Home sales were sluggish in both 2023 and 2024, but recent trends have left some hoping that the worst is now over.
That could be the case. A growing population in the U.S. and higher levels of new and existing homes for sale might point toward a coming renaissance in home sales, according to the National Association of Realtors.
In fact, the NAR is projecting that in 2025, existing home sales will rise 9% year-over-year and new home sales will increase by 11%.
Yet, despite that optimism, there are a few troubling signs that could indicate tougher sledding is ahead for housing. Here are some bad omens that have emerged recently for the housing market.
1. The U.S. Senate expects a housing crash
The U.S. Senate is quietly sounding the alarm about the state of the housing market.
In a recent report, the Senate Budget Committee says the growing risk of more frequent and severe extreme weather events caused by climate change could result in soaring insurance costs and rising home prices that may lead to a housing crash worse than the one that occurred in 2008.
As the report starkly states:
“In certain communities, sky-high insurance premiums and unavailable coverage will make it nearly impossible for anyone who cannot buy a house in cash to get a mortgage and buy a home.”
The report goes on to predict that housing values will indeed fall and might result in a shock to the economy worse than what occurred in the wake of the Great Recession.
2. Homebuilders are starting to cut prices
Recently, the inventory of unsold but completed new homes has jumped and is now up 27% year over year, according to HousingWire.
Homebuilder Lennar says the impact of inflation and high mortgage rates is weighing on sales. So the company is planning to cut prices and offer incentives to boost demand. MarketWatch reports that Lennar’s guidance suggests it will make less money on the homes it sells this quarter than it has at any time over the past seven years.
Falling home prices can be great news for buyers. But as we saw in the last housing crash, they can also lead to further price declines that can weigh on the health of the housing market.
3. Investor purchases are drying up
As home sales slumped during 2024, real estate investors appeared to pull back from the market.
Aside from South Dakota, Oregon and the District of Columbia, the share of investor-purchased home sales did not increase in any state year over year during the third quarter.
In a post at the CoreLogic website, economist Thomas Malone says:
“As the total number of purchases continues to slide, interest rates remain elevated, housing prices are high, and economic conditions are in flux, property investment may be becoming less attractive. Faced with these headwinds, it is not clear what may draw investors back into the market at previous levels.”
However, Malone does caution that recent history has shown “no consistent correlation between investor share and price movements, cautioning against oversimplified narratives about their market impact.”
4. Buyers might be looking to mobile homes instead
The high price of conventional homes might have pushed more home shoppers to take a second look at manufactured housing. Also called mobile homes, such homes — which are typically much more affordable — surged in popularity during 2024.
CNN recently reported that mobile homes selling for as little as $25,000 have gone viral on websites such as TikTok and YouTube.
Through September, shipments of manufactured homes were up 16% year over year.
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