Housing Market Predictions: Will Home Prices Drop in 2025?

The year 2024 has been a noteworthy one for the national real estate market. Although mortgage rates have dipped since 2023, high home prices and continued low inventory have kept many potential buyers on the sidelines. With the holiday season upon us and the calendar about to turn the page to a fresh year, it’s a fitting time to assess the current landscape and consider what the future might hold for home buyers and sellers.

Key questions linger: Will home prices drop in 2025? Is now a smart time to buy a home? When might mortgage rates and the housing supply numbers improve? To find answers, we consulted industry experts to share their predictions for the housing market.

In this article (Skip to...)

• Current housing market overview
• When will home prices drop?
• Will mortgage rates come down?
• Will housing inventory increase?
• Will 2025 be a buyer’s or a seller’s market?
• Will the housing market crash?
• The bottom line

National housing market trends and stats

Here’s what we know about the national real estate market at the time of this writing, based on the latest data from the National Association of Realtors, Redfin, and The Mortgage Reports:

• $407,200 – median existing-home sales price (up 4.0% year-over-year)
• $382,723 – median asking price of existing homes for sale (up 5.1% year-over-year)
• 96 million – seasonally adjusted annual rate of existing home sales (up 2.9% year-over-year)
• 37 million (4.2 months’ supply) – inventory of unsold existing homes (up 0.7% year-over-year)
• 42 days – average number of days existing homes remained on the market in November (up 7 days higher than a year ago)
• 6% – share of homes selling above list price (down from 27% a year ago)
• 27% – percentage of home sales coming from first-time buyers (down from 28% a year ago)
• 779% – average conventional 30-year fixed mortgage rate in early December.

Numbers alone don’t paint the full picture. To better understand how we arrived at this point, evaluate the current state of the national housing market, and explore forecasts for key factors like rates, prices, inventory, and leverage, we turned to a range of industry experts. Below, we share their insights and predictions.

Current housing market overview

The pros we polled were asked to give a broad perspective on where the real estate landscape is currently and perhaps where it’s headed next year. Here’s what they had to say.

Rick Sharga, president/CEO of CJ Patrick Company: “The housing market isn’t particularly pretty right now. We’re likely to end the year with fewer existing home sales for the third consecutive year, falling from 6 million in 2021 to 5 million in 2022, 4 million in 2023, and somewhere around 3.8 million this year, which would be the lowest number of homes sold since 1995. Affordability is the worst it has been in the last 40 years. And the inventory of homes for sale is still off by more than 20% from pre-pandemic levels. So there’s not much to buy, and what’s available isn’t very affordable.”

Kenon Chen, executive vice president, strategy and growth, Clear Capital: “The current national housing market continues to slowly improve, but is marked by now familiar challenges of limited supply and home price increases. The amount of housing supply has steadily improved since January, and has finally reached the levels we saw in 2020. However, we remain well below pre-pandemic inventory numbers which contributes to home price appreciation remaining at 4.7% year-over-year. Expecting that purchase demand will continue to grow, and that mortgage rates will gradually decline over the next year, we can expect home prices to continue to increase without a substantial change in supply.”

Albert L. Lord III, founder/CEO, Lexerd Capital Management: “The current conditions are characterized by a slowdown in sales, with houses remaining in the market for longer today than a year ago. Also, housing prices remain elevated with a marginal decline of 0.7% compared to last year. Supply is still constrained but improving in some parts of the country. Factors that have contributed to the above conditions include affordability, as housing prices have increased rapidly in the last three years while incomes have not adjusted to inflation, and elevated, albeit slowly declining, interest rates.”

Bruce Ailion, Realtor and real estate attorney: “It’s too early to tell where the market will head in 2025. The primary uncertainty is whether President-elect Trump will follow through on the promise of mass deportations and stiff tariffs. While these policies will impact all of the country, some will be more impacted than others. A rare circumstance of Republicans controlling the House, Senate, and Presidency promises more favorable tax treatment for real estate; perhaps the elimination of the capital gains tax on the sale of a personal residence, elimination or reduction of the capital gains tax for investor sales to owner-occupant buyers. This would influence the supply and affordability of homes.”

