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# Will Home Prices Crash When Mortgage Rates Drop?
- URL: https://www.mortgagemomradio.com/will-home-prices-crash-when-mortgage-rates-drop/
- Published: 2025-04-16T22:00:19.000Z
- Updated: 2026-09-04T17:10:11.000Z
- Description: Social media says falling rates will flood the market with listings and crash home prices. Debbie takes the theory apart: what locked-in sellers will really do, why inventory is still at 60 days versus 180 in 2008, and why post-Dodd-Frank underwriting means no foreclosure wave.
- Author: Deborah Marcoux
- Tags: Podcast, Mortgage Mom Radio, #episode-backfill

Mortgage Mom Radio • “Are Home Prices Going to Crash?” • Live show from Wednesday, April 16, 2025 • 34 minutes • Hosted by Debbie Marcoux, NMLS #237926

Scroll TikTok or Instagram long enough and you'll find video after video promising a housing crash the moment mortgage rates drop: locked-in sellers will flood the market with listings, and prices will tumble. Debbie has been through the Northridge quake, the Great Recession, and COVID in 30 years of real estate and lending — and in this episode she takes that theory apart piece by piece: what locked-in sellers will actually do, where inventory really stands, and why the foreclosure wave the crash videos need isn't coming.

## Key takeaways

- **The viral crash theory:** when rates fall, everyone who's been sitting on a 2–4% mortgage lists at once, inventory floods the market, and prices collapse. Debbie's answer: more inventory will come — but so will a wave of buyers, and supply and demand will move together.
- **Locked-in sellers won't race to the bottom.** These are the same owners who put life on hold to keep a great rate and payment. Many with heavy equity may keep the old home as a rental instead of selling at all — they're not going to get competitive on price unless they have to.
- **Inventory is still tight:** about a 60-day supply today, versus 90–120 days in a normal market — and roughly 180 days or more during the 2007–2009 crash. Better than 2020–2022, but nowhere near crash territory.
- **The foreclosure wave isn't coming.** Crashing prices need banks listing foreclosures below the last sale. Post-Dodd-Frank, roughly 95% of loans written since 2008 are full-income-documented, and owners with 10–50% equity sell rather than let a bank take the house.
- **Demand is a coiled spring.** On April 4 — the best rates since October 2024, conventional in the mid-to-high sixes and government loans in the fives — just two good days produced a jump in pre-approvals, refinance applications, and purchase contracts. Debbie's trigger levels: around 6.5% conventional and 5.75% FHA/VA, demand spikes hard.
- **Waiting hasn't paid.** Ask yourself where home values were when you first thought about buying versus today. Buyers in the current lull face less competition and better odds of seller credits than they will once rates drop.
- **Her outlook:** appreciation decelerates, values flatten or dip a little in some pockets — but nothing is crashing.

## Chapters

- 01:00The crash videos flooding social media
- 03:30The theory: rate drops flood the market with listings
- 05:00What locked-in sellers will actually do
- 08:00Inventory today vs. a normal market vs. 2008
- 09:30Why the foreclosure wave isn't coming
- 11:30Q&A: listed since January with no reasonable offers
- 14:00What Dodd-Frank changed after the Great Recession
- 16:30How borrowers qualify now — even without W-2s
- 19:00The spring buying season and the school calendar
- 22:00April 4: the best rates since October — and what two days did
- 25:00Why waiting hasn't paid off
- 28:0030 years of markets: the quake, the recession, COVID
- 30:30Before you sell a 3–4% home, consider keeping it

## Questions answered on this show

### “My home has been on the market since January with only two lowball offers. What am I doing wrong?”

Debbie's straight answer: if a home has sat since January with only low offers and no follow-up, it may simply be listed too high for today's market, where both prices and rates are at the top. The seller has options — pull it off the market and relist later, hold steady, or talk to the agent about a price reduction. Timing matters too: the spring buying season is just starting. Buyers get pre-approved and start looking in April, go under contract in May, close in June, and the run continues through Labor Day — because the school calendar, plus the holidays and winter weather, drives when families are willing to move. If the goal is a sale now, a price conversation is the honest place to start; if not, the seasonal pickup is arriving.

### Buying, selling, or waiting it out? Talk through your timing

Call [844-935-3634](tel:8449353634) (844-WE-LEND-4), [start an application](https://www.mortgagemomradio.com/apply/), or run your numbers with the [mortgage calculators](https://www.mortgagemomradio.com/tools/). Get the weekly rate rundown in the [newsletter](https://www.mortgagemomradio.com/newsletter/).

