Economists Top 5 Housing Predictions for 2025

Housing costs are currently sky-high, regardless of whether you are renting or in the market to buy a home. According to the latest data from the U.S Cenus, the median sales price for a single-family home was $437,300, which is up from $426,800 a month prior.

On the rental front, the median price for rent in the U.S. hit $1,619 in October, which is up a mere 0.2% from a year ago according to Redfin.

In a new report by Redfin, an online real estate brokerage firm, several economists make predictions regarding the housing market in 2025.

“If the housing market were going to crash, it would have already crashed by now,” said Daryl Fairweather, chief economist at Redfin in a recent CNBC article. “The housing market has been so resilient to interest rates going up as high as they have.”

Here is what you can expect in the 2025 housing market according to Fairweather and other economists in the CNBC article: 

Home price growth will drop to pre-pandemic levels

According to the CNBC article and the Redfin report, the median asking price in the U.S. will only rise 4% over 2025 which roughly matches the pace homeowners saw in the second half of 2024. This pace will be a move back to a normal growth rate.  The pandemic pushed prices up much faster than normal and the report claims price growth will slow to a more normal pre-pandemic level in 2025.

While growth price growth will slow, there could certainly be volatility in prices. It is possible that price growth could stay flat or rise less than 1% in the 2025 spring home buying season, said Selma Hepp, economist at CoreLogic in the CNBC article.

Another economist in the Redfin report predicted that home prices could be headed up if President-elect Donald Trump actually enacts some of his economic policies. 

“We kind of have some mixed signals right now in terms of what may or may not happen to home prices,” he said in the CNBC article. 

Tariffs on foreign goods and materials combined with mass deportations could easily result in higher home prices as the cost of materials and labor will head up. In addition, fewer construction workers will slow building, leading to fewer homes, resulting in higher home prices. 

Rent costs will flatten in 2025

According to the Redfin report, rent prices in the U.S. will most likely stay flat over 2025, mainly due to new rental inventory becoming available in the year. 

“If rents are flat, and people’s wages continue to grow, that means people have more money to spend,” Redfin’s Fairweather said in the report and CNBC article, “as well as increase their savings.”

According to 2023 U.S. Census data, over 21 million renters are “cost-burdened” which means they are spending over 30% of their household income on housing costs.  

A rental market where prices are stable allows renters to negotiate with landlords on rental prices. In some markets, renters are already being offered enticements to move in such as a free month, waived fees or free parking spaces. 

While experts predict that rents should stay flat, if home buyers continue to be priced out of the home buying market, it could lead to increased competition in the rental market. It should be noted that rental markets vary depending on local conditions which could result in rent heading up in certain markets. 

As an example, Austin, Texas was the “epicenter of multi-family construction,” said Selma Hepp, economist at CoreLogic in the CNBC article. All of this construction means that a large supply of rentals were added to the Austin rental market which will bring down rental costs. This led to rents falling by 2.9% from a year ago, CoreLogic found.

On the other hand, areas such as Seattle, Washington, D.C., and New York City, are seeing rental prices climbing 5% annually because they are having issues building new homes which leads to higher rents. 

Could be a bumpy year for mortgage rates

The Redfin report is forecasting that mortgage rates will average roughly 6.8% in 2025, with a low in the low 6% range if the economy slows. However, the report predicts that 2025 will be a volatile and bumpy year for mortgage rates. 

If Trump tax cuts and tariffs are implemented, there is a good chance that inflation will spike. “We’re sort of in uncharted territory. It’s really tough to say exactly what’s going to happen,” said LendingTree’s Channel in the CNBC article. 

While mortgage rates went down in the fall due to the first interest rate cut since March 2020. However, mortgage rates climbed again in November after Donald Trump’s win. 

“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, said in the CNBC article.

Home sales will climb in 2025

The Redfin report predicts that pent up demand from sellers and buyers will lead to more home transactions next year.

“People have waited long enough,” Fairweather said in the CNBC article.

Redfin forecasts that roughly 4 million homes will be sold by the end of 2025, which would be an annual increase between 2% and 9% from 2024. 

While Redfin expects more home transactions this year, the competition for properties may not be as aggressive as it has been in recent years.