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A housing market crash happens when home values plummet due to a lack of demand for or an oversupply of homes. The factors leading to a housing market crash are varied, ranging from economic recessions, depressions, and job losses to high mortgage rates that make buying a home widely unaffordable.
A housing crash can have upsides for some home buyers, with lower prices making homes more affordable. For instance, during the last housing market crash in 2008, home prices dropped over 15% in 2008 compared to 2007, according to the S&P/Case Shiller Home Price Indexes. For other buyers, however, a crash means losing built-up home equity and tighter finances that could lead to falling behind on mortgage payments.
What’s ahead for the housing market in 2025? Experts say there’s no crash in sight, and home prices and sales are expected to remain on a slightly upward swing.
Read more: How to recession-proof your house as a homeowner
In this article:
When will the housing market crash?
In general, economists don’t foresee a housing market crash anytime in 2025. According to recent insights from JPMorgan, it’s predicted that supply won’t outpace the demand for homes.
Housing experts point out that home supply is gradually increasing — but the operative word is “gradually.” Supply would have to move much faster to contribute to a crash.
Jobs data points toward no crash in sight
“Unless there is a significant surge in the rate of unemployment, which is currently not in the forecast, the housing market is expected to continue to rebound from 2023 lows,” said Selma Hepp, chief economist of real estate data analytics firm Cotality, in an email. Current data backs that up, with the April 2025 jobs data from the U.S. Bureau of Labor and Statistics showing unemployment at 4.2% — virtually unchanged from May 2024.
Home prices also continue upward — for now
Are home prices slumping? A little bit. In a May 2025 report, Cotality reported that year-over-year home prices increased by 2.5% from March 2024 to March 2025.
Zillow’s April 2025 Home Value and Home Sales Forecast predicts national home prices will decrease by 1.9% in 2025 — a major improvement from the previous prediction of a 0.6% increase and from 2024 projections, which cited a 2.5% increase.
Hepp anticipated that home sales would likely increase due to lower mortgage interest rates and a rise in the number of existing homes on the market. Although mortgage rates probably won’t plummet this year, they should drop at least a little compared to 2024.
Learn more: Why are home prices so high?
Housing market crashes: Supply and demand dynamics
For the housing market to crash, supply and demand must be drastically out of balance, favoring supply. Looking back at Q1 2025, we can see that hasn’t been the case. As of March 2025, the Federal Reserve Bank of St. Louis showed a housing supply of just over eight 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, the buildup to the 2008 financial crisis led to a drastic oversupply — 13 months. That was more than double the average figure of six months and more than a ways to go from the current nine-month supply.
There’s also demand chipping away at the current market supply, likely driven in part by consumers taking advantage of declining mortgage rates. For instance, in early May 2025, the average rate for a 30-year fixed-rate mortgage was 6.76%. While these aren’t the rock-bottom rates seen in early 2021, those sub-3% mortgage rates are unlikely to return. Hence, buyers eager to buy are getting a foothold in the market where they can start building equity. If interest rates decline, owners can always refinance for additional savings.
Dive deeper: How historical mortgage rates compare to rates today
Housing crisis lessons for today
The housing crash that started in 2007 and contributed to the global financial crisis continues to weigh heavily on the minds of many economists and consumers. But the factors that led to that crash are not in place today.
“Literally everything is different about today’s housing market dynamics than the conditions that led to the housing crisis,” Sharga said. “That includes a limited supply of homes, high levels of home equity, economic strength, and the strict guidelines mortgage borrowers must meet.”
Mortgages today also look quite a bit different. Gone are the days of the low- to no-doc mortgage and zero-down for anyone and everyone. Today, lenders are looking for buyers willing to put skin in the game. The lowest down payments are typically with VA loans — which offer zero down — and FHA loans — offering down payments as low as 3.5%. Both loans still require stringent income, asset, and employment verification.
With those subprime lending products gone and most mortgage lenders requiring money down, today’s homeowners also have significantly more home equity than those from the early 2000s. Today, the average American has more than $300,000 in home equity.
Divounguy said that in 2007, homeowners who couldn’t afford their monthly payments typically had little home equity.
