What To Expect from Mortgage Rates and Home Prices in 2025

What To Expect from Mortgage Rates and Home Prices in 2025

Curious about the direction of the housing market in 2025? The good news is that experts are providing some encouraging forecasts, particularly regarding two key factors that directly impact your decisions: mortgage rates and home prices.

Whether you’re considering buying or selling, here’s a glimpse of what the experts are saying and how it might affect your plans.

Mortgage Rates Are Forecast To Come Down

One of the most significant factors likely impacting your plans is mortgage rates, and the forecast appears positive. After experiencing a dramatic rise in recent years, experts project that rates will ease slightly throughout 2025 (see graph below):

While the decline won't be a straight path downward, the overall trend is expected to continue over the next year. You can anticipate some fluctuations along the way, as the trajectory of rates will be influenced by new economic data and inflation numbers as they are released. However, don’t get too caught up in those market reactions; instead, focus on the bigger picture.

Lower mortgage rates lead to improved affordability. As rates decrease, your monthly mortgage payment will also drop, providing you with greater flexibility in what you can afford when purchasing a home.

This shift will likely encourage more buyers and sellers to re-enter the market. As Charlie Dougherty, Director and Senior Economist at Wells Fargo, explains:

“Lower financing costs will likely boost demand by pulling affordability-crunched buyers off of the sidelines.”

As this occurs, both inventory and competition among buyers will increase. The key takeaway? You can get ahead of that competition now. Rely on your agent to help you understand how shifts in rates are affecting demand in your area.

Home Price Projections Show Modest Growth

While mortgage rates are anticipated to decrease slightly, home prices are projected to rise—but at a much more moderate pace compared to what the market has experienced in recent years.

Experts estimate that home prices will increase by an average of about 2.5% nationally in 2025 (see graph below):

This is much more manageable than the rapid price increases of previous years, where some markets experienced double-digit percentage growth.

What’s driving this ongoing increase in prices? It once again relates to demand. As more buyers return to the market, demand will rise—but so will supply as sellers feel less rate-locked.

In markets where inventory remains below normal, an influx of buyers will exert upward pressure on prices. However, with more homes likely to be listed, supply will help keep price growth in check. This means that while prices will increase, they will do so at a healthier, more sustainable pace.

Of course, these national trends may not precisely reflect what’s happening in your local market. Some areas might experience faster price growth, while others could see slower increases. As Lance Lambert, Co-Founder of ResiClub, states:

“Even if the average national home price forecast for 2025 is correct, it’s possible that some regional housing markets could see mild home price declines, while some markets could still see elevated appreciation. That has been, after all, the case this year.”

Even in the few markets that may experience flat or slightly lower prices in 2025, the significant appreciation seen in recent years may mitigate any major impact. This underscores the importance of collaborating with a local real estate expert who can provide you with a clear understanding of what’s happening in the area where you plan to buy or sell.

Bottom Line

With mortgage rates anticipated to ease and home prices expected to rise at a more moderate pace, 2025 is looking like a more promising year for both buyers and sellers.

If you have any questions about how these trends might affect your plans, let’s connect. This way, you’ll have someone to help you navigate the market and make the most of the opportunities ahead.