Boom or Burst? A look at the current U.S. housing market

If you’re considering buying (or selling) a home, you may be wondering about current housing market trends and whether it’s a good time to make a move. You may have heard chatter about interest rates, housing bubbles, and even references to the housing market crash in 2008. But what does it all mean?

In this article, we’ll look at:

• What is a housing market bubble and what causes it?
• Why did the housing market crash in 2008?
• Is the housing market going to crash again?
• How do I know whether it’s a good time to buy?
• What can I do to be in the best position to buy?

What is a housing market bubble? 

A housing market bubble is a period of rapidly increasing home prices to unsustainable levels.^{Disclosure 1} When demand falls and supply increases, prices drop significantly and a bubble “bursts,” creating a market crash.

A bubble can be caused by different factors. Those might include:^{Disclosure 2}

• Low interest rates and abundant credit
• Relaxed lending standards
• Housing speculation (investors buying homes to “flip” them)
• Over-building: an increase in housing inventory

When a bubble bursts, home values rapidly decline, which can lead to decreased home value and equity for homeowners and an increase in mortgage foreclosures.^{Disclosure 1} It can also result in economic effects such as financial instability, stricter lending restrictions, and reduced consumer spending.

Why did the housing market crash in 2008?

In 2008, a bubble formed after years of low interest rates and easier lending conditions. As housing demand and prices rose, some lenders offered high-risk mortgages to borrowers with poor credit with little or no income verifications. These “subprime mortgages” were bundled into complicated financial products called mortgage-backed securities and sold to investors.^{Disclosure 3}

As interest rates went up and housing prices began to fall,^{Disclosure 1} people who could not afford their higher payments defaulted on their mortgages, leading to a wave of foreclosures and causing the value of mortgage-backed securities to drop. Companies holding those securities suffered losses, and the ripple effect created resulted in a financial crisis.

Will the housing market crash again?

While it’s impossible to say for sure, most economists and housing experts don’t predict a crash in the foreseeable future.^{Disclosure 4}

New safeguards and regulations have attempted to address some of the factors that contributed to the 2008 crisis. That means it’s harder for people to get loans and less likely they’ll be overextended financially.^{Disclosure 4} Demand for homes remains steady as of Fall 2025, and a shortage of homes for sale is keeping demand high, preventing a large price drop.

How do I know whether it’s a good time to buy?

Mortgage rates are continuing to decline as of September 2025.^{Disclosure 5}In addition, it’s a buyer’s market, giving homebuyers more leverage. But your personal and financial circumstances are the best driver of whether it’s time to buy a house.

What can I do to be in the best position to buy?

It’s important to check your financial readiness to be in the best position to buy a home. Steps include:

• Checking your credit score
• Ensuring you have enough savings for a down payment—typically 3% to 20%, although some loans offer 0%
• Ensuring you have enough for closing costs—typically 2% to 5% of the total loan amount for buyers
• Having an emergency fund to cover unexpected expenses—3 to 6 months in reserve is generally recommended
• Checking your debt-to-income ratio—36% or less as a general guideline
• Determining a mortgage payment range that fits your budget

You may also want to check on market cycles and current housing inventory in your area.

The housing market can change unexpectedly, but ultimately your financial situation is the best indicator of whether it’s time to buy. A mortgage professional can help you make the best decision for you.