Home prices have jumped 61% since 2020, before hitting their peak in 2024. Affordability is stretched. Speculation is back. It’s understandable that the question is being asked again: Is the current housing market in major trouble?
While today’s market shares some similarities with the 2000s housing issues, the differences are notable. For new homebuyers, the landscape is tough, but it isn’t doomed. The June report for the National Housing Outlook from Zonda breaks this down for what it means for consumers.
2008 and 2025: The Similarities
Some of the recent trends echo the past.
Big price gains: Between 2002 and 2006, home prices rose 46%. From 2020 to 2024, prices rose 61%, according to the National Association of Realtors.
Affordability pressure: The payment-to-income ratio rose from 17% in 2020 to nearly double, reaching 32% in 2024. That outpaces the 23% to 28% spike from 2004 to 2006.
Speculative buying: In 2022, home flips reached nearly 450,000, a level last seen in 2005.
These patterns matter because the last crash led to a 33% drop in national prices and years of economic recovery.
NewHomeSource chief economist Ali Wolf points out that there are significant differences between the mid-2000s and today, but new homebuyers aren’t out of the woods just yet.
“Will we avoid [a recession] altogether? I did not believe that the Federal Reserve was going to be able to execute that soft landing after raising rates,” she said. “And up until this point, they absolutely have. But now we're starting to see some shifts in the data.”
What’s Changed This Time
The market is not a carbon copy of 2008. Several fundamentals are stronger:
Lending is tighter. In 2005, 13% of mortgages went to borrowers with a credit score of less than 620. In 2025, that number sits at 5%. Loans for borrowers with a credit score of 720 or more currently make up 79% of the market.
Builders are cautious. They have scaled back quickly in response to slowing demand, helping prevent a flood of supply.
Mortgages are safer. Fixed-rate loans dominate in today’s market. In 2006, over 35% of loans were adjustable-rate mortgages. Today, that figure is 8%
“Creative financing was the name of the game in the mid-2000s,” said Wolf. “Adjustable-rate mortgages are not inherently bad, but the extent to which they were used and the extent to which people probably didn't know what they were getting themselves into, is where it became an issue.”
The Affordability Crunch
First-time buyers are getting squeezed. Existing homeowners are stable, with mortgage debt payments at 5.8% of disposable income. However, new buyers face higher costs and fewer affordable areas.
Home price growth has spread nationwide. Many smaller markets lack the infrastructure or supply to handle massive growth, leaving fewer affordable cities for cost-conscious buyers.
“We don't think any market is fully safe, said Wolf. “We're not going to see a pullback in demand and we're not going to see a pullback in pricing.”
Where the Market Could Go
Zonda analysts outline three paths ahead:
Baseline. Buyers remain cautious. Sales stay soft. Modest price declines continue in many markets. Inventory rises, but not excessively. Recession risk is around 40% to 60%.
Worst-case. A consumer pullback triggers a confirmed recession, job losses, a deeper drop in home prices, and a spike in supply due to homebuyers being forced to sell.
Best-case. Wages rise faster than inflation. The economy holds steady. Mortgage rates stay stable or dip. Sales rebound and price growth becomes more modest and sustainable.
What Buyers Should Do Now
Be patient. The frenzy has cooled.
Get your finances in order and secure preapproval.
Pay attention to how prices and inventory shift locally.
The market is shifting, but it is not collapsing. Thoughtful buyers still have opportunity, even if it takes time to find the right home.
Learn more about how to subscribe to the Zonda monthly National Housing Outlook report here.
