Since 2021, China’s real estate industry has been confronted with challenges it has never encountered before. These include developer defaults, such as Evergrande having a debt of 300 billion US dollars, as well as a decline in real estate sales, which dropped by 13% in 2023 compared to before. Additionally, there are structural issues like an aging population and regional disparities. This study aims to investigate the complex driving and restrictive factors influencing the recovery of this industry, providing stakeholders with evidence-based strategies. By conducting qualitative case studies, such as the sharp increase in land prices in Chengdu and the “quality housing” policy in Shanghai, this paper also conducts theoretical analyses, such as supply and demand elasticity and financial contagion theory, and explores innovative trends. For instance, green housing and AI-driven prediction can be used to assess the rebound potential and systemic constraints of this industry. Importantly, this paper also studies Guangzhou's urban renewal projects, 1.31m planned apartments by 2025, 36㎡ per capita target and Shi Pai Village projects. The key conclusion indicates that a more lenient policy will stabilize first-tier cities in the short term, while long-term sustainable development depends on whether regional and population challenges can be well addressed. This research has practical value for policymakers to formulate targeted policies, developers to optimize their strategies, and investors to assess risks, which can help promote the sustainable development of this industry.