Full transcript (lightly edited for clarity) 

*Auto-generated captions cleaned for readability. Commercial breaks and repeated housekeeping have been trimmed; licensing information appears at the bottom of this page.*

### The crash videos flooding social media

Welcome to Mortgage Mom Radio. I'm Debbie Marcoux, the Mortgage Mom, and today we're talking about whether I think the housing market is going to crash. Like everybody, I flip through TikTok, Instagram, and YouTube when there's downtime — and I keep coming across video after video claiming the housing market is going to crash. I listen to them, and I want to take what they say into account, but I do not agree at all with their reasoning.

This matters because a lot of people are affected by it. There are people who haven't jumped into the housing market yet, under the false impression that if they just wait longer they'll get in at a lower price. And there are homeowners who would really like to sell and move, but have been holding out for rates to drop further. None of the people making these videos are names I recognize or anyone I'd tell you to be listening to — but it's social media, it's out there, and I believe it's genuinely scaring people.

### The theory: rate drops flood the market

Here's the argument these videos make. So many people have been waiting to list their homes because they don't want to trade a 3 or 4% interest rate — some of you have a 2% rate — for something like 7%. As rates come down, the theory goes, all of those sellers list at once, the market floods with inventory, and prices fall because it becomes a buyer's market. I can sort of see what they're trying to say. Now let's get into the nitty-gritty of why it doesn't hold up.

### What locked-in sellers will actually do

Yes — people who want to downsize because the kids moved out, or upsize because they ran out of space, have put those plans on hold. The normal cyclical movement we'd see year after year — kids graduating, getting married, buying first homes; people retiring and downsizing — hasn't been happening. Everybody's been sitting in a stalemate.

But think about what those owners will actually do when rates come down. Many of them have a ton of equity. Realistically, we are probably not coming back to the low fours or high threes anytime in the next four or five years — it would take economic changes beyond our control. When rates stabilize, we're anticipating somewhere between about 4.75% and 5.25% as the new normal. So if you have a home at 3 or 4% with a pile of equity, are you going to sell it — or hang on to it as an investment and go buy something new? A lot of those “pent-up sellers” won't list at all.

Some will, of course — at 4.75–5.25%, the math gets forgivable enough that they'll sell and buy again. So we will see more inventory come to market. But when that happens, we'll also see many more buyers come to market. Supply and demand move together.

### Inventory today vs. a normal market vs. 2008

Right now we're very low on supply — better than 2020, 2021, and 2022, but still only at about a 60-day inventory level. A normal market needs more than 90 days; they really like to see about 120 days of inventory. In 2007, 2008, and 2009, during the housing recession, we had inventory around six months — 180 days and sometimes more. We're not going to see that kind of inventory again, for two reasons: falling rates bring more buyers to meet the new listings, and we're not going to see the foreclosures.

### Why the foreclosure wave isn't coming

For prices to tumble, you need foreclosures. You need banks pricing foreclosed homes below the last sale in the neighborhood, forcing every other seller to come down to compete — and then things start to cascade. We're not seeing foreclosures come, and we're not seeing default rates increase. Too many homeowners have too much equity. If you're struggling to make your payment, you call your lender for help — and if they can't help, are you going to let the bank foreclose when you have 10, 15, 20, sometimes 40 or 50% equity? No. You're going to sell.

### What Dodd-Frank changed after the Great Recession

The foreclosures haven't come back since '07–'08, when the CFPB rolled in and the Dodd-Frank Act was written. The whole point was to give the mortgage and banking industry guidelines for making loans. Here's the simple version of what went wrong back then: anybody with a good credit score could get a mortgage with zero money down and no income verification. People were stating incomes they didn't make, buying homes to flip in a month or two. When everything halted — rates up, buyers gone — the person on the hook couldn't actually afford the payment, and the foreclosures began.

Since the industry was regulated, we have been qualifying borrowers to be able to make their payments. There will always be some foreclosures in every market — a job loss, an illness, a couple that needed two incomes — that's par for the course no matter how well we underwrite. But the job market is strong right now, and everyone who has gotten a mortgage in this era has qualified with W-2s, pay stubs, and tax returns. Even self-employed borrowers in the non-QM space show 12 to 24 months of bank statements. Investors using debt-service loans put 25 to 35% down, and we verify that market rents cover the full principal, interest, taxes, and insurance. I'd say about 95% of the loans written since 2008 have been full-income-documented. We are not going to rerun the Great Recession's foreclosure market.

