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Is the Housing Market in 2025 Actually Healthy—or Just Less Broken?
Trying to assess the state of the housing market in 2025 can feel like sorting through static. Between conflicting headlines, social media speculation, and shifting data, the truth often gets buried. So here’s a question worth asking:
Is the housing market genuinely healthy this year, or are we simply recovering from past damage?
This thought came to mind after reading a new article by Logan Mohtashami, a housing analyst known for avoiding hype in favor of hard data. His claim that today’s market is “much healthier” than it’s been in years made me stop and think. Could that really be true?
The last several years have been marked by skyrocketing prices, affordability issues, and record-low inventory. Yet Logan’s data-centered argument made me want to take a closer look. To do that, I put together a simple five-point framework to evaluate where the housing market truly stands today.
What Defines a Healthy Housing Market?
Before we analyze the current market, we need a clear definition of “healthy.” In my view, that means a housing market that includes:
- A stable balance between supply and demand
- Home prices growing in line with inflation
- Consistent transaction activity—homes actually changing hands
- Affordability for average income earners
- Low levels of financial stress—few delinquencies or foreclosures
Let’s explore where each of these key indicators stands in 2025.
- Supply and Demand Are Starting to Rebalance
After years of extreme shortages, inventory is finally rising. Homes are staying on the market for about 53 days on average, which is close to the pre-pandemic norm of 60 days. That suggests the market is moving toward a more balanced dynamic between buyers and sellers.
- Price Growth Is Tracking Inflation
For once, home prices aren’t dramatically outpacing inflation—or falling off a cliff. They’re moving in line with broader economic trends. That’s a positive sign of price stability and a healthier long-term trajectory.
- Transaction Volume Remains Subdued
This is one area where the market still has room to improve. Annual home sales are hovering around 4 million—a significant drop from historical norms. While some of that is due to limited inventory and affordability pressures, it’s a clear sign that activity has not yet returned to pre-pandemic levels.
- Affordability Is Still a Major Hurdle
Housing affordability continues to be one of the market’s biggest challenges. High prices and elevated mortgage rates are pushing many buyers out of the market. Wage growth hasn’t been strong enough to keep up, and until that changes—or financing becomes more accessible—homeownership will remain out of reach for many.
- Distress Levels Are Low
Despite the pressure on affordability, homeowners appear to be in relatively strong financial positions. Foreclosure rates remain below pre-2019 levels, and while there are small signs of stress in certain loan categories (especially FHA and VA), overall delinquencies are low. This is one of the clearest indicators of improving market health.
So, Is the Market Healthy? A Mixed Picture
Out of the five indicators above, three show strong improvement: supply and demand balance, price stability, and low distress. Two—transaction volume and affordability—still reflect notable weakness.
But when compared to recent years, this is real progress. In 2023 or even 2024, the market would’ve likely failed most of these benchmarks. Today, we’re in a far more stable and functional position, even if it’s not perfect.
What Could Turn the Market Fully Healthy?
Two things are holding the market back: low transaction volume and poor affordability. Fortunately, these problems are deeply connected. If affordability improves, more people will buy—and sales activity will increase.
That improvement could come from several directions:
- Lower mortgage rates
- Higher wages
- A modest correction in home prices
At the moment, none of these shifts appear dramatic or immediate. Rates may edge downward, and wages are slowly rising, but significant movement is likely to take time. That means we’re likely to remain in a “stabilizing” phase for a while—better than the chaos of past years, but not yet fully healthy.
Investing in a Transitional Market
For real estate investors, this kind of market often creates opportunity. When the market is uncertain—but not collapsing—there are fewer bidding wars, more time to make decisions, and better potential for negotiation.
I bought my first property in 2010, during a turbulent time, and I’ve seen the same pattern repeat in 2020 and 2021. Investors who stay calm, analyze carefully, and act strategically often do well in periods like this.
Today’s market offers a similar window: more inventory, less competition, and opportunities for those prepared to move when the right deal comes along.
Are you seeing signs of recovery in your area? Is affordability still the main challenge, or are you noticing more listings and less buyer urgency?
Let’s continue the conversation. The housing market may not be fully healed—but it’s no longer in crisis. And that alone is worth watching closely.
