Housing Market Forecast: What the Experts Are Saying (Updated 2025)

Purchasing a home has become more challenging in the last few years because of interest rates and inventory shortages. As the real estate industry faces more supply chain disruptions before recovering from the pandemic, the 2025 housing market forecast will shift accordingly. What do the experts say? Here’s a comprehensive guide on what to expect from the real estate market this year.

What Is the State of the Housing Market?

If you’ve noticed higher housing prices, you’re not imagining things. Real estate prices have dramatically risen since 2020 due to numerous factors, including the pandemic, supply chain disruptions and low inventory. The fourth quarter of 2019 saw an average sale price of $384,600, whereas the first three months of 2025 saw homes sell for an average of $503,800. While appreciation is standard, the surging costs have left buyers with questions.

That said, the price depends on where you live. Some markets are more active than others, with many buyers flocking to Sun Belt states and warm-weather areas.

Georgia, Florida, Texas and other southern states have many popular places to buy a home because they have retirement neighborhoods, low prices and investment opportunities. You get similar features in northern regions, but warmer South weather has driven a more favorable housing market forecast.

6 Trends for the 2025 Housing Market Predictions

2025 will be critical for home buyers and sellers as more people try to get into the property game. What trends will you see this year? Experts say these six housing market predictions are the ones to watch.

1. Interest Rates

The most pressing issue for the housing market in 2025 is the interest rates. A fixed-rate mortgage has an interest rate that stays consistent for your entire loan, so buyers try to lock in low rates whenever possible.

The Federal Reserve raised interest rates multiple times in the last two years to curb inflation, increasing from 0.25% to 5.5% between March 2022 and July 2023. Although the Fed has cut rates thrice since then, the 2025 spring homebuying season was underwhelming. Buddy Hughes, the chairman of the National Association of Home Builders, shares that builders aren’t optimistic about near-term demand. “Persistent elevated interest rates, policy uncertainty and building material cost factors hurt builder sentiment,” he added.

The status quo may not change unless the Fed heeds President Donald Trump’s request for ultralow interest rates. The Federal Reserve expects two rate cuts before the end of the year, but ClearValue Investing founder and CEO Brian Kim doesn’t believe this move will be enough.

“It’s not going to get us down to the 3%-4% range for mortgage interest rates because they’re talking about cutting the Fed’s funds rate by a smaller amount,” he said. “They’re talking about cutting it by a quarter point each time, so, in total, 0.5% — half a percentage point.”

2. Fewer Home Sales

High interest rates keep buyers away from the market because they’re less likely to pay interest rates north of 6% and 7%. On the other hand, sellers are less likely to sell because they purchased their homes when the rates were lower.

Josiah Carter — a Texas-based real estate professional and the founder of Move Into Fort Worth — says interest rates aren’t likely to drop anytime soon. If the rates stay high, the market will only be even more unaffordable for buyers.

“Until we see an increase in supply or lower rates, it’s likely that fewer potential sellers will enter the market,” Carter said. “After all, who would want to relinquish their 3 percent rate to purchase something at 7 percent?”

3. Inventory Shortage

Buyers are less likely to enter the market when interest rates are higher. Michael Tilford — a California-based real estate professional and the owner of Tilford Appraisals — says the interest rates are responsible for fewer homes available.

“This has caused a huge shortage of inventory in the housing market that won’t be changing any time soon,” Tilford said. “At the same time, there are still a substantial number of buyers looking for homes due to ever increasing cost of rent.”

As Millennials and Gen Zers graduate college and start professional careers, more buyers have entered the housing market. There’s only one problem — the United States is short about 3.2 million homes to meet demand.

So, what will happen in the meantime? Brady Bridges, the owner of Reside Real Estate in Fort Worth, Texas — says the younger generations will look for alternative means to afford today’s cost of living.

“Markets with predominantly affordable houses will take a nose dive due to young professionals struggling with inflation, skyrocketing living expenses, and student loans,” Bridges said. “Millennials and Gen Zs are more likely to downsize, rent an apartment, or move in with their parents than try to be a homeowner.”

4. Competitive Luxury Real Estate

While young people struggle, older generations will have more purchasing power because of increased cash assets. Thus, Bridges expects a silver tsunami that makes the luxury real estate market more competitive. 

“The buyers will target residential properties with chic architecture that go over the million mark,” he said. “Scenic coastal Florida and tax-haven Texas will have an influx of elders.

“The lavish gated communities featuring resort-style amenities, management services, and maintenance workers will sell houses faster than regular homes.”

Research shows numerous Florida cities have seen at least a 25% increase in sales price, including Coral Gables, Lauderhill and Aventura.

5. Balanced Market

Despite the rising prices in some markets, the real estate industry should begin to stabilize. You should expect a balanced market throughout the rest of 2025, as prices increase more sustainably. Selma Hepp, the chief economist for property data firm Cotality, seconds this opinion.

“Home-price appreciation will slow to an average growth of 2% for 2025, as compared to 4.5% growth in 2024,” she noted. “Markets with greater inventory are the ones most likely to see home prices drop, while popular regions with less new inventory, particularly in the West and Northeast, will continue to see steady price increases.”

6. Possible Warning Signs

Rising housing prices have caused some people to wonder if a crash is in the 2025 housing market forecast. The last time a crash happened was the Great Recession of 2008, leading to multiple years of declining costs before the industry started recovering. If you ask Matt Strickland, a Realtor based in St. John’s, Florida, the current economic conditions are ripe for a repeat.

Strickland’s warning signs include a drop in mortgage application rates and the average monthly purchase index. Plus, he says home-buyer delinquency has increased with credit card defaults even more than during the pandemic.

“A housing market crash happens when the buyers default on their loans and don’t have enough money to invest in real estate,” Strickland said. “The current U.S. housing market is facing both problems.”

However, not all real estate professionals see the 2025 housing market forecast similarly. Tilford said today’s conditions differ too much from 2008 to cause a repeated catastrophe.

“Those who are predicting a crash are not looking at the whole picture,” he said. “For housing prices to decline significantly, there needs to be a huge influx of inventory, far exceeding what we are currently seeing, which is extremely unlikely in the current environment.”

Frequently Asked Questions

Here are the answers to the hottest questions about when housing prices will ever go down.

Will the Housing Market Crash in 2025?

The housing market has been in a stalemate for the first half of 2025. There’s been weak buyer interest due to unaffordable prices, but sellers haven’t been desperate enough to lower their demands. Barring any significant events that would force sellers to put their properties on the market for less money, house prices are unlikely to drop sharply anytime until the end of 2025.

When Will the Housing Market Crash?

Anyone can speculate when the housing market will crash, but nobody can tell when housing prices will drop for sure. Nevertheless, falling sales volumes, rising inventory, increased days on the market, and significant price drops indicate that a real estate bubble is about to pop.

When Will It Be a Buyers Market?

Timing the beginning of a buyers market is more of an art than a science. However, monitor local inventory levels to see when properties for sale outnumber buyers. Home buyers gain more bargaining power than sellers when the months supply exceeds six months.

Previewing the 2025 Housing Market Forecast

A red-hot seller’s market has shown signs of cooling down due to high interest rates and selling prices. However, the outlook for all parties involved in this year’s housing market predictions have changed. What’s going to happen in 2025? Our experts say interest rates, market stabilization and luxury housing competition are some trends to watch.

Original Publish Date 4/9/2024 — Updated 6/30/2025

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