As 2025 approaches, understanding what experts predict for the housing market is key to making informed decisions about homeownership. Whether you're considering buying or selling a home, being aware of market forecasts can guide you toward the best choices for your financial future. From mortgage rates to home sales and prices, here's an early look at the most recent projections for 2025.
Mortgage Rates Are Projected To Come Down Slightly
Mortgage rates are always a hot topic when it comes to real estate. They significantly impact both buyers' affordability and sellers' ability to attract buyers. According to forecasts from reputable institutions like Fannie Mae, the Mortgage Bankers Association (MBA), the National Association of Realtors (NAR), and Wells Fargo, we can expect a gradual decline in mortgage rates throughout 2025.
Why Are Mortgage Rates Expected to Drop?
The easing of inflation and a slight rise in unemployment rates are key signals of a slowing but resilient economy. These trends lead many experts to predict that the Federal Reserve may begin to lower the Federal Funds Rate. A decrease in this rate often causes mortgage rates to drop, making homeownership more affordable for prospective buyers.
Morgan Stanley supports this view, stating:
“With the U.S. Federal Reserve widely expected to begin cutting its benchmark interest rate in 2024, mortgage rates could drop as well—at least slightly.”
Although the anticipated decline in mortgage rates is expected to be modest, it could still help more buyers enter the market, especially those who've been waiting for lower rates.
Expect More Homes To Sell in 2025
As mortgage rates ease, the housing market will likely see an uptick in activity. Experts are predicting a slight increase in home sales as more buyers and sellers who have been holding off decide to take action. This increase is projected to bring more supply into the market, satisfying the growing demand.
How Many Homes Will Sell?
Fannie Mae, MBA, and NAR predict a steady rise in home sales in 2025. Collectively, they forecast that around 5.4 million homes will sell, up from an expected 4.5 million homes in 2024 and 4.8 million homes in 2023. While this represents a gradual improvement, it's essential to recognize that lower mortgage rates alone won't trigger a massive wave of buying or selling. Still, the combination of more favorable rates and pent-up demand will likely encourage more movement in the market.
As a result, we should expect more competition among buyers, but also a greater selection of homes to choose from. For sellers, this could mean a more favorable environment, while buyers may need to be prepared for increased competition.
Home Prices Will Rise Moderately
As more buyers return to the market, home prices are expected to continue climbing. However, unlike the rapid price surges seen during the height of the pandemic, experts believe price growth will be more moderate, giving buyers some relief.
What Do the Experts Say About Home Prices?
According to a survey of 10 trusted sources in real estate, home prices are forecast to rise by an average of 2.6% in 2025. Though there is some variation in the projections, most experts agree that prices will increase at a more normal pace compared to the extreme highs seen in previous years.
This moderate price appreciation is a sign of a stabilizing housing market. However, keep in mind that prices can vary widely depending on location. Some markets may experience stronger price growth than others based on local supply and demand factors. As always, real estate is a hyper-local industry, and knowing your specific market can make all the difference.
What Do These Trends Mean for Buyers and Sellers?
Understanding these housing market forecasts can help you prepare for your next move, whether you're buying or selling in 2025. For buyers, the anticipated decrease in mortgage rates could improve affordability, allowing you to purchase a home with a more favorable interest rate. However, with home prices expected to rise, acting sooner rather than later might be a good strategy to avoid higher prices down the line.
For sellers, the prospect of increased demand and moderately rising prices could create a more competitive market, potentially allowing you to sell your home at a higher price. However, keep in mind that a more balanced market may also bring more homes onto the market, giving buyers more options and reducing the urgency that characterized past seller markets.
Bottom Line
The housing market in 2025 is shaping up to be more balanced, with mortgage rates expected to ease slightly, a modest increase in home sales, and moderate price growth. Whether you're looking to buy or sell, staying informed about these trends can help you make strategic decisions for your future.
Let's connect and discuss how these forecasts may impact your homeownership plans. With the right guidance, you can navigate the changing market and make the best possible choices for your financial future.