5 Data-Based Predictions for the U.S. Housing Market in 2025

On this page: A collection of U.S. housing market predictions with an overall forecast for 2025, compiled and curated by the Home Buying Institute. Last updated: July 17, 2024.

Housing market forecasts can be challenging for the forecaster and reader alike. There are so many overlapping factors and variables to consider, and they change constantly. It’s like herding cats.

To simplify matters, we’ve organized this report around five key predictions for the U.S. real estate market in 2025. Consider it an educated guess based on current trends and conditions.

Summary of Housing Market Predictions for 2025

Here’s the gist of our housing market outlook in five digestible bullets.

• Prices: Nationally, home prices are expected to remain flat in 2025, and possibly decline. But this will vary by location. Some local housing markets may see price gains next year, while others will experience declines.
• Affordability: An overall lack of affordability will continue to be a major factor in the housing market. Higher house prices and mortgage rates are making homes less affordable for many potential buyers, limiting sales in the process.
• Rates: Mortgage rates are predicted to decrease in late 2024 and into 2025. Lower rates could encourage more buyers to enter the market and potentially boost sales activity.
• Inventory: More homes are expected to come onto the market through the rest of this year and into 2025. This could help to ease inventory shortages and create more opportunities for buyers.
• Leverage: Despite the market slowing down, sellers will likely maintain an advantage in most cities due to ongoing low inventory levels. Buyers may have more negotiating room than in recent years, but supply shortages will continue to favor sellers.

That takes care of the appetizers. Now let’s move on to the main course.

1. Home prices will decline a bit in many U.S. cities.

The takeaway: Forecasters suggest that home prices could drop a bit between now and 2025. But those are national predictions. At the local level, house values could either rise, fall or flatten out, depending on where you live.

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As of summer 2024, the median home price in the U.S. was around $363,000. That was an increase of 3.8% from one year earlier.

We expect home prices to flatten out over the next year or so, in much of the U.S. But some cities could see steady price growth in 2025, particularly the hotter real estate markets like those in the Northeast and Midwest.

Other housing markets (like struggling Austin, Texas) could experience additional declines.

Researchers from Zillow recently predicted that home prices nationwide would dip slightly over the next year or so. They issued this forecast in June 2024, with a 12-month projection extending into 2025.

During that timeframe, they anticipate that house values will drop by 1.4%.

A relevant quote from their June 2024 report:

“Zillow’s home value forecast was revised downward this month, while expectations for existing home sales were adjusted upward. … Over the next twelve months, Zillow expects home values to fall 1.4%.”

These trends are partly influenced by the real estate market boom that occurred during the pandemic. The pandemic led to a nationwide surge in home-buying activity, which in turn sent prices skyrocketing like never before.

We’ve had one major price correction already, during the second half of 2022, when house values dropped in most U.S. cities. But it’s clear that the housing market is still settling from the pandemic-fueled upheaval.

2. Affordability challenges will continue to limit sales.

The takeaway: Housing affordability remains a challenge for many would-be home buyers across the U.S., and this could limit sales activity in 2025.

The latest evidence comes from a July 2024 report published by the real estate property data company ATTOM Data Solutions. Their researchers used a variety of metrics to determine housing market affordability for individual counties across the country.

They then calculated an affordability index based on the percentage of the average wage needed to cover the monthly housing costs on a median-priced home.

A key finding: During the second quarter of 2024, median-priced homes were less affordable in 99% of the analyzed counties when compared to historical averages.

According to Rob Barber, CEO for ATTOM:

“The latest affordability data presents a clear challenge for home buyers. While home prices are increasing and mortgage rates remain relatively high, these factors are making homes less affordable.”

This is unlikely to change anytime soon, and it’s partly why some real estate market forecasts for 2025 predict further price erosion.

The bottom line here is that the housing market has gotten too expensive when compared to average wages and incomes. So, it’s only logical to expect additional price declines in 2025.

3. Mortgage rates will decline from their current levels.

The takeaway: Forecasts suggest that mortgage rates could decline later in 2024 and into 2025. This could bring more homes onto the market, by encouraging reluctant sellers to finally list their properties. 

Mortgage rates have followed a roller coaster path over the past three years. But within the past few months, they’ve settled into a narrow range between 6.8% to 7.2%.

(That’s for a standard 30-year fixed-rate mortgage, America’s most popular home loan.)

Looking forward, the latest housing market forecast from Freddie Mac predicts that average mortgage rates will be lower in 2025 than they are now.

In their June 2024 Housing and Mortgage Market Outlook, Freddie Mac’s research team wrote:

“As inflation remains above the Federal Reserve’s target rate of 2%, an immediate cut in the federal fund rates is not on the horizon. However, in a scenario where the job market cools sufficiently to keep inflation in check, we anticipate one rate cut in the latter half of the year. This potential scenario could lead to a gradual easing of mortgage rates.”

Lower mortgage rates could ease the affordability challenges mentioned earlier, motivating more home buyers to enter the market. It could also contribute to inventory growth, as explained in the next prediction.

4. More inventory will come onto the housing market.

The takeaway: A shift in the average mortgage rate held by homeowners could reduce the so-called “lock-in effect” and bring more homes onto the market in late 2024 and 2025. 

A shift is occurring in the U.S. housing market as older, lower-rate mortgages are gradually being replaced by newer loans with higher interest rates.

That’s based on a July 2024 report from ICE Mortgage Technology. This gradual transition is pushing up the average loan rate for U.S. homes, with millions of new mortgages originated since 2022 carrying rates above 6.5%.

The shift is attributed to factors such as people aging out of their homes, retiring, or experiencing life-changing events that necessitate selling homes with older, lower-rate loans.

As more homeowners find their mortgage rates closer to prevailing rates, they might be less hesitant to sell their homes. This could lead to increased inventory and more sales in the months ahead.

And we might be seeing some of this already. A recent report from Realtor.com showed a significant increase in the number of active real estate listings. The biggest inventory gains occurred within the more affordable price range that’s popular with first-time buyers.

To quote that report:

“For the seventh straight month, homes actively for sale rose, with 35.2% more homes actively for sale in May 2024, compared with the same time last year. … A deeper dive into the mix of homes for sale shows a 46.6% increase in homes priced in the $200,000 to $350,000 range across the country year-over-year…”

The most recent housing market report from Zillow, published on June 12, seems to reinforce the inventory-boosting trend mentioned above. 

According to their data, new listings increased 8% in May compared to the previous month. That was a bigger month-to-month increase when compared to pre-pandemic averages and 13% higher than last year’s low pace.

Zillow economist Skylar Olsen wrote: “The effects of ‘rate lock,’ owners holding on to their existing homes and low-rate mortgages, appear to be lessening over time…”

5. Sellers will (still) have the upper hand in most cities. 

In 2024, home buyers have been experiencing improved market conditions compared to the overheated frenzy of the pandemic and post-pandemic years.

Intense bidding wars have become increasingly rare, and buyers have a little more negotiating leverage due to slower home sales. These and other trends have reduced some of the urgency and pressure buyers might have felt in the past.

Despite these ongoing changes, forecasts suggest that most real estate markets across the U.S. will continue to favor sellers rather than buyers in 2025.

The main reason for this: low inventory levels.

Yes, the real estate market is moving at a slower pace these days. And yes, home-price growth has slowed considerably—and even flattened in many U.S. cities.

But even so, persistent supply shortages will give sellers the upper hand in most cities.

Disclaimer: This report contains forward-looking projections relating to the real estate market. Such views are the equivalent of an educated guess and should be treated as such. The Home Buying Institute (HBI) makes no claims or assertions about future housing trends.