The housing market in 2025 is expected to remain challenging for many potential buyers, even as the number of new homes increases, Axios reports.
Here’s what experts predict about mortgage rates, inventory levels, and market dynamics in the coming year.
Experts agree that mortgage rates will remain relatively high, limiting affordability for many aspiring homeowners.
- Danielle Hale, chief economist at Realtor.com, forecasts rates in the low- to mid-6% range by the end of 2025.
- Redfin economists predict slightly higher rates, near 7%.
While lower rates might seem like a relief, real estate professionals warn they could intensify competition.
“As mortgages become more affordable, more buyers will enter the market, creating greater competition and ultimately driving home prices higher,” says Josh Altman, real estate agent and co-founder of Redy.
In response to persistent housing shortages, builders are expected to expand single-family construction.
- Lawrence Yun, chief economist at the National Association of Realtors, notes that homebuilders are profiting and motivated to continue expansion.
- However, increased inventory may not fully alleviate affordability challenges for first-time buyers.
The mortgage “lock-in” effect, which has kept many homeowners from selling due to their low fixed rates, may lessen slightly.
- In mid-2024, 84% of homeowners with a mortgage had a rate below 6%, but that number is expected to drop to 75% by the end of 2025, according to Realtor.com.
- This shift could encourage some homeowners to sell, potentially increasing the supply of homes on the market.
The high-end housing market continues to thrive, as affluent buyers are less affected by elevated mortgage rates.
- Mauricio Umansky, CEO of The Agency, anticipates steady growth in luxury real estate.
“High-net-worth individuals view property as a valuable, resilient asset,” he says.
Renters are expected to face rising costs due to increased demand and limited new apartment construction.
- Apartment owner Joe Fisher highlights a trend of renters staying put longer, further tightening the rental market.
- This dynamic, combined with delayed home purchases, could lead to continued rent increases.
Legal scrutiny of real estate industry practices adds another layer of unpredictability.
- The National Association of Realtors (NAR) recently settled a lawsuit involving commission rules, but federal prosecutors remain concerned about potential anti-competitive practices.
- Realtors are watching closely for any intervention by the Department of Justice (DOJ), which has scrutinized industry practices in the past.
