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The housing market has been rough for at least the last 2 years, and some would argue longer. Rising prices, not just for homes, has made it difficult for first time home buyers to afford a mortgage. But according to some experts, there is a light at the end of the tunnel. In this article, we’ve compiled a list of experts and we’ll review their predictions for the housing market in 2025 and beyond.
National Association of Realtors
Lawrence Yun, the chief economist at the National Association of Realtors, presents a positive outlook for the housing market through an evaluation of 3 key factors.
Home Sales to Rise
Yun sees signals in the job market and stock market pointing to a better outlook for home sales in the years ahead. He also points to the theory of pent-up demand, similar to what we saw in the economic boom after the covid lockdown period.
According to Yun, the inventory for new and existing homes for sale is on the rise. That alone is not enough to signal an improvement in the number of homes sold, but in combination with the rise in US population and the uptick in the economy in the way of new forecasted jobs, he says it points to a high likelihood of increased home sales in the coming years.
Mortage Rate Stabilization
While mortgage rates will not be back down to the 3-4% numbers we enjoyed 10 years ago, Yun predicts the increase in rates will stop and rates may reduce slightly. Over the last 52 weeks, the average 30-year fixed mortgage rates were between 6.08% and 7.44%. Yun predicts we may have seen the ceiling in terms of rate growth, and then we may fall back to somewhere closer to the bottom end of that range in 2025.
He goes on to say that there is a chance we could approach the 4% figure, but that would require a significant decrease to the US budget deficit, something that is technically possible but should be seen to be believed.
Flattening Home Prices
In contrast to the sharp increases in home prices over the last several years, Yun sees a flattening of the curve as we enter 2025. While he does still predict in increase in the median home price of roughly 2%, that is a stark contrast compared to the nearly 6% increase we saw from 2023-2024.
This flattening should entice more buyers to pull the trigger, especially those who were primed to buy over the last few years but who were waiting to see signs that the rising prices would taper off.
Forbes
Forbes seems to have a mixed view of the housing market headed into 2025, with a slight lean toward improvement. However, that improvement is based on some contingencies. While they do agree with Yun that mortgage rates are stabilizing and could fall back from their peak in 2023, they warn that this could result in a surge of demand that would initially be good for the market but could result in another sharp price increase if the housing inventory can’t keep up with the demand.
They also concur with Yun that mortgage rates are still a long way off from returning to the glory days of ~4%. But they also point to the increased number of affordable homes on the market as a positive sign. Construction companies have made an effort to offer more affordable housing by reducing the size of the homes they build. This could be an effective strategy to entice first time homebuyers to make a purchase.
Will The Housing Market Crash Again?
This is a logical question to have considering the 2008 disaster. Any time the housing market is underperforming, it sparks debate over whether we are on the road to another crash and burn event. But what we’re seeing today is vastly different than what caused the 2008 crash.
The ’08 crash was caused largely by one thing: Homeowners were over-leveraged in their loans. In other words, they were granted loans that they had no business being approved for based on their debt-to-income ratio. Lenders handed out loans like candy without proper pre-approvals. To the consumer, it sounded like a good proposition – being able to get a loan for a nice new home. In the end it was the worst thing that could’ve happened to them, as what resulted was a slew of foreclosures and financial ruin for many families.
In contrast, today we see homeowners unable to get approval for loans due to the high prices. So instead of a market that is falsely profitable, propped up by unpayable debts, we have a market that is sluggish but stable in terms of the debt repayment. In other words, the people who are buying can afford to pay back the mortgage, so there will not be a crash.
Forbes’ Final Take
Forbes basically straddles the fence on the issue, predicting a very moderate improvement in the housing market for 2025. Their overall message is that mortgage rates will decline a bit, which should help, but that supply is a major limiting factor to seeing a boom in demand.
They point to the fact that many homeowners are locked in at the glory day rates of 3-4% and are unwilling to sell their homes to trade out for a 5-6% rate. This seems to be a logical conclusion.
That puts the onus of supply mostly on new construction, which alone cannot create the kind of supply necessary to drive down prices to the point where we could experience a heavy buyers’ market.
Therefore, Forbes sees the path to buyer dominance in the market going through mortgage rates, and their take is that we are just simply too far away from the ideal rates to expect a significant impact in 2025.
Business Insider
Business Insider mirrors the predictions of the National Association of Realtors and Forbes, stating that a low supply of inventory and economic conditions preventing the lowering of mortgage rates will limit the potential of a shift toward a buyers’ market in 2025. However, they present a theory that is interesting in the years beyond 2025, called the “Silver Tsunami”.
The Silver Tsunami
Potentially the saving grace for the housing inventory problem that keeps the market firmly in the seller’s favor and prevents downward price pressure, the Silver Tsunami refers to what might happen when baby boomers age out of their current homes.
This process is somewhat gloomy, as it relies on aging boomers to either pass away or move to long-term care facilities. Business Insider predicts these events will be more prevalent in the years ahead, leaving behind a supply of home inventory that could put price pressure on the market and being about more favorable buying conditions.
When will this occur? Not right around the corner, according to them. We’re probably looking at a gradual ramp up over the next few years before we hit the peak of this proposed event sometime in 2027 or 2028.
Conclusion
Unfortunately, the magic cure for the high prices and mortgage rates doesn’t seem to be on tap for 2025. Factors such as the state of the federal deficit, the inventory of homes for sale, and the high price of everyday items will still lead to an environment where prices and rates are uncomfortably high for many Americans who struggle to pay their day-to-day expenses.
But there is hope. Economists are generally bullish on the Trump economy helping to lower the cost of everyday items, and construction companies are making efforts to build more affordable housing to attract first time homebuyers. Like most things, if it took years to break it, it will take years to fix it and the housing market is no exception. If all goes well, and the pieces of the complex puzzle align, we could see a return to a buyers’ market in the next 3-4 years.
