2025 Housing Market Predictions

Experts agree that home prices, mortgage rates, and inventory levels will all shape housing affordability over the next year, and with 2024 quickly receding in the rear view, it’s time to look ahead to see what buyers and sellers can expect in 2025.

Mortgage Rates

Mortgage interest rates have been unpredictable over the past few years, driven by changes in inflation and economic growth. Looking ahead to 2025, many experts are hesitant to pinpoint exactly where rates will land, but are predicting a gradual decrease.

Mortgage rates are expected to dip slowly in 2025, helping ease some of the current market challenges. While these rates may not reach the historically low levels seen in the peak pandemic years, they will likely be lower than today’s elevated rates. 

The slight decrease is expected to spark some pent-up demand from potential buyers who have been hesitant due to high borrowing costs.

The lingering "locked-in" effect is expected to play a less of a role in the housing market, as the U.S. sees roughly 3.5 million new babies born each year, 1.5 million marriages, 700,000 divorces, 3.5 million people turning 65, and 25 million job changes. These milestones will always continue to ensure that the market remains active.

Housing Inventory

The housing inventory situation is showing signs of life. 

As of October 2024, the U.S. had a 4.2-month supply of existing homes on the market, according to the National Association of Realtors (NAR). This is a notable improvement from February 2024, when the supply was just 2.9 months. Although the current inventory still falls short of the 5 to 6 months typically needed for a balanced market, the increase in available homes is encouraging.

Looking ahead to 2025, inventory levels are expected to continue improving, especially if mortgage rates decrease. As borrowing costs lower, more potential sellers may decide it’s the right time to put their homes on the market. Homebuilders are also growing more optimistic, with lower interest rates potentially giving them greater access to capital to build new homes.

Home Values

National home values are forecast to rise by 2.6% in 2025. While this is a more moderate increase compared to the rapid growth seen in recent years, it may be a welcome sign for buyers who have been financially stretched by escalating prices.

The combination of more listings and slightly lower mortgage rates should make housing more affordable in certain markets, provided that wages continue to rise at a similar pace. For many buyers, a calmer market will provide the opportunity to save for a down payment without the pressure of rapidly rising home values. 

Closing Thoughts

As we head into 2025, the housing market looks set to experience more balance compared to the volatility of the past few years. While mortgage rates may not return to their record lows, their gradual decrease will likely stimulate demand. 

Housing inventory is expected to improve, helping to ease the supply shortages seen in previous years. And while home values are projected to rise modestly, stable market conditions could provide opportunities for buyers who have been waiting for the right moment.

Whether you're looking to purchase or sell, 2025 promises to be a year of adjustment and opportunity in the housing market. As always, give us a call or visit us online to get started on your housing journey today.