Expert Forecasts for the 2025 Housing Market

Expert Forecasts for the 2025 Housing Market

Curious about the housing market this year? Whether you’re planning to buy or sell, staying informed is key. Experts are regularly updating their predictions, so here’s the latest on two major trends shaping the market: mortgage rates and home prices.

Will Mortgage Rates Come Down?

Mortgage rates are on everyone’s radar, with many hoping for a drop. The big question is: how far and how fast will they decrease? While projections suggest rates will ease in 2025, a return to the historically low 3-4% range isn’t likely. Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), explains:

 “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 remember that mortgage rate forecasts can shift as new data comes in. These predictions are based on current trends, but factors like inflation and economic changes will continue to influence rates. This means some fluctuation is likely. Rather than trying to perfectly time the market, focus on the overall trajectory and what’s within your control.  

Partnering with a trusted lender and real estate agent ensures you’ll stay informed with the latest updates and insights. Even a slight decrease in rates can have a meaningful impact on your future mortgage payment, and your team of experts will help you navigate these changes.

Will Home Prices Fall?

The bottom line? Significant drops in home prices are not on the horizon. While mortgage rates might decrease slightly, home prices are expected to continue rising in most areas, albeit at a more moderate and sustainable pace. Expert forecasts project an average increase of about 3% for next year, with many predictions landing in the 3-4% range. This aligns more closely with historical norms, offering a steadier growth rate for the housing market. (see graph below):

Don’t expect a dramatic price drop if you’re planning to buy this year. While this might seem discouraging if you’re holding out for lower prices, consider the silver lining: the rapid price hikes of recent years have tapered off, offering more manageable increases. Plus, any home you purchase is likely to appreciate in value over time, which is a win for your investment.

So why are prices still climbing? It’s all about supply and demand. Even though there are more homes available now compared to last year, the inventory still falls short of meeting buyer demand. As Redfin points out:

“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.”

Remember, the housing market is highly localized, meaning trends can vary significantly from one area to another. While prices may continue rising in most places, some markets with increased inventory could see them level off or even dip slightly. Other areas might experience even steeper increases.

To get a clear picture of what’s happening in your local market, it’s essential to work with an agent who understands the trends and can explain how they impact your plans. Let’s connect to explore what’s happening in your neighborhood and strategize your next move!

Bottom Line

The housing market is ever-changing, and 2025 will bring its own set of shifts. With mortgage rates expected to ease slightly and home prices projected to rise at a steadier, more sustainable pace, staying informed and having a solid plan is key.  

Let’s connect to discuss the latest trends in our local market and create a strategy that aligns with your goals for a smart next move.