Will home prices drop in 2025? Here’s what experts say.
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Higher mortgage rates and limited Homes for sale This has created significant hurdles for buyers in recent years. average 30 years mortgage interest rate Hovering between 6.08% and 7.44%, while listings remain well below normal. Housing prices, which have soared during the pandemic, remain high, leaving many people unable to afford a home.
These challenges have forced countless buyers to postpone their plans. Overall, home prices are significantly higher than they were a few years ago. After factoring in today’s high interest rates, monthly payments could be double what they were before the pandemic.
As 2025 approaches, buyers and sellers alike are paying close attention to signs of change in the housing market. Industry experts have unique opinions on whether prices will drop next year. Some predict cooling in certain areas, while others expect continued increases due to strong demand. Below, we’ve gathered their predictions for house prices in the coming months.
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Will house prices fall in 2025?
“Things will vary from area to area,” says Evelyn Lueker, associate real estate agent with Auker Group in San Diego, California. She noted that home prices in some areas could fall if interest rates drop and more sellers list their homes. But other factors, such as millennial demand and housing shortages, could keep home prices high. Here’s what experts predict for both scenarios:
No, house prices are expected to continue rising
Many real estate and mortgage professionals believe home prices will continue to rise in 2025, despite current affordability challenges.
For example, loanDepot sales manager Debbie Calixto doesn’t expect home prices to fall in the new year. “Inventory is increasing, but across the country, there is still a housing shortage and a lot of pent-up demand,” she observed. When interest rates cool again, many potential homebuyers may re-enter the market. Greater competition tends to drive up the cost of housing.
Demographic trends reinforce this supply and demand view. Millennials make up a large portion of homebuyers, but their homeownership rates lag behind those of previous generations in the same age group. “Supply is not keeping up with growing demand,” Luke stressed. The ongoing gap between strong buyer demand and limited housing supply suggests prices will continue to climb.
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But housing prices are always a possibility Can reduce
Depending on where you live or where you’re looking, you may see home values stabilize as pandemic-era trends reverse. Some real estate markets adjusted from 2020 to 2022 when remote work became the norm. Many people leave expensive cities for more affordable areas.
Now, things are changing. “As the pandemic ends, more employers are bringing employees back (to the office),” said Joe Chung, a real estate agent with Equity Union in Palm Springs, Calif. He expects some purchases in resort and retirement areas Homes for remote workers will need to sell. This can create buyer-friendly conditions in these markets.
While national price falls are less likely, local markets may respond differently to affordability pressures. “If we see prices drop, it’s likely to be due to changes in supply and demand caused by ongoing affordability issues,” Calixto noted. Areas that experienced sharp price increases during the pandemic are likely to be the first to cool down as buyers reach their financial limits.
bottom line
Forecasts of real estate prices are speculative and may change based on a variety of factors. So instead of trying to time the market, focus on your financial preparedness. Lueker stresses that the best time to buy a home is when you can afford it.
With the Federal Reserve considering further interest rate cuts in 2025, Calixto expects more buyers to stop waiting. This could lead to a gradual normalization of the market. But conditions vary widely from place to place, so you have to know your specific market.
Meet with some lenders first Understand your budget and loan options. Then, connect with local real estate agent Become familiar with your target area. Whether you’re ready to buy now or need to wait, they can help you make a realistic plan. An experienced agent will also guide you through local market trends, available homes in your price range, and negotiation strategies.
Keep in mind that while interest rates and home prices may change next year, Find the right home at the right time Because your situation matters most.
