2024 will soon be in the rearview mirror. It has been one of the toughest years for the housing market in recent memory; higher mortgage rates, resilient housing prices, and a continuing trend of low inventory have made affordability a real challenge for many consumers.
So, what’s in store for the real estate market in 2025? Will we see things trend toward a more balanced market? Let’s see what the experts are saying about home sales, price appreciation, mortgage rates, and several other major factors as we head into the new year.
Home Sales
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Home sales nationwide saw a 3% gain year-over-year in September, which is the lowest we’ve seen since 2010. Lawrence Yun, chief economist at the National Association of Realtors, suggests that “maybe the worst is over”.
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He also predicts that we will see existing home sales rise by 9% in 2025, and new home sales increase by 11%.
Price Appreciation
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CoreLogic, a major data resource for real estate, forecasts that home prices will appreciate by 2% nationwide in 2025.
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They also predict Denver, Miami, and Boston among the top markets for price increases next year.
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Goldman Sachs researchers forecast a 4.4% increase in home prices next year.
Mortgage Rates
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According to Freddie Mac, the average 30-year fixed rate mortgage has ranged from 6.08% to 7.44% over the last year, and Lawrence Yun says “rates should stabilize at the low end of that range for 2025”.
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Without an exact percentage, Bernard Markstein, chief economist at Markstein Advisors said that “rates will be lower than current levels…[which] will unleash some of the pent-up demand for housing in 2025”.
Overall, many experts are predicting that affordability will remain a challenge next year. However, if rates go lower than expected, or if we see a notable increase in inventory across new and existing homes, that would help stimulate more activity from buyers. Compared to other areas across the country, Colorado’s housing market has lower inventory and higher demand, so it’s likely that price appreciation may outpace the national average, especially in more urban areas.
What other factors could influence the housing market in 2025?
The job market always plays a major role in the real estate industry. The unemployment rate is currently sitting at 4.1%, and forecasts suggest unemployment rates to hover between 4.1% and 4.4% over 2025. However, Lawrence Yun predicts an increase of 2 million jobs next year; any improvement we see with the jobs market would be good for the housing market.
While home prices are expected to appreciate by 2% nationwide in 2025, we may see even more of an increase in certain areas with higher demand and lower inventory. CoreLogic forecasts Denver, Miami, and Boston among the top markets for price increases next year.
The ‘lock in effect’ is still a factor across the real estate industry; many would-be sellers are staying put with the lower mortgage rates they locked in over the pandemic. As rates decrease, this would soften the ‘lock in effect’, but there likely won’t be enough of a change to unlock any notable amounts of inventory. On the other hand, new home construction could add some needed housing and provide more opportunities for buyers struggling with affordability. New construction permits are forecasted to increase each quarter as we head into 2025, according to researchers at the National Association of Realtors.
As of now, the forecasts for 2025 suggest no major changes for the real estate market. We will likely see moderate appreciation across the state, and hope for lower mortgage rates along with increased inventory to help ease the challenges of affordability.