Yahoo Finance I’m a Real Estate Expert: 10 Early Housing Market Predictions for 2025
The real estate market has been challenging to understand over the last few years. Limited inventory, higher interest rates and increased home prices have frustrated many potential home buyers, leaving many waiting to see if rates will come down.
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Although it’s early to say for certain what the housing market will look like in 2025, GOBankingRates reached out to two real estate experts for their predictions on what to expect.
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Housing Market Will Stabilize
“The real estate market in 2025 is expected to experience a period of stabilization and modest growth,” said Tammie Carter, a licensed Realtor and real estate advisor with Engel & Völkers Atlanta. “Home prices are likely to grow at a slower, more [sustainable] pace compared to the rapid increases seen in recent years.”
Carter believes that prices should remain relatively flat or see minor price increases on a national basis. After rising more than 50% over the last five years, prices may finally stabilize in 2025.
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Housing Prices Won’t Drop
While real estate prices could finally stabilize, it doesn’t look like they’ll drop in 2025.
“Home prices are expected to continue rising, though at a more moderate pace,” said Shelly Cofini, a real estate expert and CSO at Redy. “Nationally, experts forecast 15%-25% price appreciation over the next five years.”
Mortgage Rates Could Finally Drop
“After experiencing a period of higher-than-normal rates, there’s potential for rates to stabilize or even decrease slightly by 2025,” said Carter. “This would improve affordability for buyers, although rates are expected to remain in the mid to high single digits in the near term.”
Fannie Mae predicts that mortgage rates will remain around 7% through 2024 but ease downward in 2025.
Housing Affordability Will Remain a Significant Challenge
“Despite potential mortgage interest rate cuts … high home prices and living costs are expected to keep affordability issues at the forefront through 2025,” Cofini said.
Carter added, “Housing demand is still high, and inventory is still lagging.” She also pointed out that new housing starts are expected to rebound in 2025, which should address the supply shortage.
The Rental Market Will Remain Strong
Cofini and Carter agree that the rental market will stay strong in 2025, meaning that rents may not decline from the national median price of $2,150.
Cofini said, “Certain areas are projected to experience significant price growth, potentially pushing them into unaffordable territory for many renters and buyers by 2025.”
Carter added that supply in the rental market is projected to be greater than demand, however, which could result in mildly lower average annual rents.
Housing Inventory Will Remain Tight in Many Markets
“The persistent lack of housing supply, especially affordable options, is expected to continue being a major factor influencing the market,” said Cofini. “Builders are likely to leverage their ability to offer concessions and incentives to attract buyers in a competitive market.”
According to Zillow data, there’s currently a shortage of 4.5 million homes across the country, which is keeping real estate prices high. Experts believe that inventory will remain tight in the foreseeable future.
Generational Shifts Will Impact the Market
Cofini said, “Millennials and Gen Z buyers will increasingly shape housing preferences, potentially driving demand for walkable neighborhoods and smaller homes.”
She also pointed out that with baby boomers expected to downsize, this could eventually increase inventory.
Technology Will Play a Vital Role in Real Estate Transactions
“Advancements in PropTech, virtual tours and data analysis are expected to increase efficiency and transparency in the market,” said Cofini. “Compensation changes for real estate because of the NAR [National Association of Realtors] settlement could spur on new technology development.”
Cofini believes that technology will play a pivotal role in real estate transactions. Some technological advancements could include using AI-powered tools for services normally provided by a real estate agent, like reviewing contacts or creating listings.
Inflation Will Continue To Drive Prices
Stubborn inflation over the last few years has impacted the housing market, and it looks likely to continue in 2025, though less dramatically.
“With economic uncertainty and regulatory challenges, inflation is a continual factor, although it’s expected to decrease gradually, which would lead to lower interest rates and improved mortgage affordability,” Carter said.
The Real Estate Market Will Be Tested
As mortgage rates slowly start to come down, it’s worth monitoring housing prices to see if they eventually stabilize — or if the limited inventory will lead to further price increases.
“The market’s resilience will be tested by ongoing affordability concerns and inventory constraints, yet innovation in technology and shifts in generational preferences promise to reshape the industry in exciting ways,” said Cofini.
Carter concluded, “Overall, the market in 2025 should be more balanced, with slower price growth and better affordability, especially if mortgage rates decrease as anticipated. While challenges remain, such as inventory shortages and economic uncertainties, the outlook is generally positive for both buyers and sellers.”
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This article originally appeared on GOBankingRates.com: I’m a Real Estate Expert: 10 Early Housing Market Predictions for 2025
