Let’s talk about this hot topic in the real estate world.
As housing affordability reaches crisis levels across the United States, many investors, homeowners, and industry professionals are asking the same pressing question: Are real estate prices going down? While the market hasn’t fully shifted yet, several indicators suggest that a major correction could be on the horizon.
This blog explores the key data, expert warnings, and early signs of change that real estate professionals should monitor closely.
A Growing Disconnect Between Income and Home Prices
One of the strongest indicators that the market is unsustainably priced is the widening gap between household income and home values. The median U.S. home price reached $410,800 in Q2 2025, a 42% increase over the past decade. To afford a median-priced home, a typical household would need to earn around $118,530 per year. The actual median U.S. household income in 2024 is just $83,730.
This gap—over $34,000—signals severe affordability strain. Historically, housing markets tend to correct when home prices pull too far away from income levels.
Melody Wright, a housing analyst interviewed on Thoughtful Money, believes the U.S. may be heading for a major rebalancing. She argues that home values may have to fall dramatically to realign with household earnings.
Analysts Warn: A Larger Crash Than 2008?
The phrase “real estate prices going down” has gained traction recently due to warnings from multiple economic and housing experts.
Wright suggests a correction could be worse than 2008, stating that home prices may need to fall “near 50%—and even more in certain markets” to restore affordability. During the last crash, institutional investors stepped in and stopped prices from falling further. This time, she believes big investors may stay on the sidelines.
That raises the question: Could such a steep decline really happen?
Early Signs of a Slowdown
While a nationwide crash hasn’t materialized yet, several data points indicate momentum is shifting:
- Zillow reports that 53% of U.S. homes lost value over the past year, the highest percentage since 2012.
- The average value decline among these homes was nearly 10%.
- Treasury Secretary Scott Bessent recently remarked that the housing market is in a “recession” due to current Federal Reserve policy.
- Prominent investor Robert Kiyosaki has warned that a large real estate downturn may already be underway.
For industry professionals, these trends highlight the importance of preparing clients for extended market volatility.
When Could a Correction Begin?
Wright believes the price decline could begin as early as 2026, though she emphasizes that the full correction may take years to play out. Long correction cycles are not unusual in real estate, which tends to adjust more slowly than other markets.
If interest rates remain elevated, affordability continues to deteriorate, or unemployment rises, downward pressure on prices could accelerate.
What a Housing Correction Means for Real Estate Professionals
A major downturn—if it occurs—could produce:
- More motivated sellers: Owners with high leverage or recent buyers facing negative equity may look to exit quickly.
- Greater opportunity for investors: Falling home prices could create buying opportunities for investors who have waited on the sidelines.
- Shifting buyer priorities: Affordability concerns may push buyers toward smaller homes, different regions, or alternative financing.
- Slower sales cycles: In a declining market, buyers may hesitate, expecting better prices ahead.
Preparing for Market Uncertainty
Even if a major correction is still only a possibility, real estate professionals can take steps now to help clients navigate uncertain conditions:
- Encourage financial resiliency: Buyers should maintain strong cash reserves and avoid over-leveraging.
- Prioritize long-term value: Focus on markets with stable job growth and diversified economies.
- Stay educated: Understand local inventory trends, days on market, and pricing shifts.
- Help clients make data-driven decisions: Emphasize affordability, sustainable payment plans, and realistic expectations.
Are Real Estate Prices Going Down?
While no one can predict the future with certainty, the warning signs are becoming harder to ignore. The combination of sky-high home prices, stagnant income growth, and early value declines suggests that the question is no longer if home prices will adjust—but how much and how quickly.
For real estate professionals, staying informed and proactive will be essential. Whether the market experiences a mild correction or a historic downturn, adaptability will be key to guiding clients successfully through the years ahead.
If you need help interpreting current market data or preparing strategies for buyers and sellers in shifting conditions, Clagett Enterprises is here to support you.
Trust the Professionals at Clagett Enterprises for Your Realty Needs
If you’re looking for an experienced property management company, the perfect realtor for your property, or a professional to assist you during your purchase of any home, you can rely on Clagett Enterprises. Clagett Enterprises is a full-service real estate company with almost 30 years of experience in the Frederick and Western Maryland area. For assistance with commercial sales, leasing, management, and development and consulting, contact us online or give us a call at 301-665-6009. To meet our team and see some of our beautiful homes, follow us on Facebook and Linkedin.