This is good news for buyers and will inevitably bring mortgage rates down slightly. But because of the other key factors at play in the housing market, nobody’s expecting rates to come below 6% by the end of 2025.
A lot of people look to average property prices to gauge market health. But house prices aren’t a great bellwether.
Figures published by the U.S. Department of Housing indicate house affordability is at an all-time low. In June 2025, the median sale price on new houses was $401,800. This represents a 6.9% drop from May and a 2.9% decrease YoY.
According to FRED, the country’s median sale price (which includes non-new homes) sits a little higher at $410,800. But that’s pretty staggering when you compare it to pandemic lows of $317,000 and a pre-2008 high of $257,400.
This slowing increase isn’t a promising sign for the market, as it could be perceived as more of a correction than anything else.
There are also regional divergences to consider. Some markets are absolutely booming while others are contracting, and that has a lot to do with inventory.
Researchers at the National Association of Realtors say sales hit a nine-month low in June, largely driven by a sales slump in new homes (down 6.6% YoY). A lot of that goes back to the creep in prices in recent years.
There’s a chronic under-supply of appropriate housing in a lot of key U.S. markets.
When we say “appropriate,” we’re really talking about affordability. Houses are on the market longer because they’re either unaffordable for first-time buyers or unsuitable for families looking to move up the ladder.
That’s why there are shortages in markets like Hawaii and California. Meanwhile, there’s a significant oversupply in Florida and Maine.
To fix this imbalance, rates need to decrease so housing is more affordable. But builders also need to do more to keep up with demand.
Sales numbers and any potential oversupply really boil down to supply and demand.
There may be enough homes available in 2025, but they’re either not at the right price, in the right place, or the right size.
In 2025, we’re seeing millennials entering their prime buying age. A recent survey by the National Association of Home Builders found millennial buyers prefer larger homes than past generations. Unfortunately, that’s where affordability comes back into play.
Remote work has caused another shift in demand. Remote and hybrid working opportunities open up more options when it comes to housing. That creates disparity across traditionally popular and stable regional markets.
Finally, there’s immigration to consider.
International immigration is the primary driver of U.S. population growth, and recent government policies aim to stifle immigration.
The good news is PwC expects the U.S. working age population to expand by around 10 million over the next decade. That growth should fuel demand for a wider range of property types and ultimately relieve costs. But in the short term, it doesn’t look like this demand shift is going to be easily addressed.
The short answer is: No, there isn’t another housing market crash coming. The long answer is a little bit more complicated.
Economists normally define a “crash” as a nationwide price decline of between 15% and 20%. We’d also expect to see an overstress of liquidity in mortgage and credit markets as part of a wider housing collapse.
Right now, that’s not happening. The easiest way to demonstrate this is to look at the last big market collapse.
In 2008, the U.S. was dealing with a subprime lending crisis, relatively weak credit standards, and unstable household balance sheets.
If you’re feeling bearish, it’s fair to point out that affordability is almost non-existent in 2025. Sales numbers are slowing, and there’s a supply imbalance that has yet to be corrected.
But limited supply in many key markets also keeps a floor under prices. Meanwhile, a strong up-and-coming labor market offers a lot of hope that activity will heat up and build demand in oversupplied regions.
We might see sudden price corrections in pockets across the U.S. over the rest of 2025. But the most realistic scenario is another six months of relative stagnation.
Homeowners are sitting on loads of equity and aren’t in a rush to sell, which means they can afford to wait for demand to catch up. The market is definitely slowing down. But in the grand scheme of things, it should be fine.
At the end of the day, buyers should expect house prices to remain relatively stagnant across 2025. We’ve seen modest sales declines YoY, but it’s nothing to get too excited about. More importantly, these rates of decline definitely don’t fall into the realm of what economists might define as a crash.
Just remember: If you’re looking to invest in property in 2025, you shouldn’t expect a fire-sale market.
Most sellers aren’t in a rush, and prices aren’t going to plummet. So, your best bet at securing a better deal is to look for regional opportunities or wait until further rate cuts make borrowing cheaper.
