The Best News We’ve Had in 3 Years | Dec. 2025 Housing Market Update

Quick Overview

The December 2025 housing market update reveals good news heading into 2026, characterized by improving affordability due to home prices being flat or declining in real terms (1.4% year-over-year price increase against 3% inflation) and a full one percent drop in mortgage rates from 7.25% to 6.25% over the year, signaling a stable correction rather than a crash.

Key Points: National home prices rose only 1.4% year-over-year, which Dave Meyer calls relatively flat and a correction in real terms when compared to 3% inflation. Mortgage rates dropped a full percentage point over the year, moving from a peak of 7.25% in January to 6.25% in December, which significantly improves affordability. The number of regional markets seeing price declines is stable at 105 out of the top 300, though Florida markets like Punta Gorda (down 13% YoY) show severe, concentrated crashes. Inventory growth has contracted significantly, dropping from 25-30% year-over-year growth early in 2025 to just 4% growth in October, and overall inventory remains about 200,000 homes short of pre-pandemic 2019 levels. A major emerging trend is high 'delistings'—properties pulled off the market—at the highest level since 2017, as sellers refuse to accept current conditions, which provides a floor for prices. While 900,000 homes are underwater on their mortgages (1.5% of holders), this does not signal a disaster unless forced selling occurs, as homeowners typically just keep paying. Delinquency rates are slowly increasing but remain below 2019 pre-pandemic levels, although FHA and VA loan delinquencies are rising following the expiration of foreclosure moratoriums.

Context: Dave Meyer, a housing market analyst and investor at Bigger Pockets, provides the final housing market update for December 2025, assessing the year's shift from a rapidly cooling market with 7% rates to the current state. The analysis focuses on price stability, mortgage rate movements, inventory dynamics driven by seller behavior, and the potential risks associated with underwater mortgages and rising delinquencies, aiming to define whether the market is correcting or heading for a crash.