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 to high mortgage rates that make it less affordable to buy a home. A housing crash can have upsides (low home prices) and downsides (losing built-up equity and tighter finances). So, what’s ahead for the housing market at the end of 2025 and into 2026?
Generally, experts don’t foresee a housing market crash in 2025. If anything, they see a greater sense of normalcy following multiple years of twists and turns.
“We’re not heading toward a housing crash; we’re in a market correction defined by stability, not volatility,” Hoby Hanna, CEO of Howard Hanna Real Estate Services, said via email. “Today’s housing environment is fundamentally different from 2008. Homeowners have record levels of equity, lending standards are sound, and inventory remains constrained. What we’re seeing now is a normalization, not a collapse, as the market adjusts to new economic realities. For buyers and sellers, this is a market filled with opportunity and resilience, not instability or uncertainty.”
It could be difficult to consider late 2025 as a “market filled with opportunity” if you remember the past few months showing weak growth in the job market. How are Americans supposed to keep up with mortgage payments if unemployment is on the rise? Many experts even cite weak job data as the reason for the Fed’s recent interest rate cuts.
Things are looking up in the jobs sector, though.
According to the October Job Openings and Labor Turnover Survey (JOLTS), layoffs increased in October — but job openings increased more than economists had predicted. So, while the jobs market isn’t necessarily thriving, it isn’t struggling to the point that it would lead to a housing market crash anytime soon.
The monthly ADP National Employment Report shows that the private sector added 42,000 jobs in October 2025, bringing the total employment to 134,571,000 — the highest it’s been in years.
While the 42,000 added jobs fall short of what economists have historically expected, they lean toward a new normal for the job market, according to Josh Hirt, senior U.S. economist at Vanguard.
“People are always entering and leaving the job market,” said Hirt via email. Those pluses and minuses create what’s called a break-even rate, or the number of jobs the economy has to add to make up for those who leave jobs.
“Previously, that break-even point was roughly 150,000 jobs per month,” Hirt added. Yet today, he said the real break-even point is around 60,000 jobs per month. He credits much of that shift to new immigration policies and the increasing number of workers reaching retirement age, which will only continue to rise in the coming years.
“Due to those factors, we know we’re going to experience low labor market growth for the foreseeable future,” Hirt said. Putting his comments into context, the addition of 42,000 jobs in October compared to a 60,000 break-even falls short, but still trends upward toward the level Hirt’s team at Vanguard expects.
For buyers and current homeowners, this could translate to a few things.
First, job losses can happen to anyone, and current market conditions could mean it takes longer to find a new job. This makes emergency savings even more important and might mean revisiting your current savings to see if it’s worth bumping it up a bit.
Next, it could also mean that current homeowners approach home equity lending products more conservatively. While home prices still trend upward (more on that in a minute), a softer labor market could mean that borrowing small proves the wiser move. For instance, if you need to remodel your kitchen, a home equity line of credit (HELOC) that you can draw from to pay for your project in each stage (cabinets, flooring, plumbing, etc.), versus a home equity loan that’s dispersed in a lump sum. The HELOC could leave you less exposed if your income changes suddenly.
Are home prices slumping? Not really. Recent data from Redfin shows home prices up 1.3% year-over-year. Some hot markets, such as Baton Rouge, La., and Dallas, have posted price increases between 11.1% and 33.9% compared to last year.
However, Zillow data shows monthly declining prices in markets like Austin, Texas, Pittsburgh, Dallas, and San Antonio.
For the housing market to crash, supply and demand must be drastically out of balance, favoring supply. Looking back at the first half of 2025, we can see that while supply is increasing, the discrepancy isn’t as drastic as it was in 2008. As of October 2025, the National Association of REALTORS® showed a housing supply of 4.4 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, 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 way to go from the current 4.4-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 December 2025, the average rate for a 30-year fixed-rate mortgage was 6.19%. While these aren’t the rock-bottom rates seen in early 2021, sub-3% mortgage rates are unlikely to return.
Hence, eager buyers are getting a foothold in the market where they can start building equity in their homes. If interest rates decline, owners can always refinance for additional savings.
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. Not only are housing supply levels and home equity levels vastly different, but mortgages are a different animal as well.
“Lending practices have tightened significantly since 2007, making for a wildly different scenario today than we faced back then,” David Gottlieb, a wealth advisor at Savvy Advisors, said via email.
Gone are the days of the low- to no-documentation 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, and sellers can afford to cut prices to close a deal.
“When comparing the financial health of the consumer and banking industry between 2008 and today, we truly are looking at apples and oranges,” Gottlieb said.
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. A large increase in foreclosures would bring home values down, potentially triggering a 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 suggested 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.
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, increasing unemployment numbers could mean many Americans 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.
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.
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.
While some markets have shown a slight decline, home prices are broadly up for the year. The most recent data from Redfin shows that home prices are up 1.3% year over year compared to 2024.
A good time to buy a house is when buying makes sense for your unique financial circumstances. For some, that might mean buying a home in 2026 if their income, other debts, and employment support the mortgage payment required for the home they want. For others, 2026 could be the year to pay down debt and build a down payment, so they qualify for a better mortgage rate in the future.
Economists expect mortgage rates to decline gradually throughout 2026, although most predict that the average 30-year fixed rate will remain above 6%.
Laura Grace Tarpley edited this article.