Is the Global Housing Boom Over? Surging Prices and Sky-High Rates Strain Buyers

• U.S. housing: Existing-home sales dipped in August to a 4.00 million (annualized) pace reuters.com – a historically low level – even as new-home sales unexpectedly jumped 20.5% to an 800,000 pace, the strongest since early 2022 reuters.com. Mortgage rates have eased modestly (30-year fixed around 6.3%) after the Fed’s late-Sept rate cut, but remain much higher than pandemic-era lows reuters.com reuters.com.
• Supply crunch: Builders face an inventory glut. U.S. single-family housing starts fell 7.0% in August to 890,000 units (seasonally adjusted annual rate), the lowest since spring 2023 reuters.com. Santander economist Stephen Stanley warns builders must “bite the bullet and cut back” on new projects, after 18 months of excess unsold homes reuters.com. Europe shows a similar trend: BNP Paribas reports a 19% drop in new housing permits in H1 2025 realestate.bnpparibas.com, stifling future supply. Tight supply has sent rents to record highs – the report notes European rents hit “new record highs” amid short supply realestate.bnpparibas.com – and U.S. rental vacancies remain near historic lows.
• Central bank & policy moves: In late September, major policy actions aimed to stabilize housing. The U.S. Federal Reserve cut its key rate by 25 bp (to 4.00–4.25%) for the first time in 2025 reuters.com, nudging mortgage rates down slightly reuters.com. China’s central bank surprised markets on Sept 24 with aggressive easing: it cut benchmark lending rates (e.g. 20–30 bp off the Loan Prime Rate), trimmed bank reserve requirements by 50 bp (releasing ~¥1 trillion liquidity), and cut mortgage rates by 50 bp pgim.com. Beijing also lowered second-home down-payments and offered re-lending funds to clear unsold inventories. Meanwhile, Vietnam’s government ordered a burst of home construction and cheaper mortgages to cool a 5.6% year-to-date price surge reuters.com. (India’s central bank has cut 100 bp this year to 5.50%, but analysts say house prices — up ~7–8% – still outpace incomes reuters.com reuters.com.)
• Major deals: Investors are reshaping the market. Compass Inc. agreed to buy rival Anywhere Real Estate for $1.5 billion in stock bloomberg.com, creating America’s largest residential brokerage. Rithm Capital (a mortgage-finance firm) is paying $1.6 billion for Paramount Group, a New York City office-REIT reuters.com, a bet that office fundamentals will improve. The Paramount deal values the company at a ~10% discount to its recent price reuters.com, reflecting continued skepticism in the office sector. These transactions highlight where big money is going: adapting to low rates and discounted prices, and betting on eventual recoveries.
• Global market trends: In Europe and Asia the picture is mixed. A Reuters poll finds German home prices up ~3.0% in 2025 (after two years of declines) reuters.com, and average prices across European cities are rising (up ~5.5% in Q1 2025 realestate.bnpparibas.com). But Europe’s building-permit slump suggests tighter supply ahead. In the UK, surveys show sales slowing and rents moderating (Zoopla reports rents up just +2.4% year-over-year, the slowest in four years). In India, strong demand is pushing prices higher: analysts forecast +6.3% growth in 2025 and +7.0% in 2026 reuters.com, far above general inflation. With construction lagging far behind population growth (India faces a ~10 million affordable-home deficit), more people are renting. Reuters pollsters predict Indian urban rents will jump ~5–8% next year reuters.com. Japan’s government data show nationwide land prices rose 1.5% in mid-2025 (4th annual gain) nippon.com, and urban condo investments are driving Tokyo land values higher, reflecting still-low mortgage rates and tourism demand. Overall, most markets report tight demand and rising prices despite higher financing costs.
• Affordability crisis: Across the board, housing has become dramatically less affordable. An IMF analysis finds that on average, homes are now less affordable than at the 2007-08 bubble peak imf.org. For example, IMF data show the U.S. housing affordability index plunged from ~150 in 2021 to the mid-80s by 2024, while the U.K.’s index fell from 105 to the low-70s imf.org. Experts note this squeeze: NAR’s Lawrence Yun says home sales are “sluggish…due to elevated mortgage rates and limited inventory” reuters.com. ING’s James Knightley warns that with the labor market under strain, “we could start to see some forced sellers” – but meanwhile “buying a home is going to be out of most young Americans’ reach for quite some time” reuters.com. In India, one analyst notes the financing boom has made housing so unaffordable that the typical buyer’s age has climbed from 40 to 45 reuters.com. The result is record renter populations in many countries and growing social concern: governments in places like the U.S., UK, France and Canada are debating more housing subsidies or supply boosts to ease the crunch.
• Forecasts & Outlook: The consensus among forecasters is for only modest price gains ahead. U.S. housing analysts see low-single-digit growth: Reuters polls project U.S. home prices rising roughly 2–3% in 2025 reuters.com, with existing-home sales holding around 4.0–4.1 million per year through 2026 reuters.com. Similarly, German prices are expected to rise ~3.0% next year reuters.com and possibly pick up in 2026, while Indian house prices may grow ~6–7% reuters.com. Mortgage rates are forecast to ease only slightly (Fannie Mae sees 30-year mortgages ~6.3% on average in 2025), so financing will remain a headwind. Most major analysts (from Fannie Mae to Goldman Sachs) stress that demand will stay subdued by high borrowing costs and tight budgets. In short, the outlook is a slower, cooler market: no crash is predicted, but also no return to boom-time growth. Industry experts advise buyers to monitor shifting policies (further rate cuts or stimulus) and analysts’ national forecasts – for example, NAR now expects median U.S. prices near $410K in 2025 (about +2% yoy) – as they navigate the market.

Sources: News and analysis from Reuters, IMF/World Bank, and real estate research firms reuters.com reuters.com realestate.bnpparibas.com reuters.com reuters.com imf.org reuters.com bloomberg.com (citations link to original reports).