What’s in Store for the Housing Market in 2025?
Written by
John Csiszar
Edited by
Amber Barkley
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The housing market has had a wild ride over the past five years. In the first few years after the COVID-19 pandemic, when interest rates remained at rock-bottom levels, home prices skyrocketed. Shortly thereafter, inflation reached its highest levels in more than 40 years, pulling up mortgage interest rates, as well. While this slowed the rate of increase, home prices still rose ever higher, averaging $484,800 in November 2024, according to the U.S. Census Bureau.
So, where does this leave the market heading into 2025? Here’s what the experts have to say.
Demand Will Remain High
Due to a number of factors, from high mortgage rates to the rising unaffordability of homes, there has been pent-up buying demand for years. Experts say that this high level of demand may continue to drive home transactions in 2025 — and may even accelerate them, according to CoreLogic.
Daryl Fairweather, chief economist at Redfin, told CNBC, “People have waited long enough.” Overall, Redfin anticipates that about 4 million homes will be sold in 2025, which amounts to an increase of between 2% and 9% from 2024.
Fairweather added, “People who need to move on with their lives” will contribute to the continual demand, including those who have gotten new jobs or changed their lifestyles, or sellers who have been waiting to make a move.
Home Prices Are Likely To Continue Higher
Experts at Realtor.com anticipate that home prices will jump another 3.7% in 2025, after hitting all-time highs in 2024, according to Robb Report. While some would expect a market correction after the multi-year rally in home prices, those who are waiting to buy the dip may be disappointed.
As senior economist at Realtor.com, Ralph McLaughlin told Business Insider, “If you look at the times that home prices fall, it’s typically only when there’s a recession, and only when people are forced to sell.”
Fairweather concurs with this assessment, saying, “If the housing market were going to crash, it would have already crashed by now. The housing market has been so resilient to interest rates going up as high as they have.”
The return of President-elect Donald Trump to the Oval Office could further exacerbate home price gains. According to Jacob Channel, senior economist at LendingTree, some of Trump’s economic policies, if enacted, could drive home prices much higher. Further, Trump’s proposed tariffs could raise the cost of goods and materials, resulting in higher construction costs and slowing home-building activity. And if fewer homes are built when demand is already high, the combination could fuel even greater price gains, Channel told CNBC.
Inventory Is Rising
Selma Hepp, chief economist at CoreLogic, noted that inventory is actually improving in many markets, a trend she sees continuing in 2025. The experts at Realtor.com concur, predicting that inventory will surge 11.7% in 2025. This should help loosen up the market, removing its “fever pitch” aspect and allowing buyers more wiggle room to negotiate.
With more buyers flooding the market, this may boost overall home sales in 2025.
Mortgage Rates May Fall a Bit
High mortgage rates have been one of the key contributors to rising unaffordability in the housing market. A decrease in rates should have a stimulative effect on buying. But experts themselves don’t share a consensus on where rates will trend in 2025, only agreeing that the year should be a “bumpy” and “volatile” one for mortgage rates, CNBC reported.
Redfin economists, for example, see rates averaging 6.8% for all of 2025, but they are also calling for rates to hover in the low-6% range if the economy slows. But Jessica Lautz, deputy chief economist and vice president of research at the National Association of Realtors, told CNBC, “Our expectation is that rates are going to be in the 6% range as we move into 2025.”
Net-net, Realtor.com economists said, “Mortgage rates are expected to keep mortgage payments essentially unchanged in 2025 despite continued home price growth,” according to Robb Report.
The Bottom Line: Still Searching for the Post-Pandemic ‘New Normal’
The only clear thing about the housing market in 2025 is that it is still searching for its “new normal” after the effects of the pandemic.
Will the economy weaken, leading to job losses and more distressed selling, which would drive prices lower? Or will the economy remain strong, with increases in job growth and wages pushing demand even higher, translating to more expensive homes? Will mortgage rates eventually fall in line with inflation, or will they remain at elevated levels? Will increased inventory satisfy the pent-up demand from buyers that currently exists?
Even the experts can only make educated guesses at this point. Overall, however, the general consensus is that both demand and home pricing will remain strong in 2025.
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