This year's housing market has been a struggle, especially for those looking to buy a home. The high home prices and elevated mortgage rates have pushed many buyers, especially potential first-time owners, out of the housing market.
The forecast for next year predicts the same condition, but there are some encouraging signs that the housing market could recover.
Here are four predictions from Realtor.com.
Home Prices Will Increase
As of October, the median sale price of a typical home in the US was $434,720. This is expected to climb modestly, with Realtor.com predicting an increase of about 3.7% in 2025. That would amount to about $15,000.
Ralph McLaughlin, senior economist at Realtor.com, said home prices would likely only fall should the US experience a recession.
Mortgage Rates Will Hover Above 6%
The average contract rate for a 30-year mortgage peaked at 7.8% a year ago. It has since dipped to 6.69% in the week ending Dec. 5, per Freddie Mac.
That said, experts predict the Federal Reserve could make a few cuts to its interest rates this month and throughout early 2025, potentially bringing mortgage rates down to 6.2% by the end of next year.
Housing Supply Will Increase Significantly
Home prices soared this year partly due to a shortage of houses for sale on the market. Next year, experts predict there will be an 11.7% jump in existing home inventory and a 13.8% increase in single-family home starts---both of which would give prospective buyers more options.
As of the third quarter of 2024, the US needs 3.7 million more homes on the market to offset the shortage.
Rents Will Remain The Same
Rental prices are unlikely to grow next year, but the decline won't give buyers much relief. Realtor.com expects apartment prices in the US to fall by only 0.1% in 2025.
The decline is caused by an increase in rental units on the market, which hit its highest level in at least 50 years, according to data from real estate site Zumper. While inventory will increase nationally, data shows the construction trend will cause a surge of new rental units in the South.