In the previous post: “Is Now a Better Time to Invest in Real Estate Debt or Equity?“
Is the Housing Market in 2025 Actually Healthy—or Just Less Broken?
Has the U.S. Housing Market Finally Begun to Thaw After the Pandemic?
It seems like the housing market might be showing signs of life. According to a recent report from Redfin, pending home sales in early October have seen their largest year-over-year rise since 2021, with a 2% increase in the four weeks ending October 6.
This news is likely to be welcomed by real estate investors who have felt the market has offered limited opportunities over the past few years. However, it’s important to take a cautious approach—one promising statistic doesn’t necessarily indicate a broader trend.
Is the Housing Market Truly Recovering?
Let’s explore the different factors at play.
Interest Rate Reductions: A Critical Factor or a Red Herring?
The Redfin report links the surge in pending sales to the Federal Reserve’s much-anticipated rate cut announcement in mid-September. According to Redfin, this announcement prompted buyers to re-enter the market in late September, despite mortgage rates having already been falling for weeks before the cut.
This psychological boost is crucial. Although buyers were aware of the falling rates beforehand, many seemed to be waiting for a formal signal to act. This could be attributed to a lingering fixation on the ultra-low rates of 3% to 4% that buyers enjoyed before 2022.
Any rate cut announcement serves as a nudge for prospective buyers, making them feel that now might be the right time to purchase, even if mortgage rates had been decreasing already. In an unstable mortgage market, such announcements hold significant influence.
However, mortgage rates are just one piece of the puzzle when analyzing housing market performance. As noted by Investopedia, the real estate market is driven by four primary factors: interest rates, demographics, economic conditions, and government policies.
Demographics: Shaping the Market
During the pandemic, demographic shifts had a profound effect on U.S. real estate, with major population movements like the Sunbelt migration fueling booms in cities such as Phoenix and Austin, which later became unaffordable for many.
Age is another key demographic factor, and the millennial generation’s pent-up demand continues to be a driving force behind the rise in home purchases. Despite the challenges of the past few years, millennials who have longed to become homeowners are now entering the market in greater numbers, as more properties become available.
Rising Inventory: A Sign of Stabilization
A key factor contributing to the market’s stabilization is the growth of housing inventory over the last year. The pandemic had a significant impact on the availability of homes, with sellers hesitant to list properties due to COVID-19 restrictions and, later, higher mortgage rates.
Some homeowners, particularly those upgrading to larger homes, found it financially challenging to sell and take on higher mortgages. Others, however, simply chose to wait for a more favorable market.
Although the latest Realtor.com report shows that inventory remains down by 23.2% compared to pre-pandemic levels, we are seeing an upward trend. For instance, new listings have been rising since last year, with a 5.7% year-over-year increase for the four weeks ending October 6.
As of September 2024, some states have even surpassed their pre-pandemic inventory levels, including Tennessee, Texas, and Idaho, with others, like Washington, close behind.
Vulnerabilities in Certain Regions
However, not all regions are showing positive signs. For example, some areas, particularly those affected by extreme weather, have seen inventory spikes not because of market recovery, but due to homeowners trying to offload damaged properties they can’t afford to repair.
For instance, regions like Florida and North Carolina, hit by hurricanes, have experienced increases in home listings, but these may reflect a response to climate-related challenges rather than market health.
Opportunities for Investors
Investors should be discerning when choosing markets, focusing on regions where inventory is growing due to increased home construction rather than climate-related distress. States like Idaho, Utah, North Carolina, and Texas, which are building new homes, offer potential, though caution is needed in areas prone to natural disasters.
The Midwest and Northeast, meanwhile, still face significant challenges in recovering to normal market conditions. These regions have lower rates of new construction, meaning inventory remains scarce, which could present both opportunities and difficulties for investors.
The Bottom Line
The U.S. housing market is showing signs of recovery, but the situation remains complex and varies by region. Interest rates play an essential role in unlocking the market, but investors should also consider other critical factors, such as homebuilding trends, climate risks, and government policies. While the market is heading in the right direction, it’s crucial to examine regional differences carefully before making investment decisions.
In the previous post: “Is Now a Better Time to Invest in Real Estate Debt or Equity?“