Ask any real estate or mortgage professional what housing has been like in 2024, and the answer is likely chaotic. Ask consumers the same question, and they’ll probably sum it up in one word: unaffordable.
A continued trend of higher-for-longer mortgage rates will continue into 2025 accompanied by high home prices, but slight improvements are ahead, bringing some (but not much) relief to cost-weary potential homebuyers who’ve been sidelined.
So how does all of this impact housing market predictions for 2025? This article serves as a look at what experts are forecasting for the year ahead, based on the latest published forecasts and in-depth interviews with several industry economists.
Rates will fall, sales will rise—by how much?
Mike Fratantoni
Most economists are calling for lower mortgage rates, eventually ending the year around the low-6% mark in 2025. But initial estimates for rates to dip into the high 5% range have since been revised to stay firmly above 6% for the year.
MBA: The MBA forecasts mortgage rates will decline throughout 2025, with 30-year fixed rates potentially averaging 6.5% for the year, down from an average of 6.6% for 2024, according to the group’s latest data. At its annual conference in late October, the MBA had initially projected average 30-year fixed rates would dip to 5.9% by the end of 2025, but later revised it.
Joel Kan
“With an incoming Trump administration and Republican control of the House and Senate, our November forecast reflects faster economic growth, somewhat higher inflation and larger deficits than the October forecast, all of which leads to a higher path for rates,” MBA economists Mike Fratantoni and Joel Kan said in a joint commentary.
“Markets moved immediately to price in these changes, with the 10-year increasing to over 4.4% after election day (November 5) and staying in the 4.3% neighborhood since.”
Lawrence Yun
NAR: Meanwhile, the National Association of REALTORS® (NAR) shared a similar outlook, projecting rates to settle between 5.75% and 6.25% by mid-2025. With the Federal Reserve’s rate cuts—50 basis points in September and a smaller 25 bps cut in October—consumers had hoped mortgage rates would follow suit, but that’s unlikely to happen anytime soon, said Lawrence Yun, NAR’s chief economist.
“With a large budget deficit, there’s less mortgage money available,” said Yun in a recent NAR article, noting that the federal deficit will prevent mortgage rates from falling further. However, Yun concedes his forecast might change and mortgage rates could fall quickly if the deficit were to decrease, housing regulations were eased or the labor market saw an uptick in hiring to help lower inflationary pressures.
Ralph McLaughlin
In fact, Yun said in a separate forecast that it might only take a “credible plan” to address the deficit for mortgage rates to fall even further—closer to 5%. That could happen sooner rather than later, he added, though what might qualify as a “credible plan” was unclear.
Realtor.com®: Senior Economist Ralph McLaughlin’s forecast tracks much the same as MBA and NAR. He predicts average mortgage rates to oscillate in the 6.3% to 6.5% range.
“On average, we’re expecting in 2025 to have rates that are about 50 basis points higher than we were forecasting even just three or four months ago,” McLaughlin tells RISMedia. “That’s the humbling nature of forecasting mortgage rates; just when you think you got it right, the market will come by and give you a little slide.”
NAHB: The National Association of Home Builders (NAHB) is forecasting mortgage rates to reach around 6% by the end of 2025, says Danushka Nanayakkara, NAHB’s associate vice president for forecasting. The path to 6% rates will not be smooth, she says, noting that rates have yo-yoed in the final months of 2024.
Danushka Nanayakkara
After a challenging period for transaction volume over the last two years, 2025 is expected to see a respectable rebound in home sales.
NAR: Yun painted a rosier picture than most for home sales in the year ahead. NAR’s forecast calls for existing-home sales to climb 9% and 13% in 2025 and 2026, respectively. And for new-home sales, Yun sees an 11% uptick in 2025 before moderating to an 8% increase in 2026.
“The combination of lower mortgage rates, increased inventory and steady price appreciation should help boost sales activity,” Yun said. “However, we’re still below the pre-pandemic sales pace of 5.34 million units in 2019.”
First-time buyers are expected to represent a larger share of purchases in 2025, helped by slightly improved affordability conditions and the aging of millennial households into their prime home-buying years.
Realtor.com: Meanwhile, Realtor.com forecasts a much smaller bump in existing-home sales to a rate of 4.07 million units, up just 1.5% over this year.
While McLaughlin says there was a lot of optimism and anticipation that 2025 would be the boom year for home sales the market desperately needs, the election has put a damper on how far economists had hoped mortgage rates would fall.
Daryl Fairweather
“If you look at what markets were doing before the election, they were clearly anticipating a Trump victory,” he says. However, Trump’s proposed policies could drive up inflation, keeping rates higher for longer—curbing buyer demand and borrowing power.
