This past year has been a mixed bag for the housing market. The first few months of 2024 were slow: Buyers stayed on the sidelines and sellers held tight as mortgage rates climbed above 7%. This summer, signs of improving affordability and easing inventory shortfalls popped up, only to fade away in late fall.
Now, homebuyers who are tired of facing choppy market conditions are asking: Will 2025 be any different?
Industry analysts from all major trade associations and brokerages — including the National Association of Realtors, Zillow, Redfin and Realtor.com — are cautiously optimistic about the upcoming year. Housing demand remains steady, and inventory is slowly improving. Although home prices continue to rise, it’s no longer happening at the double-digit pace that characterized the pandemic years. Overall, housing experts expect both buyers and sellers to be more active next year, producing a bump in home sales activity.
All these factors also point to a housing market that is on its way to being in balance, which means there are enough listings to meet demand, home prices are affordable and the market isn’t tilted in favor of sellers or buyers.
If these trends continue, says Orphe Divounguy, senior economist at Zillow, “it’s just good news for the housing market going forward.”
Market conditions are moving in the right direction, but they are far from normalizing. Inventory continues to fall short of demand in many cities, and mortgage rates are currently hovering close to 7%. Many potential buyers continue to hold back in hopes of more favorable buying conditions. Until more inventory comes online to help lower prices, there’s still a long way to go to achieve balance.
In addition to the current challenges of higher mortgage rates, limited supply and rising prices, next year will also see a new presidential administration implementing policies that will affect the U.S. economy and housing. While it’s still too early to tell whether the effects under President-elect Donald Trump will be positive or negative, buyers and sellers must be prepared for several potential outcomes.
Want to know what’s to come? Here is the experts’ 2025 forecast for home sales and inventory. We’ll look more in-depth at mortgage rates and home prices in separate stories.
Home sales forecast for 2025
Home sales over the past two years have been sluggish, to say the least, averaging about 4 million each year. Compared to the typical annual rate of about 5 million home sales during the years before the pandemic, sales have been about 20% lower than quote-unquote “normal.”
If current trends continue, these numbers should improve in 2025 due to rising inventory and more moderate financing costs. Speaking at an NAR conference held in November, Lawrence Yun, the chief economist for the realtors’ association, forecast that existing home sales will increase by 9% next year, bringing the total to about 4.3 million homes.
Yun pointed to recent stock market gains, a growing jobs market, steady buyer demand and easing mortgage rates as the primary factors leading to improved home sales next year.
This total aligns well with other forecasts. Redfin, for instance, is predicting a 2% to 9% increase, which would put home sales between 4.1 and 4.3 million for the year, while Zillow is anticipating about 4.3 million units sold.
Realtor.com, on the other hand, expects total sales to be just over 4 million homes, or about a 1.5% year-over-year increase.
Will housing inventory improve next year?
While inventory remains well below pre-pandemic levels in many cities, it has been slowly improving in aggregate. According to the Federal Reserve, there was a 4.3-month supply of active listings on the market in September, the most recent month for which data is available. (Compare that number to January 2022, when the supply was at a record low of 1.6 months.)
The improvement has been gradual: Fewer buyers are active in the market because of the high cost of financing a home purchase, leading to less competition, slower home sales and longer stays within the supply chain. Additionally, more homeowners are deciding to list their properties, as life events such as marriages, births and new jobs trigger the decision to find a new home.
As a result of these two factors, total listings are expected to increase by as much as 11.7% next year, according to data from Realtor.com. Other experts also expect listings to rise, with listing site Bright MLS forecasting a 12.5% increase in supply.
Some cities may experience a faster inventory bump than others as more buyer interest leads to increased builder activity and new home construction that complements the supply of existing homes. That’s why it’s difficult to declare a nationwide buyer’s or seller’s market — while many areas offer strong opportunities for sellers, several cities are already seeing a more neutral dynamic and better balance that benefits buyers.
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