Realtor.com anticipates a gradual increase in home prices by 3.7% in 2025, marking a continuation of the upward trend observed in recent years. This rise reflects a more stable economic backdrop without the threat of recession, according to Ralph McLaughlin, a senior economist. The forecast suggests that despite some regional variations, most areas will experience price appreciation, particularly in the Southeast and Southwest.
Mortgage rates, on the other hand, are predicted to remain above 6% throughout the year, settling at about 6.2% by the end of 2025. Despite slight interest rate cuts expected from late 2024 into early 2025, these adjustments aren’t anticipated to significantly lower mortgage rates. Therefore, those in the market for new homes may face continued high borrowing costs.
Rental prices are expected to stabilize, with a projected minor decrease in rents due to an increase in apartment inventories across the US. Significant construction in recent years has bolstered supply, particularly in urban areas, which could keep rent increases at bay. McLaughlin notes that renters with rising incomes might opt for home ownership instead, preventing landlords from aggressively raising rents.
The housing supply is projected to reach levels not seen in nearly a decade, with a notable rise in both home and apartment availability. Realtor.com envisions an 11.7% increase in existing home inventories and a 13.8% surge in single-family home construction, suggesting a more balanced market where neither buyers nor sellers hold a distinct advantage.
Home sales are expected to show a modest increase, potentially climbing by 1.5% as more properties become available. However, other industry forecasts predict even greater activity, partly driven by the anticipated economic policies of the new administration, which could spur both business confidence and homebuyer interest.
The 2025 housing market projections highlight a year of cautious optimism. While rising home prices and persistent mortgage rates might challenge buyers, increased inventory offers hope for improved affordability. Potential buyers and sellers should prepare for a market that demands careful navigation of its evolving dynamics.
Source: BusinessInsider