Martin Orefice, founder, Rent To Own Labs: “Interest rates are starting to edge down, which is certainly a good sign, but home prices are still quite high, and there just isn’t enough inventory, especially on the lower end of the market, for those prices to come down any time soon. Construction is picking up, but primarily for luxury homes and apartments. More affordable homes just aren’t profitable to build, and any that do hit the market are likely to be snapped up by investors.”

Jason Gelios, Realtor, Community Choice Realty: “We are continuing to see higher mortgage rates, compared to this time two years ago, which is keeping many homebuyers from purchasing a home. We are still seeing a shortage of housing inventory primarily due to lowered seller confidence. Sellers aren’t confident in selling their home because it is more expensive on the buying side.”

When will home prices drop?

Experts predict that home prices in 2025 will likely remain stable or see modest increases, particularly influenced by slow wage growth, elevated mortgage rates, and varying conditions across local markets.

Dennis Shirshikov, professor of finance and economics at City University of New York/Queens College: “Home prices are expected to stabilize or even see modest declines in 2025, particularly in overheated markets. Affordability, however, will remain a challenge due to a combination of slow wage growth and still-elevated mortgage rates. While prices may not rise dramatically, the affordability crisis will persist for many first-time buyers, as even small rate increases have a significant impact on monthly payments. This may push more buyers toward smaller markets or multi-family options as a way to stretch their budgets.”

Mason Whitehead, branch manager, Churchill Mortgage: “Overall I see prices remaining strong with moderate appreciation. I don’t think we’re going to see the 10% to 20% appreciation per year anytime soon, but that’s probably a good thing. Builders are still doing very well because they offer artificially low rates in many cases, which help buyers feel more comfortable. Some markets will see people lose money if they bought in the last couple of years and have to sell.”

Lord: “The CoreLogic Case-Shiller Price Index projects even higher price increases. However, I believe improving supply and rising inventory will moderate price growth overall. Price increases are expected to be less pronounced in Southern states, where rising insurance costs and potential economic slowdowns linked to immigration challenges could ease price pressures. Currently, 30% of homes are selling above their list price.”

Sharga: “Nationally, it seems more likely that home prices will continue to rise in 2025 rather than fall, mostly due to pent-up demand outpacing available supply. Overall, we might see home prices increase by somewhere between 3.0-3.5% in 2025. But it’s important to remember that local markets will vary significantly in terms of price appreciation.”

Chen: “Expecting that purchase demand will continue to be strong, and that mortgage rates will gradually decline over the next year, we can expect home prices to continue to increase without a substantial change in supply. Home appreciation rates should remain in the low single digits in 2025.”

Orefice: “Nationwide, I expect housing prices to stay fairly static, or maybe even go up, in the coming year, but that top-line number is going to obscure a lot of movement in local markets, with some areas becoming much more expensive and others, especially in high climate-risk areas, to drop quickly.”

Will mortgage rates come down?

The outlook for mortgage rates in 2025 continues to be a subject of debate among experts. Here’s what our mortgage pros had to say.

Whitehead: “For rates to come down, the economy has to be hurting. That’s not happening at the moment, and the Fed is even saying the economy is doing fine and they are not in a hurry to lower rates. I do think they will eventually come down and likely settle in the mid to upper 5’s, but that’s likely 18 months away.”

Chen: “Thirty-year mortgage rates are expected to gradually decline over the next year, ending up in the low 6% range. Based on Jerome Powell’s recent comments, we do not expect that the Fed will be taking aggressive action to cut rates.”

Shirshikov: “I anticipate that mortgage rates will remain elevated but could show slight improvement by late 2025 as the Federal Reserve eases its monetary policy stance. Rates in the range of 6.5% to 7% for a 30-year fixed mortgage are likely for much of the year.”

