Housing market set to plunge to a 30-year low
Buyers have been scared off by a rocky economy, surging HOA fees, and punishing mortgage and insurance rates, leaving sellers slashing prices to lure offers. 'Even with more homes on the market, buyer response has remained muted compared to what we'd expect from similar supply shifts in the past,' Realtor.com chief economist Danielle Hale said of the shocking figures.
Thirty‑year mortgage rates will average 6.7 percent across 2025 and end the year at around 6.4 percent. That is slightly higher than previous forecasts. Median home prices have jumped 52 percent since May 2019, far outpacing wage growth of just 30 percent, NAR data shows.
Despite the frozen market, economists do not predict a correction in home prices but conversely see them rising 2.5 percent through 2025. This is largely driven by sellers who refuse to drop their asking price and are instead pulling their homes off the market in droves. Others have been forced to slash their asking prices and accept a more reasonable offer in the current uncertain market.
More than 20 percent of listed homes had price reductions in June, the highest share for the month since 2016. Phoenix, Arizona, is at the epicenter of the delistings trend, seeing more homes pulled from the market than any other area. Economists believe this is because areas in the South and West have seen inventory hit pre-pandemic levels but prices remaining flat or are even falling.
Last week Moody's Chief Economist Mark Zandi issued a 'red flare' warning for the housing market and cautioned that it could drag down the entire economy. 'I sent off a yellow flare on the housing market in a post a couple of weeks ago, but I now think a red flare is more appropriate,' Moody's Chief Economist Mark Zandi wrote on X. A 'red flare' warning suggests the market is experiencing major instability and a fall is imminent. 'Home sales are already uber depressed,' Zandi wrote. 'Housing will thus soon be a full-blown headwind to broader economic growth, adding to the growing list of reasons to be worried about the economy's prospects later this year and early next.'
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