“When their home couldn’t sell, they couldn’t cut their asking price in order to sell their home,” Divounguy said. “As a result, many walked away from their homes.”
In contrast, today, people who sell have plenty of home equity and can afford to cut sale prices if they need to sell.
“Home equity is still near record highs in most housing markets,” Divounguy said. Most homeowners have extremely low monthly payments due to record-low pandemic mortgage rates. As a result, mortgage delinquency and distressed sales remain low.”
Learn more: 7 ways to build equity in your home
Signs of a housing market crash
Whether you’re monitoring your home’s value or hoping to buy a new home, you may want to watch for indications of a future housing market crash. An economic shock such as a significant stock market crash or big, prolonged job cuts could signal the start of a housing market crash, Yun said, along with a large increase in the supply of homes.
If unemployment rose rapidly and homeowners couldn’t afford their mortgage payments, they could lose their homes to foreclosure if they couldn’t sell them, Hepp said. A large increase in foreclosures would bring home values down, leading to a potential housing crash.
“Currently, what may be a concern for some markets is the significant increase in non-mortgage related costs, such as property insurance and taxes,” Hepp said. “That may be a bigger concern for households with fixed incomes who may choose to sell their home if they can no longer afford to make their payments. If a significant number of properties were being listed as a result, that could dampen home prices and weaken a housing market. Nevertheless, with housing shortages still outweighing the impact of these additional expenses, a housing crash is not likely, especially a widespread one.”
Sharga suggests that consumers watch their local market conditions, such as whether the population and the job market is growing or declining, along with wages, home sales, and home prices.
“While a national housing crash remains very unlikely, every market is unique, and some are likely to see prices go down even as the national numbers are going up — probably not enough to designate it as a ‘crash,’ but enough to make a difference for some homeowners,” Sharga said.
Learn more: Which is more important, your home price or mortgage rate?
What a housing market crash could mean for home buyers
A housing crash is a mixed bag for home buyers. Crashes typically come with other economic undesirables, like job losses. Even if housing prices drop, many Americans could find it more difficult to qualify for a mortgage.
On the other hand, some home buyers could welcome a crash. Lower prices could mean those who have saved and are steadily employed have first dibs on more affordable housing. There’s also a small faction of buyers who think a housing crash of any kind. A December 2024 survey from LendingTree found that 36% of respondents wanted the market to crash for reasons ranging from market stability to lower property taxes. Of those, 8% of respondents feel a crash could help them buy a home.
Read more: Should you buy a house during a recession?
What a housing market crash could mean for sellers
In a housing crash, homeowners who don’t need to sell may prefer to wait until home values regain their strength. Being “underwater” on your mortgage — owing more on your mortgage balance than the value of your home —- as many people were during the previous housing market crash doesn’t immediately impact your finances.
However, if you need to sell your house, you may need to consider more competitive pricing. Buyers in market crashes are looking for bargains, and you may end up with less profit on your home than you anticipated.
How to prepare for a potential housing market crash
If you’re worried about when the housing market will crash again, you can take steps to protect your financial well-being.
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Build an emergency fund. Experts recommend having three to six months of expenses in the bank.
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Pay down your debt. Try to prioritize high-interest debt, like credit cards.
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Buy within your budget. Whether the market crashes or not, it’s always wise to have a mortgage you can comfortably afford.
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Make extra mortgage payments. Even a little bit extra each month can help you build equity in your home faster.
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Choose a fixed-rate mortgage. Enjoy a steady mortgage payment, and don’t worry if rates increase — a fixed mortgage rate is locked in, regardless of what happens in the real estate market.
Housing market crash FAQs
Are home prices going to drop in 2025?
Some economists anticipate a drop in home prices in 2025, though not enough to cause a housing market crash. Experts at Zillow forecast home prices to decrease by 1.9% in 2025.
Is 2025 a good year to buy a house?
The best time to buy a house is when buying makes sense for your unique financial circumstances. For some, that might 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, 2025 could be the year to pay down debt and build up a down payment so that they qualify for a better mortgage rate in the future.
Is it possible for the housing market to crash again?
Yes, another housing market crash one day is a possibility. However, economists don’t expect a crash in the near future.
This article was edited by Laura Grace Tarpley.
