Housing Market Predictions 2025: Will Real Estate Boom?

Will the housing market explode in 2025? Probably not a full-blown boom, but it's unlikely to be a complete bust either. Expect a mix of modest growth, slightly increased sales, and a bit more inventory. It will likely be a more balanced market, leaning slightly more in favor of buyers than we've seen in recent years.

I know, that's not as exciting as a ‘boom' headline, but it’s a more realistic picture based on the data I've been digging into. Let me explain why, and break it all down for you.

Housing Market 2025: Experts Predict Slower Growth, Not a Boom

2024: A Year of Twists and Turns

To understand what's coming in 2025, we first need to look back at the wild ride that was 2024. It was definitely a year that kept us on our toes, with some unexpected challenges and shifts. If you thought you had it figured out, well, the market probably threw you a curveball! Predictions made at the beginning of the year? Many just didn't pan out.

It was like trying to predict the weather in a hurricane – pretty much impossible.

Here's a quick summary of what made 2024 so unique:

• Interest Rate Roller Coaster: Instead of the expected decline, mortgage rates unexpectedly surged, hitting new highs and making homes even less affordable. This put a damper on buyer enthusiasm. Even though there was a small dip in September, the volatility made it very tough for people to make plans.
• Affordability Crisis: Home prices, already sky-high, combined with rising interest rates, property taxes and insurance costs, led to a major affordability crunch. It's not just that houses cost more; people are paying a bigger chunk of their income on housing compared to past years. Think Great Financial Crisis levels – but with less wage growth.
• Inventory Lock-In: Many homeowners who refinanced at super low rates were hesitant to sell, fearing higher rates on their next purchase. This “lock-in effect” kept housing supply tight, adding to the affordability problem.
• Creative Solutions: People started thinking outside the box. “House hacking,” like renting out rooms or units in a multi-family property to offset mortgage costs, became more popular, especially with younger buyers. This is just one sign that buyers are very adaptable and will figure out how to navigate tough markets.

What's in Store for 2025?

So, with the background of 2024, let's dive into what 2025 might bring us. This is where different experts and reports start to offer varying perspectives, but let's try and see the bigger picture.

1. Mortgage Rates: The Unpredictable Factor

Okay, let's talk about mortgage rates. They were the main villain of 2024, and they’re going to continue to be a major player in 2025. The million-dollar question is: will they come down?

• The Optimistic View: The National Association of Realtors (NAR) Chief Economist, Lawrence Yun, is predicting that we might see rates stabilize between 5.5% to 6.5%. They are predicting a slow drop which I think is overly optimistic. This, according to them, would be the “new normal.”
• My Take (with a dash of skepticism): While I'd love to believe in a big drop in rates, based on what I'm seeing, I'm leaning towards them being more in the 6.5% to 7.5% range, possibly higher for a while. Why am I so cautious? Well, longer-term rates, which really influence mortgages, are tied to things like the 10-year Treasury yield. These yields are determined by market forces – inflation fears, government spending, future economic expectations, etc. The Federal Reserve can influence these, but it doesn't control them completely. Right now, the market isn't showing signs that it expects inflation to disappear soon, and this means mortgage rates may stay elevated.To me it feels like the bond market is still fearful of higher inflation and continued large government deficits which leads to higher interest rates.

Here's a table of the different predictions:

Source	2025 Avg. Mortgage Rate
NAR (Lawrence Yun)	5.5% – 6.5%
Realtor.com	6.3%
My Prediction	6.5% – 7.5%

Remember these are forecasts and can change.

The most important takeaway here? Don't expect a return to the super low rates of the past. Prepare your budget for rates at these levels.

2. Home Prices: More Growth, but Slower

It's unlikely that we'll see a complete collapse in housing prices, but we may see price growth slow down. Here's the gist:

• Realtor.com Forecast: They're predicting a 3.7% increase in home prices for 2025, which is a bit lower than the 4% they're expecting for 2024. This is mainly because while they see a small drop in mortgage rates they expect inventory to increase. This additional supply will have a downward impact on pricing.
• NAR Forecast: Yun is forecasting a 2% increase in median home prices for both 2025 and 2026.
• My Opinion: I do believe that prices will slow in growth, and it's possible that in some overinflated areas we could see prices even decline. I also think that condo prices will likely drop first, as we're already seeing that in places like Denver and some areas in Florida. There is already oversupply in some areas, which means prices will eventually drop due to basic economics of supply and demand.

Here’s a table summarizing the median home price appreciation:

Source	2025 Median Home Price Appreciation	2026 Median Home Price Appreciation
NAR	2%	2%
Realtor.com	3.7%	Not Available
My Opinion	Slower growth (possibly declines in some areas)	Slower growth or stagnation

It is worth nothing here that 2024 price growth was around 4% which is a lot higher than 2023 which was 1.1%.

3. Sales Volume: A Slight Increase

Will more people be buying homes in 2025? The data suggests that a modest increase in sales is possible:

• NAR: They predict about a 10% jump in existing-home sales in both 2025 and 2026, along with an 11% increase in new home sales in 2025 and an 8% jump in 2026.
• Realtor.com: They are forecasting that home sales will increase by 1.5% year over year, which would lead to 4.07 million sales for the full year of 2025. This number is significantly lower than the numbers put out by NAR.
• My thoughts: I am very skeptical about a substantial sales volume increase in 2025. High interest rates and the “lock-in effect” are going to continue to slow down movement in the market. Unless interest rates drop significantly (due to a recession or some other major event) or unemployment surges, the market is likely to remain sluggish. I think the Realtor.com forecast is more realistic. I also think that costs of homeownership like property taxes and insurance are a huge factor that the NAR numbers might be ignoring.

