As 2025 approaches, it’s crucial to understand what experts are forecasting for the housing market. Whether you’re considering buying or selling a home, having a clear understanding of upcoming trends can help you make the right decisions for your future.

Here’s a look at the latest predictions on mortgage rates, home sales, and home prices for 2025.

Mortgage Rates Are Expected To Decline Slightly

Mortgage rates are a key factor in the housing market, and they’ve been top of mind for many buyers and sellers over the past few years. Looking forward, forecasts from Fannie Mae, the Mortgage Bankers Association (MBA), the National Association of Realtors (NAR), and Wells Fargo show a slight drop in mortgage rates over the course of 2025.

This expected decline is tied to factors like a continued easing of inflation and a small increase in unemployment, signaling a cooling yet still strong economy. Many experts believe these conditions will prompt the Federal Reserve to lower the Federal Funds Rate, which often leads to lower mortgage rates. As Morgan Stanley points out:

"With the U.S. Federal Reserve widely expected to begin cutting its benchmark interest rate in 2024, mortgage rates could drop as well—at least slightly."

More Homes Will Likely Be Sold

The housing market in 2025 is expected to see an increase in both the supply of homes available and buyer demand. This shift will bring more people off the sidelines—both those who’ve been waiting for lower rates and those ready to make a move.

According to projections from Fannie Mae, MBA, and NAR, total home sales are expected to rise slightly, with an average of 5.4 million homes forecasted to sell in 2025. This would be a modest increase from the approximately 4.8 million homes sold in 2023 and the anticipated 4.5 million sales expected by the end of this year.

While the slight decrease in mortgage rates won’t lead to an overwhelming surge in activity, it will certainly help motivate more buyers and sellers to enter the market. This will lead to more homes for sale and increased competition among buyers.

Home Prices Will See Moderate Growth

As more buyers enter the market, the pressure on home prices will continue. According to forecasts from 10 major real estate sources, home prices are expected to rise by an average of 2.6% nationally in 2025. While predictions vary slightly, experts agree that price growth will be more moderate compared to the steep increases of recent years.

This slower rate of appreciation is a return to a more typical pace, providing stability to the market. However, it’s important to remember that home prices will continue to vary by local market, depending on supply and demand in specific areas.

Bottom Line

Understanding the housing market forecasts for 2025 can help you plan your next move, whether you’re buying or selling. Staying informed about projected trends in mortgage rates, home sales, and home prices will ensure you make the best decision possible. Let’s connect to discuss how these forecasts may affect your real estate plans.