What’s Ahead for the Housing Market in 2025? Here’s What You Need to Know

Curious about what’s in store for the housing market this year? If you’re planning to buy or sell a home, understanding the key trends can help guide your decisions. The best way to stay informed is by consulting with the pros.

Experts are constantly updating their predictions, so here’s the latest on two major factors expected to shape the market in 2025: mortgage rates and home prices.

Will Mortgage Rates Decrease?

Everyone is closely watching mortgage rates, hoping they’ll drop. But the real question is: by how much and how fast? The good news is that experts anticipate a slight decrease in 2025, but don’t expect mortgage rates to fall back to the 3-4% range. As Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), states:

“Are we going to go back to 4%? Per my forecast, unfortunately, we will not. It’s more likely that we’ll go back to 6%.”

Other experts agree, with many predicting rates will stabilize in the mid-to-low 6% range by the end of the year. However, these predictions are subject to change as new information emerges. Since factors like inflation and the broader economy influence where rates go from here, expect some fluctuation. Rather than trying to time the market based on exact numbers, focus on the overall trend and what’s within your control.

A trusted lender and agent partner can help you stay up to date on the latest data and how it impacts your specific situation. Even a small decrease in rates could make a significant difference in your mortgage payment.

Will Home Prices Drop?

The short answer: not likely. While mortgage rates are expected to ease, home prices are projected to continue rising in most areas—just at a slower, more typical pace. On average, experts predict home prices will increase by about 3% in 2025, with many forecasts falling in the 3 to 4% range. This is much closer to a sustainable, long-term increase, so don’t expect a major price drop that will allow you to score a bargain if you’re planning to buy this year.

While that might sound disappointing if you’re hoping for a steep drop, here’s why it could still be a good thing: you won’t face the dramatic price hikes we’ve seen in recent years, and any home you purchase will likely increase in value after you close.

So why are prices still on the rise? The answer lies in supply and demand. While more homes are available than a year ago, inventory still isn’t enough to meet the high demand from buyers. As Redfin explains:

“Prices will rise at a pace similar to that of the second half of 2024 because we don’t expect there to be enough new inventory to meet demand.”

That said, the housing market is highly localized. Some areas may see higher prices, while others could see prices level out or dip slightly if inventory is high in those regions. However, in most places, prices will continue to rise.

To get a better understanding of the housing market in your area, rely on a knowledgeable agent who can explain the current trends and how they affect your plans.

Bottom Line

The housing market is constantly evolving, and 2025 will be no different. With mortgage rates likely easing slightly and home prices rising at a more normal pace, staying informed is key to making a smart move. If you're ready to buy or sell, now’s the time to make a plan that works for you.

Reach out to me for a personalized look at your home's value or to explore your options for purchasing a home in Montgomery County, PA. As the best realtor in Montgomery County, I’m here to guide you through every step of the process!