Will House Prices Fall in 2025? Expert Predictions for Buyers and Sellers

The U.S. housing market remains challenging, with rising home prices and high mortgage rates making it tough for first-time buyers and keeping many homeowners hesitant to sell. As we head into 2025, experts predict that while home appreciation will slow, prices aren’t likely to decline significantly. Let’s break down what this means for buyers, sellers, and renters in the year ahead.

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A Quick Look Back at 2024

Home prices soared during the pandemic and dipped briefly between late 2022 and early 2023, giving buyers hope that the market might cool. However, by late 2024, prices had climbed back to near-pandemic levels. According to recent data:

Redfin: The median sale price of a U.S. home in November 2024 was $430,010, up 5.4% year-over-year.
Zillow: Typical home values reached $357,469, a 2.5% increase compared to the same time in 2023.

This upward trend reflects ongoing challenges, such as a national housing supply shortage and buyers struggling with high mortgage rates.

What Experts Say About 2025

While home prices may not drop in 2025, appreciation is expected to slow compared to recent years.

Market Outlook

Moody’s Analytics: Economist Matthew Walsh anticipates modest price growth of 1-1.5% year-over-year by the end of 2025. This is attributed to low demand and gradually improving inventory levels.
Redfin: The brokerage predicts a slightly higher rise of 4% in home prices, citing limited new inventory coming to market.
Zillow: Senior economist Kara Ng forecasts a 2.2% increase in home values, with affordability improving slightly as wages grow.

Mortgage Rates

Mortgage rates remain a key factor influencing the housing market:

Expectations for 2025: Rates could average around 6.8%, with fluctuations throughout the year, according to Redfin.
Challenges for Buyers: Ng advises buyers to brace for a bumpy ride, as both the Federal Reserve and markets respond to evolving economic data.
Possible Improvement: Experts believe it’s unlikely that rates will dip below 6%, but even a slight decrease could offer some relief.

Opportunities in Renting

As high home prices and mortgage rates keep many buyers sidelined, the rental market is poised to benefit:

Increased Supply: Pandemic-era rental construction is expected to come online, giving tenants more options.
Renter’s Market: Landlords may offer more concessions to attract renters, especially as wages continue to rise.

Redfin predicts median U.S. asking rents will remain flat in 2025, improving rental affordability for many.

The Bigger Picture: Affordability Still a Challenge

Despite slowing price appreciation, housing affordability remains a significant hurdle:

According to Walsh, incomes would need to rise by 70%, home prices would need to fall by 40%, or mortgage rates would need to drop by 4.6 percentage points to restore 2019-level affordability.
Without major shifts in these areas, demand will likely remain weak, particularly for first-time homebuyers.

Advice for Buyers, Sellers, and Renters in 2025

For Buyers

Be prepared for continued competition and fluctuating mortgage rates.
Consider purchasing sooner rather than later if you find a home within your budget, as waiting may not lead to significant savings.

For Sellers

Price your home competitively and be prepared for a less frenzied market than in previous years.
Focus on making your property move-in ready to attract buyers who may be wary of additional expenses.

For Renters

Take advantage of a renter-friendly market with more options and potential concessions from landlords.
Keep an eye on wage growth, which could further improve rental affordability.

While 2025 won’t bring dramatic relief to the housing market, it’s shaping up to be a year of gradual adjustment. Whether you’re looking to buy, sell, or rent, understanding these trends can help you navigate the market with confidence.

Thinking about making a move in 2025? Let’s connect and explore your options!

Original article: Will House Prices Fall in 2025? Experts Give Their Predictions – Newsweek