Expert Forecasts for the 2025 Housing Market

Expert Forecasts for the 2025 Housing Market

Wondering what the housing market holds for this year, especially if you're planning to buy or sell a home? The best way to get accurate insights is to rely on professional expertise.

Experts frequently update and revise their forecasts, providing the most current outlook on key factors that will influence the market. Here’s the latest information on two major factors expected to shape the year ahead: mortgage rates and home prices.

Will Mortgage Rates Come Down?

Everyone is closely monitoring mortgage rates, hoping for them to decrease. The key question is about the extent and speed of this potential decline. The positive news is that rates are expected to ease somewhat in 2025. However, it's important to temper expectations and not anticipate a return to the historically low rates of 3-4%. As Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), notes:

 “Are we going to go back to 4%? Per my forecast, unfortunately, we will not. It’s more likely that we’ll go back to 6%.”

And the other experts agree. They’re forecasting rates could settle in the mid-to-low 6% range by the end of the year (see chart below):

It's important to keep in mind that these projections will evolve as new data becomes available. Expert forecasts are contingent on current knowledge, and factors like inflation and economic activity could influence future mortgage rates, with some fluctuations expected. Rather than fixating on specific numbers or attempting to time the market perfectly, it's more practical to focus on broader trends and aspects within your control.

Working with a trusted lender and a real estate agent ensures that you have access to the latest information and a clear understanding of what it means for your financial situation. With their guidance, even a modest decrease in mortgage rates can translate into significant savings on your future mortgage payments. This partnership can help you navigate the complexities of the market and make informed decisions tailored to your needs.

Will Home Prices Fall?

The likelihood of significant drops in home prices seems slim. While mortgage rates may ease somewhat, home prices are expected to continue rising in most areas, albeit at a slower, more typical pace. When averaging out expert forecasts, you'll find that home prices are anticipated to increase by roughly 3% next year, with most predictions falling within the 3 to 4% range. This represents a more normal and sustainable rate of price growth. (see graph below):

Don't expect a dramatic drop in prices that would land you a big deal if you're planning to buy this year. While it may seem disappointing if you were hoping for lower prices, consider shifting your focus to the positive aspects. The slower rate of price increase means you won't face the steep climbs experienced in recent years, and the home you purchase is likely to appreciate in value once you own it, which is actually beneficial.

If you're wondering why home prices are still rising despite these conditions, the answer lies in supply and demand. Even though the inventory of available homes is higher than it was last year, it's still insufficient to meet the demands of all the buyers in the market. As explained by Redfin:

“Prices will rise at a pace similar to that of the second half of 2024 because we don’t expect there to be enough new inventory to meet demand.”

Keep in mind, though, the housing market is hyper-local. So, this will vary by area. Some markets will see even higher prices. And some may see prices level off or even dip a little if inventory is up in that area. In most places though, prices will continue to rise (as they usually do).

If you want to find out what’s happening where you live, you need to lean on an agent who can explain the latest trends and what they mean for your plans.

Bottom Line

The housing market is constantly evolving, and 2025 will bring its own changes. With mortgage rates expected to ease slightly and home prices projected to rise at a more normal and sustainable pace, the key is to stay well-informed and develop a plan tailored to your needs.

Let's connect so you can receive up-to-date information on what's happening in our area and expert advice to ensure your next move is a smart one.