Curious about where the housing market is headed in 2025? The good news is that experts offer some promising forecasts, especially regarding two key factors that directly affect your decisions: mortgage rates and home prices.
Whether you’re thinking of buying or selling, here’s what the experts say and how it might impact your move.
Mortgage Rates Are Forecast To Come Down
One of the most significant factors likely affecting your plans is mortgage rates, and the forecast looks positive. After rising dramatically in recent years, experts project rates will ease slightly throughout 2025 (see graph below):
While that decline won’t be a straight line, the overall trend should continue over the next year. Expect a few bumps along the way because the trajectory of rates will depend on new economic data and inflation numbers as they’re released. But don’t get too hung up on those blips and reactions from the market as they happen. Focus on the bigger picture.
Lower mortgage rates mean improving affordability. As rates come down, your monthly mortgage payment decreases, giving you more flexibility in what you can afford if you buy a home.
However, this shift will likely bring more buyers and sellers back into the market. As Charlie Dougherty, Director and Senior Economist at Wells Fargo, explains:
“Lower financing costs will likely boost demand by pulling affordability-crunched buyers off of the sidelines.”
As that happens, inventory and buyer competition will ramp back up. The takeaway? You can get ahead of that competition now. Lean on your agent to ensure you understand how the rate shifts impact demand in your area.
Home Price Projections Show Modest Growth
While mortgage rates are expected to come down slightly, home prices are forecast to rise at a much more moderate pace than the market has seen in recent years.
Experts are saying home prices will grow by an average of about 2.5% nationally in 2025 (see graph below):
This is far more manageable than the rapid price increases of previous years, which saw double-digit percentage growth in some markets.
What’s behind this ongoing increase in prices? Again, it has to do with demand. Demand will rise as more buyers return to the market, but so will supply as sellers feel less rate-locked.
More buyers in markets with inventory that’s still below the norm will put upward pressure on prices. However, with more homes likely to be listed, supply will help keep price growth in check. This means that while prices will rise, they’ll do so at a healthier, more sustainable pace.
Of course, these national trends may not reflect precisely what’s happening in your local market. Some areas might see faster price growth, while others could see slower gains. As Lance Lambert, Co-Founder of ResiClub, says:
“Even if the average national home price forecast for 2025 is correct, it’s possible that some regional housing markets could see mild home price declines, while some markets could still see elevated appreciation. That has been, after all, the case this year.”
Even the few markets that may see flat or slightly lower prices in 2025 have had so much appreciation in recent years – it may not have a significant impact. That’s why it’s essential to work with a local real estate expert who can give you a clear picture of what’s happening where you’re looking to buy or sell.
Bottom Line
With mortgage rates expected to ease and home prices projected to rise more moderately, 2025 will be a more promising year for buyers and sellers.
If you have any questions about how these trends might impact your plans, let’s connect. That way, you’ll have someone to help you navigate the market and maximize the opportunities ahead.
