Housing Forecast 2025

The Realtor.com Housing Forecast for 2025, released in early December, predicts that broader economic factors are expected to have a larger impact on the housing market than potential new federal policies in 2025.

While President-elect Trump can work quickly with his administration to implement some regulatory changes, other policies that will affect housing, such as tax changes and broad deregulation, require the cooperation of other branches and levels of government,” said Danielle Hale, chief economist at Realtor.com. “The size and direction of a Trump bump, will depend on what campaign proposals ultimately become policy and when. For now, we expect a gradual improvement in housing market dynamics powered by broader economic factors. The new administration’s policies have the potential to enhance or hamper the housing recovery, and the details will matter.”

Realtor.com’s Housing Forecast for 2025 predicts that buyers and sellers can expect:

• Average mortgage rates of 6.3%, with rates edging down to 6.2% by year-end
• Home prices will rise by 3.7%, continuing growth trends since 2012
• Rents will remain about the same, with a slight 0.1% drop
• An 11.7% increase in existing-home inventory, continuing the trend from 2024
• Single-family new-home starts will grow 13.8%, reaching 1.1 million homes, a figure not seen since 2006
• Home sales will grow 1.5% year-over-year to 4.07 million
• Months supply, a key market balance indicator, is expected to improve from a 3.7 months average in 2024 to 4.1 months in 2025. Anything under four is typically considered a seller’s market, while four to six months of supply is typically considered a balanced market.

The Republican sweep of the presidency and both houses of Congress may result in pros and cons for the housing market, according to Realtor.com.  Among Trump’s proposals to address the housing shortage is making more federal land available for homebuilding and addressing regulation.  (Estimates suggest excess regulations contribute to more than $90,000 of the cost of a new home.)  Since the election, markets have generally pushed longer-term rates higher, anticipating either higher inflation, larger deficits, stronger economic growth or some combination.

Overall, buyers and sellers should expect to see a more balanced market in 2025, according to the Realtor.com Housing Forecast 2025, which will require some give and take on both sides. Homebuyers frustrated by higher interest rates will have some buyer-friendly conditions in 2025, such as the highest for-sale inventory since December 2019 and nearly 20% of listings coming with price cuts. Mortgage rates are expected to improve slowly in 2025, but the drop likely won’t move the needle back toward a seller’s market, according to the forecast. Buyers should expect a friendlier, less competitive housing market than in past years, although one that is still costly because of stubbornly high mortgage rates and home prices.

At the same time, limited inventory and strong demand in many areas could mean that sellers still have the upper hand in terms of negotiating prices, especially in desirable locations, the report said. However, higher interest rates or slower than expected income growth could lead to fewer buyers being able to afford homes, which might result in longer selling times or price reductions in some markets.

Slight rebound in overall home sales. The 2025 forecast has home sales slightly increasing, with an expected annual count of sales to be 1.5% more than 2024, for an annual tally of 4.07 million sales. As mortgage rates ease back in 2025, the market is likely to see slightly more activity during the busier summer months, compared to last year.

Mortgage rates. While markets are factoring in expectations of a higher-rate environment than previously thought, there is uncertainty around which policies will take priority and whether the specifics match or merely rhyme with campaign promises. These details will matter for the outlook and for mortgage rates.

Rent prices will largely remain the same, more rental supply growth in the South. While the surge in new multifamily supply offers renters more options, the large renter population will dampen any significant impact on rental prices. The median asking rent in 2025 is expected to be only slightly lower than in 2024 (-0.1%). Looking ahead to 2025, recent construction trends suggest all four regions will see continued growth in rental stock, with the South leading at an annual increase rate of 1.5%, followed by the West (1.2%), Midwest (0.9%) and Northeast (0.7%). It is likely that Southern rental markets will maintain a relative affordability advantage in 2025.

Big increases in both new-home sales and new-home starts. While existing-home sales are expected to remain largely unchanged for the year in 2025, new-home sales and single-family housing starts are expected to outperform. With a substantial construction deficit over the last decade, builders have room to run and may get an additional boost from a builder-friendly administration that understands the need for more construction. Single-family starts are expected to total 1.1 million in 2025, an impressive 13.8% pickup over 2024.

“While more inventory means buyers will likely have more time to make purchase decisions in 2025, in any market, a fast-acting buyer will have a higher likelihood of making the winning offer,” said Hale. “For this reason, it’s wise to get prepared financially and for the home search overall. Thankfully for homebuyers there are more tools, like Realtor.com’s dynamic map layer, to help homebuyers and sellers get ready.”

The Realtor.com Housing Forecast 2025 predicts that there will be a 17% growth in sales volume year over year in 2025 and a 5% increase in prices.

If you are planning on buying a home in Bethesda MD or the larger DC metro area, this increase in inventory will be good news for you.  If you are planning on selling a home, the continued increase in prices will be welcome news!  If you are planning on any real estate moves in 2025, we should talk!  Just call the Lise Howe Group at 240-401-5577 or email us at lise@lisehowe.com.