Redfin: While the real estate brokerage concurs in its predictions that home sales will see an uptick, particularly in the lower-end price ranges, it won’t be because younger buyers are flooding the market, says Redfin Chief Economist Daryl Fairweather.
“Instead, affordable homes will be snapped up by older buyers who are priced out of higher price tiers,” Fairweather notes in Redfin’s 2025 forecast. “Gen Zers, meanwhile, will keep living with family or renting until well into their 30s, opting to build wealth in other ways.”
Housing crisis: priced up or priced out?
Despite hopes for improved affordability, home prices will continue marching up in 2025. But the pace of home-price appreciation will slow considerably, giving buyers some relief from the double-digit price gains seen in recent years.
Homebuyers and owners looking to refinance will have more borrowing power in the new year as home-price growth moves higher, too. The Federal Housing Finance Agency (FHFA) increased conforming limits in 2025 to $806,500 for most single-family properties. For high-cost areas, the new loan limit will be $1,209,750.
MBA: Median existing-home prices in 2025 will climb to $411,200, up about 1.31% from $405,900 this year, the MBA predicts. Meanwhile, the trade group is forecasting median new-home prices to rise slightly to $425,800, up about 1.07% from $421,300 in 2024.
CoreLogic: The housing and analytics data firm predicts a slowdown in home-price gains in 2025, with home prices increasing by 2.4% on a year-over-year basis from October 2024 to October 2025. That’s compared to the current annual rate of 3.4%.
However, CoreLogic’s forecast notes that single-family home prices will likely reach a new high by April 2025. The current median sales price for single-family homes is $385,000.
Realtor.com: On home prices, McLaughlin forecasts national price growth at around 3% to 4% in 2025, with some regional variation. However, he noted that affordability is expected to improve slightly due to a combination of stabilizing mortgage rates and household income growth to tick up around 3.4%.
“Overall, we don’t expect homes to get any less affordable. In fact, we expect them to eke out a slight gain in affordability nationally, but of course, your mileage may vary by metro,” McLaughlin says.
NAR: The trade association projects the national median existing-home price to reach $410,000 in 2025, up 2% from 2024, and climb another 2% to $420,000 in 2026. This slower appreciation rate could help gradually improve affordability for buyers, especially if mortgage rates tick lower.
“The strong price increases cannot be sustainable for another five years, or America will be divided…with only a few getting to experience the tremendous housing wealth,” Yun said. “If we bring more supply to the housing market, home price increases will not be as outrageous…and will be more in line with wages.”
In a separate forecast, Yun noted that NAR data showed first-time homebuyers are now older, on average, than they’ve ever been. That “depressing statistic” means that a lot of younger people are missing out on building wealth, Yun said.
“There is a crisis of renters who would like to buy a property,” he said. “Also, we do have (a) crisis…in terms of low existing-home sales. From my bigger picture perspective, this is saying Americans are not moving because we generally associate Americans with energy level—wanting to always advance in their career, advance in their life—and purchases of homes would reflect that.”
He continued, “So anytime there’s an advancement, people want to trade up, move into a better circumstance. But the fact that we have had historically low home sales in 2023 and 2024 is implying a housing crisis.”
Moving and growing—who is selling, who is building?
Realtor.com: On a regional level, Realtor.com revealed the top 10 markets for 2025 are exclusively in the South and West. Three states hold the majority of these markets, including Texas (No. 4 El Paso and No. 7 McAllen); Florida (No. 2 Miami and No. 6 Orlando); and Virginia (No. 3 Virginia Beach and No. 5 Richmond).
Rounding out the list are Colorado (No. 1 Colorado Springs), Arizona (No. 8 Phoenix), Georgia (No. 9 Atlanta) and North Carolina (No. 10 Greensboro).
So why exactly are these markets projected to be the strongest in 2025?
“From a technical standpoint, they make the list because we forecast these markets to be the leaders in home sales and price growth in 2025 across the 100 largest markets,” Realtor.com researchers said in a joint statement.
“Going beyond the technicalities, however, shows us a correlation between the 2025 percentage increase in home sales across these markets and the 2025 home sales forecast relative to a market’s 2017–19 home sales average.”
Demographically, these top 10 markets have higher concentrations of younger households under age 35 and those with children. They also have above-average shares of households with prime-working-aged families aged 35 to 54, Realtor.com reported.
One thing most everyone in housing can agree on: more building is needed. And in 2025, new construction will pick up a bit before rebounding more measurably in 2026.
NAHB: The trade organization anticipates a gradual ramp-up in construction, projecting 1.42 million total housing starts for the year. Single-family construction is expected to lead the way, with builders responding to the ongoing shortage of existing homes for sale.
The forecast calls for approximately 1.02 million single-family starts in 2025, a 7.5% bump from 2024. However, this figure still falls short of the estimated 1.5 million units the U.S. housing market needs annually to address the nation’s housing shortage.