Lord: “Rates will go down, expected to reach 6.2% by the end of 2025. This prediction is based on the fact that Federal Reserve Policies are gradually easing interest rates due to approaching the target inflation, consumer spending will moderate as wage inflation has been contained, trends point to moderate increases in prices, albeit dependent on tariffs, and economic growth due to deregulation and optimism about future investments.”

Sharga: “If we end 2024 with rates at or near 7%, we could see 30-year loans with rates just above or below 6% by the end of next year. But the decline is probably going to be a bit unsteady – up a little one month, then down the next – as we get to that point.”

Orefice: “Falling prime borrowing rates have given lenders some wiggle room, but many still have awkward balance sheets that are heavy on older, low-interest loans, and this will encourage them to keep rates high. Expect rates to get below 6% by the end of 2025.”

Will housing inventory increase?

We spoke with several experts to get their insights on what the inventory of homes might look like in 2025. Here’s their take on it.

Sharga: “The inventory of homes for sale has improved by about 28% in 2024, and inventory levels will likely continue to improve in 2025, but at a slower pace. New listings are only up by about 17% from a year ago, so part of the reason inventory levels are higher is that it’s taking longer to sell homes once they’re listed. New listings typically peak between April and July and inventory between June and September, so we won’t know until then how robust the market will be.”

Shirshikov: “Housing inventory is likely to improve in 2025, albeit incrementally. Factors such as reduced construction costs, the completion of delayed development projects, and more homeowners listing properties due to financial pressures could contribute to increased supply. That said, inventory levels will still fall short of meeting long-term demand, particularly in high-growth metropolitan areas.”

Lord: “I anticipate a 3% to 4% increase in inventory compared to last year, bringing the total to an estimated 1.45 million homes. This will translate to a 4.5-month supply of homes on the market, up from four months—a modest change that is unlikely to drive significant price declines.”

Ailion: “Inventory has been increasing throughout 2024, new construction is up, and people are tired of keeping their lives on hold because of interest rates and are putting their homes on the market. There will be greater inventory and likely higher transaction volume in 2025.”

Chen: “Based on this year’s trends, it seems likely that housing inventory will continue to increase in 2025, but only moderately. The counterbalance of lower mortgage rates and pent-up purchase demand will counteract any rapid change in inventory growth even as homeowners get more comfortable listing their homes in this market.”

Will 2025 be a buyer's or a seller's market?

The perspectives from market experts suggest a shifting landscape in 2025. While the housing deficit continues to drive competitive conditions, there is optimism about a gradual transition from a seller’s market to a more balanced one.

Here are the insights shared by some of the experts we interviewed:

Lord: “The market remains a seller’s market, though less pronounced than in the past two years. The U.S. continues to face a significant housing deficit of 2.4 to 3 million homes, maintaining competitive conditions. Additionally, the number of newly listed homes remains well below typical levels, with only 350,000 compared to 320,000 last year and 400,000 in 2023.”

Whitehead: “I think 2025 will be a year where it’s about even. I don’t see multiple offers where sellers are winning as substantially as they were before, but I also see buyers making reasonable offers and asking for reasonable concessions, which are being accepted. Given this, it is my hope and belief that we’ll return to more of a normal market again in 2025.”

Chen: “2025 will be a transition year of moving from a seller’s market toward a buyer’s market, but the change will most likely be gradual.”

Gelios: “There will be a short period where both a homebuyer and seller will benefit from both sides. After that, we should see the housing market tilt towards favoring sellers if the rates decrease, which would cause more buyers to hit the market competing for homes.”

Will the housing market crash?

Curious about which areas are riskier to purchase in and safer to purchase in next year? Per ATTOM, Tennessee led the list with eight low-risk counties, including Rutherford and Williamson near Nashville; Blount and Knox near Knoxville; Hamilton (Chattanooga); Bradley (outside Chattanooga); and Sullivan and Washington near Kingsport and Johnson City. Wisconsin followed with seven, including Brown (Green Bay), Outagamie (near Green Bay), Dane (Madison), Rock (near Madison), Eau Claire, La Crosse, and Winnebago (Oshkosh). In fact, 22 of the 50 counties least vulnerable to housing market challenges out of 578 analyzed were located in the South, with 13 in the Midwest, 11 in the Northeast, and only four in the West.

