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Realtor.com Forecasts 2025 Housing Market Trends

Realtor.com has recently released its housing market outlook for 2025, suggesting a modest increase in home values and a stable rental market due to a surge in available apartment inventory. Stakeholders in the real estate sector, including property owners, prospective homebuyers, renters, and landlords, can expect a continuation of current trends for the upcoming year.

The 2025 housing forecast indicates that home sales are anticipated to rise by 1.5%, while home prices are projected to increase by 3.7%. In contrast, rent is expected to remain relatively stable, experiencing only a slight decline of 0.1%. Additionally, mortgage rates are likely to decrease slightly but will remain above 6%.

These forecasts are underpinned by expectations of a favorable economic environment characterized by lower interest rates and consistent economic growth. Realtor.com analysts predict that the Federal Reserve may initiate rate cuts beginning in December, with further reductions possible in the first half of 2025.

One crucial point noted in the forecast is the absence of predictions for a potential economic downturn, aside from a few dissenting voices. The stability of the housing market seems likely to persist, with home prices expected to remain elevated and gradually increase, despite being below their post-pandemic peak.

Ralph McLaughlin, a senior economist at Realtor.com, emphasized the correlation between home price fluctuations and economic indicators, asserting that price drops typically occur only during recessions when sellers are compelled to lower their prices.

Furthermore, uncertainties surrounding the impact of President-elect Donald Trump’s policies on the housing market remain. Analysts generally agree that initiatives such as tax cuts and deregulation could enhance business confidence, potentially benefiting homebuyers indirectly. McLaughlin suggested that positive economic policies may encourage consumers to enter the housing market, whether by purchasing their first home or upgrading to a larger property.

Significant Supply Increases Ahead

Amid largely predictable trends, the 2025 housing landscape may witness notable changes due to a significant rise in housing supply. The long-standing shortage of homes is projected to ease, as Realtor.com anticipates the emergence of a more balanced housing market. This shift is attributed to an 11.7% increase in the inventory of existing homes and a 13.8% growth in the starts of single-family homes.

The current trajectory sees home listings rising across many of the 50 largest real estate markets in the United States, contrary to earlier expectations of a steep decline in inventory this year. However, a shortfall of approximately 3.7 million homes still looms, according to Freddie Mac’s estimates.

With improvements in the housing supply forecasted, Realtor.com estimates that the inventory of homes available will climb to 4.1 months by 2025, up from 3.7 months at present. Similarly, the National Association of Realtors has reported a current availability of 4.2 months’ supply of existing homes.

The rental market is also seeing an increase in available units, as research from Zumper indicates that new apartment supply has reached its highest level in 50 years. This uptick is projected to keep rent growth in check, according to McLaughlin. Unlike single-family homes, the availability of multi-family units tends to be introduced all at once, creating significant and localized impacts on urban rents.

As more options become available, renters are likely to avoid the steep rent increases that became prevalent during the pandemic. Additionally, landlords may struggle to implement significant rent hikes in a healthy economy where renters have numerous alternatives for housing, including the option to purchase homes.

While a larger rental inventory may reduce the pressure on rental prices, it is unlikely to result in major discounts on home prices or rental units. Over time, prices tend to rise alongside population growth and an expanding money supply, meaning that individuals yearning for pre-pandemic pricing may find their hopes unmet, despite an otherwise thriving market in 2025.

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