Housing Market Predictions For 2025

Whether you’re looking to buy or refinance, it’s key to have your finger on the pulse of the housing market. But people don’t participate in real estate every day, so it makes sense to let the experts do the hard work. But even those who are steeped in the data aren’t oracles. You have to look at the opinions and ultimately make up your own mind based on your situation.

While new data points can always change things, we’ll go over some of the key questions you might have on your mind and the housing market predictions that analysts have on those topics.

Key Housing Market Takeaways

• Home inventory is expected to increase, but not so much for new homes.
• Mortgage rates are generally expected to fall, if only modestly.
• Home prices can be expected to rise, but at a slower pace than in recent years.

2024 Real Estate Trends

Before we move forward, let’s use 2024 as a baseline for where we’ve been. Here are the trends that defined the housing market last year. Because this was drafted before the holidays, the data collected for visuals is accurate as of the second week of December. By the way, if you’re curious, see how we did on our 2024 housing market predictions.

Mortgage Interest Rates

Mortgage rates in 2024 started at 6.62% for a 30-year fixed mortgage, according to the Freddie Mac Primary Mortgage Market Survey. As of mid-December, the rate was 6.6%. On the surface, that’s not much movement. But it was a roller coaster ride getting there. 

Rates were as high as 7.22% on May 2. The Federal Reserve didn’t pivot from a concern about tamping down inflation until mid-September, so for much of the year, rates were on the high side. That September timeframe was the height of mortgage rate exuberance. The Fed had just cut the range for the federal funds rate and the average 30-year rate was 6.08% on September 26. 

Home Prices

Our friends at Rocket Homes^SM keep track of monthly data around median list and sale prices for homes on the site.¹ I think the most remarkable thing about this data is how unremarkable it is. Yeah, I can explain if you’ll bear with me for a couple of paragraphs.

In January, the market was coolest, with the median list price being $360,023, but with the median home eventually selling for just $347,425. Things really heated up in June with kids out of school and the weather being good for open houses. The median list price was $392,538 and the median sale price ended up at $391,811. November was the latest data available, with the median list price being $374,069 and homes selling for $374,781. 

This represents a very typical pattern in that home prices are lower during the winter months. Not many people are trying to move during the holidays without being motivated, so the homes that are sold tend to go from lower prices. Many more buyers are out during the summer months and sellers can get a higher price typically.

But what’s special about this is that we haven’t had a normal housing market for a while. COVID-19 and the low rates coming out of it led to a couple of years of hotter than normal housing markets throughout the fall and into the winter. 2024 might be the year the real estate market got a reset.

The market might be settling in general. Driven by people being dissatisfied with their living spaces after spending so much time in them due to COVID-19, there was a housing inflation storm that came along with rapidly rising demand coupled with increased buying power due to low mortgage rates.

The Case-Shiller national index of home prices has risen 8.92% on an annualized basis over the last 5 years, as of September. But new to date, that number is only 4.92%. That’s a little below the longer-term 10-year average of 6.86%.

Housing Inventory

When it comes to housing inventory, the actual number of homes for sale tells you very little by itself. What’s important is how that supply compares to the level of demand. The traditional metric often used takes a look at months’ supply on the market. This measures how long it would take to sell out of home inventory if sales continued at their current pace.

There are a couple of very different stories here in terms of inventory for new construction or existing (preowned) homes. It’s usually said that the market is in healthy balance between buyers and sellers when there’s roughly 6 months’ worth of inventory. Although we’ve talked about a national picture, variations in regional housing inventory can greatly impact market prices.

The market for existing homes has typically held in the 3 – 4-month range. This means that the market has been weighted toward sellers for quite a while. In some ways, this is still the result of the pandemic. Mortgage rates were so low for a while after the pandemic that there was a boom in refinancing. Now people want to hold onto the rate as long as they can, and they aren’t selling.

New homes can be a bit of a different story. These inventory numbers are higher for a couple reasons:

First, many people consider existing homes before new ones because they tend to be slightly cheaper when looking at the median. Second, once built, new homes aren’t really taken off the market because the builder needs to recoup the cost. So inventory may naturally be higher in the winter months if homes are still sitting there but no one is looking.

Housing Market Predictions In 2025

With 2024 now in the rearview mirror, let’s look ahead to what several market participants think might happen in 2025. We’ve bucketed these into sections you can use to guide your decisions if you think you may enter the housing market.

What Factors Will Stabilize The Housing Market?

The housing market would benefit from a few factors to relieve the affordability challenges faced by some: more housing inventory, lower mortgage rates and moderating price growth. Let’s take a look.

Housing Inventory

When it comes to inventory, new homes are probably the best place to start because it’s stock that didn’t exist before. The National Association of Home Builders (NAHB) predicts a small 0.64% increase in single-family home starts to 1.011 million. Definitions are confusing, but a home with four units or fewer is a single-family home and you can get a residential mortgage.

Of course, that’s just shovels in the ground, but once you start to build a home, you don’t often stop, so it’s an indicator of supply.

Others have opinions on housing starts as well, with Fannie Mae seeing housing starts falling 1% to 995,000. The Mortgage Bankers Association (MBA) thinks single-family starts will be up 6.75% to 1.075 million. 

Of course, then there’s existing inventory. The National Association of REALTORS^® (NAR) tracks these on a regular basis and they think existing home sales will be up anywhere from 7% – 12% in 2025. Meanwhile, the NAHB predicts air 5.02% increase in existing sales to 3.85 million. The MBA thinks existing home sales will be up about 5.12%. Fannie Mae predicts a 4.8% increase to 4.251 million existing homes sold.

Freddie Mac doesn’t give specific numbers