In 2025, the U.S. real estate market is poised for growth, driven by a strong economy and evolving conditions.

• Home sales are projected to increase by 10%, mainly due to existing properties.
• Mortgage rates are expected to drop to around 6% by early 2025, despite recent hikes. Updated November statistics now show forecast of 6.3%-6.4%
• Home price appreciation is predicted to slow, with an estimated growth of 2.6% by year's end.
• High mortgage rates are causing current homeowners to hesitate in selling, leading to low inventory and elevated prices.

January 2025 Update

• No one is talking about interest rates below 6%. Low 6% is the best we will get.
• Average home forecast is 3% which is within the prior range but the average is higher
• More homes will be on the market. This hasn't changed

Source: November, 2024 forecasts by Fannie Mae and the Mortgage Bankers Association.

Update from NAR Chief Economist:

• Higher home sales: “After two years of sluggish home sales in 2023 and 2024, existing-home sales are forecasted to rise,” Yun says. He predicts existing-home sales to increase to 4.47 million in 2025 and to more than 5 million in 2026.
• Slower home price appreciation: “During the next two years, expect a slower rate of growth in home prices that’s roughly in line with the consumer price index because of additional supply reaching the market,” he adds. Yun predicts the median sale price for existing homes to increase to $410,700 in 2025 and $420,000 in 2026. However, the pace of home price hikes is slowing, he says.
• Falling mortgage rates: Further helping home affordability, Yun also predicts that the 30-year fixed-rate mortgage will decrease to 5.9% in 2025. However, he says mortgage rates likely will increase to a 6.1% average by 2026. However, a later release by Mortgage Bankers has the end of 2025 still having a 6.3%-6.4% mortgage interest rate for end of 2025 and for 2026! (UPDATE).
  

Click here to read Yun’s full housing forecast.

Update 2025 Interest Rate Predictions

• Mortgage rates will average about 6.4%, dropping to 6.25% by the end of 2025 (Bright MLS).

• Rates will hover around 6.3% most of the year, ticking downward in the fourth quarter (Realtor.com).

• Rates will remain around 7%, hampering affordability for many (Redfin).

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"It's a strange dynamic. Generally, mortgage rates move in tandem...with the Federal Reserve policy,” said Jeff Ostrowski, a mortgage and housing analyst at Bankrate.

"The combination of Donald Trump moving back into the White House and Republicans gaining control of the Senate...has been pushing rates up," he said.

Everyone is expecting significant tax cuts and increased federal deficits under a second Trump administration, leading to higher treasury yields and, consequently, higher mortgage rates.

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Experts are saying that people hoping that lower interest rates next year will boost the market for buyers and sellers might not find much help from Trump's election. His likely policies are expected to raise interest rates, similar to what happened after his last election.

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Trump's plan to remove Fannie Mae and Freddie Mac from government control is expected to increase home ownership costs by about $1200 a year, according to a 2015 study from Moody's Analytics and The Urban Institute, making housing even less affordable.

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"But hopeful buyers who may be waiting for lower mortgage rates likely won’t see that anytime soon, Yun said. “Mortgage rates will not decline in tandem” with the Fed’s rate cut, he said, blaming the bloated budget deficit as the reason"

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There’s almost a 100% chance of rate cuts throughout the course of the rest of this year and into next year. Whether they’re going to be a quarter or half percent is to be determined.”

Banosian predicted Fed rates in the next year to be in the 5.25% to 5.5% range, which would translate to about 6% mortgage rates without any points."

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However, a later release by Mortgage Bankers has the end of 2025 still having a 6.3%-6.4% mortgage interest rate for end of 2025 and for 2026! (UPDATE).

The Fed's cuts just aren't enough to really stabilize the market. Bond market reactions, which have a big impact on mortgage rates, depend not only on what the Fed does but also on larger political factors. As bond markets react to election results and think about possible changes under a Republican White House and Congress, we can expect mortgage rates to stay high and keep bouncing around.

Update 2025 Home Price Predictions

Realtor.com forecast:

Jacksonville, Florida
November 2024 median home price: $394,000
Forecasted 2025 home sales change: +13.5%
Forecasted 2025 home price change: +9.8%

U.S. Forecast

• Home prices will rise 3.1% in 2025. While some economic upheaval is expected, no major risks have emerged that would cause prices to fall (Bright MLS).

• Prices will end the year 3.7% higher, continuing the growth trend that started in 2012 (Realtor.com).

• Price growth will continue at a clip similar to the second half of 2024, increasing 4% (Redfin).

• Home values will increase 2.6%, a much slower rate than previous years (Zillow).

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The appreciation forecast has 1.9% for Jacksonville. But even the big movers like Miami only has a 3.8% appreciation forecast. At the low end in the nation we see some cities with home prices dropping 4% and at the high end going up 6%.

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More homes are on the market but overall housing inventory level is still below 2017 - 2019. This will help home values stabilize or even rise if sales pick up.

Two likely scenarios are less cheap labor due to tighter immigration policy and tariffs or expectation of tariffs on building materials. These 2 factors will cause the cost of new construction to go up. If sales continue then this would definitely cause all home prices to rise. However, if sales do fall then builders will cut production (and raise prices and build smaller homes). This could in the long run cause prices to rise, but more slowly.

The big unknown is where demand will be. Will people start moving again? Or will people wait for lower interest rates which will more likely be around the end of 2025.

The good news is sales are expected to be up which should help appreciation.

Source: Fannie Mae November 2024 housing forecast.

What Does This Mean For 2025 Real Estate Market?

For sellers, expect it to take longer to sell a home as sales are still slow. The market is expected to have only 4 million home sales this year, the slowest since the 2008 financial crisis. In the last twenty years, home sales have averaged 5.15 million a year, peaking at 7 million in 2005. So this increase still has us below average.

For buyers, the main issue for 2025 will be continued low inventor.. While it is predicted for us to have an increase in active listings by the end of the year, it is still a limited number (but better than the year before).

Don't try to time the market as it doesn't look like there are going to be big changes. So if you are waiting for a big drop in prices or interest rates then you may be waiting a very long time. Instead, focus on your motivation to move (Do you really need/want to move?) and then finding a property that works for you.

Bottom line is a housing crash or downturn doesn't seem likely for 2025 with appreciation estimated in the 2% - 4% range. Some cities are forecast to have a decline but those are still 6% and you probably don't live in those areas anyway.

Also, if you are waiting for interest rates or prices to come down then it does not seem likely per the experts. (Please review the information above).

So the best plan is to decide if you want to move. Don't make your decision based on interest rates or prices. I say this as prices are only expected to move 2%-4% and interest rates are predicted to be in the 6% range. This is the new normal. Get used to it. Accept it. And then make your decision. The good news is you can always refinance when the numbers make sense 2-3 years or longer down the road.

Contact us at the www.frankelrealtygroup.com to get expert advice.