Real Estate Forecasts for 2025: Is Data Providing Indicators The Housing Market Will Stabilize?

Real estate forecasts reveal a glimpse of hope after housing affordability difficulties over the last few years. As 2024 comes to an end, market conditions seem to indicate positive shifting, with slightly lowering mortgage rates and potential stabilization of housing prices. 

Current real estate market conditions 

As we move into the fourth quarter of 2024, the real estate market usually slows down nationwide. We normally see a decrease in home sales, buyers, and property prices; however, this year may be different. 

This year, housing inventory has increased, with supply up 40% compared to last year, especially in entry-level homes. We have also seen wage growth surpass inflation, contributing to better housing affordability. Although these are all positive shifts, the ongoing high rates on new mortgages continue to discourage sellers from listing their properties where they have lower locked-in rates, reducing the number of new listings. 

Houses are expected to remain on the market for more extended periods of time and prices are not likely to drop as we move further into Q4. Until mortgage rates decline, many sellers will likely avoid listing their homes. 

As housing prices and inventory continue to fluctuate, what can we expect in the housing market in 2025? 

Housing market predictions 2025 

Buyers and sellers remain anxious to see what the new year will bring to the housing market. Although many have been nervous about a potential crash, experts say the market is expected to continue correcting itself. This hopeful shift will benefit buyers and sellers, making it more comfortable to list a home and reducing the number of bidding wars we have seen recently. 

Mortgage rates are predicted to continue dropping, supporting demand and allowing homes to become affordable again. That said, it’s important to monitor local markets. Depending on inventory levels, buyer demand, and regional economies, housing prices may continue to rise in certain areas. 

Experts are keeping an eye on more than just mortgage rates: 

• Unemployment rates - Employment affects the housing market. People and families are more comfortable purchasing homes when they are securely employed.
• Interest rates - Increasing the final price of a home purchase will reduce affordability, leading to a slowdown in the market. 
• Inflation - If inflation worsens, it will reduce the buyer's purchasing power and increase the demand for a pricey listing. 
• Inventory levels - If buyers and sellers become more confident in listing and purchasing, more homes will join the market, increasing inventory levels. 

Housing affordability data

Surprisingly, housing affordability was up 40% in the last quarter of 2024 compared to Q4 of 2023. While income increases have contributed to this positive trend, they are not enough to offset the effects of high home prices. 

Although housing prices are predicted to continue rising, the pace at which they will rise is expected to slow down in 2025, with a growth of about 3%. Additionally, a drop in mortgage rates could assist in affordability, and with buyers more comfortable with the prices, the housing inventory is expected to increase. Prospective home buyers will also see a jump in new home construction by 4.4% in 2025, offering even more options in the housing inventory. 

Stay informed about the dynamics of the housing market. As market trends continue to shift quickly, real estate professionals should keep a pulse on mortgage rates, inventory changes, and local market conditions. 

Constellation1 provides data services, insights and analytics to a large portion of the industry including real estate franchises, MLSs, and mortgage professionals across North America. For more information on available data sets, contact us today.