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 and inventory levels improve. There’s still uncertainty in the air, though: Rising prices and slowing construction could cause some trouble for buyers in 2025, and the impact of the new presidential administration remains a wild card.

Home prices, mortgage rates, inventory levels and more will all shape housing affordability in the coming 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 has risen to 7.08 percent as of early January 2025, despite three rate cuts from the Fed since September. Previous predictions of lower rates in 2025 appear to be shifting, with experts now predicting rates will moderate but not necessarily decrease in a substantial way. This will likely make affordability a continuing issue in 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,” says Greg McBride, CFA, chief financial analyst for Bankrate, 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 3.8-month supply at the end of November 2024, 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 17.7 percent improvement from a year ago.

Political implications

On top of typical housing concerns, there’s also the question of how the new presidential administration 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.”

Will home sales decline?

NAR’s existing-home sales numbers actually saw an increase this past fall for the first time since 2021, with home sales rising 4.8 percent year-over-year in November 2024. While 2024 saw many buyers staying on the sidelines, anticipating lower mortgage rates, it appears attitudes might be changing.

“Home sales momentum is building,” said NAR chief economist Lawrence Yun in a December statement. “More buyers have entered the market as the economy continues to add jobs, housing inventory grows compared to a year ago, and consumers get used to a new normal of mortgage rates between 6 percent and 7 percent.”

Still, buying a home in 2025 is likely to be tough.

“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 CoreLogic. “Lack of affordability and continuation of the lock-in effect will keep sellers on the sidelines.”

Will housing inventory increase?

Inventory has been rising, albeit slowly. 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 December found that future sales expectations were up to a nearly three-year high. “While builders are expressing concerns that high interest rates, elevated construction costs and a lack of buildable lots continue to act as headwinds, they are also anticipating future regulatory relief in the aftermath of the election,” said NAHB chairman Carl Harris in a statement.

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 slightly, it remains higher than last year. These rising prices are likely to continue in 2025, but at a slower pace. CoreLogic 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, according to Hepp.

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, CoreLogic 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 particularly 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, 31 percent of builders cut home prices in December, according to the NAHB, with an average price reduction of 5 percent. Along with that, 60 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 remains 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, many buyers seem to no longer be holding out for lower rates, as seen by a recent uptick in sales numbers. This could be a hint at 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 pro lead the way for you.

FAQs

• Should I buy a house in 2025 or wait?

  In 2024, many prospective homebuyers chose to wait things out in the hopes that the coming year will bring a more advantageous market. But continued rising home prices and tight supply mean that 2025 will likely still be a tough time to buy. If mortgage rates go down, though, that would alter the landscape — not only would it make the purchase more affordable for buyers, but more homeowners locked into their previous lower rates might finally choose to sell, which would add much-needed inventory to the market.

• Will mortgage rates drop in 2025?

  Rates are expected to ease somewhat in 2025, yes — but don’t expect a return to the days of 3 percent mortgages. It will likely be more of a slow decline. As of early January, Bankrate data showed that the average rate for a 30-year fixed mortgage was 7.08 percent.

• Will there be a housing recession in 2025?

  No — experts do not think a housing market crash is looming. Lending standards are much more strict now than they were before the Great Recession, and with low inventory and high demand both continuing, the housing market is not likely to enter a recession in the coming year.