“We expect about a 1% growth because of the higher-than-expected interest rates, and 2026 is, I think, the year that we truly expect a normalization of the single-family market,” Nanayakkara says. She adds that if Trump follows through on threats of mass deportations and tariffs, that would hurt new construction.
“The immigrant share of the construction labor force is around 25% and of that, if we think of just the trades, about 1/3 are immigrants,” she explains. “If deportations start as soon as they expected to, that’s just really going to shake up the construction labor force and the service sector overall.”
Currently, there are 300,000 open jobs across the construction trades, and those roles are typically hard to fill because there’s a lag, Nanayakkara points out.
Realtor.com: Meanwhile, McLaughlin notes that the Trump administration’s support of looser building regulations and opening access to certain federal lands for new construction could incentivize builders to build more homes. But it won’t necessarily be a panacea for the current housing shortages, he notes, because those initiatives would take time to implement.
The supply of homes for sale plays a major role in housing affordability and demand. The good news is more existing homes are expected to come on the market in 2025, alleviating the inventory crunch that has widely shut buyers out of the action.
Realtor.com: Active listings are expected to increase by 11.7% compared to 2024, though levels will remain well below pre-pandemic norms, McLaughlin predicts. He adds that the pace of inventory increases in 2025 marks a cooldown from 14% to 15% projected for 2024.
“That’s going to reflect a higher rate environment where we expect fewer households, or the rate of households, wanting to sell their home to be slightly lower than last year,” McLaughlin explained, referring to the rate lock-in effect where current homeowners with low mortgage rates are reluctant to see and buy another home at today’s higher rates and home prices.
NAR: According to the trade group’s latest data, total housing inventory on the market notched 1.37 million units in October, up 19.1% from 1.15 million units a year ago. Additionally, there was a 4.2-month supply of homes on the market in October, up from 3.6 months year over year.
Although October’s inventory level is well below the six months of supply considered to be a balanced market, more inventory coming on the market is a move in the right direction and will help moderate home prices, Yun said.
The Trump effect and economic headwinds
While 2025’s outlook shows improvement in several areas, it’s not all smooth sailing, especially when factoring in the wildcard of economic news.
With some of Trump’s proposed economic policies, housing will see a direct impact, and not necessarily for the better, economists tell RISMedia. Trump has expressed fervent support of imposing steep tariffs on goods imported from Mexico, China and Canada as well as mass deportations of illegal immigrants.
These policies, if enacted, will drive up the cost of building materials and create a more dire labor shortage in the new construction sector, making new homes and remodeling projects more expensive, McLaughlin says.
Then, there’s the Federal Reserve. At the NAR NXT annual conference in November, Yun told the crowd he expects four rounds of rate cuts in 2025. He also addressed the elephant in the room: the country’s soaring deficit.
“Today, we have a massive budget deficit at a time when we are not in an economic recession,” Yun said. “Clearly president-elect Trump will not stop tax cuts; he will extend or expand them.”
Yun added, “There will be less mortgage money available because the government is borrowing so much money. However, if the Trump administration can lay out a credible plan to reduce the budget deficit, then mortgage rates can move downward.”
Other wrinkles for the real estate industry to watch are commissions and business consolidation, according to Redfin. The brokerage predicts that average real estate commissions will decline slightly in 2025 in the aftermath of new agent compensation rules, especially in the luxury space and in competitive housing markets with pent-up demand.
RISMedia’s own study of commissions found a sharp decline in the wake of the NAR settlement changes going into effect, though it was unclear how persistent that would be or what other factors could affect real estate compensation—and by extension, brokerage’s bottom lines.
“It remains to be seen how much antitrust enforcers in the incoming administration will press additional real-estate industry reforms. The Department of Justice said in a recent filing that it ‘continues to scrutinize policies and practices in the residential real estate industry that may stifle competition,’ but it’s unclear if it will take any formal action,” Fairweather noted.
Redfin posited that under a new Trump administration, we might see more mergers and acquisitions among larger real estate brokerages. Some larger brokerages might tack on affiliated mortgage and title services to their real estate practices to offer a one-stop shopping experience as smaller companies look to exit the business.
The 2025 housing market forecast suggests a gradual return to a new kind of normal where home-price growth won’t be astronomical and mortgage rates will remain stable.
While buyers who’ve been waiting in the wings won’t get much relief in the affordability department, a slow-and-steady return to economic stability could make conditions ideal to act. And it might just be the nudge they need to get off the sidelines and step into homeownership.
But as real estate professionals know, anything can happen in housing, and conditions can shift quickly. Economists say they are keeping an eye on what a second Trump term has in store for the economy, which adds some uncertainty to the mix.
