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Housing isn't cheap, whether you're buying or renting.
In October, the average sales price for a single-family home in the U.S. was $437,300, up from $426,800 the previous month, according to the latest U.S. Census data.
According to Redfin, an online real estate brokerage, the average rental price in the U.S. was $1,619 in October, about flat or up 0.2% from a year ago and up 0.6% from the previous month.
While it may be difficult to say exactly how the real estate market will perform in 2025, several economists offer predictions about what will happen next year in a new report from Redfin, an online real estate brokerage firm.
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“If the housing market was going to collapse, it would have collapsed by now,” said Daryl Fairweather, chief economist at Redfin. “The real estate market has proven extremely resilient to such high interest rates.”
Here are five real estate market predictions for 2025, according to Fairweather and other economists.
Property price growth will return to pre-pandemic levels
The average asking price for a home in the U.S. is expected to increase by 4% over time 2025, a similar pace to the second half of this year, according to Redfin.
The 4% annual pace is a “normalization” compared to the accelerated growth last seen in 2020, Fairweather said.
At the beginning of 2024, the growth rate of house prices slowed to pre-pandemic levels. In other words, while prices continued to rise, the pace of price growth was not as fast as in previous years.
Despite forecasts of slowing growth, some price volatility may still occur.
In fact, home price growth could remain flat or be less than 1% through the 2025 spring buying season, said Selma Hepp, an economist at CoreLogic.
But the possibility that President-elect Donald Trump implements some of his economic policies could push home prices significantly higher, said Jacob Channel, senior economist at LendingTree.
“We have mixed signals at the moment about what might and might not happen with property prices,” he said.
General tariffs on foreign goods and materials as well as mass deportations could lead to higher construction costs and slower housing activity. If fewer homes were built in a supply-constrained market, prices could rise much higher, Channel said.
Flattening of rents, more room for negotiation
Nationally, the average asking rental price in the U.S. will likely remain flat over the course of a year in 2025 as new rental inventory becomes available, according to Redfin.
“If rents remain stagnant and people’s wages continue to rise, that means people have more money to spend,” Redfin’s Fairweather said, and that they are increasing their savings.
According to 2023 U.S. Census data, more than 21 million renter households are “cost-burdened,” meaning they spend more than 30% of their income on housing costs.
A stable rental market also gives tenants more negotiating power with landlords. In some areas, property managers already offer perks such as one month's rent, free parking or fee waivers, experts say.
However, “it’s December,” Channel said. “Rent prices typically fall in the colder months of the year,” as fewer people are looking for housing in late fall and the winter season.
If potential buyers continue to be priced out of the sales market next year by high home prices and mortgage rates, there could be competition in the rental market, he said.
Also keep in mind that the typical rental price you see will depend on what's going on in your local market, Hepp explained.
For example: Austin, Texas, is the “epicenter of multifamily construction,” she said, which means many new offerings have been added to the city's rental market, driving down rental costs. According to CoreLogic, rental prices in the metro area fell 2.9% compared to last year.
In contrast, supply-constrained metropolitan areas such as Seattle, Washington, DC and New York City are experiencing high rent growth of 5% annually.
A “bumpy” and “volatile” year for mortgage rates
Redfin forecasts that mortgage rates will average 6.8% in 2025 and will hover in the low 6% range if the economy continues to slow.
Still, experts predict 2025 will be a “bumpy” and “volatile” year for mortgage rates.
Borrowing costs for home loans could rise if measures such as tax cuts and tariffs are taken, which would put upward pressure on inflation.
“We are in uncharted territory in some ways. It’s really difficult to say exactly what will happen,” the LendingTree channel said.
Mortgage rates fell this fall in anticipation of the first rate cut since March 2020. But then borrowing costs rose again in November as the bond market reacted to Donald Trump's election victory. Since then, mortgage rates have stabilized somewhat – for now.
“We expect interest rates to be in the 6% range in 2025,” Jessica Lautz, deputy chief economist and vice president of research at the National Association of Realtors, recently told CNBC.
More home sales than in 2024
Pent-up demand from buyers and sellers on the sidelines could drive home transactions next year.
“People have waited long enough,” Fairweather said.
About 4 million homes are expected to be sold by the end of 2025, an annual increase of between 2% and 9% compared to 2024, according to Redfin.
The market is full of “people who need to get on with their lives,” such as buyers looking for new jobs and homes that accommodate life changes and sellers who have postponed their moving plans, Fairweather said.
While more buyers are expected to enter the market next year, competition may not be as aggressive as in recent years, when bidding wars were the norm.
Other affordability factors, such as rising insurance costs and property taxes, could play a role and in turn slow competition, CoreLogic's Hepp said.
“We will definitely see more buyers,” she said. “But I don’t think the competition will get as intense as it has in recent years.”
Climate risks will impact property prices
The risk of extreme weather and natural disasters could lower home prices or slow price growth in areas such as coastal Florida, California and parts of Texas that are at high risk of hurricanes, wildfires or other disasters, Redfin expects.
If attractive prices lead you to consider homes in a high-risk market, be aware of possible complications.
For example, home insurance is harder to obtain in some of these markets and tends to come with high prices. The financial impact of natural disasters could also be felt in rising home maintenance and repair costs, Redfin's Fairweather said.
What's even more difficult: “Every part of the country is at risk” because weather conditions are changing, she said. “Lately in California there have been these atmospheric rivers that have caused severe flooding for days, and these homes are not built for that.”
Although Florida has received a lot of attention when it comes to hurricane risks, the state is better prepared for this natural disaster than areas like Asheville, North Carolina, a mountain town hit by Hurricane Helene earlier this year.
“We are likely to see a fairly broad increase in insurance because of the mismatch between what homes were built for and the climate they will be exposed to in the coming years,” she said.
Correction: Asheville, North Carolina was hit by Hurricane Helene earlier this year. An earlier version misstated the name of the hurricane.