Whether you rent or buy, housing is not inexpensive.
According to the most recent data from the U.S. Census, the median sales price for a single-family home in the United States was $437,300 in October, up from $426,800 the previous month.
Redfin, an online real estate brokerage website, reports that the typical rent price in the United States was $1,619 in October, which is about the same as it was a year ago, up 0.2%, and down 0.6% from the previous month.
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Although it can be challenging to forecast exactly how the housing market will behave in 2025, a number of economists have released a new research by online real estate brokerage Redfin that lays out their expectations for the year.
“The housing market would have crashed by now if it were going to,” Redfin head economist Daryl Fairweather said. Despite mortgage rates rising as high as they have, the housing market has held up very well.
Here are five home market forecasts from Fairweather and other analysts for 2025.
Home price growth will return to pre-pandemic levels
According to Redfin, the median asking price for a property in the United States is expected to increase by 4% during 2025, which is comparable to the pace of the second half of this year.
Compared to the fast growth last observed in 2020, the 4% annual pace represents a stabilization, according to Fairweather.
The pace of home price growth decreased to pre-pandemic levels earlier in 2024. In other words, although prices continued to rise, they did so at a slower rate than in prior years.
Price volatility may persist even in the face of forecasts of slower growth.
According to CoreLogic economist Selma Hepp, home price appreciation may actually remain unchanged, or less than 1%, throughout the spring of 2025.
However, senior economist Jacob Channel of LendingTree stated that property values could rise significantly if President-elect Donald Trump implements some of his economic promises.
According to him, there are currently conflicting indications about what might or might not happen to housing prices.
Higher building prices and a slowed pace of home development could be caused by general taxes on foreign goods and supplies as well as mass deportations. In a market with limited supply, prices might rise significantly if fewer homes are constructed, Channel warned.
Flattening rents, with more room to negotiate
Redfin predicts that as new rental inventory becomes available, the median asking rent price in the United States will probably remain constant over the course of a year in 2025.
According to Redfin’s Fairweather, if rents remain constant and incomes keep rising, individuals will have more money to spend and save.
According to data from the 2023 U.S. Census, over 21 million renter households are cost-burdened, meaning they spend more than 30% of their income on housing expenses.
Additionally, tenants will have more negotiating power with landlords in a stable rental market. According to experts, property managers in certain places are already providing benefits like free parking, a month’s rent, or charge waivers.
But it’s December, Channel stated. Because fewer individuals are looking for apartments in the late fall and winter, rent costs usually decrease during these colder months.
Competition in the rental market could arise if prospective buyers are kept out of the for-sale market next year by high mortgage rates and housing prices, he said.
Additionally, bear in mind that the average rent price you see will be influenced by the state of your local market, Hepp said.
For example, she noted that Austin, Texas, was the core of multi-family building, which resulted in a large influx of new supply into the city’s rental market and a decrease in rental prices. According to CoreLogic, rent costs in the metro area decreased 2.9% from a year ago.
In contrast, substantial rent rise of 5% per year is occurring in supply-constrained urban regions such as New York City, Seattle, and Washington, D.C.
A bumpy and volatile year for mortgage rates
According to Redfin, if the economy continues to deteriorate, mortgage rates will likely linger around the low-6% area and average 6.8% in 2025.
However, analysts predict that 2025 will be a rough and unpredictable year for mortgage rates.
If policies like tax cuts and tariffs are implemented, home loan borrowing prices may increase, pushing inflation higher.
We are somewhat in unfamiliar area. It’s really difficult to predict exactly what will occur, according to LendingTree’s Channel.
In anticipation of the first interest rate drop since March 2020, mortgage rates fell this fall. However, in November, borrowing costs surged once more as the bond market responded to Donald Trump’s presidential victory. For the time being, mortgage rates have been quite stable since then.
As we enter 2025, we anticipate rates to remain about 6%, Jessica Lautz, the National Association of Realtors’ deputy chief economist and vice president of research, recently told CNBC.
More home sales than in 2024
Next year’s house transactions might be fueled by pent-up demand from buyers and sellers on the sidelines.
According to Fairweather, people have waited long enough.
Redfin estimates that by the end of 2025, almost 4 million homes will have been sold, representing a 2% to 9% annual rise from 2024.
People who need to move on with their lives are flooding the market, including sellers who have postponed their plans to relocate and purchasers who require properties that can accommodate life changes due to new jobs, according to Fairweather.
Although more buyers are anticipated to enter the market in the upcoming year, there might not be as much competition as there was in previous years, when bidding wars were common.
According to Hepp of CoreLogic, additional affordability considerations including growing property taxes and insurance premiums could also be at play, which would reduce competition.
She stated, “There will undoubtedly be more buyers out there.” However, I don’t think the competition will heat up to the degree it has in recent years.
Climate risks will bake into homes prices
“In regions like coastal Florida, California, and portions of Texas that are at high risk of hurricanes, wildfires, or other disasters, the risk of extreme weather and natural disasters may anchor down home prices or slow down price growth,” Redfin predicts.
Be mindful of potential issues if you are interested in properties in a high-risk market because of the attractive price tags.
For example, plans for home insuranceare more expensive and more difficult to find in some of these markets. Rising prices for house maintenance and repairs could also be a financial impact of natural disasters, according to Redfin’s Fairweather.
What’s more difficult is that, according to her, the changing weather patterns make every region of the nation vulnerable. California has recently had days of severe flooding due to atmospheric rivers, and their homes weren’t constructed for it.
Although Florida is frequently mentioned when discussing hurricane dangers, the state is more equipped to handle this natural calamity than places like Asheville, North Carolina, which was devastated by Hurricane Milton earlier this year.
“There is a mismatch between what homes were built for and the climate that they will be facing in the coming years, so we will probably see insurance increase pretty broadly,” she added.
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