Understanding the difference between a healthy housing market and an unhealthy one is essential for both buyers and sellers—especially as market conditions shift across the U.S. in 2025. Whether you're investing, selling, or planning to purchase your first home, recognizing key indicators can help you make smarter decisions.

Here’s what to look for in both strong and struggling real estate markets.

What a Healthy Housing Market Looks Like

A healthy market balances buyer demand, supply, economic stability, and affordability. Here are some signs your local market is strong:

- Balanced Inventory

• Homes typically sell within 30–60 days

• There is enough supply for buyers—but not too much

• Buyers have options, and sellers receive fair offers

- Moderate Price Growth

• Home prices rise gradually, not drastically

• Appreciation aligns with income growth and inflation

• Sellers gain equity without making homes unaffordable

- Stable Mortgage Rates

• Rates are predictable and manageable

• Buyers can plan for long-term payments

• Refinancing remains accessible

- Low Foreclosure & Delinquency Rates

• Homeowners are keeping up with payments

• Banks have little distressed inventory

• Strong job market supports homeownership

- High Buyer Confidence

• Buyers feel secure making offers

• Sellers receive solid, qualified interest

• Transactions move smoothly through closing

What an Unhealthy Housing Market Looks Like

An unhealthy real estate market shows significant stress—for either buyers or sellers. Here’s what to watch out for:

- Rapid Price Spikes or Declines

• Prices climb too fast, making homes unaffordable

• OR prices fall quickly, signaling instability

• Either extreme harms long-term homeowner confidence

- High Mortgage Rates

• Buyers get priced out of their budgets

• Loan applications slow down

• Sellers must reduce prices or offer concessions

- Rising Foreclosures & Late Payments

• Financial stress spreads into the housing sector

• Banks acquire distressed properties

• Neighborhood values can suffer

- Low Inventory + High Demand

• Bidding wars become common

• Investors outbid first-time buyers

• Locals struggle to buy in their own towns

- Oversupply & Slow Sales

• Homes sit on the market too long

• Sellers are forced to drop prices

• Buyer demand weakens, signaling economic concerns

Key Indicators to Watch (Healthy vs. Unhealthy Housing Market)

Indicator. Healthy Market Unhealthy Market

Inventory 3–6 months of supply. <2 months (too low) or >7 months (too high)

Price Trends Steady growth Sudden spikes or declines

Mortgage Rates 5–7% Volatile or rapidly rising

Days on Market 30–60 days <7 days (overheated) or >90 days (slow)

Buyer Confidence Strong Low or uncertain

Foreclosures Minimal Rising sharply

Why This Matters for Buyers & Sellers

- Sellers

In a healthy market, sellers can price confidently and attract multiple buyers—without needing steep discounts or incentives.

In an unhealthy market, pricing strategy becomes critical, and homes may need stronger presentation, staging, or concessions.

- Buyers

A healthy market allows buyers to compare homes, negotiate fairly, and build equity over time.

In an unhealthy market, buyers may feel pressured—either by rising costs or declining values—and must rely heavily on data, inspections, and financing options.

How to Tell Where Your Local Market Stands

To evaluate your area, look at:

• Local inventory levels

• Mortgage application trends

• Average days on market

• Price stability over the past 12 months

• Job market and economic indicators

Real estate is local. Even if the national market changes, your community might still be stable—or gaining momentum.

A healthy housing market doesn’t favor buyers or sellers—it creates an environment where long-term value and affordability coexist. As the economy continues to shift, understanding the signs of both strong and struggling markets can help you act with confidence.

Want to know if your area is in a healthy housing market right now? I can provide a local market snapshot and price analysis—no obligation.

Send me your zip code, and I’ll send you a quick breakdown!

Matt Witte strives to be the best realtor in North Andover, MA.

Any questions about real estate, reach out to Matt Witte, North Andover Realtor, MA