If you’re thinking about buying a home in 2025, you probably know about the double whammy of both home prices and mortgage interest rates increasing in the past few years. While there’s no crystal ball that can predict the specifics of the 2025 housing market, real estate experts do have some predictions for what’s in store for first-time homebuyers in the coming year. Will the persistently high interest rates subside? Will the market flip to be in buyers’ favor? And how will the recent presidential election play into all of this?
It’s hard to say. But there are some silver linings:
The housing market should be more balanced than in recent years, and housing inventory has been steadily rising,
In 2025, homebuyers should expect fewer bidding wars. Homes listed for sale received an average of 2.5 offers in October, a significant drop from the height of post-pandemic bidding wars, when homes often garnered closer to five offers, he says. This shift gives homebuyers more breathing room to carefully assess their options.
Will It Be a Buyers or Sellers Market?
First of all, some good news: There will be plenty of houses for buyers to choose from. Buyers can expect to see more houses hit the market in 2025, with an 11.7% increase in existing home inventory.
Still, we won’t outright call it a buyers market — which is a market condition defined by “months of supply” — an indicator that basically means how long it would take to sell all of the homes on the market. (A sellers market is when the month’s supply is under four months — a balanced market is when there’s four to six months of supply).
Will Home Prices Go Up or Down in 2025?
The cost of homes has been climbing steadily for over a decade and will continue to go up in 2025.
Real estate experts predict that home prices will grow by 3.7%. New home prices aren’t coming down, either. The cost of materials, labor, and land is just too high. Developers are paying through the roof for construction loans and skilled workers, and that’s not changing until we solve the labor shortage in the trades.
Some areas where homes have typically been more affordable could be notably more expensive.
Many Americans are continuing a trend that began at the start of the pandemic, and moving from higher-priced areas in the West and the Northeast to relatively less expensive cities in the South and Midwest. This could lead to increased competition in the regions where these buyers are moving.
What Will Happen with Interest Rates in 2025?
Just like housing prices, first-time buyers are closely watching interest rates, which can majorly influence spending power. Over the last year, the average interest rate on a 30-year, fixed-rate mortgage has swung between 6.08% and 7.22%.
Experts however, the average mortgage rates in 2025 will be 6.3%, with rates edging down over the year to reach 6.2% by the end of 2025. This puts rates at 6.4% during the second half of 2025.