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Realtor.com® 2025 Housing Market Forecast Update

As we look ahead to 2025, the housing market is set to face continued challenges, as outlined in the latest forecast from Realtor.com. The projected outlook indicates that home sales are likely to remain below the levels seen in 2024, primarily due to persistent affordability challenges and a sustained high interest rate environment. According to Realtor.com, sales are expected to dip below the 4 million mark, marking a continued trend of subdued activity in the market.

Key Market Trends

One of the most significant trends highlighted in the report is the slowing home price growth, which reflects a more balanced housing landscape. Despite a seemingly promising increase in available homes for sale, the response from buyers has been muted compared to past market shifts. Danielle Hale, the chief economist at Realtor.com, emphasizes that while there is more inventory in regions such as the South and West, affordability constraints continue to suppress demand. Conversely, the Northeast and Midwest markets are exhibiting tighter activity, indicating significant regional disparities.

A Shift Towards a More Balanced Market

The revised forecast indicates a pivotal movement towards a balanced housing market. The months' supply of homes for sale is anticipated to reach an average of 4.6 months, the highest level since 2016. This shift suggests buyer-friendly conditions are emerging, creating potential opportunities for those who have been on the lookout for homes. However, the extent of bargaining power will vary depending on geographical location and price point, particularly for homes close to the national median.

Mortgage Rates Remain Elevated

Looking at the mortgage landscape, rates are projected to gradually ease, averaging around 6.7% for the year and potentially dropping to 6.4% by the end. While this is a slight improvement over previous projections, the ongoing economic conditions, including inflation and fiscal challenges, are likely to keep rates elevated. The uncertainty surrounding tariffs and growing fiscal debt due to recent legislation underscores the need for prospective buyers to remain cautious.

Sales Predictions

Existing home sales in 2025 are estimated around 4 million, slightly lower than the historically low figure of 4.06 million recorded in 2024. While sales have slightly exceeded projections earlier in the year, a recent slowdown has been observed. This trend is expected to continue, leading to an estimated 1.5% drop in total existing-home sales for 2025 compared to the previous year.

Home Prices on the Rise but Slowing

The report outlines that home prices have remained elevated, spurred by a chronic supply shortage that the U.S. has been grappling with for years. Although home price growth is anticipated to slow, with an estimated increase of 2.5% across 2025, the high cost of ownership still poses challenges for many potential buyers. Some metro areas are already starting to see price declines, pointing to a diversification in market dynamics.

Seller Behavior in a Changing Market

Amidst these changing conditions, sellers have started to react. A recent report from Realtor.com noted a noticeable trend of price reductions among listings, as inventory climbs nearly 30%. With more homes being listed, sellers are facing the reality of needing to be flexible with pricing to attract buyers. Interestingly, an increase of 47% in delistings—where homeowners opt to remove their properties from the market rather than reduce prices—has also been observed. This behavior further complicates the market dynamics by dampening the supply of available homes.

The Attractive Rental Market

With homebuying conditions remaining tough, the rental market continues to present an appealing option. Rents have started to ease, marking a 2.1% decline in the past year and providing significant savings for renters. The latest trends indicate that the median asking rent has dropped by approximately $50 monthly compared to peak levels seen in August 2022.

Conclusion

In summary, the 2025 housing market is poised for a period of adjustment as it grapples with affordability challenges, elevated mortgage rates, and shifting inventory dynamics. Buyers and sellers alike should remain attentive to these trends as they navigate their respective positions in a market that is gradually evolving towards a more balanced state.