As we embark on a new year, potential homebuyers may be taking the temperature of the housing market before they take the plunge on a purchase. Will mortgage rates go down? What about housing prices? Is housing supply edging upwards?
We’ve compiled the predictions of some of the biggest entities in finance and real estate, and we’ll give you a rundown of their expectations for the 2025 housing market.
Considering buying a home or refinancing† your existing one? Newrez mortgage experts can help you find the right loan for your needs. If you’re not sure what you can afford, take a crack at our Mortgage Calculators.
1. Housing supply is expected to increase slowly
The U.S. has faced a housing shortage for quite some time now, and high demand following the COVID-19 pandemic accelerated this shortage.1 A couple years after this phenomenon, rapidly climbing mortgage rates constrained existing housing supply, since many homeowners didn’t want to part with their locked-in lower rates.2
Buyers can breathe a sigh of relief now that more housing supply is taking shape in 2024. The Federal Home Loan Mortgage Corporation (otherwise known as Freddie Mac®) reports that 4.3 months’ worth of housing supply was available in September, which is the highest supply level since October of 2020.3 Builder confidence increased in October of this year, suggesting construction conditions could be improving.2
Forecast: Buyers might get a bit more wiggle room to find the home of their dreams and to negotiate with sellers. The Mortgage Bankers Association® (MBA) is anticipating a “gradual increase” in housing supply through 2025.4 Meanwhile, the National Association of Realtors® (NAR) is also forecasting a balanced market of 4 months’ supply available in 2025.5
2. Housing prices are predicted to rise moderately
While home prices have been ticking upward, the good news is that the rate of price growth has eased considerably from the breakneck pace seen during and immediately after the COVID-19 pandemic.6 We’re now closer to a historically “normal” rate of growth, which might encourage more people to pull the trigger on a home purchase.
The median U.S. housing price at the end of the third quarter of 2024 was $420,400.7 All told, the NAR expects that we’ll end 2024 with a 4% median housing price growth rate from the previous year.5
Forecast: 2025 home price growth predictions range from slow-to-moderate, 2.6 to 4% growth.8 An increase in the expected number of homes available for sale could put some downward pressure on housing prices. Another factor that might come into play: Rental costs are predicted to remain quite low in 2025, leading some people to choose to continue renting rather than moving into the homebuyers’ market.9
3. Mortgage rates are unpredictable
The movement of mortgage rates has certainly taken the housing market on a roller coaster ride over the past five years. From ultra-low rates pushing a surge in housing demand in 2020-2021 to rapidly rising rates scaring buyers and sellers into hiding in 2022-2023, mortgage rates grabbed the attention of experts and consumers alike.10
The 30-year mortgage rate sits at 6.6% as of mid-December 2024.11 Mortgage rates could be a bit of a wild card in the coming year. Even a minor drop could be enough to encourage purchases – and refinances†, too.
It’s important to remember that, while the Federal Reserve is expected to lower the federal funds rate at least once more within the coming months, the federal funds rate does not have a direct bearing on mortgage rates. To learn more about what influences mortgage rates, read this article.
If you do decide to buy a home in 2025, but you’re worried about the movement of mortgage rates, Newrez offers Lock and Shop*** - lock in a rate for 45 days while you shop around for your perfect home.
4. More buyers could hit the housing market in 2025
Forecast: With an increased housing supply, only moderate price growth and steady mortgage rates anticipated, many housing market experts expect that more people will wade into the buying pool.9 How much sales will increase is still a matter of debate – while several sources expect only modest sales growth in 2025, the NAR is boldly forecasting existing home sales to rise by 9% year-over-year and new home sales to jump by 11% year-over-year.12
Is buying a house the right move? Purchasing a home is a deeply personal decision that should be informed first and foremost by your own circumstances and goals. However, mortgage and real estate experts are cautiously optimistic about housing market conditions in 2025.
The Market Changes Quickly
While these forecasts are the best guesses of economists and industry experts, none of these predictions are guaranteed – and as the pandemic has taught us, sometimes the unexpected throws a wrench in our best estimations. Be aware that the recent presidential election could lead to market shifts, and supply and pricing will vary depending on where you live.
Whether you’re a first-time home buyer or looking to make a move, 2025 could be your year. Reach out to learn more about our stacked product suite.
Freddie Mac® is a registered trademark of the Federal Home Loan Mortgage Corporation. MBA Mortgage Bankers Association® is a registered trademark of the Mortgage Bankers Association. National Association of Realtors® (NAR) is a registered trademark of the National Association of Realtors. None of the above-mentioned companies are affiliated with Newrez LLC.
References:
1 The U.S. is now short 4.5 million homes as the housing deficit grows - Jun 18, 2024
2 Housing Market Predictions For 2025: When Will Home Prices Drop? – Forbes Advisor
4 forecast-commentary-nov-2024.pdf (MBA)
5 Realtor.com 2025 Housing Forecast - Realtor.com Economic Research
6 US House Prices Growth | Economic Indicators | CEIC
7 Median Sales Price of Houses Sold for the United States - 2024 Data 2025 Forecast 1963 Historical
8 Housing Market Predictions for 2025: What's Next for Buyers and Sellers | Zillow
11 30-Year Fixed Rate Mortgage Average in the United States (MORTGAGE30US) | FRED | St. Louis Fed
