Q2 2025 - Market Update
“In ancient times cats were worshipped as gods; they have not forgotten this. I sometimes watch my cat do something incredibly stupid, and then I realize I’m the one watching a cat do something incredibly stupid.”
— Terry Pratchett
“The housing market is the only place where you can pay a million dollars for something and still need to fix the roof.”
— Unknown
What a world we find ourselves in today. We’re watching unprecedented policy shifts, a “12-day war” that may not be only 12 days, tariff levels not seen since the 1970s, inflation falling after unusually high peaks, a tax plan that is pro-growth but adds significantly to U.S. debt, and a consumer who is increasingly strained. And yet—somehow—markets are slightly up this year.
Perhaps most shocking? A team from Oklahoma won the NBA Championship. Truly a fascinating time.
With so many complicated topics available to explore, today’s focus is on something foundational—something that represents the largest asset for most Americans: their home.
Let’s dive in.
Mi Casa, Su Casa: The State of U.S. Housing
Housing makes up roughly 15% of U.S. GDP and is valued around $4.5 trillion with approximately 146 million housing units nationwide.
It’s not just economically large—it’s culturally central. Owning a home is deeply tied to the American Dream, and about 65% of the population owns one. That means housing prices play a major role in how wealthy Americans feel, which influences how they spend, save, and invest.
So the big question is usually:
“Are home prices going up or down?”
Let’s start with the data.
Home Prices Have Climbed Dramatically
On page 3 of the file, the Case-Shiller U.S. Home Price Index shows a long-term upward trend, with an especially sharp rise after COVID reshaped how Americans value their homes.
Average home price in March 2020: $212,000
Average today: $327,680
Increase: ~55% in just 5 years
Yes—home prices have gone up. A lot.
But Mortgage Rates Have Also Jumped
According to Chart 2 (page 4), mortgage rates tell another story.
After years of historically low rates, the average 30-year mortgage rate has surged into territory not seen in decades.
That naturally brings up the next question…
The Cost of Owning a Home Has Exploded
Page 5 shows a striking chart of average monthly mortgage payments, rising from:
$975/month in 2020
to nearly $2,200/month in 2025
This makes home ownership the most expensive it has been since 1980 (inflation-adjusted).
So… Is a Housing Crash Coming?
Not necessarily.
Yes, prices are high.
Yes, mortgage payments are high.
Yes, demand has cooled.
But housing crashes typically require oversupply or credit stress — neither of which are present at 2008 levels.
What is happening, according to Chart 4 (page 6), is:
The rate of price growth has slowed significantly
Some markets are now experiencing modest price declines
There are more sellers than buyers (1.9M vs 1.4M — the widest gap since 2013)
The takeaway:
Expect downward pressure on home prices, but nothing resembling the 2007–2008 collapse.
Or, as the commentary humorously notes using a twist on Emerson:
“The faster he spoke of his prediction, the faster I counted my spoons.”
Final Thoughts
The housing market is cooling, not crashing.
Mortgage payments are historically high.
Prices are leveling off and, in many areas, beginning to decline.
Uncertainty remains elevated across the economy.
But markets—and homeowners—have weathered worse.
As always, we remain at your service and watching closely.
Daken J. Vanderburg, CFA
Chief Investment Officer
MassMutual Wealth Management