Zillow just sounded the alarm, slashing its 2025 home price forecast nearly in half. They once predicted a 2.9% increase—now it’s just 1.1%. With inflation running at 3%, that means real losses. Housing permabulls won’t say it, but this is a flashing red light.
The Wall Street Journal reports that as home prices and inflation surged, borrowers got stretched thin. The FHA kept insuring loans for over-leveraged buyers, and now the numbers are worse than 2008. About 7.05% of FHA mortgages issued last year went seriously delinquent—90+ days late—within 12 months. That’s higher than the subprime peak of 7.02% during the last crash, according to WSJ’s February 20 data.
But where are the foreclosures? Buried under a government bailout scheme. The Biden administration has been covering missed payments and rolling debt into borrower balances without interest. Servicers get paid to avoid foreclosures, and homeowners sink deeper into debt. Miss five payments? That’s $20,000 tacked onto your mortgage. FHA will even slash your monthly payment for three years, adding another $36,000 in deferred debt. Total damage: $56,000 extra. Miss payments again? The cycle repeats. Servicers cash in every time.
Now, the market is reacting. Homebuilder stocks are on track for the largest monthly outflow in history. That’s no coincidence. The industry sees what’s coming. Mortgage demand is crumbling, delinquencies are rising, and government intervention can only hold back reality for so long.
Zillow is trying to get ahead of the inevitable. They know housing is on artificial life support, riddled with debt-laden buyers, and primed for a reckoning. The question isn’t if the floor gives out—it’s when.
Sources:
https://www.fastcompany.com/91282220/housing-market-map-zillow-just-revised-2025-home-price-forecast
https://x.com/texasrunnerDFW/status/1893400230671855732
https://x.com/Barchart/status/1893456089599091094