Housing is not cheap — whether you’re buying or renting.
In October, the median sales price for a single-family home in the U.S. was $437,300, up from $426,800 a month prior, according to the latest data by the U.S. Census.
Meanwhile, the median rent price in the U.S. was $1,619 in October, roughly flat or up 0.2% from a year ago and down 0.6% from a month prior, according to Redfin, an online real estate brokerage firm.
While it can be difficult to exactly pinpoint how the housing market is going to play out in 2025, several economists lay out predictions of what’s likely to happen next year in a new report by Redfin, an online real estate brokerage firm.
“If the housing market were going to crash, it would have already crashed by now,” said Daryl Fairweather, chief economist at Redfin. “The housing market has been so resilient to interest rates going up as high as they have.”
Here are five housing market predictions for 2025, according to Fairweather and other economists.
Home price growth will return to pre-pandemic levels
The median asking price for a home in the U.S. will likely rise 4% over the course of 2025, a pace similar to that of the second half of this year, according to Redfin.
The 4% annual pace is a “normalization” compared to the accelerated growth last seen in 2020, said Fairweather.
Earlier in 2024, the rate at which home prices grew slowed down to pre-pandemic levels. In other words, while prices were still rising, the speed of price growth was not as fast as it was in previous years.
Despite predictions of growth slowing, there may still be some volatility in prices.
In fact, home price appreciation might stay flat, or less than 1%, going into the 2025 spring home buying season, said Selma Hepp, economist at CoreLogic.
But the possibility of President-elect Donald Trump enacting some of his economic policies could drive home prices much higher, said Jacob Channel, senior economist at LendingTree.
“We kind of have some mixed signals right now in terms of what may or may not happen to home prices,” he said.
General tariffs on foreign goods and materials as well as mass deportations could result in higher construction costs and slower home-building activity. If fewer homes are built in a supply-constrained market, prices might grow much higher, said Channel.
Flattening rents, with more room to negotiate
At a national level, the median asking rent price in the U.S. will likely stay flat over the course of a year in 2025, as new rental inventory becomes available, according to Redfin.
“If rents are flat, and people’s wages continue to grow, that means people have more money to spend,” Redfin’s Fairweather said, as well as increase their savings.
More than 21 million renter households are “cost-burdened,” meaning they spent more than 30% of their income on housing costs, according to 2023 U.S. Census data.
A stable rental market will also give renters more strength to negotiate with landlords. In some areas, property managers are already offering concessions like one month rent free, a free parking space or waiving fees, experts say.
However, “it’s December,” Channel said. “Rent prices typically decline in the colder months of the year,” as fewer people are apartment hunting in the late fall and winter seasons.
If would-be buyers continue to be priced out of the for-sale market next year through high home prices and mortgage rates, competition in the rental market may ensue, he said.
Also keep in mind that the typical rent price you see will depend on what’s going on in your local market, Hepp explained.
For instance: Austin, Texas was the “epicenter of multi-family construction,” she said, meaning a lot of new supply was added into the city’s rental market, bringing rental costs down. The metro area’s rent prices fell by 2.9% from a year ago, CoreLogic found.
In contrast, supply-constrained metropolitan areas like Seattle, Washington, D.C., and New York City, are experiencing high rent growth of 5% annually.
A ‘bumpy’ and ‘volatile’ year for mortgage rates
Redfin forecasts mortgage rates will average 6.8% in 2025, and hover around the low-6% range if the economy continues to slow.
Yet experts expect 2025 will be a “bumpy” and “volatile” year for mortgage rates.
Borrowing costs for home loans could spike if policies like tax cuts and tariffs are enacted, putting upward pressure on inflation.
“We’re sort of in uncharted territory. It’s really tough to say exactly what’s going to happen,” said LendingTree’s Channel.
Mortgage rates declined this fall in anticipation of the first interest rate cut since March 2020. But then borrowing costs jumped again in November as the bond market reacted to Donald Trump’s election win. Since then, mortgage rates have somewhat stabilized — for now.
“Our expectation is that rates are going to be in the 6% range as we move into 2025,” Jessica Lautz, deputy chief economist and vice president of research at the National Association of Realtors, recently told CNBC.
More home sales than in 2024
Pent-up demand from buyers and sellers on the sidelines may drive home transactions next year.
“People have waited long enough,” Fairweather said.
About 4 million homes are expected to be sold by the end of 2025, an annual increase between 2% and 9% from 2024, according to Redfin.
The market is piling on with “people who need to move on with their lives,” like buyers who are getting new jobs and need homes suitable for life changes, and sellers who have delayed moving plans, Fairweather said.
While more buyers are expected to hit the market next year, the level of competition may not be as aggressive as in recent years, when bidding wars were the norm.
Other affordability factors may come into play, like rising insurance costs and property taxes, in turn slowing down competition, said CoreLogic’s Hepp.
“We’ll definitely see more buyers out there,” she said. “But I don’t see the competition heating up to the levels that it has over the last few years.”
Climate risks will bake into homes prices
The risk of extreme weather and natural disasters may anchor down home prices or slow down price growth in areas like coastal Florida, California and parts of Texas, which are at high risk of hurricanes, wildfires or other disasters, Redfin expects.
If palatable price tags have you eyeing homes in a high-risk market, be aware of potential complications.
For instance, home insurance policies in some of these markets are harder to come by, and tend to carry high price tags. The financial impact of natural disasters may also be felt in rising home maintenance and repair costs, said Redfin’s Fairweather.
What’s more challenging, “every part of the country is vulnerable” because the weather patterns are changing, she said. “Lately, there have been these atmospheric rivers in California that have caused days of heavy flooding, and those homes aren’t built for that.”
While there’s a lot of focus on Florida for hurricane risks, the state is more prepared for this natural disaster, unlike areas like Asheville, North Carolina, a mountainous city battered by the hurricane Milton earlier this year.
“We will probably see insurance increase pretty broadly because that mismatch between what homes were built for and the climate that they are going to be facing in the coming years,” she said.
