If you follow real estate market news in the U.S., you’ve probably read recently that the market is “slower” and “cooler” and even “sluggish” in some cities.
All of that is true. The U.S. housing market has cooled down since the overheated days of 2020 – 2022, and some cities continue to see falling prices.
But that doesn’t mean the real estate market will crash in late 2025, or in 2026. It just means that home prices will probably remain flat for a while.
Here are five things you should know right up front:
- Experts do not expect a nationwide housing market crash in 2026.
- Home prices are forecast to rise slowly or level off, not plunge.
- A supply shortage and steady demand are keeping prices stable.
- Regional price dips may occur, but a 2008-style crash is very unlikely.
- Conditions can vary from one city to the next, so do your research!
Current Real Estate Conditions in the U.S.
In fall 2025 the U.S. housing market remains somewhat sluggish. Reduced affordability and other factors have weakened demand among buyers, resulting in fewer and slower sales.
Some economists point out that the market is essentially “stuck,” as buyers hold off and sellers remain reluctant to give up the low mortgage rates they secured several years ago.
While housing market inventory has risen over the past couple of years, overall supply levels remain well below historical norms. This has prevented steep price declines in most U.S. cities.
Expert Forecasts: Slow Growth, Not Collapse
Almost all forecasts for 2026 call for modest price gains or stabilization, not a market crash.
- For example, Fannie Mae’s economists project that home prices will rise about 2.0% in 2026. The National Association of Realtors (NAR) expects 4% price gains in 2026.
- The Mortgage Bankers Association offered a more conservative forecast with prices mostly flat in 2026.
- A recent Reuters poll of 27 analysts has median forecasts of about +2.1% in 2025 and +1.3% in 2026.
- Bank of America analysts also predict a “stuck” market with prices climbing around 0.5% in 2026.
These forecasts imply a soft landing or gradual cooling: prices may rise more slowly or flatten, but a sudden collapse isn’t expected.
Overall, experts overwhelmingly say a nationwide crash is very unlikely in 2026, unless the economic outlook fundamentally changes.
This doesn’t mean that a housing market crash next year is impossible—just that it’s not expected based on current economic and real estate trends.
Why a Market Crash Is Unlikely in 2026
Several fundamentals argue against a crash-type scenario in 2026.
Chief among them is the persistent supply shortage in most cities. Lawrence Yun, chief economist for the National Association of Realtors (NAR) said there is “simply not enough supply” of homes.
At the start of 2025, the U.S. housing market was millions of units short of a healthy inventory. So even if demand slows further, prices probably won’t free-fall.
As usual, it’s a supply-and-demand story. Buyer demand is improving, but the supply of homes for sale remains lower than normal. This puts upward pressure on prices.
Mortgage delinquencies are also a lot lower now compared to 2008 levels, which was when the last major market crash occurred. So a wave of forced sales is not on the horizon.
Potential Risks and Corrections
That said, downside risks do exist within the housing market.
The most likely scenario that could send home prices south would be a broad economic shock. For example, an economic recession could increase unemployment, forcing some homeowners to sell and making buyers less likely to enter the market.
According to James Knightley, chief international economist at ING:
“With the labor market looking more strained, housing demand will remain soft, though we could start to see some forced sellers, who can no longer keep up payments, if unemployment rises.”
Additionally, persistently elevated mortgage rates could reduce buyer demand over the long term, weakening home prices.
At the regional level, supply-and-demand imbalances could also cause localized price declines. In some fast-growing Sun Belt areas like Florida and Texas, home builders have recently ramped up construction.
Inventory is jumping fastest in those markets and analysts expect prices there may dip modestly.
While local market corrections are possible, a broader nationwide housing crash would require both oversupply and a demand collapse—and that’s not likely.
Bottom Line for Home Buyers
The big takeaway is that no authoritative forecast calls for a U.S. residential real estate crash in the next one to two years.
Most analysts expect home prices to keep growing slowly (a few percent per year) or to plateau, with occasional regional softness. Supply shortages and strong homeowner equity make a sudden 2008-style collapse unlikely.
In 2025 and into 2026, the housing market today will likely remain on solid ground rather than perching on a bubble. So the most likely outcome is a soft landing, not a sudden crash.
