The housing market in 2025 is shaping up to be more favorable than much of 2024, thanks to improving mortgage rates and increasing inventory levels. However, uncertainty still looms due to rising home prices, slowing construction, and the unpredictable effects of the presidential election. Factors such as mortgage rates, housing inventory, and market demand will continue to define housing affordability throughout the year. While challenges remain, experts predict gradual improvements that could ease some of the pressure on buyers and sellers alike.
Mortgage rates, which peaked at over 8 percent in late 2023, have settled at 6.84 percent as of December 2024. While this is an improvement, it’s still higher than the historic lows seen in prior years. Experts like Bernard Markstein, president and chief economist for Markstein Advisors, predict that lower interest rates in 2025 will unleash pent-up housing demand, though they will remain above the ultra-low levels of recent years. Meanwhile, housing inventory has been gradually increasing, with a 4.2-month supply at the end of October 2024 — up from 2.9 months earlier in the year. This progress, combined with growing optimism among homebuilders, suggests a more balanced market could be on the horizon.
Navigating a Shifting Market
Political factors are adding complexity to the housing market as well. With the incoming presidential administration, proposed policies on taxes, tariffs, and regulations could significantly influence mortgage rates, builder confidence, and housing affordability. For instance, Redfin economists suggest that reduced regulatory burdens and steady economic conditions under the new administration could boost new construction, potentially easing inventory challenges.
Despite these positive developments, affordability remains a hurdle for many buyers. The median U.S. home-sale price reached a record $407,200 in October 2024, representing a 4 percent year-over-year increase. While price appreciation is expected to slow to around 2 percent in 2025, many areas are still firmly in a seller’s market. Experts recommend buyers and sellers consult experienced real estate agents to navigate these complexities, as local market conditions can vary widely. With lower mortgage rates, improving inventory, and tempered price growth, 2025 may present opportunities for those prepared to make informed decisions in the housing market.