2025 Housing Market: Here’s what to expect
Get ready for more rate swings, ongoing affordability challenges, and a small bump in inventory for 2025. With rising home prices, tight inventory, and the lingering mortgage lock-in effect, buying a home is still a big hurdle for many folks.
Here’s a quick look at what we can expect in the housing market next year.
Inventory and Home Sales
Inventory Relief in 2025:
Inventory levels are expected to increase, providing relief for buyers.
Life events and an acceptance of higher mortgage rates are unlocking more supply, as many homeowners hold mortgage rates under 4%.
Market Trends:
Inventory levels are at their highest since December 2019, with 20% of listings seeing price reductions.
84% of homeowners currently have mortgage rates below 6%, though this figure is projected to decline to 75% by the end of 2025.
Sale Forecast:
Redfin predicts home sales will rise by 2%-9% in 2025, reaching 4.1-4.4 million annualized sales.
Realtor.com projects sales of 4.07 million, a 1.5% increase from 2024 but below the 2013-2019 average of 5.28 million.
Zillow anticipates 4.3 million existing-home sales in 2025, up slightly from 2024's 4 million.
New Construction Trends:
New single-family home inventory in October 2024 was up 8.8% year-over-year, providing 9.5 months' supply—above the balanced market benchmark of 5-6 months.
Realtor.com forecasts home supply to rise 11.7% in 2025, with new construction growing 13.8% to 1.1 million starts.
Positive Takeaways for Buyers:
Slower sales may give first-time buyers more time to make decisions.
Increased inventory and new construction are expected to provide more options in the market.
Mortgage Rates
Mortgage Rate Uncertainty
Mortgage rates are expected to remain volatile, with fluctuations likely throughout the year.
Current Forecasted Trends:
Rates peaked at 6.44% in April 2024, dropped to 5.15% in September, and rose again to 6.1% in November, according to Freddie Mac.
Realtor.com predicts an average rate of 6.3% for 2025, ending the year at 6.2%.
Redfin anticipates rates will stay in the high 6% range throughout 2025.
Factors Influencing Rates:
The trajectory of mortgage rates could be affected by President-elect Donald Trump’s economic policies, including tax cuts and tariffs.
Decisions impacting inflation, the national deficit, and Federal Reserve interest-rate cuts may also play a role.
Home Prices
Home Price Growth in 2025:
Home prices are expected to continue rising next year, though at varying rates.
Zillow forecasts a 2.6% increase in home values.
Realtor.com predicts a 3.7% rise in prices, slightly down from 4% in 2024 but higher than the 1.1% growth in 2023.
Redfin expects the median home price to end 2025 4% higher than this year.
Lawrence Yun of the National Association of Realtors projects a 2% increase in the median home price nationally.
Impact on First-Time Buyers:
Rising home prices will continue to challenge affordability for first-time buyers.
Nationwide, more households are being added to the economy, but a larger share will become renters rather than homeowners.
The U.S. homeownership rate is expected to decline as a result.
So, what does all of this mean for you? The 2025 housing market will definitely have its challenges, but it’s not all bad news. Whether you’re buying, selling, or just keeping an eye on things, understanding these trends will help you make smart moves when the time comes. And remember, you don’t have to navigate it alone—I’m always here to help guide you through the ups and downs of the market. Let’s tackle 2025 together and make it a year of progress toward your real estate goals!
Stay updated with the latest market trends, neighborhood highlights, and real estate tips by subscribing to my newsletter and following me on social media. Let’s connect!
