Real estate market predictions 2025
The U.S. housing market has undergone seismic shifts over the past two years, but according to economists at the National Association of REALTORS® (NAR), brighter days may be on the horizon. During NAR NXT, The REALTOR® Experience, held in Boston, Chief Economist Lawrence Yun and Deputy Chief Economist Jessica Lautz presented a roadmap for the future of home sales, mortgage rates, and changing buyer demographics. Their insights reveal opportunities and challenges for real estate professionals navigating a dynamic market in 2025 and beyond.
Let’s explore their predictions for home sales, mortgage rates, and buyer behavior—and how these factors, coupled with economic and political influences, could shape the real estate landscape.
Home Sales: A Promising Comeback
The past two years have been challenging for real estate, with sluggish sales and affordability concerns dominating the headlines. However, Yun’s forecast offers hope: existing home sales are expected to rise by 9% in 2025, followed by an additional 13% in 2026. Similarly, new home sales are projected to jump 11% in 2025 and 8% in 2026.
Key Factors Driving This Growth:
Job Creation: Yun predicts nearly 4 million new jobs by 2026, bolstering consumer confidence and purchasing power.
Stock Market Recovery: With improving market conditions, prospective buyers are regaining financial stability.
Pent-Up Demand: Despite a 70-million population growth since 1995, home sales have remained stagnant, hinting at significant latent demand.
While challenges like inventory shortages persist, these signs point to a healthier housing market ahead.
Mortgage Rates: Stabilization in Sight
Mortgage rates have been a critical concern, with many buyers sidelined by high borrowing costs. Over the past year, 30-year fixed-rate mortgages hovered between 6.08% and 7.44%. Yun anticipates that rates will stabilize at the lower end of this range by 2025 and 2026.
Why Rates May Remain High:
A large budget deficit limits available mortgage funds.
The Federal Reserve’s rate cuts don’t directly impact long-term mortgage rates.
Factors That Could Lower Rates:
Reduced federal deficits.
Relaxed housing regulations to boost construction.
A larger labor force to mitigate inflation.
Although rates may not plummet to pre-pandemic levels, stability will provide much-needed clarity for buyers and sellers alike.
Rising Home Prices: A Slow and Steady Climb
After years of rapid appreciation, home prices are poised for more measured growth. The median home price is forecast to reach $410,700 in 2025 (a 2% increase) and $420,000 in 2026 (another 2% rise).
The Wealth Gap Between Homeowners and Renters: Homeownership has proven to be a powerful wealth-building tool, with the average homeowner gaining $147,000 in equity over the past five years. In contrast, renters’ median net worth remains at just $10,000, compared to $415,000 for homeowners.
To avoid exacerbating inequality, Yun emphasizes the importance of increasing housing supply to align price growth with wage increases.
Changing Buyer Demographics: The New Face of Homeownership
Jessica Lautz unveiled a transformed buyer profile in NAR’s 2024 Profile of Home Buyers and Sellers. Here are the trends shaping the future:
1. The Rise of All-Cash Buyers
Cash sales have surged to 26% of transactions, driven by equity-rich homeowners and savvy investors. Repeat buyers are especially likely to pay cash, with 31% foregoing mortgages altogether.
2. Older First-Time Buyers
First-time buyers now have a median age of 38, reflecting extended saving periods and financial support from family or investments. High down payments—averaging 9%—highlight the financial hurdles facing this group.
3. Multigenerational Living
Cost savings and family dynamics have driven multigenerational households to an all-time high of 17%. These buyers often pool resources to afford larger homes.
4. The Resurgence of City Living
The urban appeal is back, with the largest shift toward city centers in over a decade. Buyers are drawn to the convenience and vibrancy of metropolitan areas.
5. Single Women Leading the Market
Single women continue to outpace single men in home purchases, accounting for 24% of transactions compared to men’s 11%. Changing societal norms and financial independence are key drivers.
Economic and Political Influences on Housing
Economic stability and political outcomes play a pivotal role in shaping the housing market. This year’s contentious presidential election has brought some clarity, with Yun noting that home sales typically see a post-election boost due to reduced uncertainty.
Further, improvements in the broader economy—such as rising employment rates and easing inflation—will likely spur more housing activity.
Opportunities for Real Estate Professionals
For REALTORS® and brokers, understanding these trends is essential to seizing opportunities and addressing challenges:
Adapting to Buyer Demands: As multigenerational and cash buyers grow, agents must tailor their marketing strategies and services to meet diverse needs.
Educating First-Time Buyers: Offering resources and guidance can help older first-time buyers navigate the complexities of homeownership.
Leveraging Urban Appeal: Highlighting the benefits of city living can attract clients seeking convenience and community.
Conclusion
The housing market is entering a phase of recovery, with rising home sales, stabilizing mortgage rates, and evolving buyer demographics paving the way for a dynamic future. Real estate professionals who stay informed and adaptable will be well-positioned to thrive in this shifting landscape. By aligning their strategies with these trends, they can help clients achieve their goals while driving their businesses forward.
FAQs
What are the key predictions for home sales in 2025 and 2026?
Home sales are expected to rise, with existing sales increasing 9% in 2025 and 13% in 2026. New home sales are projected to grow 11% in 2025 and 8% in 2026.
How will mortgage rates impact the housing market?
Mortgage rates are expected to stabilize, but large federal deficits may keep them higher than pre-pandemic levels. Stability, however, will boost buyer confidence.
What are the biggest demographic shifts among home buyers?
There’s a rise in all-cash buyers, older first-time buyers, multigenerational households, and single women buyers. Urban living is also seeing renewed interest.
How will economic factors influence the market?
Improving job numbers and easing inflation are expected to support home sales, while political clarity following the presidential election may provide an additional boost.
Why is the wealth gap between homeowners and renters widening?
Homeowners have gained significant equity due to rising home prices, while renters have limited opportunities for wealth accumulation.
What challenges do first-time buyers face?
High down payments, rising home prices, and delayed financial independence are key hurdles for first-time buyers, many of whom rely on family support or investments.
