Housing Market Predictions for 2025: Will Home Prices Finally Drop?

After a hot few years, the 2025 housing market is showing signs of cooling. Slower price growth, rising inventory in key regions, and slightly lower mortgage rates are giving buyers some breathing room. But experts say major price drops may still be out of reach—at least for now.

Fed Rate Cuts and Mortgage Relief

In October 2025, the Federal Reserve made its second rate cut of the year, lowering the federal funds rate to 3.75%–4.00%. While mortgage rates have dipped to their lowest levels in nearly a year, affordability remains tight.

“Lower rates are helping refinance activity more than home purchases,” says Bright MLS chief economist Lisa Sturtevant. “Consumers are cautious amidst growing economic uncertainty.”

Home Prices Are Cooling—But Not Crashing

According to the S&P CoreLogic Case-Shiller Index, U.S. home prices rose just 1.6% year-over-year in August, the slowest growth since 2023.

• Sunbelt markets like Miami, Tampa, and Phoenix are seeing prices soften.

• Midwestern and Northeastern cities—Chicago, Cleveland, and New York—are still posting gains.

Experts say local economic strength will determine where prices go next.

Will the Housing Market Crash in 2025?

A housing crash remains unlikely. Inventory has improved but is still below pre-pandemic levels, and most homeowners today have strong equity or even own their homes outright.

“Low supply protects against a market crash,” says Angel Oak’s Tom Hutchens.

What Needs to Happen for a Recovery

Two major shifts are needed for a true housing recovery:

1. More inventory – More homes for sale would help balance prices.

2. Lower mortgage rates – Ideally around 4%–5% for affordability to rebound.

If rates fall too fast, though, a sudden demand surge could send prices climbing again.

Market Activity Snapshot

• Existing-home sales rose 1.5% in September, helped by lower mortgage rates.

• Pending sales held steady, showing cautious optimism among buyers.

• Inventory is up 33% from 2024, as more homeowners decide it’s time to move.

Foreclosures Rising—But Still Manageable

Foreclosure filings rose 20% year-over-year in September 2025 but remain far below pre-COVID levels. Homeowners now hold record-high equity—over $35.8 trillion nationwide—which helps prevent widespread defaults.

Should You Buy in 2025 or Wait Until 2026?

Timing the market is tough.

“The best time to buy is when you find a home that fits your needs and budget,” says Zillow economist Orphe Divounguy.

Waiting for lower rates could mean paying more later. Building equity sooner still offers long-term value.

Pro Tips for Buyers and Sellers

For Buyers:

• Focus on what you can comfortably afford monthly.

• Stay flexible on location and size.

• Get pre-approved early to strengthen your offer.

For Sellers:

• Price competitively based on local comps.

• Keep your home photo-ready and well-maintained.

• Work with an experienced agent who understands your market.

Bottom Line

The 2025 housing market is balancing out—not collapsing. Buyers have more chances than last year, while sellers still benefit from high equity and limited supply. Whether you’re buying or selling, staying informed and working with a trusted local expert can help you make the most of today’s changing market.

✅ Ready to Make Your Move in 2025?

Let’s talk about your next step—whether it’s finding your dream home, preparing to sell, or exploring investment opportunities.

📞 Contact Yvonne Yang today or call (650) 530-3162 for a personalized market consultation.

Source: https://www.forbes.com/advisor/mortgages/real-estate/housing-market-predictions/

Insights originally shared by Forbes. Local perspective and commentary by Yvonne Yang, Top Bay Area Realtor®.