Housing market predictions for 2025

The housing market in 2025 might have a more favorable outlook than much of 2024 had, especially if mortgage rates improve. There’s still plenty of uncertainty in the air, though: Rising prices and slowing construction could cause some trouble for buyers in 2025. And the ongoing impact of tariffs, and the new presidential administration as a whole, remains a wild card.

Home prices, mortgage rates, inventory levels and more will all shape housing affordability throughout the rest of the year. Curious where these trends may go? Read on to learn what the experts predict for the 2025 housing market.

What will happen to the housing market in 2025?

After dipping as low as 6.2 percent in September 2024, the average 30-year mortgage rate rose back above 7 percent for most of early 2025. Previous predictions of lower rates in 2025 appear to have shifted, with experts now predicting rates will moderate but not necessarily decrease in a substantial way. Indeed, rates remain only just below that 7 percent threshold — 6.86 percent as of late April — indicating that affordability is likely to be a continuing issue in the remainder of 2025.

“The average 30-year fixed mortgage rate will spend most of the year in the 6s, with a short-lived spike above 7 percent, but never getting below 6 percent,” Greg McBride, chief financial analyst for Bankrate, said in his 2025 mortgage rates forecast. “Continued economic growth and worries about inflation and government debt will keep mortgage rates elevated.”

Housing inventories, though, actually have been improving of late, with a 4-month supply at the end of March, according to existing-home-sales data from the National Association of Realtors (NAR). While that is still below the 5 to 6 months typically needed for a balanced market, it’s a significant 19.8 percent improvement from a year ago.

Political implications

On top of typical housing concerns, there’s also the question of how the Trump administration’s evolving policies could impact housing. “Investors are anticipating that if Donald Trump implements a significant portion of his proposed tax cuts and tariffs, and the economy stays strong, the Fed will only cut its policy rate twice in 2025, keeping mortgage rates high,” Redfin economists Daryl Fairweather and Chen Zhao said in their 2025 predictions. As for new construction, they say, “the Republican sweep of the White House, Senate and House has improved builder confidence by bringing renewed optimism that regulatory burdens may ease.” However, the increased costs to building materials due to tariffs have many people worried.

Will home sales decline?

NAR’s existing-home sales numbers fell 5.9 percent in March, the slowest March pace since 2009. Last year saw many buyers staying on the sidelines, anticipating lower mortgage rates, and despite earlier hopes from economists, it appears that is not changing yet. “Homebuying and selling remained sluggish in March due to the affordability challenges associated with high mortgage rates,” said NAR Chief Economist Lawrence Yun in a statement.

Homebuying activity in 2025 is likely to remain sluggish. “The prospect of elevated mortgage rates throughout 2025 suggests that housing market activity will continue to be challenged,” says Selma Hepp, chief economist for real estate data firm Cotality. “Lack of affordability and continuation of the lock-in effect will keep sellers on the sidelines.”

Will housing inventory increase?

Inventory has, in fact, been rising. But if it is to grow meaningfully in 2025, don’t expect it to come from existing homes, says McBride. “Mortgage rates won’t fall enough to spur an increase in existing-home inventory, with most of the increase in inventory seen in the market coming from new construction,” he says.

The National Association of Home Builders (NAHB) regularly surveys builders for its monthly Housing Market Index (HMI). The HMI data released in April found that builder confidence remains low, indicating a slow start to the usually-busy spring season. “Policy uncertainty is having a negative impact on home builders, making it difficult for them to accurately price homes and make critical business decisions,” said NAHB Chief Economist Robert Dietz in a statement. “The April HMI data indicates that the tariff cost effect is already taking hold, with the majority of builders reporting cost increases on building materials due to tariffs.”

Will home prices go down?

The median sale price for an existing home in the U.S. hit a record-high $426,900 in June 2024, according to NAR. While it has since dipped, it remains higher than last year, and March 2025’s median of $403,700 marked the first time the March median price has ever exceeded $400,000. These rising prices are likely to continue throughout 2025 — but, hopefully, at a slower pace. Hepp predicts that home-price appreciation will slow to an average growth of 2 percent for 2025, as compared to 4.5 percent growth in 2024.

Markets with greater inventory are the ones most likely to see home prices drop, Hepp adds, while popular regions with less new inventory, particularly in the West and Northeast, will continue to see steady price increases. The top markets for price increases in the next year include Miami, Boston and Denver, Cotality forecasts. Markets that it predicts will be most susceptible to price decreases include Atlanta and Salt Lake City.

“Nevertheless, understanding the new reality of higher mortgage rates may help bring buyers off the sidelines who can no longer postpone their purchase and are ready and able to make the move,” says Hepp.

McBride agrees that, while overall prices are not likely to go down in 2025, they won’t rise quite as much: “Home-price appreciation will be tepid, with many markets seeing little or no change in prices,” he says.

Still, you may be able to find a deal in specific instances, including with new homes. For instance, 29 percent of builders cut home prices in April, according to the NAHB, with an average price reduction of 5 percent. Along with that, 61 percent of builders offered sales incentives to buyers.

Will 2025 be a buyer’s or seller’s market?

While the housing market improved for buyers over the course of 2024, it’s still tight enough that 2025 is likely to remain a seller’s market in most areas. The good news is that inventories and demand appear to be coming more into balance, but “many regions remain significantly undersupplied, making it difficult to experience a buyer’s market,” says Hepp.

According to McBride, “Most areas will still lean toward a seller’s market due to limited inventory. However, those markets that have seen a surge in inventory will definitely be more of a buyer’s market and will be susceptible to price declines.”

Bottom line

The continued combination of high mortgage rates, steep home prices and insufficient inventory levels points to 2025 being another tough year for buyers and sellers. However, as homebuying season ramps up, buyers may stop holding out for lower rates and accept “the new normal.” This could result in more movement in the market in 2025 than there was in 2024.

The complexities of the current conditions mean that, now more than ever, it’s smart to lean on the guidance of an experienced local real estate agent. If you want to enter the housing market in 2025, whether as a buyer or a seller, let a seasoned pro lead the way for you.

FAQs

• Should I buy a house in 2025 or wait?

• Will mortgage rates drop in 2025?

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