Are you wondering what’s in store for this year's housing market? Would you like to know what it all means for you if you're currently planning to buy or sell a home? Well, your best information will come by leaning on the pros.
Housing market experts are constantly updating and revising their forecasts, so here is what they're predicting for two important factors expected to impact the year ahead: home prices and mortgage rates.
Will Mortgage Rates Come Down?
Everyone from current homeowners to prospective buyers are keeping an eye on mortgage rates with hopes for them to come down. So, the big question is: how far will they come down and how fast will it happen? The good news is that they are projected to lower a bit in 2025. But that doesn’t equate to the return of 3-4% mortgage rates. According to Lawrence Yun, Chief Economist at the National Association of Realtors (NAR):
“Are we going to go back to 4%? Per my forecast, unfortunately, we will not. It’s more likely that we’ll go back to 6%.”
And Yun is not alone - other experts agree. They’re forecasting that mortgage rates could land in the mid-to-low 6% range by the end of 2025 (see chart below):
One thing to remember, this information is fluid and will continue to change as time goes by and new information becomes available. Like any financial prediction, these expert forecasts are based on what is known right now. And since everything from inflation to economic drivers can influence where rates go from here, some volatility is still very likely. So, don’t focus on the exact numbers here and attempt to time the market. Instead, concentrate on the overall trend and on what is at your disposal to actually control.
Having a trusted lender and an agent partner on your side will ensure that you’ve always got the latest data and the context on what it really means for you and your bottom line. With their help, you’ll see that even a small decline can help decrease your future mortgage payment.
Will Home Prices Fall?
The short answer is - not likely. While mortgage rates are expected to ease, prices of homes are projected to keep increasing in most areas – just at a slower, more normal pace. If you were to average expert forecasts together, you’ll see that prices are expected to increase by roughly 3% this year, with most of them landing in the 3 to 4% range. And that’s a much more typical and sustainable rise in prices (see graph below):
So if you're thinking of buying this year, don’t expect a sudden drop that’ll score you a big deal. While you may find that disappointing if you’re hoping prices will come down, refocus on this. It also means that you won’t have to grapple with the steep increases experienced in recent years, and that you’ll also likely see any home you do buy increase in value after you close on it. And that’s actually a good thing.
And, if you're asking how it’s even possible prices are still rising, here’s your answer. It simply boils down to supply and demand. Even though there are more homes for sale now than there were a year ago, it’s still not enough inventory to keep up with all the buyers out there. As Redfin explains:
“Prices will rise at a pace similar to that of the second half of 2024 because we don’t expect there to be enough new inventory to meet demand.”
Keep in mind, though, the housing market is hyper-local. So, this will vary by area. Some markets will see even higher prices. And some may see prices level off or even dip a little if inventory is up in that area. In most places though, prices will continue to rise (as they usually do).
If you want to find out what’s happening where you live, you need to lean on an agent who can explain the latest trends and what they mean for your plans.
Bottom Line
The housing market is always shifting, and 2025 will be no different. With rates likely to ease a bit and prices rising at a more normal and sustainable pace, it’s all about staying informed and making a plan that works for you.
Let’s connect so you can get the scoop on what’s happening in our area and advice on how to make your next move a smart one.