significant price adjustments.

The chronic undersupply of homes in the U.S. is mentioned as a structural issue that has plagued the market for over a decade. The "One Big Beautiful Bill Act" has an impact on the State and Local Tax (SALT) deduction, allowing homeowners in high-tax states to deduct up to $40,000 from their income (up from $10,000).

In June 2025, Pittsburgh, PA, was the only metro where buying a starter home was more affordable than renting, indicating a high affordability challenge. Lawrence Yun, the Chief Economist for the National Association of REALTORS® (NAR), predicts a 6% rise in existing home sales in 2025, a 10% increase in new home sales in 2025, and continued modest growth in median home prices.

In conclusion, the housing market in 2025 is expected to rebalance with slower sales, higher mortgage rates limiting demand, and moderate price adjustments, creating more accessible opportunities for buyers in certain areas rather than a broad, severe market crash.

While some segments of the real estate market may experience localized rental or price declines, the national market consensus emphasizes stability over freefall in 2025.
To mitigate the impact of elevated mortgage rates, investors might opt to diversify their portfolio with a focus on rental properties, offering an alternative means of investment growth in the housing market.
In light of the rebalancing housing market in 2025, homeowners, particularly in high-tax states, may benefit from the Restoration of the State and Local Tax (SALT) deduction, which permits deduction up to $40,000 from income.
The market forecast for 2025 suggests that the housing-market's steady growth could continue, with Lawrence Yun predicting a 10% increase in new home sales and a 6% rise in existing home sales.
In an effort to adapt to the changing market, realtors and mortgage lenders may employ innovative strategies to manage risk and maintain liquidity, such as using AI forecasts to evaluate lending conditions.
As the housing market moves towards a more balanced landscape in 2025, financial news outlets should closely monitor the impact of the One Big Beautiful Bill Act on the affordability of housing and the potential effect on the rental market.
Likewise, investors engaged in real-estate investing should stay informed about the latest news and trends in finance, as these could impact their investment strategies and portfolios in the fluctuating housing market of 2025.