From Challenges to Opportunities: The 2025 Housing Market Forecast

What’s Ahead for Real Estate: Predictions for 2025 and Beyond

The real estate market has faced a tough couple of years, but there’s reason to be optimistic. According to Lawrence Yun, Chief Economist of the National Association of REALTORS® (NAR), the worst may be behind us. During NAR NXT, The REALTOR® Experience, Yun and Deputy Chief Economist Jessica Lautz shared valuable insights into what’s next for the housing market, mortgage rates, and buyer trends. Here’s a breakdown of their predictions and how they might impact your real estate business in the coming years.

A Brighter Market Forecast

After navigating turbulent waters in 2023 and 2024, the housing market is poised for recovery:

• Home Sales Growth: Existing home sales are projected to rise 9% in 2025 and 13% in 2026. New home sales are expected to jump 11% in 2025 and 8% in 2026.
• Mortgage Rate Stability: While mortgage rates won’t drop significantly, they’re expected to stabilize between 6% and 7% for the next two years. Budget deficits may limit the possibility of further declines, but factors like improved labor force participation or reduced deficits could drive rates lower.

This renewed stability, combined with improving job numbers and rising inventory levels, sets the stage for a stronger housing market in the years ahead.

Shifts in Buyer Demographics

As the market evolves, so do the people driving it. NAR’s latest data highlights several notable trends:

• All-Cash Buyers: Accounting for 26% of home sales, cash buyers are at record highs. Many repeat buyers leverage housing equity gains to purchase without a mortgage.
• First-Time Buyers: The median age of first-time buyers has reached 38, reflecting longer saving periods and reliance on family gifts or inheritance. First-time buyers are also making the highest down payments in nearly 30 years (9%).
• Multigenerational Purchases: A record 17% of buyers are purchasing multigenerational homes, driven by cost savings, caregiving needs, and young adults moving back home.
• Urban Appeal: Cities are back in demand, with urban homebuying seeing its largest uptick in a decade.
• Single Women Buyers: Single women make up 24% of the market, doubling the share of single men at 11%.

The Impact of Life Events

Yun emphasized that life milestones continue to fuel real estate moves. With 3.5 million births, 1.5 million marriages, 700,000 divorces, and millions of job changes annually, housing demand remains resilient. These factors help counteract the “locked-in” effect of homeowners holding onto low-rate mortgages.

Challenges and Opportunities

While the market outlook is positive, challenges persist:

• Affordability Issues: Rising home prices have widened the gap between homeowners and renters, with median homeowner net worth at $415,000 compared to $10,000 for renters. Slowing price increases could help bridge this divide.
• Supply Shortages: Addressing housing regulations and increasing supply is critical to keeping prices aligned with wages.

Looking Ahead

The forecast for 2025 and beyond signals a gradual recovery, fueled by growing inventory, stabilized mortgage rates, and evolving buyer demographics. By staying ahead of these trends, real estate professionals can position themselves for success in an ever-changing market.

What strategies will you implement to thrive in this new era of real estate? Let’s connect and discuss how we can navigate the opportunities together!