As we step into 2025, many homebuyers and real estate professionals are wondering what the housing market will look like in the coming year. Following a period of high mortgage rates and limited inventory, experts have shared their predictions, offering a mixed yet optimistic outlook for the housing market in 2025. Here’s what to expect:
Increased Home Sales with Favorable Mortgage Rates
One of the key drivers for a potential increase in home sales is the prediction of lower mortgage rates. Lawrence Yun, chief economist for the National Association of Realtors, anticipates a 9% increase in national home sales next year, following the typical post-election market boost. As mortgage rates begin to ease and more homes become available, buyers may find it easier to enter the market and take advantage of better rates.
Several real estate organizations have weighed in on where mortgage rates are headed in 2025. While predictions vary, many experts foresee rates stabilizing in the high 6% range. Redfin Real Estate anticipates that mortgage rates will average around 6.8% throughout the year. Realtor.com, however, is more optimistic, forecasting mortgage rates to dip slightly into the low 6% range by year’s end. Jordan Levine from the California Association of Realtors is the most bullish, predicting rates could fall as low as 5.9%, providing much-needed relief for homebuyers.
Home Prices to Moderate
While home prices have risen steadily in recent years, there is optimism that the pace of growth will slow in 2025. In California, for example, Levine predicts a 4.6% appreciation increase in home prices next year, a drop from this year’s 6.8% rise. As mortgage rates stabilize and more homes come onto the market, experts believe that homebuyers will have more opportunities to purchase without facing the skyrocketing prices of recent years.
However, while the slowdown in price increases is a positive sign, inventory levels will likely remain constrained due to the ongoing housing shortage. Despite efforts from the new administration to reduce fees and make federal land available for new housing, it will take time for these initiatives to result in significant changes. The current housing stock is still insufficient to meet growing demand.
More Buyer Activity and Increased Listings
The election may have brought some uncertainty, but many real estate professionals are seeing an uptick in buyer activity, particularly from first-time homebuyers. Michelle Perry, president of the Santa Clara County Association of Realtors, notes a recent surge in first-time homebuyers entering the market. While these buyers may face challenges competing with cash buyers in some areas, the overall increase in activity bodes well for the coming year.
As inventory levels increase, buyers will have more choices in the market. Michael Gordon, president-elect of the Santa Clara County Association of Realtors, believes that the market will see increased listings in 2025, which could provide buyers with more options and reduce competition. If mortgage rates dip into the low 6% or sub-6% range, it could significantly boost market activity.
Inventory Constraints Persist
Despite a potential rise in listings, real estate professionals like Joe Brown, the incoming president of the Santa Clara County Association of Realtors, don’t expect inventory to increase dramatically in the near future. He believes that Silicon Valley, in particular, will continue to see home prices outpace much of the country due to its high demand and limited housing supply. Brown advises buyers not to wait for interest rates to fall significantly, as the appreciating value of homes may offset any potential savings from lower mortgage rates.
Conclusion
While the 2025 housing market is expected to bring some relief to homebuyers, it’s important to remain realistic about inventory levels and pricing. Mortgage rates are likely to remain favorable, with some predictions pointing to a drop into the low 6% or even high 5% range, offering an opportunity for more buyers to enter the market. However, the ongoing housing shortage may continue to put upward pressure on home prices, especially in high-demand areas like Silicon Valley.
For those looking to buy in 2025, the market may offer a more favorable environment with increased listings and slightly lower competition. Buyers should act when they find the right home, as waiting for the perfect moment could mean missing out on valuable opportunities.