### Q&A: listed since January with no offers

William writes: *“I've had my home on the market since January with only two offers, both way low. I countered with no comeback. Viewings have gone up a little — but still no reasonable offers.”*

I'm very frank, and I'm not trying to be mean: if your home has been listed since January with only a couple of low offers and nothing since, you very well may just be listed too high for today's market. Rates are high, prices are high, and that combination makes housing genuinely unaffordable for a lot of buyers — which is why closings have been in a lull. Sellers like William, who probably has a great rate on his own mortgage, are in no hurry to drop their price, and that's their right — they can sit and wait. But if the goal really is to get the house sold, talk to your real estate agent about a price reduction.

And hold the season in mind. We're just entering the normal buying season: buyers get excited and pre-approved in spring, start looking in April, go under contract in May, deals close in June, and it runs through about Labor Day weekend. Then things slow down — holidays, weather, and above all school. Kids are in class from roughly mid-August to mid-May (or September to June depending on the state), and most families don't want to move mid-year. So: you may be priced a little high, or you may just need to hold steady into the season that's starting now.

### April 4: the best rates since October

Last week on Wednesday's show — that was the 9th — I talked about the Friday before, April 4: the best interest rates we had seen since October of 2024\. Thursday was good; Friday was the best; and then we hit resistance and bounced right back up. You can watch the stock market for the pattern — when stocks are doing great, rates get worse; when stocks tumble, rates get better.

Here's what matters: from just those two good days — rates down into the mid-to-high sixes for conventional and the fives for government financing, FHA and VA — we saw an uptick in pre-approval applications, refinance applications, and purchase contracts. Two days. So when rates genuinely reach about 6.5% conventional and about 5.75% on government loans and keep falling from there, we are going to see a huge spike in demand. Yes, more inventory is coming — and so is a wave of buyers.

### Why waiting hasn't paid off

If you've been wanting to buy and put it on hold: go back to the day you first thought, “I'd love to buy.” Where were home values then? Where are they today? Has waiting done you any justice? Somebody who bought last year took a rate at 7.25 or 7.5% — but their home is worth more today, and they got in before the demand wave. Right now there are fewer buyers in the market, less competition, and better luck getting sellers to help with credits toward closing costs. If you need to buy or need to sell, we are right around the corner from demand and inventory both spiking — and now is a great time to get ahead of the curve.

You don't have to take my word for it. Forbes published a piece on housing market predictions for 2025 and when home prices will drop — a money magazine, explaining in more detail than I did why they don't believe a crash is coming either. There will be some pockets around the country that see adjustment, and they expect deceleration: appreciation slowing down, maybe flat, maybe down a little. But a housing crash around the corner? Nothing's crashing.

### Thirty years of markets

Read up and come to your own conclusion — but I can tell you where mine comes from. I started selling homes in 1994 and doing mortgages in 2002, and it's 2025\. I lived through the Northridge earthquake in California and watched property values plummet from something completely out of anyone's control. I lived through the Great Recession. I lived through COVID and watched what happens when the Federal Reserve drops rates to zero and leaves them there too long — and what happens when inflation gets out of control, which is where we've been. We're now starting to get inflation back under control. I've been through all the waves, the bumps, and the ups and downs.

One more thing for Californians: because of the wildfires, rents are up, and home values have actually spiked in many of those communities — the shortage got worse, not better. The fires did not drop values the way the Northridge quake did. And no one has a crystal ball — another natural disaster nobody can predict could absolutely change my view. But as things stand, I think it's a very good time to buy: a stalemate market, fewer buyers, less competition, and sellers more willing to negotiate.

### Wrap-up

If you own a home with a 3 or 4% rate and you're thinking of selling, talk to me first — there may be a better option, like keeping that property as a long-term rental or a short-term vacation rental and starting to build your portfolio. Go to mortgagemomradio.com — don't forget the radio — and schedule an appointment so we can talk about your situation and your timing. I'm here every Wednesday at 1 PM with another hot topic. If you want to know when I go live, text the word LIVE to 844-935-3634 — that's 844-WE-LEND-4\. I hope you all have a fabulous rest of your week. Talk to you all real soon.

Debbie Marcoux is licensed by the Department of Financial Protection and Innovation under the California Residential Mortgage Lending Act, NMLS ID #237926, and additionally licensed in AZ (0941504), FL, GA, HI, ID, IL, NV, NC, OR, TN, TX, and WA. Rates and figures discussed were current as of the air date of April 16, 2025, reflect national conforming averages, and are not an offer of credit or a rate quote. Debbie Marcoux is not a financial advisor; consult qualified professionals about your individual situation.