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The housing market in 2025 could have a more favorable outlook than much of 2024 had, due to improving mortgage rates and inventory levels. There’s still uncertainty in the air, though: Rising prices and slowing construction could cause some trouble for buyers in 2025, and the impact of the presidential election remains a wild card.

Home prices, mortgage rates, inventory levels and more will all shape housing affordability moving into 2025. Curious where these trends may go? Read on to learn what the experts predict for the 2025 housing market.

What will happen to the housing market in 2025?

A year after rising just above 8 percent in October 2023, the average 30-year mortgage rate sat at 6.78 percent as of October 23, 2024 — an improvement, to be sure, but not the big dip many were hoping for. Many experts do foresee mortgage rates decreasing slowly over the next year, though.

Lower interest rates will unleash some of the pent-up demand for housing in 2025,” says Bernard Markstein, president and chief economist for Markstein Advisors. “This will help keep mortgage rates above their ultra-low rate of just a few years ago, [but] rates will be lower than current levels.”

Housing inventories have also been improving of late, with a 4.3-month supply at the end of September 2024, according to existing-home data from the National Association of Realtors (NAR). While that is still below the 5 to 6 months typically needed for a balanced market, it’s a significant improvement from the 2.9-month supply seen back in February. And there’s growing optimism among homebuilders, too, with lower interest rates granting more potential access to capital.

Key Takeaways

Would-be homebuyers continue to be discouraged by elevated mortgage rates and rising home prices.

In addition, while housing inventory has grown, it’s still below what’s needed for a balanced market.

All three issues show signs of improving slightly in the coming year, but experts still expect 2025 to be a challenging one for the U.S. housing market.