The U.S. housing market is experiencing a slowdown that has drawn comparisons to the period following the Great Recession, according to a recent analysis by Wells Fargo economists.
However, unlike the Great Recession, today’s sluggish market is driven not by economic collapse but by persistent affordability challenges.
Fortune reported on March 24, 2025, that Wells Fargo economists noted January’s total home sales reached 4.7 million, a figure described as “only modestly above the weak rate experienced in the wake of the Great Recession between 2008 and 2010.”
For context, pre-pandemic sales typically hovered around 6 million annually, with even higher numbers during the pandemic housing boom. The economists emphasized, “The tepid pace of home sales cannot be blamed on a recession,” pointing instead to affordability as the primary culprit.
Yahoo Finance echoed this sentiment in its coverage, detailing how the combination of soaring home prices—up 45% since February 2020—and elevated mortgage rates has stifled demand.
The average 30-year fixed mortgage rate, which stood at 3% in early 2020, has climbed to 6.67%, significantly increasing monthly payments for prospective buyers. “Fewer people are buying homes because they cannot afford them,” the outlet noted, citing Wells Fargo’s research.
Unlike the Great Recession, which was marked by widespread foreclosures and a crumbling financial system, today’s housing market is grappling with a unique set of challenges.
Reuters, in a historical piece from 2007, recalled Wells Fargo’s then-CEO John Stumpf describing that downturn as the worst since the Great Depression.
Fast forward to 2025, and the bank’s current analysis, as covered by multiple sources, paints a different picture—one where high prices and interest rates, rather than systemic failure, are keeping buyers at bay.
CNBC, in a separate report from January 2023 about Wells Fargo scaling back its mortgage business, provides context for the bank’s perspective.
Once the nation’s top mortgage lender, Wells Fargo has shifted focus amid a changing market landscape, giving its economists a front-row seat to evolving trends.
The bank’s latest findings align with broader industry observations, such as Moody’s prediction—cited by Fortune—that transaction volumes will see little improvement this year, with only modest gains expected in 2026.
A key factor in the current slowdown, as highlighted by Yahoo Finance, is the “interest rate lock-in” phenomenon. Homeowners with low mortgage rates secured during the pandemic are reluctant to sell, reducing the supply of existing homes.
Moody’s housing economist Matt Walsh told Fortune, “The interest rate lock-in is behind the recessionary low levels of existing home sales, which account for the lion’s share of total home sales.”
This scarcity, combined with a structural shortfall of nearly four million homes, keeps prices elevated despite weaker demand.
Wells Fargo senior economist Charlie Dougherty elaborated in an email to Fortune, stating, “A meaningful improvement in the adverse affordability conditions which persist currently seems unlikely given the elevated rate environment and structural shortfall of available homes keeping home prices on an upward trajectory.”
This assessment underscores a market caught in a bind: high costs deter buyers, yet limited supply prevents significant price drops.
Looking forward, Wells Fargo anticipates only a gradual uptick in home sales over the next several years, a forecast corroborated by Moody’s modest expectations.
Yahoo Finance reported that the average monthly principal and interest payment on a home has more than doubled in the past five years, with Moody’s housing affordability index at its lowest since the 1980s.
These conditions suggest that, while the economy remains robust, the housing sector may continue to mirror post-Great Recession sluggishness for some time.
Fox Business, in a 2022 article about Wells Fargo’s recession predictions, noted the bank’s cautious economic outlook, which adds weight to its current housing analysis.
Although the broader economy isn’t in a recession, the housing market’s struggles reflect a disconnect driven by monetary policy tightening and inflation pressures that began in 2022.