Let’s look at the home sales projections:

Source	2025 Sales Volume (YoY)	2026 Sales Volume (YoY)
NAR	10%	10%
Realtor.com	1.5%	Not Available
My Opinion	Minimal to Low Increase	Stagnant or Slight Increase

4. Inventory: Slowly Unlocking

Good news! We may finally be seeing some relief from the incredibly tight housing supply:

• The “Lock-In” Loosening: The lock-in effect is starting to show signs of easing as people move due to life events or wanting to tap into their home equity. We're seeing more listings in typically tight markets, like California, and more inventory in Texas and Florida where there's more new construction.
• Realtor.com Forecast: They're predicting an 11.7% increase in the for-sale inventory for 2025 which is down from 15.2% growth seen in 2024.
• My Perspective: The increase in inventory is a positive sign, but it's a gradual change. While the peak of the lock-in is likely over, it’s still going to have an impact, especially at the start of 2025. I think, on the whole, we will see a good jump in supply overall compared to the last couple of years, but we’re not going to be back to pre-pandemic levels anytime soon.

5. Affordability: A Continued Struggle

Even with a slower pace of price growth and the possibility of slightly lower interest rates, affordability is going to remain a key challenge.

• Cost of Ownership: It's not just about the price of the home. Property taxes, insurance costs, and even maintenance expenses are all going up. This means a larger portion of people's income goes toward owning a home.
• Potential Upsides: Realtor.com points out that a Trump administration might bring tax cuts and other policies which could lead to a small bump in disposable income which would make homes more affordable, however, that remains to be seen.
• My Thoughts: I do think affordability will continue to be an issue. The good news is that the pressure is not as strong as it was in the past couple of years. The cost of housing as a percentage of income is expected to go down. However, affordability is still way off from historical norms.

6. The Political Wild Card

With a new administration taking office, there's a lot of uncertainty. Here's what's on the table:

• Trump's Potential Policies: President Trump has talked about things like deregulation, making federal land available for homebuilding, and slashing inflation. Some of these proposals could help with housing supply and even bring down interest rates if he can successfully cut down on inflation.
• Potential Drawbacks: However, some of his other proposed policies could work against the positive outlook. Tariffs and immigration restrictions could affect the construction industry and increase costs. It's also uncertain how tax cuts and increased government spending will play into inflation.
• Market Reaction: The markets have already reacted to this by pushing longer-term rates higher, suggesting they are worried about inflation, larger deficits, or stronger economic growth, or even a combination of all three.As I see it, the market is definitely seeing the Trump victory as an indication that there will be a more inflationary environment which would lead to higher interest rates for much longer. How this impacts housing will be something that I'll be watching closely.

Key Takeaways for Buyers, Sellers, and Renters

Okay, after all that, here are some specific tips for you based on what I'm seeing in the data:

For Buyers:

• Prepare your budget: Don't count on super low rates. Plan for a mid-6% range and make sure you have a good handle on your monthly expenses.
• Be patient: The market is becoming more balanced, so you might have more time to consider your options. Don't feel pressured to rush into a purchase if something doesn't feel right.
• Explore creative options: Consider things like house hacking, or equity-sharing if you're struggling with affordability.
• Get financially prepared: Be ready to jump on a good opportunity if it comes up. Get pre-approved, and have all of your financial documents in order.
• Be Aware of Realtor Changes: Real estate commissions are now negotiable. Make sure you and your buyer agent have an upfront agreement on compensation.

For Sellers:

• Price strategically: With more inventory, you may need to be more careful about pricing your home to attract buyers. Don’t price yourself out of the market!
• Consider incentives: In a more competitive market, offering things like closing costs or rate buy-downs could make your home stand out.
• Flexibility is key: Be open to negotiating and adjust your strategy to the market conditions.

For Renters:

• Renting may remain more affordable (for now): In many markets, renting may be the more cost-effective option, especially in the short term.
• Splitting Costs: If you are trying to save for a down payment, look into splitting rental costs with roommates to build your savings quicker.
• Consider Location: If you are looking for a cheaper option, renting further from the city center might be an option, or even looking at a less expensive city could be a solution.
• Tools for evaluating: There are resources like the Realtor.com Rent vs Buy calculator that can help you evaluate your options.

Final Thoughts

So, will there be a housing boom in 2025? Based on all the data, my analysis, and my gut feeling? I doubt it. Instead, I'm expecting a market that's gradually normalizing, where buyers have a bit more power and inventory starts to increase, even while affordability is still an issue. It will be a year of slow change, not a rapid boom. It is going to be an interesting year, and I'll be watching closely to see how the market unfolds.

It's important to remember that real estate is local, and these trends may not apply everywhere. Always do your research and consult with local experts.

And that's where I leave it for now. I hope I've given you a realistic view of the 2025 housing market. It’s a complicated puzzle, but by staying informed, you can make better decisions, whether you're buying, selling, or renting.