Real Estate Predictions: What to Expect in the 2025 Market
The real estate market ebbs and flows with changing socioeconomic conditions. Tough economic conditions and high mortgage rates dampened the industry’s growth for the past two years. However, the National Association of REALTORS (NAR) predicts a brighter, more robust future for real estate in 2025.
Based on current trends and expert opinions, home sales will be on the rise in 2025. Many factors will contribute to this welcoming turn of events. Let us analyze some insightful predictions and forecasts for the real industry in 2025 to get an idea of what lies ahead.
Fewer Fluctautaions in Mortgage Rate
- The mortgage rate has a huge impact on the housing market. A stable mortgage rate with fewer fluctuations is good news for buyers and sellers. In 2024, the average 30-year fixed mortgage rate fluctuated between 6.08 and 7.44%. The 1.36% fluctuation created a climate of instability, and buyers were cautious about applying for a mortgage.
However, according to NAR, mortgage rates will settle at the lower end of this range in 2025. As the Federal Reserve continues to lower interest rates, hopefully, the mortgage rates will also be reduced in 2025 and 2026.
Economists predict that if the following conditions are met, they can result in a quicker reduction in mortgage rates:
- Federal budget deficit reduces.
- Housing regulations become less stringent.
- An increase in the labor force to reduce the inflationary pressures.
Expected Increase in Home Sales
- 2024 started as slow, but home sales picked up pace in the second half of the year. This is evidenced by the 3% year-over-year gain in pending home sales in September 2024. 2025 comes bearing positive news as home sales are expected to be on a steady rise. Improvement in the job market and stock market growth are the driving forces that will motivate people to buy more homes.
Economists predict that approximately 2 million new jobs will be available between 2025 and 2026. More employment opportunities mean a larger percentage of the middle class can afford to buy new homes. 2025 is expected to bring a positive change from the recent housing market downturn of the past two years.
- Economists predict a 9% increase in existing home sales and an 11% increase in new home sales (year-over-year change) for 2025. Likewise, for 2026, a 13% increase is expected for existing homes and an 8% increase in sales for new homes.
Slow Appreciation for Home Prices
- 2024 proved to be a seller’s market. In June 2024, the median sale price for existing US homes hit a record high of $426,900. Home price appreciation will continue in 2025; however, its pace will slow down. According to estimates, in 2025, home appreciation will be marked at 2 percent, which is significantly lower compared to 4.5 percent growth in 2024.
Market conditions will be more favorable for buyers in those regions where more new homes are added to the inventory, reducing competition. West and Northeast regions will see steady price growth because fewer homes will be added to the inventory.
- All in all, in 2025, it is unlikely to see a drop in home sales prices.
Are you looking for a trustworthy realtor in Morris County? Contact Jackie Scura. We are an experienced team of real estate professionals who provide expert guidance and support throughout the home-selling process. Call us at (973) 319-8334 for more information.
