Will the Real Estate Market Crash in 2025? What Buyers and Sellers Need to Know

by Carlos Pioroda

As we move toward 2025, one question seems to be on everyone’s mind: Will the real estate market crash? While the idea of a housing market crash often stirs concern, expert insights and data suggest that a crash is highly unlikely. Instead, we’re seeing a steady path of growth with evolving opportunities for both buyers and sellers.

Let’s dive into what you need to know to make an informed decision about buying or selling in 2025.

Why a Market Crash is Unlikely

Supply and Demand Dynamics

A major driver of housing market crashes is an oversupply of homes. However, the U.S. currently faces a significant housing shortage—estimates suggest we're between 2.3 million and 6.5 million units short of meeting demand. Even if demand dips, there simply aren’t enough homes available for prices to drop significantly.

Stability of Mortgage Rates

While mortgage rates have been higher than the historic lows seen in 2020-2021, they are expected to stabilize in the 6% range by 2025. Lower borrowing costs could bring more buyers back into the market, increasing demand and putting upward pressure on prices.

Low Foreclosure Rates

Another indicator of a potential crash—high foreclosure activity—is not present. In fact, foreclosures were down 11% year-over-year in late 2023, signaling that homeowners are in a strong financial position.

What the Experts Predict for 2025

Home Prices Will Rise Slowly

Major institutions like Fannie Mae and Realtor.com predict home prices will increase by 3.6% to 3.7% in 2025. While the growth isn’t as explosive as in recent years, it’s a sign of a more balanced and sustainable market.

A Gradual Return to Normalcy

Economists note that the rapid price hikes seen during the pandemic have slowed. Home price growth is now closer to pre-pandemic levels, making the market more predictable for buyers and sellers.

Pent-Up Demand Will Drive Activity

With many buyers and sellers waiting on the sidelines due to high mortgage rates, 2025 is expected to see increased transactions. Redfin predicts up to a 9% increase in home sales compared to 2024, as more people move forward with life changes like job relocations and family expansions.

Advice for Homebuyers in 2025

If you’ve been holding off on buying a home, 2025 may be the right time to act. Here’s why:

Mortgage Rates Are Stabilizing
While we’re not likely to see the 3% rates of 2020 again, rates in the low-6% range are expected to make homeownership more affordable than it has been in recent years.
More Inventory Options
A modest increase in housing inventory will ease competition, giving buyers more room to negotiate and find homes that fit their needs.
Your Income May Go Further
Experts predict that wage growth will outpace home price growth, which could help improve affordability for first-time buyers.

What You Should Do:

Start preparing now by saving for a down payment and improving your credit score to secure the best possible mortgage terms.
Expand your search to suburban or less competitive markets where prices may be more favorable.

Advice for Homeowners and Sellers in 2025

Sellers have enjoyed a strong advantage in recent years, and while the market is shifting, 2025 could still be a great time to sell.

Limited Supply Means High Demand
Even with slight increases in inventory, there will still be more buyers than homes available in many markets. This imbalance can keep prices stable or rising.
Leverage Your Home’s Equity
With home values up an average of 4% annually, many homeowners are sitting on significant equity. Selling in 2025 could allow you to capitalize on your investment.
Plan for a Competitive Edge
While sellers are still in a good position, buyers are becoming more price-conscious. Be prepared to price your home strategically and consider small upgrades to make your property stand out.

What You Should Do:

Reach out to a trusted real estate agent (like us!) to evaluate your home’s value and discuss the best timing for listing.
Stay informed about your local market conditions, as trends can vary by area.

What to Expect in 2025

While the real estate market will likely continue to experience some bumps, the overall outlook for 2025 is positive. Buyers may find more opportunities to enter the market with slightly lower mortgage rates and increased inventory, while sellers can still benefit from strong demand and rising home values.

If you’re considering buying or selling next year, the key is preparation. Start now by understanding your financial position, researching the market, and connecting with an experienced real estate team.

How Future Policy Could Impact the Housing Market in 2025

The policies of future President Donald Trump could have a significant impact on the housing market. Some economists predict that proposed changes, such as tariffs and immigration policies, may influence the cost of construction and the availability of homes.

Potential Policy Effects

Rising Construction Costs:
Proposed tariffs on building materials like lumber, concrete, and imported goods could increase construction costs. This might slow down the pace of new home building, further limiting supply and putting upward pressure on home prices.
Labor Shortages:
Immigration policy changes could exacerbate labor shortages in the construction industry, driving up costs for homebuilding and remodels. With one in three tradespeople in industries like plumbing and roofing coming from outside the U.S., any reductions in the labor pool could strain the market.
Opportunities for Builders:
On the other hand, Trump's administration is expected to reduce some regulatory barriers to new home construction. This could incentivize builders to increase housing supply, especially in high-demand areas.

What This Means for Buyers and Sellers

While the full effects of these policies will take time to unfold, the combination of limited supply, higher construction costs, and potential regulatory relief will likely maintain steady home price growth in 2025. Buyers should remain mindful of how rising costs could affect affordability, while sellers may benefit from the continued strength of the housing market.

Let’s Make Your 2025 Real Estate Goals a Reality

Whether you’re ready to buy your dream home or sell your current property, The Laffins Team is here to guide you every step of the way. With years of experience and deep knowledge of the Chico real estate market, we’ll help you make informed decisions and achieve your goals.

📞 Call us today at (530) 809-4594
📧 Email: info@laffins.com
🌐 Visit us online: www.laffinsrealestate.com

Don’t wait—2025 is shaping up to be an exciting year for real estate. Let’s start planning your next move!