The housing market in 2025 is shaping up to look more favorable than much of 2024. Easing mortgage rates and rising inventory levels could provide some relief to buyers, though challenges remain. Slowing construction and rising prices may still create obstacles, while the new administration adds a layer of uncertainty to the overall outlook.
Trends to watch in 2025:
Home prices will rise - Housing experts largely agree that home prices will keep climbing unless there’s a significant market disruption, which is not expected. The median U.S. home-sale price is predicted to rise steadily throughout 2025, ending the year 2-4% higher than it was in 2024. Rising prices are one factor that will keep homeownership out of reach for many Americans, leading some would-be homebuyers to rent instead.
Mortgage rates will remain near 7% - industry experts expect mortgage rates to remain in the high-6% range throughout 2025, with the weekly average rate fluctuating throughout the year but averaging around 6.8%. Investors are anticipating that if President-elect Donald Trump implements a significant portion of his proposed tax cuts and tariffs, and the economy stays strong, the Fed will only cut its policy rate twice in 2025, keeping mortgage rates high. However, mortgage rates could drop to the low-6% range if the economy weakens and/or if plans for tariffs and tax cuts are dialed back. Any year in which the presidential administration changes is unpredictable, and 2025 is no exception.
There will be more home sales in 2025 than 2024. Housing analysts expect existing home sales to tick up next year, ending 2025 at an annualized rate of between 4.1 million and 4.4 million. That represents a year-over-year increase of between 2% and 9%. The sales range is unusually wide this year because high housing costs may keep some buyers out, but there’s still plenty of pent-up demand in the market. Sales may see modest growth due to high mortgage rates and low inventory but could increase more significantly if rates drop or demand remains strong. Following the November election, homebuying demand surged, with many buyers gaining confidence despite mortgage rates around 7%. This boost in demand suggests that, if the economy stays strong and enough people can afford high housing costs, sales could rise more than expected.
2025 will be a renter’s market. Many Americans will stay renters or become renters, as homebuying costs rise but rental affordability improves. With wages increasing and more rental units completing from the pandemic-era building boom, supply will outpace demand. This will create more supply than demand, motivating landlords to offer concessions like free parking, a free month of rent, more amenities or a hiatus on rent increases in order to retain residents.
Fewer construction regulations will lead to more homebuilding. Homebuilders are expected to increase single-family home construction in 2025, though it will take time for this to significantly lower home prices. Builder confidence has risen with hopes that regulatory burdens will ease. The mortgage-rate lock-in effect will also limit competition from existing homes. Additionally, easing regulations may boost multifamily housing starts, reversing the pullback seen in 2024. However, builders face challenges, including likely high interest rates and potential cuts to immigration, which could reduce the available construction workforce, as immigrants make up about 30% of the industry.
Markets to watch: Currently, 13 major metro areas are buyers markets — where buyers have the upper hand in negotiations, according to Zillow’s market heat index — with most of those in the Southeast. Zillow predicts buyers markets will spread to the Southwest in 2025 as inventory continues to come unstuck in relatively affordable markets.
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Sources:
Median Sales Price of Houses Sold for the United States (MSPUS) | FRED | St. Louis Fed
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