Meanwhile, ATTOM recently revealed that the nation’s most vulnerable markets (based on factors like home affordability, foreclosures, and other indicators) are:

• Butte, CA
• San Joaquin, CA
• Kings, CA
• Humboldt, CA
• Cumberland, NJ
• Kern, CA
• Atlantic, NJ
• Solano, CA
• Lake, IN
• Madera, CA

Does the vulnerability of so many key markets to price declines and foreclosures indicate a potential housing crash in 2025?

Chen: “The fundamental dynamics of the current housing market do not seem to support a housing market crash. Moderate home price appreciation, historically low supply, declining mortgage rates, and a continued strong jobs market all seem to point to a very low risk of a housing market crash.”

Sharga: “Barring an unforeseen economic crisis, a crash in home prices in 2025 seems highly unlikely. Strong demand and limited supply usually keep prices from falling too rapidly. A strong economy – lots of jobs, low unemployment, rising wages – strong demand from homebuyers, and virtually no foreclosure inventory leading to distressed property sales should all add up to a pretty stable environment for home prices.”

Gelios: “I don’t see the housing market crashing because we don’t have many of the indicators that caused the 2008 housing bubble. We will see continued gains in appreciation and a market that has finished correcting itself.”

Whitehead: “Barring some major shock like a war, I find it very unlikely. The reality is that people need a place to live and rates are what they are. And owning makes more financial sense than renting.”

The bottom line: Is it a good time to buy a house? 

Should prospective buyers act quickly to secure a home or hold off and wait? Will 2025 bring significant price drops, making it a better time to buy? Here’s what the experts had to say.

Shirshikov: “For buyers, 2025 offers an opportunity to purchase in a slightly less competitive market, but patience will remain critical. Focus on properties that are fairly priced and consider negotiating with sellers who are motivated due to longer listing times. Sellers, on the other hand, need to adjust expectations. Pricing homes realistically and being willing to offer concessions, such as covering a portion of closing costs or including upgrades, will be key to closing deals. Sellers should also invest in smart staging and marketing to make their properties stand out in a less frenzied market.”

Gelios: “2025 will be a good year to purchase a home as the mortgage rates decrease, as long as buyers are aware they may be competing for homes initially. There should also be more homes available to choose from. Homebuyers should be ready to move quickly in 2025 because they will be up against other buyers who are fully prepared.”

Sharga: “Next year should be a slightly better year to buy a home. Prices shouldn’t be going up as quickly and may decline slightly in some markets. Mortgage rates should come down over the course of the year. And there should be more properties available for sale than in the last few years. Make sure you’re ready for the financial commitment that homeownership requires – not just making your monthly mortgage payments but factoring in insurance, property taxes, utilities, and maintenance. Then, determine if you can comfortably afford a home that meets your needs at today’s prices and mortgage rates. If that’s the case, don’t hesitate to move on the opportunity.”

Whitehead: “So as long as you are comfortable in your job with income stability and can have some reserves after closing costs, owning is nearly always a better financial option than renting. My main advice is not to stretch yourself financially. Be wise and buy within your means. Remember, your first home doesn’t have to be your ‘forever’ home. Find something that meets your needs, and even if it only makes sense as part of a three- or five-year plan, that is a perfect place to start your journey as a homeowner.”

Lord: “Prospective buyers should carefully evaluate their budget, market trends, and personal needs when considering a home purchase. However, if these factors align, waiting may not be advantageous. While mortgage rates are expected to decline, the potential for gradually rising housing prices could offset the benefits of lower rates. As a result, buyers may be better off purchasing a house in 2025.”

Ailion: “Real estate is or should be a long-term investment. Providing a buyer holds long-term, any time is a good time to buy real estate. When prices are low, buying for the short term makes sense. This is not one of those times.”