Crashology: A Quick Course in Downturns
The term “housing market crash” gets thrown around a lot, especially in those doom-and-gloom clickbait-style articles.
(I’m looking at you, Newsweek.)
But from an economist’s perspective, this term means something very specific. And it’s not just a period of slow sales or a minor price dip.
Definition: A true housing market crash is a rapid, steep, and widespread drop in home prices, often involving double-digit percentage drops over a short period of time.
A market “correction,” on the other hand, is a smaller price decline often in the range of 3% to 6% annually. A correction can be a healthy market response to cool down an overheated period.
In 2025, and possibly into 2026, a lot of cities across the U.S. are experiencing a gradual market correction following the overheated conditions of previous years—but not a crash.
The Recipe for an Actual Crash
A housing market crash isn’t caused by one single factor. It usually results from a “perfect storm” where several unstable conditions converge simultaneously.
The key ingredients are almost always the same:
- Asset Bubble: A bubble forms when home prices become “detached” from underlying economic fundamentals like local incomes and rental costs. Prices are inflated by speculation and a fear of missing out (FOMO), rather than by healthy demand.
- Risky Lending: Lenders might offer mortgages with low or no down payments, interest-only options, or loans for borrowers with bad credit. This floods the market with cheap money, artificially inflating demand and prices.
- Economic Trigger: The bubble inevitably needs a “pin” to pop it. This is usually a broader economic shock, such as a recession, a sudden spike in interest rates, or a sharp rise in unemployment. This trigger event turns the speculative frenzy into a panic.
The Different Phases of a Market Crash
Housing crashes tend to follow a predictable pattern of events.
Phase 1: Before the Crash (The Bubble Phase)
This period is characterized by market euphoria. Home prices are rising at an unsustainable double-digit pace year after year. Bidding wars are common, and homes sell almost instantly.
Credit is easy to get, and many people buy homes not to live in, but as an investment they plan to flip for a quick profit. The common belief is that “real estate can only go up.”
Phase 2: During the Crash (The Collapse)
Once the economic trigger hits, home-buying demand vanishes. Buyers step back, waiting for prices to fall further and concerned about buying a depreciating asset.
At the same time, supply skyrockets. Homeowners who can no longer afford their risky mortgages face foreclosure, forcing more properties onto the market.
As inventory swells and prices plunge, panic selling can occur, accelerating the downward spiral.
Phase 3: After the Crash (The Aftermath)
The recovery from a housing crash is almost always long and slow. Home prices might stagnate for years, and it can take a decade or more for them to return to their pre-crash peak.
Lenders, having been burned, tighten their standards dramatically. This makes it much harder to get a mortgage.
Many households see their primary source of wealth (home equity) wiped out, with long-lasting negative effects on consumer spending and the broader economy.
The Post-Pandemic “Doldrums” Continue
Many economists were caught off guard when the COVID pandemic fueled a nationwide home-buying frenzy. The rise of remote work gave people a newfound ability to move anywhere, including relocations to new parts of the country.
This pandemic-fueled migration shift (combined with record-low mortgage rates and other factors), caused a sharp spike in home purchases that sent prices skyrocketing.
But starting in the summer of 2022, the U.S. real estate market cooled considerably.
Higher home prices and fast-rising mortgage rates created affordability problems for many buyers, reducing the demand for housing.
Those higher costs caused home sales to drop and prices to level off or decline—especially in overheated metros like Austin, Boise, and Phoenix.
This brings us up to the present and also paves the way for 2026.
As of fall 2025, most real estate markets across the U.S. are in a period of stagnation. Analysts use words like “sluggish” and “stuck” when describing housing market conditions.
In September, NAR chief economist Lawrence Yun stated: “Home sales remain pretty much stuck at historically low levels.”
Home prices continue to decline in many U.S. cities, but at a gradual pace that doesn’t constitute a market crash. That trend will likely continue into the first part of 2026, with a possible turnaround later in the year.
Disclaimer: This article includes forecasts and long-range outlooks from third-party sources. Such views are the equivalent of an educated guess and should be treated as such. The publisher makes no claims or assertions about future real estate market trends.